Preparing For Bankruptcy

When you are considering a trip, usually, you make substantial preparations in anticipation of that trip. You make travel arrangements; you make sure you have a place to stay; you make reservations for any activities in which you wish to participate. You will often make significant plans and preparations for any “big” event. Bankruptcy is no different. It is a significant life event that demands some thought and preparation before you embark on it.


In talking with potential bankruptcy clients, it seems that a lot of them wait until the last minute before contacting a bankruptcy lawyer to find out how bankruptcy may help them. While visiting a bankruptcy lawyer most likely does not rank high on most people’s “bucket list,” if you are struggling financially, it most likely makes sense to determine if and how bankruptcy can help you sooner rather than later.

So, how can “preparing” for bankruptcy help? First, you will need to have the fees for the lawyer and for the court available. For now, for a chapter 7 filing, just the filing fee is $306.00. Additionally, before you file, you must complete a consumer credit counseling session and get the certification that must be filed with the court. If you “fail to plan” for your bankruptcy filing by finding out what you need ahead of time, when your car is on the verge of getting repo’d, you may not have the time and/or money to retain a bankruptcy lawyer.

Second, you can carefully go over your income and expenses and see where the trouble lies. Certainly a bankruptcy lawyer can help you identify the problem (with appropriate information) but you also need to know how you got into this financial mess. Some problems are easy to identify–temporary loss of income; extraordinary medical bills; overspending for a bit, etc. Bankruptcy can assist in overcoming those past problems but you need to be aware of the problem so that you can avoid it in the future. Bankruptcy is designed to be a “fresh start.” You can greatly assist in obtaining that “fresh start” by breaking or modifying some of the habits that perhaps got you here in the first place.

Third, make sure you know who you owe and how much. Find out if there is any collateral associated with the debts and gather up loan documents. Your lawyer will need this but, more importantly, you need to know your own financial picture. Credit reports are freely available and can be a big help. Also, if lawsuits or foreclosures have been filed against you, make sure you have that paperwork–all of it! It is important!

Finally, change your mindset. In dealing with individuals facing financial problems, it is often much more difficult instead of dealing with distressed businesses. That is because a business looks at assets and liabilities and can make a rational decision as to whether keeping an asset is worth the corresponding liability. Understandably, people are attached to their “things.” But, after all, they are just “things” and you have to consider carefully whether retaining a “thing” is worth the potential stress and headache. As an example, if you suffered a decrease in income and you have two relatively late model cars. No one wants to give up one or two cars but sometimes it is better to surrender a vehicle or two in order to keep your house (if that is important to you). There will be some emotional attachment to some “things” but it is imperative that you do this. Determining what is important to you is important for your bankruptcy lawyer in setting achievable goals for your bankruptcy filing.

Finally, do some research. There is a lot of information about bankruptcy that is freely available. However, you should exercise extreme caution in considering the information. Not that the information is inaccurate (some info may be outdated or simply inapplicable) but it takes an experienced profession to know what is appropriate and what is not. But, by familiarizing yourself with some basic bankruptcy information, you will be in a better position to appreciate and assist your bankruptcy lawyer in setting realistic and achievable goals.

After all, the real goal of a bankruptcy filing is a “fresh start.”


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Important facts about bankruptcy

by Jamie Billings


Bankruptcy is a tough road that best reserved for those who do not have any other options. Generally speaking, filing a Bankruptcy is a last resort. While it should not be entered into lightly, it may prove itself to be a positive solution for you. If you cannot pay your debts or you are dealing with a lawsuit bankruptcy maybe an option for you. Bankruptcy is an option when you have little or no income in order to make any kind of monthly payment to your creditors. The court will take away from you the responsibility of paying your debts. Bankruptcy usually lasts 12 months, after which time, any unpaid debt is written off.

One of the major aims of bankruptcy law is to give a financially distressed person an opportunity to make a new financial start. Bankruptcy laws help people who can no longer pay their creditors get a fresh start through liquidating assets to pay their debts or by creating a repayment plan. It also protects troubled businesses and provides for orderly distributions to business creditors through reorganization or liquidation.

Bankruptcy is an important decision and the law and it application to one's particular situation can be very complicated. It is generally recommend that one consult with an attorney with experience in the personal bankruptcy field.

If you feel comfortable with attempting the bankruptcy process without an attorney there are several online bankruptcy services and information that may assist you. Bankruptcy information provides an expert advice and a live forum alongside a regular roundup of the latest news, statistics, and research from the world of debt solutions. You may also find reports on issues surrounding bankruptcies.

If you are deeming for a bankruptcy help, you should first understand the different consequences of bankruptcy so you will then be able to make informed decisions about the alternatives available to you. You can also try and come to an informal repayment arrangement with your creditors you can consider a formal arrangement.

There are a number of factors to consider in deciding whether bankruptcy is an appropriate option. You may wish to consult an attorney before proceeding to file for bankruptcy.

Bankruptcy laws help people who can no longer pay their creditors get a fresh start through liquidating assets to pay their debts or by making a repayment plan. Bankruptcy laws also guard troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation.

Bankruptcy will really give you a fresh start. However, careful consideration should be given before filing for bankruptcy, because doing so may affect your credit and like any ordinary phenomena, it have other consequences.

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My Life Experience with Bankruptcy

by Andrew Bernstein
Certified Personal Finance Counselor 

In 1985, I had completed my first 10 years in the newspaper business, 5 as a managing editor, which had been my dream all through school and life. The opportunity was presented to me to open my own publishing company and start to produce my own magazine and newspapers. I literally jumped in without even thinking about it. I knew how tough it was going to be and that there might be a stretch that finances would be tight.

My partner and I got great backing from a few local banks and investors and we were off and running. Our first publication, a women’s magazine, was an instant critical success. We had hired a great staff and of course with my experience as a managing editor, I was able to put a gentle hand in things. The problem was that we didn’t have a great sales and marketing team. We were relying on an outside company to do it and unfortunately their staff was not totally geared to the job. After a few months, we were able to cover costs, but had little left over for my partner and I. AND THAT IS WHERE MY TROUBLE BEGAN!!!

My credit had always been great. Buying cars, homes, etc., had never been a problem. I had 4 or 5 credit cards and I started living off them. Within about a year, the debt had crept up to the $10,000 mark, which back then was very significant. I was making all the mistakes, using one card to pay off another, using cash advances, etc.


It appeared as though I was heading for a small disaster and indeed I was. At some point I had maxed out all the cards and I was looking for more. I did get a little more and then the nightmare hit home. I started missing payments and got hit with penalties and late fees. The debt soared by several thousand and I was beginning to panic. I had always been taught that good credit is essential.

At this point, my ex-boss and good friend decided to lend me a hand. He would spot me a loan to pay off the debt and I would take on managing one of his publications in my spare time. It seemed like a good deal. The only problem was that I had not learned from my recent mistakes and started using the cards again out of necessity. Again the debt soared and while all this was going on, my partner decided to leave the business and when he did, I found out that he had left some major unpaid bills, so that of course effected the business.

It was the true perfect storm, no way to pay the bills, no way to pay myself and/or the credit card companies and the loan. To say the least it was depressing, at worst, it was totally devastating. My dream was about done and I was overwhelmed by all the debt. At that point I decided the only way out was a bankruptcy.

I filed for Chapter 7 on the personal side and I was going to file for a Chapter 11 business bankruptcy and then decided against it. I knew that it was a long shot to ever be able to open again, so I just let it go, despite pleas from certain leaders of the community to keep things going.

For the next year, I virtually lived in hiding, my reputation tarnished and my future looking bleak. There were no real credit counselors at the time per se, so there was no one to talk to about rebuilding, other than friends and interested colleagues. I started doing some consulting work for businesses that were having problems. It seemed so strange to see so many of them going through what I had just been through. I was able to help turn some of them around or at least delay the inevitable. It was then I also started seeing some potential in the fledging credit counseling industry. I joined a company in the late 1990’s and acted as a mediator between clients and their creditors. I felt as if I were getting a second chance. My own finances were now under control and I had decided to limit my credit cards to the minimum that I felt I needed.

My employer decided to move to FL in 2000 and I moved with them. I had always wanted to live in FL and this was a perfect opportunity, except that exactly a year later, the owner decided to move back to NY. I wanted to stay, so I was able to hook up with a similar company and in a short period of time, I became a floor manager and then general manager. The company was sold in 2004 and I immediately got hired by the company I work for now. I was doing counseling and began to conduct financial literacy seminars. It grew to the point where I was presenting programs in prisons, county jail facilities, the Air Force and many other agencies. I had and have truly found my niche. Of course, it’s not publishing, but I do get to write and create a lot of good and useful information. I have also learned to live exactly within my means and I keep to a tight monthly budget. It is the budgeting process that I love to teach at my seminars.

Most of all, I have discovered that there is life after bankruptcy and this is the message I like to convey to all my clients; that is, if I could come back from total economic devastation, so can they.


Andrew Bernstein

ABernstein@debthelper.com
Certified Personal Finance Counselor
Credit Card Management Services, Inc.
4611 Okeechobee Blvd. #114
West Palm Beach FL 33417
1-800-920-2262

You're eligible for Chapter 7 bankruptcy, but should you file?

Dear Opening Credits,


My husband and I have accumulated a lot of credit card debt, due to his layoff from a good job and extended unemployment/underemployment. We consulted with an attorney, and it looks like we can do Chapter 7 bankruptcy. We're trying to look at other options, but we're not sure what are legitimate and what are not. Also, we have a lot of pause about a bankruptcy and its effects on our lives for the next 10 years. I'm also concerned about a bad credit report. (Our credit was very good before all this happened.) Thank you. -- Laura

Dear Laura,

Are you familiar with the snappy little adage, "Just because you can doesn't mean you should"? It applies well to bankruptcy. Many people are able to file, but a good portion would actually be better off taking a different course of action. While your attorney said it is a viable option for you, you're right to question whether the legal route is the best road to travel. The person you spoke with likely didn't cover the myriad ways to deal with the debt.

Chapter 7 bankruptcy has equal parts wonderful upsides and rotten downsides. Indeed, it can be a great way to jump-start a new financial beginning. With it, you can walk away from those credit card balances -- well, at least those that weren't incurred for high-dollar cash advances or luxury goods within 60 to 90 days of filing. Those types of purchases might draw the creditor's attention, prompting them to ask that those debts not get discharged.

You don't say how much you owe, but I'll assume it's so much that you're struggling to meet your payments. If you've been late a few times, the interest rates on those accounts will have soared. They could be so high that nearly all of your minimum payment is going toward finance charges. Therefore, each month is the same: You struggle, scrape up as much cash as you can, neglect and even fall behind on vital expenses but get nowhere with that balance.

It seems like a horrible waste, doesn't it? Just think about how you would feel if you could get rid of that debt in bankruptcy. You would be able to use that money you were sending your creditors to pay for living expenses and non-dischargeable bills, and you might even be able to add some into a savings account. That's what people mean when they say it's a fresh start.

Before you get the wrong idea that I'm pushing you toward bankruptcy, know that I am not. If your husband will likely be working again within the next year, I would far prefer that you go on a creditor's hardship plan (assuming it was open to you) where you ask that they suspend payments and maybe even interest and fees for a while. When paychecks start flowing in again, you can get back on track. The fact is, you borrowed that money and ought to repay it if you can.

Other downsides to consider: The bankruptcy notation will remain on your credit report for a total of 10 years. That's a long time for such a black mark to follow you. Back when I was counseling, I used to have my clients picture themselves 10 years older, so a 37-year-old would have to envision herself at 47. Look at it in that kind of mirror and the gravity of a decade is apparent. As for your score, bankruptcy will take it down from where it is now to the very bottom, and it will languish there for a while. Regarding future job prospects, employers aren't privy to your score, but they can see your report --- and thus the bankruptcy. While they are not permitted to discriminate against job applicants who've filed, such a allegation would be virtually impossible for you to prove.

More, if you wanted to finance something during this time -- be it a home, car or new TV -- you would probably be charged a dreadfully high rate of interest. Have valuable property? You may have to give some of it up.

To really help you decide, please visit an accredited credit counseling agency. They will be able to give you a thorough rundown on all of your options, and that may or may not include bankruptcy. For example, a debt management plan could work well for you. Contrary to popular lore, repaying debt on such a program typically boosts a credit rating because it enables participants to resume steady payments.

So should you file, Laura? Perhaps, but only after exploring all other options first.


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Filing for Bankruptcy? A Step-by-Step Guide

If you are planning on filing for bankruptcy, there are a number of steps that you will need to complete. If you successfully complete the process, you will be able to take control of your debt situation or completely eliminate it. Here are the basics of how to file for bankruptcy.


The first thing that you will need to do is choose which type of bankruptcy that you plan on filing for. There are 2 main types of bankruptcy that most people use. These types are Chapter 7 and Chapter 13. Chapter 7 is known as the liquidation bankruptcy. With this type of bankruptcy, you will be able to discharge your debt so that you do not have to pay it any longer. With Chapter 13, you will be going through a reorganization and coming up with a plan to repay your debt.

Chapter 7 is the most sought after form of bankruptcy because it eliminates your debt. However, not everyone is eligible for it. You have to meet income requirements or pass a discretionary income test in order to qualify for Chapter 7. If you do not qualify for Chapter 7, you can file for Chapter 13 in most cases.

Hire a Lawyer

Although you could potentially file for bankruptcy on your own, hiring a lawyer will usually be the best decision. They can provide you with experience in the matter that you are lacking. They will help you fill out the necessary paperwork, meet the deadlines, and walk you through the entire process. They can also be beneficial when trying to decide which type of bankruptcy to file. You want to hire an attorney that specializes in bankruptcies instead of some other type of attorney for this process.

Documents

Once you have hired legal representation, you will need to go to the courthouse and get the appropriate documents. You will have to fill out a petition that says you are filing for bankruptcy. You will also have to gather your financial documents together that detail every aspect of your life. You will have to show how much income you make, how much debt you have, and what you have in the way of assets. You will have to detail all of this information on the appropriate bankruptcy forms with your court system.

Credit Counseling

Most states will require you to complete credit counseling before you are eligible to move forward with your bankruptcy. This will have to be done with a certified credit counseling agency. You will have to provide proof to the court system that you attended the counseling session.

Bankruptcy Trustee

With both types of bankruptcy you will have to work with a trustee. With Chapter 7, they will determine what assets you have and liquidate some of them to repay your creditors. With Chapter 13, the trustee will oversee your repayment plan.

Discharge

If you are using Chapter 7, the judge will then discharge your debt. This means that you no longer owe the debt that was discharged and creditors cannot attempt to collect it from you any longer.

Chapter 13

Background
A chapter 13 bankruptcy is also called a wage earners plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." (1) If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the law forbids creditors from starting or continuing collection efforts.

Advantages of Chapter 13
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.

Chapter 13 Eligibility
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $360,475 and secured debts are less than $1,081,400. 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor. Id.
An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.
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Five Most Common Questions

WILL MY CREDITORS STOP HARASSING ME?
Yes, they will! By law, all actions against a debtor must cease once bankruptcy documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make payments.
WILL MY SPOUSE BE AFFECTED?
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt.
However, In community property states, either spouse can contract for a debt without the other spouse's signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouses’ signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed.
Your bankruptcy lawyer will be able to guide you in this regard.
WHO WILL KNOW?
Chapter 7 filings are public records. However, under normal circumstances, no one will know you filed for Chapter 7. The Credit Bureaus will record your filing and it will remain on your credit record for 10 years.
WILL I EVER GET CREDIT AGAIN?
Yes! A number of banks now offer "secured" credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.
Two years after a discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed Chapter 7. The size of your down payment and the stability of your income will be much more important than the fact you filed chapter 7 in the past.
The fact you filed Chapter 7 or 13 stays on your credit report for 10 years. It becomes less significant the further in the past the filing is. The truth is, that you are probably a better credit risk after bankruptcy than before.
WHAT DOES IT COST?
It costs about $ 300 to file a Chapter 7 bankruptcy. A bankruptcy lawyer's fees vary but should be in the range of $ 1,000 to $ 2,000 . Many bankruptcy lawyers will give you a free initial consultation. You can keep the fees down by being well organized and well prepared. You may also be able to keep the fees down by not requiring the lawyer to attend the meeting of creditors with you. Check this with your lawyer. In some states such as Massachusetts, attorneys must attend the Section 341 meeting with the debtors otherwise attorneys are deemed to have NOT represented the debtors. (The 341 Meeting).
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Bankruptcy Law: What You Need To Know

Until just a few years ago, filing for bankruptcy was fairly easy. Not anymore. When Congress changed the nation’s bankruptcy laws in 2005, many debtors found the new “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” to be more hindrance than help in overcoming past mistakes and starting anew.


The new law is stricter, featuring more requirements than ever before. It is important for anyone considering filing bankruptcy to understand the following:

Credit Counseling:
It doesn’t matter whether you file for Chapter 7 bankruptcy that discharges your debt or Chapter 13 bankruptcy which enters you into a repayment plan with creditors, anyone filing bankruptcy is required by law to attend credit counseling by a court-approved counseling service.

Chapter 7 Filings:
Under the new law, it is no longer your right to be allowed to file Chapter 7 bankruptcy. If, after proving your income the court determines that you make more than the medium income within your state, you may be required to file Chapter 13 bankruptcy instead and enter into a repayment schedule to pay back all (or most) of your creditors.

Chapter 13:
It is not uncommon to find your repayment schedule a bit more than you can financially handle under a Chapter 13 filing. The amounts you must repay each month are calculated according to specialized guidelines that take into account your income in the last year (not what you make now), and your assets.

Residency:
While everyone must obey federal bankruptcy laws, some states offer their own, more lenient exemptions. The new federal law, however, requires residents to live in a specific state for a specified amount of time (usually at least two years) in order to qualify for any state-exemptions.

Allowable Expenses:
In the past, those  filing bankruptcy could virtually erase their debt and start new in seven years, while continuing to live the lifestyle they’d grown accustomed to. That’s no longer the case.

Under new federal bankruptcy laws, the IRS determines your monthly budget, and what you should be able to repay. Most are forbidden from having cell phone expenses as well as cable TV, high-speed Internet access, movies, meals out with the family, and anything else beyond the minimum allowable expenses as determined by the IRS and the courts.

Bankruptcy isn’t what it used to be, thanks to millions of Americans who abused the system in the past. Once reserved for people in dire financial situations to help them free themselves from excess debt and start fresh, today’s bankruptcy laws are designed t punish those who have been financially irresponsible and force them to pay back most or all of the debt they’ve accumulated. While filing for bankruptcy may have once seemed like a good way out of a bad situation, many consumers are now opting to try and fix their financial woes themselves in lieu of letting the government fix it for them.

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Does My Wife Have To File Bankruptcy With Me If We Are Both On the Deed and Mortgage?

by Peter Orville, Attorney at Law on January 21, 2010 ·

Even if you and your wife are both on the deed and mortgage it is permissible for only one to file for bankruptcy. This is true even if you are past due on your mortgage payments. If only one of you files a Chapter 13 bankruptcy, you will include the past due mortgage payments in the Chapter 13 plan to be paid by the Chapter 13 Trustee. As long as you continue to make the mortgage payments due after the bankruptcy is filed, no adverse action will be taken.

When a Chapter 13 bankruptcy is filed, an “automatic stay” is put in place. The automatic stay stops all action against you by creditors. A Chapter 13 bankruptcy also creates a “co-debtor stay”, which prohibits creditors from going after your wife for collection of the debt.

Before deciding whether to file a bankruptcy alone, or with your wife, you should contact an experienced, knowledgeable bankruptcy attorney to discuss your options.

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Can Bankruptcy Help Stop Repossession?

Bankruptcy is designed to protect individuals or businesses that are unable to meet their financial obligations–and provide protection to involved creditors as well. While bankruptcy is a serious procedure and should only be considered if absolutely necessary, sometimes it is the best solution for those suffering severe financial hardship. And, for some, it may be the only solution.


One area that bankruptcy can be particularly helpful in alleviating financial hardship is by protecting property that may be in danger of repossession. This is when creditors take back goods that buyers are failing to make timely loan payments on. Some loans are secured–meaning the buyer has put down some form of collateral, often the item being purchased–while some are unsecured–typically credit cards. If you default on an unsecured loan, the only option creditors have when collection attempts have failed is to sue. But with a secured loan, creditors can repossess the collateral and sell it. Of course, if that doesn’t provide sufficient funds to wipe out the loan, they can then sue you for the remainder of the loan balance.
Bankruptcy can sometimes help cancel the debt, or even allow you to stop the repossession process. After filing a bankruptcy petition in bankruptcy court, all creditors are prevented from making any further collection attempts. This is also known as an “Automatic Stay”, which is an automatic order from the bankruptcy court issued upon the filing of a bankruptcy petition to all creditors. This applies to creditors attempting to repossess collateral such as automobiles.

If you file for chapter 7 bankruptcy in order to stop repossession, you’ll have to make arrangements with the creditor to bring all payments current after filing for bankruptcy. If you want to keep the car after bankruptcy, you’ll need to sign a reaffirmation agreement and make all payments after the bankruptcy.

In a chapter 13 bankruptcy, the repossession will be stopped and the debtor gains the chance to repay the value of the car to the creditor through the chapter 13 plan. Chapter 13 is beneficial to debtors owing more on a car than what it is worth, since chapter 13 payment plans can lower car payments on car loans where the debtor owes more than the car is worth.

If you’re thinking about filing for bankruptcy in order to stop repossession, you should seek out an experienced bankruptcy attorney in order to find out which option will work the best in your particular situation.

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What If I Want To Sell My Home During Chapter 13 Bankruptcy?

If you’re in Chapter 13 bankruptcy and you want to sell your home, there are few things you need to know before you proceed:


1.The bankruptcy court must approve the terms of the sale before a debtor closes on the property.

2.The debtor’s bankruptcy attorney must notify all of the creditors in the bankruptcy before the property is sold.

3.You and your bankruptcy attorney must disclose the details of the proposed sale to both the creditors and the bankruptcy court before you can proceed. Those details should include, the home’s sale price, proof of the property’s current value and the details of how the proceeds from the sale will be disbursed to the creditors. That takes us to our next point.

4.Your bankruptcy attorney must provide the bankruptcy trustee and creditors with a detailed account of all deductions made and profits earned from the sale of the home. All proceeds from the sale of your home during Chapter 13 bankruptcy become part of the bankruptcy estate and must be paid directly to the bankruptcy trustee. The bankruptcy trustee will then disburse the proceeds from the sale to the creditors.

It is possible that after selling your home in Chapter 13 bankruptcy you will not see any of the proceeds of the sale. The question then becomes, should you sell your home during Chapter 13 bankruptcy? Well, it depends. If it is your primary home and you can afford the payments it may not be a wise decision. However, if it is a second property that you are struggling to pay for, it may be wise to proceed. But before you sell any property, work with your bankruptcy attorney to create an effective plan. A matter of fact, you should create a plan with the help of your bankruptcy attorney before you file.

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What is Bankruptcy?

While searching the internet and posting blogs, I realized that it has been awhile since this blog dealt with what bankruptcy actually is. To make sure that you are aware of whether or not you should pursue this option, here is some information that I have pulled from various sites (which are linked below) to help you out.

Two Types of Bankruptcy

While there are many types of bankruptcy, here are the two most commonly filed chapters (or types). For a full list of the requirements and your potential eligibility concerning bankruptcy, you can get a free consultation with a bankruptcy attorney, consultant, or a similar expert.

1) What is a chapter 7 bankruptcy? (a more thorough explanation can be found in our September 27th post)

"Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien."

2) What is chapter 13 bankruptcy?

"In a chapter 13 case you file a plan showing how you will pay off some of your past-due and current debts over a period of three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property, like your home or car, even if you are behind on payments or you have equity not covered by your exemptions. Your payments on these secured debts will generally be your regular monthly payments plus some extra amount if you need to get caught up because you are behind when you file."

Experts in this field can be found in your local area or through sites such as http://www.debthelper.com/.

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Experts Answer your Bankruptcy Questions

The Dow may be over 10,000, but unease about the economy persists as unemployment hovers over 10%. To help ease some of your concerns, WalletPop is ready to answer your personal finance questions. Here's this month's sample:


Question: My wife and I are in debt that I no longer can tolerate. I am retired and have burned through my 401(k) and my annuity to pay the $6,000 a month in mostly credit cards and home mortgages.

What are my options? I don't think we qualify for Chapter 7 bankruptcy. What about Chapter 13, and what does that entail?? Do I need an attorney? How do I keep creditors from calling me day and night?

--Gary Anders

Answer from James Caher, co-author of Personal Bankruptcy Laws for Dummies

"Bankruptcy is definitely something you should look into, since it looks like you're sinking fast and probably wasting your retirement paying debts that you might be able to eliminate in bankruptcy. But there are many, many things to consider.

"I suspect that you may very well qualify for Chapter 7 (the one that does not involve a repayment plan of any kind), since you are living on retirement income. But this depends on whether your income exceeds the median income for your state, which is probably around $4,300/month before taxes. Social Security income does not count. Even if your income exceeds the median, you may qualify for Chapter 7, but you would have to pass the Means Test.

"You might not want to file a Chapter 7 if the equity in your home exceeds the allowable exemption in your state. For example, assume that your home is worth $200,000 with mortgages totaling $150,000, leaving $50,000 in equity (the difference between the value of the property and the mortgages). If your state allows a homestead exemption of $50,000 or more, you won't lose your home in a Chapter 7 -- provided you keep up with your mortgage payments.

But if your state allows, say, $15,000 for a homestead exemption, a Chapter 7 trustee could sell your home, pay off the mortgages, pay you $15,000 and pay the rest to creditors.

Chapter 13 is different. Property is not liquidated. Instead, folks pay what they can afford for the next 3-5 years, and remaining balances are wiped out. If you are behind on your mortgage, you can use Chapter 13 to catch up on back payments by stretching them out over 3-5 years while continuing to make regular payments going forward. Yes, you should consult with an experienced bankruptcy lawyer for advice tailored to your particular situation, but you can get a very good idea about your options from our book, Personal Bankruptcy Laws for Dummies.

Source

Student Loan Debt — Dischargeable In Chapter 13 Bankruptcy?

Anyone who has ever taken out a student loan is quite aware of the fact that student loan debt is next to impossible to discharge in bankruptcy unless the debtor can prove “undue hardship.” But the 9 th Circuit Court ruled in October that student loan debt could be discharged through the confirmation of a Chapter 13 plan if the creditor is given notice of the plan and does not object, (Espinosa v. United Student Aid Funds Inc., No. 06-16421, 9th Cir. 10/02/08).


The court stated:

“Our long-standing circuit law holds that student loan debts can be discharged by way of a Chapter 13 plan if the creditor does not object, after receiving notice of the proposed plan, Pardee, 193 F.3d at 1086, and that such notice is not constitutionally inadequate. In re Gregory, 705 F.2d at 1123. We find it highly unlikely that a credi­tor whose business it is to administer student loans will be misled by the customary bankruptcy procedures or somehow be bamboozled into giving up its rights by crafty student debtors. If the creditor fails to object, it is doubtless the result of a careful calculation that this course is the one most likely to yield repayment of at least a portion of the debt. In such circumstances, bankruptcy courts have no business standing in the way. Cases such as In re Webber and In re Patton are, to that extent, overruled.”

Although this ruling should not be considered an open door for all who want to discharge student loans in bankruptcy; it is a long overdue relief for debtors who are burdened by massive student loan debt. If the Chapter 13 bankruptcy trustee has examined the debtor’s ability to repay his/her student loan debt and has determined that the balance of the student loan should be discharged in Chapter 13 bankruptcy, then it is up to the creditor to accept or dispute the ruling. No special provisions should be given to student loan creditors who do not follow bankruptcy proceedings and challenge discharge rulings according to the law.

Source

The Importance Of Finding A First-class Bankruptcy Attorney

Bankruptcy. It’s not a decision anyone comes to lightly. For most people it is, as it ought to be, a last resort, chosen only after other options have been exhausted. Before you even get to point of considering bankruptcy, you’ve probably already been through disappointment, discouragement, worry, and many gut-wrenching bill paying sessions.

Don’t compound your troubles by trying to make decisions about bankruptcy without good expert advice. A reputable Phoenix bankruptcy attorney can review your situation and will honestly let you know whether or not bankruptcy is the best option and if you are likely to qualify. If you are unsure where to begin finding an attorney, you can check with the Maricopa County Bar Association. Their referral service can help you find a competent and reliable Phoenix bankruptcy lawyer. A creditable lawyer will charge you a nominal fee for an initial consultation, at which point you can determine if this is the right person to help you move forward with your bankruptcy filing.

Good advice can help you determine the best way to manage your debt and get your life back on track. It will take time, but eventually your can regain a good credit standing as well, certainly faster than if you continue to miss payments or try to borrow more and more to catch up to your debt obligations. Your bankruptcy lawyer will assess your state of affairs and let you know which form of bankruptcy is the better option: Chapter 7 or Chapter 13. These labels refer to the federal codes regulating bankruptcy, and your personal circumstances, including type of debt and assets you may want to protect, will determine the better choice.

Many people will not even have an option, as you must meet the standards of a means test to qualify for a Phoenix Chapter 7 bankruptcy. Congress passed a sweeping new bankruptcy law in 2005, making it more difficult for people to qualify, and file, for bankruptcy.

The reasoning behind the new bankruptcy regulations was that too many people were carelessly piling on debt and using bankruptcy to get out of their obligations. If you find yourself facing this incredibly difficult decision, you probably think that any member of Congress ought to try walking in your shoes for a while. They might become aware that injury, illness or job loss does not constitute carelessness. When you find yourself in this challenging position, don’t tough it out alone. Find yourself a good Phoenix bankruptcy lawyer to help you guide you through to the light at the end of the tunnel.

Source: Lawyers-Law.com

Surviving Bankruptcy

Getting through painful process requires composure, organization and advice.
By Thomas Gnau and Vince McKelvey

When ‍bankruptcy appears to be your least bad option in a sea of bad options, what should you do? In plain English: Don’t panic. Get your records together. Talk to your attorney. How do you know you’re headed for ‍bankruptcy?Unfortunately, that may be the easy part. “Most typically, when you’re headed in that direction, you’re having trouble paying your bills,” said Ronald Pretekin, attorney with Dayton law firm Coolidge Wall. You also may be tempted to divert federal and state withholding taxes to pay creditors, Pretekin said. If so, resist the temptation. Such diversions simply create bigger problems, he said. “Responsible officers can be held personally liable for dealing with those issues.”

One of the first questions Pretekin asks clients: Where do you stand on your taxes?

Matters get murkier — for nonspecialists, anyway — when it comes to the array of ‍bankruptcy options.

Miami Twp. attorney Wayne Novick chairs the Dayton Bar Association ‍Bankruptcy Committee. Business structure determines the kind of ‍bank‍‍ruptcy protection available, he said.

In general, businesses can shut their doors in Chapter 7 or attempt to continue operating and reorganize through Chapter 11. The law does not allow corporations to file Chapter 13.

An individual “doing business as” can file Chapter 7 (to shut the doors), Chapter 11 (to reorganize) or Chapter 13 — sometimes known as an option for “smaller guys,” Novick said. With Chapter 13, if a nonincorporated business can produce a suitable plan, a court can allow it to move forward with perhaps less oversight or influence from creditors.

Chapter 11 means holding off previous creditors while trying to attract or work with new ones, Novick said. That can be challenging, to say the least.

Indeed, often the path to ‍bank‍‍ruptcy becomes clear because creditors are clamoring for payment — or suing.

“In this environment, I think a lot of creditors will work with you for at least some period of time,” Pretekin said. “But there’s always a point where everybody runs out of patience.”

“One of the keys is, who is going to give them credit?” Novick said. “You have to work out something with the future suppliers (creditors), and that’s where the small business Chapter 11s run into difficulty.”

Novick — talking the language of attorneys who work with entrepreneurs — says it comes down to the “input of new capital.” How will payroll be met or supplies purchased?

Attorneys need to evaluate whether a business can go forward. Good business records help that decision. Even getting something as fundamental as a monthly “P&L” — a profit and loss statement — can be difficult for some small businesses.

Other questions that demand answers: How strong is the relationship with suppliers? Can they count on suppliers to continue that relationship? Can the business operate on cash? Are accounts receivable collectable? What’s the debt total?

Fear of confronting the issue won’t help, Novick says. Talk to your accountant and attorney sooner rather than later.

“There’s no harm in that,” Novick said. “But people fear that.”

Said Pretekin, “One of the earliest things to do is talk to your lawyer, your accountant.”

Pretekin and Springboro attorney Ira Thomsen emphasize the importance of considering not just the business’ position, but that of the individual or individuals who have guaranteed loans. The question becomes: Does seeking ‍bankruptcyprotection make sense in this case?

“Do I really need to file a ‍bankrupt‍‍cy for this business if I’m going out of business?” Thomsen said.

If a business isn’t being sued by creditors, and if assets are not sufficient to pay off secured lenders, then attorneys may advise clients to close their doors and concentrate on protecting personal assets.

Assets usually are on the line when small businesses have one or two owners. Often those owners have personally guaranteed their business’ obligations, Thomsen said.

In that case, individual owners may consider filing personal ‍bankruptcies, usually a Chapter 7 or 13, but not filing for their business.

Said Thomsen, “I have not run into a situation, a small business situation, where the debt is not guaranteed.”

If there are reasons to file for both personal and business situations, often different attorneys will be needed for each side, Thomsen said.

Contact this reporter at (937) 225-2390 or tgnau@DaytonDailyNews.com .

Source: GratefulLawyer.com

Will You Qualify For Chapter 7 Bankruptcy After Halloween?

If you are a consumer thinking about filing bankruptcy, you will want to figure out whether to file bankruptcy before or after November 1 when changes to the income eligibility guidelines take effect. For some people, the means test changes will help and for others the changes will hurt.

In Kansas, for example, median family income for families of one to three goes up while median family income for four or more person families decreases. In Florida, median family income went down for all family sizes.

The new income figures have been released so you have 21 days until October 31, 2009, to file bankruptcy, if you will be hurt by the new means test guidelines. See your consumer bankruptcy attorney to learn your options.

Congress created an income test for determining eligibility for consumer bankruptcy in the law reform of 2005. The thought was that you should only get as much bankruptcy relief as you need. Creditors complained that people were discharging all their debt in chapter 7 bankruptcy who had the ability to make partial payment in chapter 13 bankruptcy.

A math test was created to determine who can file chapter 7, who must file chapter 13, and how much debt has to be repaid in chapter 13. This test is called the means test. It starts with the median family income for your family size in your state according to data compiled by the U.S. Census Bureau and adjusted by the U.S. Trustee Program. The median income figures are changing for bankruptcy cases filed on or after November 1, 2009.

If your income is less than the family median income for your state, you pass the means test and are eligible for filing either chapter 7 or chapter 13 bankruptcy.

If your income is higher than the family median income for your state, then you keep going by filling out about six pages of information about your expenses and various deductions you are allowed to take to determine if you have disposable income to pay your unsecured creditors (the ones without collateral such as credit cards and medical bills). You could pass the means test at the end of the process if you have no disposable income and qualify for either chapter 7 or chapter 13 bankruptcy. You could even qualify for nominal repayment to general unsecured debts in chapter 13 bankruptcy. Or, if you have disposable income, you may be eligible for a chapter 13 payment plan bankruptcy.

The means test is very complicated. The devil is in the details, as they say, and your consumer bankruptcy attorney can help you determine your options.

Source: Bankruptcy Law Network

How to Keep Your Costs Down and Get Good Bankruptcy Advice Quickly

Personal bankruptcy is made for "what if" scenarios. What if I file individually instead of jointly with my wife? What if I quit my job while I am in the middle of my Chapter 13? What if I need a replacement vehicle after I file?
I don't always have the answers but I can usually think through one or two likely scenarios. I can be more effective helping you if you give me the information I need. Specifically that means the following:

•take the time to complete my intake questionnaire in its entirety. Don't leave out information that you believe is not relevant. My intake questionnaire is keyed to my bankruptcy program and I have been developing and updating it for over 15 years. Everything on my questionnaire is there for a reason – and I can serve you better if I have everything that is requested there

•get me copies of your credit reports. AnnualCreditReport.com offers a free service to get current copies of your credit reports. Current credit reports help us avoid leaving out creditors from our analysis and they can also provide other helpful information such as prior addresses and other names in which you have been extended credit

•get me copies of all payment advices for the past 7 months. The Bankruptcy law now requires all debtors to engage in a median income test as well as a means test analysis. The starting point of this analysis is evidence of income you and other members of your household have received. Payment advices should be provided for salaries, investment income, one-time checks, some disability payments, dividends, etc. If you are not sure, ask.

Sometimes I hear from clients who want to submit their information on a spreadsheet or Quicken file. Feel free to send those files along, but do not send them in lieu of my questionnaire and the other requested information.

Source: BkBlog

Considering Bankruptcy? These guys can help...

Clark & Washington, P.C., Georgia Bankruptcy Law Firm

Valuable information for anyone considering bankruptcy.
http://www.cw13.com/index.html

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