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WHAT IS A BANKRUPTCY Personal bankruptcy is a way of getting protection from your creditors either permanently or while you make a payment plan. Bankruptcy has been around since biblical times and has been used as a means for people to obtain relief from burdensome debts.
The U.S. bankruptcy laws are formulated to give the "honest" debtor a "fresh" start. Bankruptcy is intended to level the playing field between people who owe money and the people to whom they owe money.
WHAT IS A CHAPTER 7 BANKRUPTCY? Chapter 7 Bankruptcy is called a “liquidation” bankruptcy. Chapter 7 bankruptcy is designed to help people who are unable to pay their existing debts. When you file for Chapter 7 bankruptcy you can wipe out most debts with the exception of student loans, taxes, domestic support obligations and court fines. Even taxes are sometimes dischargeable. In a Chapter 7 bankruptcy, a trustee takes possession of your property that is not considered "exempt." In most cases, all of your property will be exempt. For example, a car with equity of up to $3,225 is exempt ($6,450 for married couples), as are your clothing and household goods valued up to $10,775 ($21,550 for married couples) and jewelry up to $1,350 ($2,700 for married couples), retirement accounts, equity in your home up to $125,000.
 WHAT IS A CHAPTER 13 BANKRUPTCY? Chapter 13 bankruptcy, nicknamed the "Wage Earner Plan" is designed for people who have excess income in their budget and can use those funds to repay a portion of their debts over time. Most individuals who seek protection under Chapter 13 of the U.S. Bankruptcy Code are those who:
| • | own property that would not be considered exempt under Chapter 7; | | • | have a past due balance on a mortgage or car loan and wish to repay those past due balances over time without fear of foreclosure or repossession; | | • | have debts such as taxes or student loans that would not be discharged under a Chapter 7 bankruptcy; or | | • | have Disposable Income (as defined by the bankruptcy laws) sufficient to repay a portion of their debts over a three or five year period of time, depending on your income.
| | Under Chapter 13 you have the opportunity to catch up on your mortgage if it is past due as well as your car loan if it is past due. Also, if you repay your debts through Chapter 13 you are given a predictable payment plan that your creditors are required to accept. The primary difference between Chapter 13 and debt consolidation is that Chapter 13 gives you the protection of the U.S. Bankruptcy Code from continued interest, late fees and creditor harassment. | WILL I QUALIFY FOR CHAPTER 7? Your ability to file for Chapter 7 bankruptcy and eliminate your debts is determined largely by your household income, which, for these purposes, is the determined by adding up all of your non-social security income for the last six months, dividing that number by 6 and then multiplying it by 12 to get your annual income. That number also includes regular contributions to the household by other family members or other members of the household. If your monthly income is less than the state median income for a household of your size then you most likely qualify for Chapter 7 bankruptcy. If your monthly household income is greater than the state median family income for a household of your size then you may or may not be eligible for Chapter 7. If your Current Monthly Income is greater than the state median family income for a household of your size the courts look to your allowable expenses (these may or may not be the actual amounts you spend on your basic living expenses). If your Current Monthly Income minus your allowable expenses leaves you with enough money to repay a certain portion of your debts over time then you may be eligible to file for Chapter 13 bankruptcy.
THE BANKRUPTCY PROCESS Your bankruptcy case begins with our representation of you at which time you can tell all of your creditors to leave you alone. We take over and handle your creditors from that time on. We handle preparation of your bankruptcy petition and schedules and the filing of the petition, assist you with questions and concerns the Trustee may have. Since the trustee's role is to sell any assets that are not protected by law and to distribute the proceeds of that sale to your creditors, we will have already discussed the value of and exemptions for your assets. In most cases there are no assets to liquidate, so do not be concerned. If the trustee does identify assets, we probably have already advised you about this possibility. We will notify you of and be present to represent you at the first meeting of creditors. This hearing date will usually occur within 40 days of the filing of your bankruptcy. Although the purpose of the meeting is to give creditors a chance to ask questions under oath, it is rare that a creditor actually comes to the hearing. Usually, the trustee will ask you several questions regarding your debts and assets and then the hearing will be over. Most meetings take only a few minutes. Most of our clients are very anxious about the meeting of creditors. But, there is no reason to fear the trustee. The meeting usually takes place in an meeting room, and the trustee is not a judge; the setting is fairly informal. After the meeting most people agree that their sleepless night was really uncalled for given the simplicity of what they went through at the hearing. Just bring the minimal documentation we tell you about before the hearing and answer all questions and the hearing should go off without a hitch.
HOW LONG DOES A BANKRUPTCY CASE LAST? A Chapter 7 case is usually completed about 90 days after filing. At that time you will receive a document called “Discharge of Debtor” from the court. The discharge order is the official court order relieving you of your obligation to pay your bills. Remember that the Discharge of Debtor in a Chapter 7 case may not relieve you of all of your debts. You should speak with us to find out which debts will not be discharged in a Chapter 7 case. In a Chapter 13 bankruptcy case, the discharge order is issued upon your successful completion of the 36 – 60 month repayment plan.
WHAT EFFECT DOES BANKRUPTCY HAVE UPON YOUR CREDIT? Your bankruptcy filing can remain on your credit record for a period of ten years. This does not mean that you will not be able to get anything, finance anything, or make any money during that time. Filing for bankruptcy does not mean the end of your life or even your credit. By filing for bankruptcy you can eliminate those debts and begin to save money again. And once you save money you won't need credit for routine expenses such as groceries, gasoline and clothing.
There is no reason to feel guilty about filing bankruptcy; it is your Constitutional right. Use it as an opportunity to make a positive and permanent financial change which will provide security for your family. A large number of well-known actors, actresses, investors business people and businesses have filed bankruptcy. Everyone enocounters serious financial problems at some point in life. Your financial problems may certainly be serious but they are not the end of the world. Filing bankruptcy is often the beginning of your new life of financial freedom. FORECLOSURE When you fall behind on your mortgage, it can be very scary. It is tempting to stall and hope a solution will present itself. However, it is important that you take action as quickly as possible. Waiting and losing valuable time will only serve to limit your options and the options we have with which to help you.
Bankruptcy can help you catch upon your bills. Chapter 13 bankruptcy gives you the ability to stop a foreclosure and catch up on your past due mortgage payments over a 3-5 year period. This is helpful if you have fallen behind on your mortgage payments as a result of a temporary financial problem but are now in a position to catch up.
REBUIDING YOUR CREDIT There is life after bankruptcy. Now that you have eliminated most or all of your debts, it is time to begin rebuilding your credit. Rebuilding your credit depends largely upon you.
You will get new credit offers after bankruptcy. Having a bankruptcy on your credit report does not mean that you will not be able to get credit. What it does mean is that you will need to put time and distance between yourself and the bankruptcy filing and take an active role in rebuilding it. Many of our clients are able to get new credit just a few months after completion of their bankruptcy. We can work with you to give you suggestions which will help you improve your credit score and credit report.
THE FAIR DEBT COLLECTION PRACTICES ACT . The Fair Debt Collection Practices Act (the "FDCPA") governs the actions of collection agencies and other debt collectors, including attorneys. Even where money is legitimately owed, a debt collector's conduct is restricted by this law. The FDCPA applies to all “consumer” debts. This means credit cards, mortgages and other household debts.
WHAT DEBT COLLECTORS ARE NOT ALLOWED TO DO?
Debt collectors are not allowed to take any actions against you that are deceptive, fraudulent, or designed to harass or intimate you. This includes threats of criminal action, and threats to take legal action (such as garnishment and repossession) without any intention to act on the threat), informing third parties, such as your employer, that they are collecting a debt.
YOU HAVE RIGHTS WHEN COLLECTORS ARE CALLING YOU.
If, within thirty days after receiving written notice of the debt from the debt collector, you send the collection agency a letter asking for proof of the debt then the collector must stop contacting you and all other efforts to collect the debt until the proof is provided.
You can instruct a debt collector to make all inquiries about the debt they are collecting through your attorney if you have one. Then, they can no longer contact you directly.
You may also write the debt collector and simply tell the debt collector to stop contacting you. Under the FDCPA, they must do so. Of course, that does not mean you no longer owe the debt, it simply relieves you of the phone calls.
If the debt collector violates any of the above, you may be able to sue them and recover damages you have suffered plus up to $1,000 and your costs and attorney fees. | 12 myths about bankruptcy | | By Bankrate.com
| | Like most big, bad scary things, bankruptcy has a reputation based on a few tidbits of truth and lots of embellishment. It's not nearly as frightening once you know the truth. | With a mind toward declawing the monster, here are a dozen misconceptions about bankruptcy: | | | | 1. Everyone will know I've filed for bankruptcy.
Unless you're a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it's true that bankruptcy is a public legal proceeding, the number of people filing is so massive that very few publications have the space, the manpower or the inclination to run all of them. 2. All debts are wiped out in Chapter 7 bankruptcy.
You wish. Certain types of debts cannot be discharged (erased). They include child support, alimony, government-issued or government-guaranteed student loans, and debts incurred as the result of fraud. It's also very unlikely that a judge will discharge legal settlements you've been assessed, such as money you've been ordered to pay to someone who sued you. 3. I'll lose everything I have.
This is the misconception that keeps people who really should file for bankruptcy from doing it, says Chris Viale, chief operating officer of Massachusetts-based Cambridge Credit Counseling Corp. "They think the government will sell everything they have and they'll have to start over in a cardboard box," Viale says.While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing. "For most people, they'll pass through a bankruptcy case and keep everything they have," says John Hargrave, a bankruptcy trustee in New Jersey. If you have a mortgage or a car loan, you can keep those as long as you keep making the payments (like the rest of us). 4. I'll never get credit again.
Quite the contrary. It won't be long before you're getting credit card offers again. They'll just be from subprime lenders that will charge very high interest rates. "There are innumerable companies that will provide credit to you," says California bankruptcy attorney and trustee Howard Ehrenberg. "I don't advise any of my clients to run out and run up the bills again, but if someone does need an automobile, they can go and will be able to get credit. You don't have to go underground or something to get money." | However, if you're planning to buy a house or a car, you might want to do that before you file. Those loans will be tough to get and the higher interest rate on such a large purchase would make a significant impact on your payments. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don't have to list it as a creditor since you don't owe any money on it. That means, you might be able to keep that card even after the bankruptcy. 5. If you're married, both spouses have to file for bankruptcy.
Not necessarily. "It's not uncommon for one spouse to have a significant amount of debt in their name only," Hargrave says. However, if spouses have debts theywant to discharge that they're both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn't file. 6. It's really hard to file for bankruptcy.
It's really not. You don't even technically need an attorney. However, it's not recommended to go through the procedure without one. 7. Only deadbeats file for bankruptcy.
Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They've struggled to pay their bills for months and just keep falling further behind. 8. I don't want to include certain creditors in my filing because it's important to me to pay them back someday and if the debt is discharged, I can't ever repay them.
Bless you for even thinking about such a thing. You're no longer obligated to repay them, but you always have that opportunity. If your conscience won't let you sleep nights because you didn't pay your debts, there's nothing in the bankruptcy code that prevents you from doing that once you're back on your feet. But bankruptcy is an all-or-nothing deal, so you have to include all your creditors in the petition. 9. Filing for bankruptcy will improve my credit rating because all those debts will be gone. That sounds like an ad for a bankruptcy lawyer trolling for clients. Filing for bankruptcy is the worst 'negative' you can have on your credit report. Unlike other negatives, which stay on your report for seven years, bankruptcy can be there for 10 years. 10. You can't get rid of back taxes through bankruptcy.
Generally speaking, this is true. However, there is such a thing as tax bankruptcy, says tax educator Eva Rosenberg, known on the Web as Tax Mama. To get a shot at it, you have to file all your returns and the taxes owed need to be at least three years old. 11. You can only file for bankruptcy once.
You can file for bankruptcy more than once, but the bankruptcy law that went into effect in October 2005 lengthened the required wait between filings. You can only file for Chapter 7 bankruptcy once every eight years. You have to wait two years to repeat a Chapter 13 filing and four years between a Chapter 7 and a Chapter 13 case.Of course, that doesn't make it a good idea. "Multiple bankruptcies are really bad," Rosenberg says. "Many people get into the habit of once they've done it, it becomes a way of life. This is not good for your karma." Or your credit rating. 12. I can max out all my credit cards, file for bankruptcy and never pay for the things I bought. That's called fraud and bankruptcy judges can get really cranky about it. The trustee in your case will review all your purchases right before your filing. The trustee knows what to look for.
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