Category Archives: bankruptcy

People often ask us things like “Who Pays for Bankruptcies” or “Can I afford Bankruptcy.”  The Fact is, if you are asking yourself those questions, you probably should consider one more question: “Can you afford not to file Bankruptcy?”.

Financial relief can be obtained by people who find themselves with a lot of debt through bankruptcy protection. A fresh start can help get your life on the rails again by filing Chapter 7 bankruptcy. But there are costs involved. The actual cost of a Bankruptcy can be minimal when compared to the savings in debt that can be eliminated.

Bankruptcy Fees And Payments

When filing bankruptcy, there are three main components to the total you will pay:  (i) Debtor’s Education Courses;  (ii) Court Filing Fees;  and (iii) Lawyer’s Fees.

• Debtor’s Education Courses – There are two courses.  The First must be taken prior to filing Bankruptcy.  The Second one comes after the 341 Meeting with the Trustee.  Fees usually range from $10 to $50. If this is not affordable, it many be possible to get those fees waived;
• Court Filing Fees – The actual fee varies with the type of filing.  Currently $335 is the cost to file for Chapter 7 Bankruptcy, and $310 to file for Chapter 13 Bankruptcy;
• Lawyer’s Fees – Lawyers obviously charge for their time, but the majority of consumer Bankruptcies are based on a flat fee basis. Therefore, you will know the cost to pay at the start of the proceedings.

Paying For Bankruptcies

Normally the person who is filing for bankruptcy is responsible for the payment of Court Fees but people who earn less than 150% of the federal guidelines for poverty can request to have the fee waived. In those circumstances, the Bankruptcy Court absorbs all the related expenses so a person can be in a position to be successful in their Bankruptcy Case. Obviously, this places a financial burden on courts, they only grant fee waivers when it is obvious the person cannot afford the filing fees including when the case has been filed and the debt no longer has to be attended too.

If you are fortunate enough to have the court filing fee waived, it is likely you also will be able to obtain waivers for Debtor’s Education Courses. Likewise, if you fall under the poverty guidelines level, you likely will be able to find voulenteer or “Pro Bono” legal representation for free or a reduced cost.

Source: “Does The Government Pay for Bankruptcies?” Upsolve, 30 Aug. 2019, upsolve.org/learn/who-pays-for-bankruptcy/.

People often think bankruptcy is where you turn too when no other options are on the table. Some see it as a second chance to rebuild finances within the confines of certain laws, while others see a stigma to bankruptcy that will haunt you as a failure, forever. The purpose of bankruptcy laws is not to be punitive but to help people obtain a restart to their finances. Whatever you choose, read on to learn more.

Reasons For Considering Bankruptcy

Medical debt and job loss are often quoted as the most frequent factors in driving bankruptcy but others include:

• A divorce
• Creditors who are suing because of unpaid debts
• Your home is in danger of being foreclosed
• Your only spending is with a credit card
• One credit card is utilized to pay the balance of another
• Looking at a 401K withdrawal to cover bills

Things To Consider

If you have enough resources bankruptcy can be avoided. Think about the following:

• Non-profit credit counseling agencies can help with a gratis service examining your finances and weighing up the possibility of a debt management program, maybe even a debt settlement or consolidation loan
• Making a monthly budget and living within it may be a great help as would obtaining a second job or selling some possessions to meet bills
• Is it possible to negotiate the debt?
• Is the current financial situation permanent or are things shortly to improve or worsen?

One last thing to consider: you may want to hold off committing money to a large bill or series of large bills that are upcoming until you have make a determination as to whether bankruptcy is the way forward, as it is possible, some of those bills may be dismissed.

Qualifying For Bankruptcy

There are two primary forms of bankruptcy for individuals:

Chapter 7 bankruptcy suits individuals who earn less than the median income for a family of your size in the state you reside in. If your income is too high, you may try and qualify for a ”means test.” In this situation a court trustee looks at your income and expenses to make a determination as whether these bills can be paid or do you really require the relief offered by a Chapter 7 bankruptcy.

Chapter 13 bankruptcy requires you have a steady and established income source as well as unsecured debts totaling less than $394,725 and secured debts totaling less than $1,184,200.

In Chapter 7 bankruptcy debts that can be wiped out include:

• Medical bills
• Credit card debt
• Lawsuit judgments
• Personal loans
• Obligations from contracts and/or leases

Chapter 13 bankruptcy includes the above as well as:

• Debts for loans from a retirement account
• Debts from divorce with the exception of support payments.

Debts that cannot be wiped out in either Chapter 7 or Chapter 13 bankruptcy include:

• Alimony
• Child support
• Student loans
• Debts for personal injuries causes when you were driving intoxicated
• Any outstanding court fines or penalties
• Debts owed to governmental agencies

How Bankruptcy Can Impact You

Make no mistake, bankruptcy will have a considerable impact to your life. Here are some of the ways it will change the status quo.

Private Life

Your name will go public and may appear in the legal notices section of your local newspaper or if they are read out by a local media operation. Anyone who has an account known as Public Access to Court Electronic records) will also be able to see this and the meeting (which is mandatory) with creditors happens in a public forum and will also be marked on your credit report.

Credit Score

You can expect a drop of anywhere between 100 to 200 points from your credit score and Chapter 7 bankruptcy will remain on your credit report for ten years, and seven years in the case of Chapter 13 bankruptcy.

Co-Signers

A co-signer on a loan will stay be responsible for the payment of aid loan even when the bankruptcy has been successful. However, Chapter 13 bankruptcy extends to co-signers as long as regular payments are made on your Chapter 13 agreement.

Bankruptcy And Your Home

It is essential to maintain payments on your home should you not want to lose it. A fresh start is a lot easier to capitalize upon when you are not homeless. But if you cannot afford your house it is very likely you will lose it. If you are in Chapter 7 bankruptcy you may be able to file for Chapter 13 bankruptcy, hence allowing greater time for you to catch up on house payments or the inevitable result is foreclosure. In Chapter 13 bankruptcy, you would return to your previously default status so your creditors can once again pursue you for payment.

Will Bankruptcy Help?

Although we cannot tell give you a yes or no answer to that questions we would ask you to consider the following: If in the next five years it will be impossible to get out of debt and you have diligently and thoughtfully researched the opportunities you may and may not have – then bankruptcy may be of benefit to you. One other thing to consider, we no longer have debtors prisons, you cannot go to prison for owing someone money.

Source: Should I File For Bankruptcy? – Do You Qualify & What Will Be The Impact https://www.debt.org/bankruptcy/should-i-file/

If you are looking for information about the different types of bankruptcy, this post should help

Understanding Chapter 7 Bankruptcy

In Chapter 7 bankruptcy you will do the following:

• Pay your secured debts or relinquish proeprty to be liquidized and the proceeds go to pay your secured debts.
• Non-exempt proeprty is surrendered so as much of your debt can be satisfied as possible.
• You keep possession of other exempt property and are released from the accrued obligations from the remaining debt that is dischargeable.

In Chapter 7 bankruptcy is a good option if you do not have the income or the assets to pay off at least part of your debts. A formula is used and if your income exceeds a certain level, you will need to file Chapter 13 Bankruptcy.

Learn more about Chapter 7 Bankruptcy

Understanding Chapter 13 Bankruptcy

In Chapter 13 Bankruptcy you will do one (or maybe a combination of) the following:

• Rid yourself of multiple debts so payments can be managed.
• Taking into account your income, restructure existing debt payments to make them more manageable for your personal circumstances.

The two most important considerations the judge and the Trustee will take into account when they make a decision to accept your proposed bankruptcy plan are:

• Will each creditor receive at the very least as much revenue if you  had filed a Chapter 7 bankruptcy?
• Whether all creditors are being treated with a degree of fairness?

In Chapter 13 bankruptcy, the goal is usually to get your creditors to agree with a plan of action. They may try to get their money faster or obtain more money from you. Creditors do not have to agree with your plan but it will influence the judge and Trustee more favorable if they will agree. Regardless of whether they agree or not, the judge may approve the plan so long as the judge determines the creditors are being treated equally and they will obtain at a minimum, the same amount as they would have been paid under Chapter 7 bankruptcy.

Learn more about Chapter 13 Bankruptcy

Deciding The Correct Type Of Bankruptcy

Ultimately your bankruptcy filing will come down to just two things, income and assets.

Your income may prevent you from going through Chapter 7 bankruptcy, not to mention the high risk of losing most of your assets in this form of bankruptcy – however, assets that can be protected in Chapter 13 bankruptcy.

Let’s look at some scenarios where Chapter 7 or Chapter 13 bankruptcy are the best options.

Chapter 7 Bankruptcy – An Unemployed Debtor With Few Assets

In a situation where the debtor has no current income aside from unemployment benefits and has a single car with a loan against it and does not own a home or any other property – Chapter 7 bankruptcy is by far the quickest and efficient means of eliminating debt. This case is so common it is frequently known as a “no asset bankruptcy.”

Chapter 7 Bankruptcy – An Unemployed Homeowner With An Upsidedown Mortgage

If you are a homeowner and the value of your property is now below the value of the loan on the property, Chapter 7 bankruptcy may still be the best option. As the lien will have greater value than the property, the homeowner has zero equity in the estate of the bankruptcy – the house is protected from the risks of liquidation.

Chapter 7 Or Chapter 13 Bankruptcy – An Unemployed Homeowner With Significant Equity

Chapter 7 bankruptcy may not be best for an unemployed homeowner who has large amounts of equity in their property. In chapter 7 bankruptcy, the homeowner may lose their home. But if they keep up the mortgage payments, the homeowner can maintain their home in a Chapter 13 bankruptcy. However, the petitioning household must demonstrate they have enough income to fund a debt payment plan.

Chapter 13 – Homeowners Confronting Foreclosure or Mortgage Delinquency

Chapter 13 bankruptcy gives homeowners who are behind on their mortgages a method of catching up mortgage payments that are past due and at the same time ridding themselves of part of their dischargeable debt. This way it is possible to ensure their home is safe from foreclosure and get rid of medical debt, 2nd or 3rd mortgages and credit card debt. There is not a way to make up mortgage arrears in Chapter 7 bankruptcy.

Chapter 11 – Wealthy Pensioners With A Large Accumulation of Debt

It is very often the case wealthy debtors have to file under Chapter 11 bankruptcy simply because there are limits to the income and debt levels in Chapter 13 and Chapter 7 bankruptcies.

Sources

1. “Types of Bankruptcy.” Legalzoom.com, 30 Sept. 2015, www.legalzoom.com/knowledge/bankruptcy/topic/types-of-bankruptcy.
2. Nolo. “Which Type of Bankruptcy Should You File? Chapter 7 vs. 13.” Www.alllaw.com, Nolo, 12 Mar. 2019, www.alllaw.com/articles/nolo/bankruptcy/which-type-chapter-7-chapter-13.html.

Wondering how bankruptcy works? This post should help. The legal process known as bankruptcy is overseen at the federal level by United States bankruptcy courts. The purpose of bankruptcy is to help businesses and individuals reduce or eliminate a portion of or their debt enabling them to at least pay back some of the money they owe, and to reduce debt burdens to allow future growth.

Although bankruptcy may help you obtain some relief from your outstanding debts, it will have negative impacts in other areas of your life. For example, it will reduce your chances of successfully opening credit card accounts as well as getting favorable rates on loans, and your credit report will show your bankruptcy for seven to ten years.

The Basics Of Bankruptcy

Bankruptcy is not something you want to endure alone. A good bankruptcy attorney can make sure the process runs as directly as it can and will ensure compliance with all the applicable regulations.

Certain requirements have to be met before you can start bankruptcy filing. You will have to do the following:

• Go through a complete credit counseling course using a credit counselor who is government approved – they will complete an assessment of your personal finances and discuss bankruptcy alternatives. They will also assist you in creating a personalized budget.
• Decide whether to file Chapter 7 or Chapter 11 or 13 bankruptcy. Although all bankruptcies can assist in eliminating the debt that is unsecured, halt repossession or foreclosure, terminate garnishment of wages, debt collection actions and utility shutoffs – you will be expected to cover the court costs and attorney’s fees. It is important though to understand how Chapter 7 and Chapter 13 resolve debt issues.

How Chapter 7 Bankruptcy Works

Commonly known as “Straight bankruptcy” – a United States Trustee directly supervises the sale of any assets that are not exempt from the bankruptcy (basic house furnishings, cars, and work-related tools may be exemptions). Oversight by the Trustee is a mandatory procedure, and the proceeds from any asset sales go toward paying off your creditors. The balance of what you owe is then eliminated once the discharge of the bankruptcy has occurred. There are some debts Chapter 7 bankruptcy is unable to discharge at any time. Examples would include unpaid taxes, student loans, child support, and alimony also known as spousal maintenance. Consider the consequences of Chapter 7 bankruptcy. It is very likely you will lose most of the property you own, and a notice of the procedure will remain on your credit report for up to ten years following the filing date. Plus, you will not be able to file Chapter 7 bankruptcy for another eight years should you accumulate debts again.

Learn more about Chapter 7 Bankruptcy

How Chapter 13 Bankruptcy Works

In return for completely paying or paying a portion of your outstanding debt, Chapter 13 allows you to keep most of your property. A repayment plan of three to five years will be negotiated through your attorney and the bankruptcy court Trustee assigned to your case. When you have paid the money owing under the plan, the balance of the debt is discharged even if you have only repaid some of the money you originally owed. Chapter 13 bankruptcy will still hurt your credit but less so than Chapter 7. As you repay some, maybe all, of your outstanding debts, you will have some assets retained. Further, Chapter 13 bankruptcy will only show on your credit report for seven years, and if needed, you can refile Chapter 13 in just two years.  People within a Chapter 13 plan send just a single check to the U.S. Trustee each month, who then routes those monies proportionally to the various creditors owed.

Learn more about Chapter 13 Bankruptcy

Definitions of Common Bankruptcy Terms

• Unsecured Debt: Credit cards are an excellent example of unsecured debt. Basically, the creditor does not hold any tangible assets or collateral to secure the debt.
• Secured Debt: This is where the creditor holds tangible assets or collateral to secure the debt. An auto loan or mortgage on a home are two examples. If the loan defaults, the creditor can seize the vehicle or home.
• Reaffirmed Account: This is when you make an agreement to continue the payment of a debt that may be discharged in Chapter 7 bankruptcy proceedings. The reaffirmation of the account and your agreement to pay the debt is usually done with the purpose of allowing the debtor to maintain a piece of collateral, a vehicle, for example – that may otherwise be seized as a standard part of the bankruptcy process.
• Means Test: Under Chapter 7 Bankruptcy a means test is mandatory to demonstrate to the bankruptcy courts a debtor has no means to repay their debts. The means test assesses things like assets, income, unsecured debt and expenses. When a debtor fails the means test, the Chapter 7 bankruptcy may be dismissed, or they may choose to start proceedings for Chapter 13 bankruptcy.
• Liquidation: When the non-exempt property of a debtor is sold – the proceeds are then paid to their creditors via the U.S. Trustee’s office.
• Lien: A legal procedure where a creditor can take, hold and/or sell real estate previously belonging to the debtor as security for debt repayment.
• Discharged Bankruptcy: Discharged refers to when the bankruptcy procedures have been completed and certain debts are literally extinguished forever.   In Chapter 7 bankruptcy this is once your assets have been sold and all of your creditors paid. With Chapter 13 bankruptcy it is completed when the repayment plan of the debtor has been completed, usually over a 3 to 5 year period.
• Credit Counseling: it is mandatory to meet with a government-approved credit counselor before you can commence bankruptcy proceedings. You will also have to complete a course in personal finance management prior to the bankruptcy being successfully discharged.
• Bankruptcy Trustee: A person (or in some cases a corporation) to act on behalf of the creditors. They are appointed by the bankruptcy court. In Chapter 7 Bankruptcy they will review the petition of the debtor, liquidate assets and be responsible for the distribution of those funds to the creditors. In filings for Chapter 13 bankruptcy, the Trustee will also oversee the repayment plan agreed by the court and the debtors’ attorney. They will also receive the monthly payments from the debtor and distribute the monies to the creditors.

Types of Unforgivable Debt

Bankruptcy potentially eliminates a great deal of debt; however, the following debt types cannot be removed in either Chapter 7 or Chapter 13 bankruptcy.

• Reaffirmed Debt
• Debt from student loans
• Government taxes, penalties or fines
• Child Support
• Alimony
• Court penalties or fines
• Federal tax lien owed to the US Government

Bankruptcy Consequences

Loss of property is probably the consequence of bankruptcy most people are familiar with. Both Chapter 7 bankruptcy and Chapter 13 bankruptcy require you to forgo assets and possessions so creditors can be repaid some of the money they are owed. Sometimes, bankruptcy may mean losing possessions, for example, jewelry, vehicles, antique furniture, and real estate. It may also hurt others if you had a co-signer on some of your debt. Bankruptcies take a toll on your credit and will cloud the way future lenders see you. They may decide not to offer you credit or burden you with higher interest rates if they do grant credit. A bankruptcy on a credit report undoubtedly causes harm to your credit score.

Obtaining A Loan Or Credit Card Following Bankruptcy

Once a bankruptcy is discharged, it will probably be very tough to get a loan or a credit card until the bankruptcy comes off your credit report. To start rebuilding your credit potential, you will need to make sure you succeed by paying all your bills regularly and on time. This may make lenders look more favorably; however, expect high rates of interest and terms that are less than favorable should you get approved.

Obtaining A Mortgage Following Bankruptcy

Many of the same problems with obtaining a credit card or loan will apply to a mortgage – plus you can expect to pay a far more significant down payment and interest rates. A good tactic is to reaffirm your home mortgage during bankruptcy proceedings. This will allow you to stay in your home and continue the payments on the mortgage you already have.

Alternatives To Bankruptcy

• Use a debt consolidation loan: These loan types take higher interest loans and combine them into a single loan at a lower interest rate to help you manage your debt.
• Credit Counseling: Credit counseling from a credit counselor who is government approved can help you with a feasible plan to repay what is owed to your creditors. They can also help with budgeting.
• Approaching Creditors to Negotiate a Short Pay: See if your creditors are willing to negotiate a different payment plan. Creditors do not want to have to handle defaults so they may be willing to work with you so a repayment plan that will be successful can be arranged.

Final Thoughts On Debt Relief

Your credit will take a negative hit every time you do not pay a debt in the manner you originally agreed. Before you declare bankruptcy, you should research all of your options, obtain advice from a counselor who is qualified and has a thorough understanding of credit issues so you can understand the full impact your decisions will have to your financial status. Remember you can always make real headway by:

• Utilizing credit in small amounts and paying the total balances when they are due.
• Keeping an eye on your credit report for its accuracy.
• The creation and keeping to a personalized budget.
• Not taking on additional debt.

Source

Bankruptcy: How It Works, Types & Consequences.” Experian, 11 Jan. 2018, www.experian.com/blogs/ask-experian/credit-education/bankruptcy-how-it-works-types-and-consequences/