What You Must Understand About Bankruptcy

Many people file for bankruptcy every day, but the vast majority of them approach the whole process incorrectly. They think they can do it all themselves, based on hearsay and what friends have told them, and what inevitably happens is that the whole process is delayed for weeks or even months longer than how long it should take.

The huge problem with this is that in the meantime, until you have actually filed for bankruptcy, your creditors are still hounding you, disrupting your dinners, calling you at work and maybe even calling your neighbors. To compound this problem, if any of your creditors file a judgment against you for what you owe them BEFORE you have completed filing for bankruptcy, then bankruptcy cannot touch that judgment, and you will need to deal with that judgment and paying back that money, in addition to however your bankruptcy filing works out.

If your financial situation is dire enough to where you need to consider bankruptcy as your only option, time is of the essence, and this is NOT a time for you to start learning about bankruptcy law. Bankruptcy law is very complex, especially after the recent major changes in the bankruptcy laws that make it much more difficult to file bankruptcy than it ever was in past years.

Before you start to file bankruptcy, I would strongly urge you to consider all possible bankruptcy alternatives and options. There are likely several financial options that you were not even aware of which may be much better than the very drastic step of filing bankruptcy.

An interesting note is that in a recent survey of people who had filed bankruptcy, a staggeringly overwhelming percentage of them said that if they had to do the whole thing over again, they would have used a bankruptcy lawyer. They realized that using a good bankruptcy lawyer would have saved them weeks and even months of time in the whole process. Some had even mentioned that a good bankruptcy lawyer could have presented their case so that they could have filed liquidation bankruptcy where all of their debts were erased and eliminated, rather than the chapter of bankruptcy that they ended up filing, which was reorganizational bankruptcy, which left all their debts in place, with only a lower interest rate and a longer time to pay them off, but still having the huge red flag of BANKRUPTCY sticking out like a sore thumb on their credit reports.

If you are confused about bankruptcy or what you should do, you are strongly encouraged to get a free bankruptcy evaluation. This will be sent to a qualified bankruptcy lawyer in your local area, who can look at your specific financial situation and make recommendations as to what your options are, or if bankruptcy is indeed your best option, what you can expect to happen, and therefore you can make an intelligent and informed decision about how you want to proceed.

Is Bankruptcy Right for you?

Bankruptcy is a financial practice that allows you to officially declare that you cannot repay your debts now and do not see how it will ever be possible in the future. Declaring Bankruptcy is a big step. For some people, there are other ways to get out of debt, like debt consolidation or negotiating with your lenders. However, if your best option for getting out of debt is bankruptcy, than you should take steps to make this financial situation work in the best possible way for you. A financial profession can help you do that. In any case, before you jump into anything, you need to fully decide if bankruptcy is right for you.

First, it is important to learn as much as you can about bankruptcy. For individuals, chapter 7 and chapter 13 are the two types of bankruptcy that can be filed. There are other options for businesses and entities. Learn the difference between the two so you can see how they work. If bankruptcy is right for you, you must be aware of your obligations and your lenders’ choices.

Once you have learned all you can about bankruptcy, take a moment to consider other options. For example, you can consolidate your debts into one large monthly payment. If you are considering bankruptcy because you just barely miss paying off your bills on time every month or if you feel overwhelmed by credit card debt, this may be a great option for you. You can also try doing nothing and living simply for a number of years, which works well if you have no family for which you are responsible. Another options is negotiating with your lenders. In the end, there are many different options other than bankruptcy, so make sure that your second step is to consider them all.

Next, check out the requirements for eligibility for declaring bankruptcy. If your debts are too high and your income too low, you probably will not qualify for chapter 13 bankruptcy. On the other hand, if your income is too high and your debts too low, you probably will not qualify for chapter 7 bankruptcy. In some cases, you may not qualify for either, and this is a sign that you did not think through your other choices.

Consider all of your property and debts if you do qualify. What will happen to your home? Your car? Your retirement plan? Every state has different specification when to comes to this, so make sure that you understand how your property will or will not be taken. Also, it is important to begin compiling lists of your assets and debts. Remember that some debts cannot be wiped out, like child support payments.

Once you have all your information compiled, you can begin the declaration process. It is best to work with a lawyer or financial professional to complete this task, and remember to always be completely honest. Declaring bankruptcy is not for everyone, but it can work for some people.

Alternatives To Bankruptcy

Many people want to file bankruptcy the moment they realize they are in over their heads, and they feel like there is nothing they can do to get out of debt. Bankruptcy however, should be used as an absolute last resort- after all other options have been thoroughly researched and exhausted.

Before making the decision to file bankruptcy, consider each of the following alternatives:

* Refinancing

* Debt Consolidation

* Debt Settlement

* Debt Negotiation

If after you’ve considered each bankruptcy alternative, you still find that your personal debts are greater than the money you have available to make payments each month, you may have no choice other than bankruptcy.

Refinancing:If you are a home owner and have not refinanced your home in the last year, it may be possible for you to obtain additional money from the equity you have in your home, and use it to pay off your other debt. This will eliminate the monthly payments on each of your credit cards or loans that you have used your refinance to pay off, and allow you to make a single, more affordable monthly payment. If you are able to use refinancing of your home to manage your debt, make sure that you do not run right out and get another credit card or car loan, because before you know it you will be right back where you were before the refinance!

Debt Consolidation: Many individuals are able to consolidate all of their monthly credit card and loan payments together by taking out a debt consolidation loan. Typically, a consolidation loan will require some form of collateral to secure it. Unfortunately, you do need to have fairly good credit in order to obtain a debt consolidation loan, but this is a viable option for someone who finds themselves in over their head before the payments start becoming late.

Debt Settlement: Sometimes you can settle your debt out of court. While it is possible to get a debt settlement on your own, it is advisable that you find a reputable company to help you negotiate with your creditors to reduce the amount of money that is owed. Typically, creditors are willing to accept less than the money that is owed to them if they believe you are going to be filing bankruptcy. They realize that a settlement is going to give them more money on the balance owed than the bankruptcy will, and it is in their favor to work with you in this situation. In order to settle your debts, you should have money on hand to immediately pay your creditors and get them to close the account, and report it as “paid as agreed” to your credit report. If you’ve just received a fairly large tax return for example, you could consider attempting to settle your debt with each creditor by offering them less than the total amount owed to close out the account.

Debt Negotiation: Negotiating your debt can be helpful, although it doesn’t eliminate your debt. Call each of your creditors and discuss with them that you are having financial difficulties. Explain you are considering bankruptcy, but before you take that leap you would like to see if you can negotiate your debt with each of your creditors to obtain payment arrangements that work better with your financial situation. Some credit card companies will lower the interest rate and stop late fees and finance charges from occurring, and it really helps you start paying down on the balances. The trouble with credit cards is that once you get behind, the interest and finance charges each month are as much as or more than your minimum monthly payments, so you are paying every month and never reducing your balance. With lower interest rates, and creditors who stop the finance charges and late fees temporarily, you can start chipping away at the actual balance, and hopefully pay off a few accounts during the negotiation period.

A Look At Personal Bankruptcy and What To Expect

One of the most difficult decisions that you can face is whether or not to file for bankruptcy. For individuals, there are basically two types of personal bankruptcy, which includes Chapter 7 and Chapter 13. Designed to give the filer a fresh start in life by wiping out certain debts, a Chapter 7 bankruptcy will rid the filer of credit card and other unsecured debt. A chapter 13 bankruptcy, on the other hand, is a court-approved payment plan in which the filer is required to repay a predetermined percentage of their debt. The determination of which chapter to file will be based on the filer’s disposable income, if any, after paying their necessary monthly bills.

When many people file for bankruptcy, their first thoughts are of their assets and whether or not they may lose their home. In a Chapter 13 repayment plan, the majority of filers are allowed to keep their property in exchange for repaying a portion of their debts. A Chapter 7, however, is designed to be a liquidation process that often results in the sale of non-exempt property. Which property is non-exempt in a bankruptcy proceeding? Each state has it’s own laws pertaining to the amount of property that an individual or married couple can keep without having to worry about it being liquidated.

The official bankruptcy process begins upon filing a petition with the local bankruptcy court. This can either be done individually, also known as pro se, or with the help of an attorney. For most, hiring an attorney is the best way to make sure that every form is completed accurately and in order to make sure their assets are protected as much as possible. Upon the filing of a bankruptcy petition, the court will assign a trustee to the case and will set a date for a Meeting of the Creditors. Although creditors of the filer are invited to attend, they are not required to do so. The filer, however, is required to attend and will be questioned by the trustee, under oath, while having the meeting recorded. This meeting is typically the only appearance required of the filer unless special circumstances are present.

Following the Meeting of the Creditors, often referred to as the 341 meeting, the creditors will have 30 days to object to the filers property exemptions and another 30 days to object to the discharge if the filing is a Chapter 7 bankruptcy. In a Chapter 13 proceeding, creditors may object to the payment plan but the discharge will not be granted until the payment plan is complete. A Chapter 13 bankruptcy can last for up to 5 years before the payments are completed and a discharge is issued. Following the discharge, the bankruptcy case will be closed and the process will be complete.

This article is to be used for informational purposes only. It should not be used as, in place of or in conjunction with professional legal advice regarding bankruptcy. Anyone who is considering filing a petition for either personal or business bankruptcy should consult a licensed attorney in their area for additional information and/or legal advice.

The Chapter 7 Bankruptcy Timeline

Bankruptcy is when you legally declare that you can no longer repay your debts. Individuals have the choice of either declaring chapter 7 or chapter 13 bankruptcies, depending on the severities of their debts and the incomes being made. Of most, chapter 7 bankruptcy makes the most sense, although you should consider both carefully and do what is right for your. However, if you do declare chapter 7 bankruptcy, here is how it will play out:

First, your declaration officially begins when you sign the paperwork and file the proper documents with a bankruptcy court. In most states, you have to finish a counseling course regarding bankruptcy so that you can be sure this is the correct option for you. This can be done no longer than six months before file your paperwork. Upon filing, your wages will no longer be garnished and your creditors can no longer proceed with legal actions against you or, in most cases, even call you regarding your debt. The court will contact your creditors.

Next, you must meet with your creditors in what is called the 341 meeting. Creditors may or may not choose to attend, but you must be there. A trustee will be assigned to your case and presides. This meeting will typically only last five minutes, and creditors usually do not show up. Afterwards, your trustee will sell any of your possessions that are nonexempt. Creditors have up to 90 days to then file claims. A bankruptcy lawyer will be assigned to help you through this process.

After the 90 days are over, or after all of your creditor have files their claims (whichever comes first), you will be discharged and all of your debts will be written off, except certain exceptions, like student loans and child support payments. Other debts that cannot be wiped clean from your slate include alimony obligations and taxes.

Be aware that most of your possessions can be sold when you file for bankruptcy and will be sold rather quickly. In many cases, it is better to sell them yourself for more money before you declare bankruptcy and use them to help pay off debts. If you can do this effectively, you might not have to declare bankruptcy at all. If you can, look for options to avoid bankruptcy. You have choices, and debt counselors can help you figure out a financial plan that is right for you.

Should You File For Bankruptcy

Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, it is a legal procedure that offers a fresh start for people who can’t satisfy their debts. People who follow the bankruptcy rules receive a discharge which is a court order that says they don’t have to repay certain debts.

The consequences of bankruptcy are significant and require careful consideration. Other factors to think about: Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows you, if you have a steady income, to keep property, such as a mortgaged house or car, which you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.

Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. Exempt property may include cars, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official, a trustee, or turned over to your creditors. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You now must wait eight years after receiving a discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period is much shorter and can be as little as two years between filings.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary by state. Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.

Another major change to the bankruptcy laws involves certain hurdles that you must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a “means test.” This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program.

When you are deep in serious financial sneakers, it seems like almost everyone you meet has bankruptcy advice. One of the big problems with this is that much of this advice is just hearsay with little basis in real fact or legal fact. Another problem is that much of this advice is very dated, stemming from the days prior to the recent sweeping changes of the bankruptcy laws in the US.

Those bankruptcy law changes were widespread and made a lot of changes and much-needed corrections to bankruptcy law. Whereas in the past it was almost a financial game to get into some money, file for bankruptcy, have your debts discharged, and then rinse and repeat, today it is a very different story.

As a consumer, you have basically two choices for bankruptcy – chapter 7 or chapter 13. Although you may prefer chapter 13, where your financial obligations are liquidated and the slate is wiped clean, the chapter that you file is not your decision or choice. The court takes an in-depth view of your finances, your obligations, your income, and then the court makes a decision as to which chapter you can file, and even further than that, IF you can file. That’s right, the courts must approve you to file bankruptcy. Just because you want to or think you need to does not mean that you can.

Also be aware that even if you are able to file chapter 13 bankruptcy where your financial obligations are erased, there are certain types of debt that cannot be erased or liquidated by any form of bankruptcy. This would include property or asset liens, taxes, and federal student loans. Also, if a creditor files judgment against you before you have filed bankruptcy, that judgment will stand and filing bankruptcy has zero effect on that.

Your best bet is to get a free bankruptcy evaluation from a qualified bankruptcy attorney in your state. He will be familiar with the bankruptcy laws in your state as well as the federal bankruptcy laws and can look at your financial situation to determine if it would even make sense for you to file. He will also be able to advise you as to your alternatives to bankruptcy, many of which you may not even be aware of.

Bankruptcy is a drastic step and one that should be used only as a last resort. Make sure you know what your options and alternatives are before you take that huge step.

If you are in a situation where you are considering bankruptcy, you might want to give it a second thought. Many people think of bankruptcy when their bad credit and financial situation seems very dire, but then again, they are not intimately involved with the financial industry and are probably not aware of other options that they have. Remember, bankruptcy should be considered an option of last resort, since it is drastic action and has long-term negative effects. For example, a bankruptcy filing, even if you go with the Chapter 13 reorganization type where your debts are not wiped out, will stay remain on your credit report for the next 7 to 10 years as a huge blemish and a red flag for future credit granters.

Be aware there are also certain kinds of debt that cannot be wiped out or reorganized via any chapter of bankruptcy. Types of debt that fall into this category would include federal student loans, child support, alimony, taxes, and more.

You have multiple options that can solve your financial problems, and typically the answer is NOT to get a second or third job. While more money will certainly help, it makes no sense to work yourself into an early grave, when the real solution is to create a budget you can live with and stick to. You have the option of a personal loan or debt consolidation loan to bring all your payments up to date. But is that the best solution for you? It may be, but for some people, it is simply borrowing from Peter to pay Paul and will only postpone the inevitable.

As opposed to a debt consolidation LOAN, you might be further ahead with a debt consolidation PROGRAM, which is very different from a loan. Click the debt consolidation link under the “Bookmarks” section to get more information about a debt consolidation program and what that could do for you and how it can benefit you and your financial situation.

But if bankruptcy is indeed your most viable option, do not go into it blind. Rather, take advantage of getting a free bankruptcy evaluation as shown by the links under bookmarks here. This will give you a free bankrutpcy evaluation which will be performed by a qualified bankruptcy lawyer in your local area. They are familiar with bankrupcy law and also how that law applies in your state, and they are in an excellent position to make recommendations as to your best options, which may not include bankruptcy at all.

Tips on filing for Bankruptcy

Not a lot of people want to make the decision of when to file bankruptcy, but you’ll also find that there is some point where it just may have to be done. You’ll want to keep in mind that bankruptcy will affect your credit rating and you’ll also have other ramifications.

Filing bankruptcy should only be a last resort when all other options have failed you. But when should you consider filing for bankruptcy?

You may also want to file bankruptcy when you are constantly borrowing money from one credit source to pay another credit source. If you need to start taking cash advances of more than $500 just to pay for living expenses.

You borrow to meet regular expenses like food and utility bills. You have stopped answering your phone because the only calls you receive now are from creditors.

Are there creditors that are threatening to sue you? They have even already taken some legal action against you. You will find that these all are signs that there is something terribly wrong and these are signs that you may want to consider filing a bankruptcy.

Then it comes to the decision of what sort of bankruptcy you need to file for. The most common are chapter 7 and chapter 13. With a chapter 7, you will find that it will wipe all your debt clean and it will also give you that immediate fresh start. Chapter 13, you will be making payments for three to five years.

However, you need to make sure that you consider filing for bankruptcy when you have gone through all of your other options. You’ll need to make sure that you think about your financials as practical situations. You will also find that if you get some professional advice from a bankruptcy lawyer they will tell you what your options are and also get the bankruptcy filing going if that is your last option.

Bankruptcy Counseling

Now, with the new laws that were passed in 2005, you will need to take some pre-bankruptcy debt counseling in order to be able to file a chapter 7. It has become law that you get counseling before and after filing bankruptcy.

The debtor must get counseling and certification from a non-profit credit-counseling agency before the forms can be filed for your bankruptcy.

You’ll need to take one or two sessions in order for you to find certification. With the certification you will be able to proceed with the bankruptcy filing.

There is work you need to do even before you get your pre-filing credit counseling certification. There are forms you will need to have filled out during your sessions.

The first is the income certification form. It will state your income and also it will show a fee schedule. Also, keep in mind that the budget form will also need to be filled out, but that form is very self-explanatory and easy to understand.

With these forms complete, and your certification now complete, you will need the non-profit credit counselor to fill out your affidavit and agreement for credit counseling. Your attorney will notarize the form, but you’ll also need to send it along with a coy of your state ID.

All of these forms must be presented to the court clerk before you begin to file your bankruptcy paperwork along with a notable fee.

You may be able to get this service online and even on the phone. Many companies will offer their service in the office, but they also are very flexible with the sessions. Once you have completed these steps, you are ready to file the paperwork with your bankruptcy court.

You will need to be prepared and understand what it is that you need to expect certain things to happen during the court process. You will want to keep in mind that another counseling session is a must in order for you to plan better for the future. You will want to keep in mind that the finical planning session will help you to get back on your feet and also plan better for your future.