Category Archives: bankruptcy

There are in excess of 50,000 bankruptcies by companies per year in the US. Generally, employees are well treated receive as creditors in bankruptcy courts, payment for wages owed is not  guaranteed once employers file for bankruptcy. Therefore, employees should know how to operate in a judicious manner. Read on to learn more.

Types of Bankruptcy

The two kinds of bankruptcy employers can file are: Chapter 7, where the company is liquidated by selling off the assets of the company and the proceeds are divided among all of the creditors in order of their priority, which is established by bankruptcy law. The second option is Chapter 11 allows a company to reorganize and restructure its debt contracts. 

Payroll

Payroll obligations can be impacted by bankruptcy. If an employer falls behind in making payroll, then files bankruptcy, employees become creditors and take priority in receiving remuneration. 

Rights as a Creditor

Employees can file a proof of claim and are entitled to a portion of any proceeds as a result of the bankruptcy. This provision in the tax law allows employees to potentially collect money from other creditors who hold a lower priority in the bankruptcy.

Payroll Taxes

By law, the employee and employer split the cost of payroll taxes. In bankruptcy, the portion of payroll taxes collected from employees cannot be discharged, but the half owed by the employer can be discharged.

Don’t Pay Yourself a Bonus or Back Pay

The bankruptcy system treats you in a similar way to an insider creditor. So if you pay yourself a bonus, repay a loan you made to the business, or otherwise take money out of the company during the 12 months prior to filing for bankruptcy, might be considered bankruptcy fraud the results of which may land you in jail or mean your bankruptcy claim is dismissed by the courts.

Source: https://smallbusiness.chron.com/can-employer-file-bankruptcy-out-payroll-10027.html

Debt restructuring is a very important element for financial survival. Let’s review some of the pro’s and con’s. Read on to learn more.

Debt Restructuring

This can be achieved in many ways. But it means settling debt through a program of debt management with a reduction on the debt amount and/or interest. Debt restructuring is of course also part of Chapter 13 bankruptcy.

Advantages

• If your accounts were late and you were receiving collection calls, these calls will terminate once your plan is underway.
• With the bankruptcy and/or debt management plan, you will be listed as current on your payments.
• Be goal focused. You have a date you can circle on a calendar to see you getting closer to the target.

Disadvantages

• When declaring bankruptcy, it will be on your credit report for up to 10 years.
• You will lose access to credit cards.
• Bankruptcy can come with high legal and court fees.

Difference Between Debt Restructuring And Debt Consolidation

A common method of debt consolidation tackles your debts with high rates of increase. it is worth exploring this option before undertaking debt restructure. With debt consolidation, you obtain a personal loan equal to the current debt amount. The newer loan has an interest rate that is lower. This means you will have one loan and one payment to handle. It is a good idea for those still maintaining reasonable credit. When you have credit that is not so great, a debt consolidation may not be the optimum option.

Source: https://www.valuepenguin.com/personal-loans/debt-consolidation/how-does-debt-restructuring-work

Bankruptcy may be the only solution in some cases but there are major consequences should you choose this route. Read on to learn more.

Consider The Following:

• Bankruptcy can do severe damage to your credit score and should be considered as a last resort.
• As an alternative, you may be able to negotiate with your creditors and work out a payment plan or other satisfactory arrangement.
• If you decide to file for bankruptcy, you have two basic options: Chapter 7 and Chapter 13.
• A Chapter 7 bankruptcy will sell off many of your assets to pay your creditors. In a Chapter 13 bankruptcy, you keep the assets but must repay your debts over a specified period.

Before Filing Bankruptcy

You should consider alternatives that may do less damage to your credit and are less expensive than bankruptcy such as:

• Finding out if your creditors are willing to negotiate.
• With a home mortgage seeing if there are options available such as alternative repayment plans or loan modifications available.
• Even the often dreaded IRS are willing to negotiate and offer payment plans.

Chapter 7 Means Test

The courts impose this test to determine whether you are eligible for Chapter 7. The test compares your average income over the previous six months with the median income for a household of your size in your state; if you earn less than the median, you should be eligible for Chapter 7. If it is greater than median you may still be eligible after you have subtracted allowed expenses. if you still do not meet the criteria, you will need to look at Chapter 13 options.

Source: https://www.investopedia.com/articles/pf/07/bankruptcy.asp

Ten years is the time a bankruptcy can stay on your credit record even following the discharge and debt repayment. However the length of time it remains depends on the kind of bankruptcy you file. read on to learn more.

Chapter 7 bankruptcy can remain on your credit report for up to ten years, meanwhile Chapter 13 can remain on there for seven years. However the impact of the bankruptcy does lessen over time and there are things you can do to help minimize the damage.

Chapter 7 Bankruptcy

When you file Chapter 7, you will most likely have to wait the full ten years before it comes off your credit report. Discharged debts will be listed as such, though they will fall from your credit report after seven years from the filing date, unless they were already delinquent, in which case, it may be sooner.

Chapter 13 Bankruptcy

A finalized Chapter 13 bankruptcy and the accounts will drop off your credit report seven years after you filed, unless they were already delinquent, in which case, it may be sooner. Chapter 13 is often looked more favorably upon because there is usually a payment of at least some of the debt.

Once the bankruptcy has been removed from your credit report, your scores should begin to upturn, even more so when you pay your bills on time and in full and utilize credit in a responsible way. Filing for bankruptcy is not an easy path though it may be right for some. If you can commit to using credit in a responsible manner following your bankruptcy, you can rebuild it while awaiting the bankruptcy debts to fall away from the credit report.

Regardless of immigration status, nearly everyone can file for Chapter 7 bankruptcy. However you must meet certain criteria. Read on to learn more.

When filing an individual consumer bankruptcy you have to pass a means test and a court will not allow your case to proceed if you have filed a bankruptcy within certain time frames, or if the court suspects cheating on your part. Note an incorporated entity is forbidden from debt discharge in Chapter 7.

Income Versus Debts

Let’s go over some of the rules for meeting Chapter 7 bankruptcy debt discharge criteria. If you fail to qualify, you will need to consider Chapter 13 bankruptcy.

Income Level

You need to start by calculating your current monthly income versus the median income for a family of equivalent size in the state where you reside. This total is the average monthly income from the previous six months. If the income is equal too or less than the median, the law presumes you qualify for Chapter 7. if it is greater than the median, you must submit a means test to see if you qualify.

Disposable Income And Debt Repayment

The means test discovers if you have the disposable income to repay some of your unsecured debts over a five year repayment period. Besides the means test, the bankruptcy trustee will examine your finances looking for your current income and expenses and the amount of disposable cash available to pay creditors. The trustee will assess your Schedule I (income) and Schedule J (expenses) – if the trustee feels you can make payments to your creditors, he will most likely recommend Chapter 13 bankruptcy to the court

Previous Bankruptcies

You will not qualify for Chapter 7 bankruptcy if you obtained a discharge of your debts in a Chapter 7 bankruptcy case within the last eight years, or a Chapter 13 case within the previous six years. Nor can you file for Chapter 7 or Chapter 13 if your case was not accepted by the court in the past 180 days because:

• The dismissal was requested after the creditor requested relief from the automatic stay
• A court order violation
• The court ruling your filing was fraudulent or it constituted an abuse of the system

Corporations or LLC’s

Chapter 7 bankruptcy will not eliminate the debt of an LLC or corporation. But the trustee will liquidate the assets of the company and distribute the funds raised to the creditors.

Depending on the chapter you filed, the public record from your bankruptcy is deleted after seven years from Chapter 13 bankruptcy and ten years from Chapter 7 bankruptcy because none of the debt has been repaid. Read on to learn more.

Accounts Included In Bankruptcy

Individual accounts included in Chapter 13 and Chapter 7 bankruptcy will remain on the credit report for a total of seven years. When an account has been delinquent when it was included in the bankruptcy, the delete date will be seven years from the originating date of delinquency. The declaration of bankruptcy will not change the delinquency date.

Will A High Credit Score Help You During A Bankruptcy?

It is a myth that possessing a high credit score or one with few late payments means the impact of your bankruptcy will be less. The bankruptcy also does not recognize recent payments that have been made on time. Conversely, if you already have poor credit, it may not be worth the effort as the bankruptcy is going to damage your credit report. In both cases over time managing your credit and debt appropriately can be positive steps for the future. Additionally, it may help to open accounts using secured credit cards and keep them paid off in full on a monthly basis, arranging to make payments on time as you proceed and keep credit cars at less than thirty percent of the maximum being used.

Source: https://www.experian.com/blogs/ask-experian/removing-bankruptcy-from-your-credit-report/

A bankruptcy discharge is the order relieving the debtor from having to repay debts that have been discharged. Read on to learn more.

Once discharged creditors can no longer try to collect on the discharged debts. Liens can still be enforced attached to debts that are secure, they may also repossess and sell all the property put up as loan collateral. There are some disadvantages to filing for bankruptcy. It will damage your credit and you will need to satisfy the court this bankruptcy is essential.

How It Works

The discharge order will be mailed to the creditors and to the US Bankruptcy Trustee who is handling the case as well as their attorney. It is important to maintain a copy and it can be used to correct any credit report issues or errors. When a creditor tried to collect, you may file a motion with the court for the case to be reopened and the creditor may face fines if it is determined they are in violation of the discharge injunction.

Types of Bankruptcy Discharges

Individuals may file for Chapter 7 or Chapter 13 bankruptcy protection. In a Chapter 7, the trustee will liquidate assets that are not exempt and divide the proceeds to your creditors. Any remaining debt will be discharged. In Chapter 13, you will agree to a five year plan of repayment – at the end of those five years, any remaining debt will be canceled. Chapter 13 allows some debts to be discharged that cannot be discharged in Chapter 7. This includes debts from a divorce agreement (but not alimony or spousal support) and tax related debts, court fees condo or HOA fees and debts unable to be charged in a previous bankruptcy.

Source: https://www.thebalance.com/bankruptcy-discharge-what-is-it-and-when-does-it-happen-960064

Once your Chapter 7 bankruptcy has been discharged, you need to look at your next steps. Read on to learn more!

Discharge

Once discharged, the case is usually at a conclusion once the court release the official final report from the appointed trustee. There may still be a delay if the trustee is yet to liquidate outstanding property or conclude any matters of litigation.

Short Term Steps

The first order of business is to ensure you have records of all your documents regarding the bankruptcy including the discharge letter. These documents need to be maintained in a secure place as you may need some of the documentation in the future. Next, obtain a copy of your credit report and make sure everything on there is up to date and accurate. You can then plan a budget using your current level of income. It may be a good idea to use Schedules I and J from your bankruptcy case to assist in this goal. Start an emergency fund with regular contributions to make sure you can cover expenses that come out of the blue. As you progress further you will want to ensure you make arrangement for the payments of debts not covered in the bankruptcy.

Rebuild Your Credit

Although you want to avoid debt, not take more on, if you take a practical approach, this can help n the long term. Commence with a small secured credit card that operates in a manner similar to a pre-paid card and ensure your payments are made in a timely fashion. The bets strategy is to use the card sparingly and ensure it is paid off on time each and every month. Also, if you are renting and have kept up to date on rent payments through your bankruptcy, this can also assist with maintaining your credit as can regular payments for car loans.

Final Thoughts

The new beginning from being discharged from your chapter 7 bankruptcy can give you a great start for practicing new financial habits that are beneficial to you as long as you budget well and do not overspend.

Source:  https://upsolve.org/learn/chapter-7-discharged/

Often thought of as the end game, bankruptcy is there for people undergoing tough economic times. But with it comes the opportunity to restore order to your finances and maybe a fresh start. There are negative results from filing for bankruptcy, so read on to learn more.

What Happens?

Bankruptcy gives you the option to pay down a percentage of your debts over a set time period or have some totally eliminated. An automatic stay is granted preventing creditors from collecting money from you or pursue your other assets. People ask if they will lose their property. In Chapter 7 you will most likely need to sell some or all of your assets while in Chapter 13, you do not have too as your debts will be reorganized in a manner you can pay them off in full or partially over  a three to five year span. But if you do not maintain the arrangements, creditors will, most likely, come after you.

Credit And Bankruptcy

Once the bankruptcy has been discharged, it may be difficult to obtain credit. That said newer good habits with credit will help you maintain a better credit score over time even with the history of bankruptcy. can certainly cause great damage to your credit score. Chapter 7 can remain on your credit report for up to ten years as it involved the elimination of debt. Chapter 13 is a little more favorable as it still shows some effort to pay off debt and will be on the report for seven years.

Are Filings Available To The Public?

Although a public record, they are registered with a system known as PACER, mainly used by creditors and attorneys – but anyone can register to use it. Sometimes local newspapers publish notices as well and it may be visible on your credit report.

Job Prospects

Nearly a third of employers run a credit card on job applicants so declaring bankruptcy may be seen as a negative when applying for jobs in certain career fields. However, a bankruptcy will not show up in a regular criminal check.

Keeping Track Of Credit

As your credit is impacted by bankruptcy, keeping tabs on your credit scores are very important. Watch for how certain transactions can take a toll on your credit score and seek out possible errors or information that may negatively impact your scores. If you discover them ,they may always be disputed with the credit agency.

Source: https://www.experian.com/blogs/ask-experian/what-happens-when-you-file-bankruptcy/