Credit and Debt Management Services, Solutions & Results.......
Bankruptcy is absolutely the last resort for anyone!
The following information will help you learn about bankruptcy but it's most important that you consult with an attorney in your State that specializes in consumer bankruptcy cases before making any decision.
Whether to file for bankruptcy because of increasing debts can be a very difficult decision.
There's no magic formula for deciding when bankruptcy is the right choice. It's an option you might consider if you:
Can't budget yourself out of debt within five years
Are getting notices that your mortgage or loans are being foreclosed
Have had a severe financial setback (job loss, divorce, major illness, etc.)
Bankruptcy does not get rid of all debts.
You are still responsible for:
Alimony Child support
Most recent back taxes
Most student loans
Recent large purchases of more than $550 for luxury goods
Fines or penalties of government agencies
Cash advances of $825 within 70 days of filing
As a consumer, you can file for bankruptcy in most states under a Chapter 7 to wipe out all debts except those listed and get an immediate fresh start or Chapter 13 to set up a repayment plan to pay back your debts over several years' time. On April 20, 2005, the President signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act. Some of the changes included:
New bans on Chapter 7
Increased Chapter 13 payments
New presumptions against debtors with increased penalties
Chapter 7, otherwise known as "liquidation," is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships. A trustee is appointed by the court to sell your non-exempt property and uses the proceeds from the sale to pay your creditors. Most chapter 7 cases are "no-asset" case, which simply means that you do not have any non-exempt property for the trustee to sell.
Means Testing... Federal bankruptcy laws provide for a "means test," which will determine whether you're eligible to file for Chapter 7 bankruptcy. This test is used to limit Chapter 7 to those people who truly can't repay their debts. If your income is below the median income for families in your state, based on Census Bureau statistics, you'll be eligible. If you make more than the median income for families in your state, it must be determined whether your disposable income will cover your debts. Expenses, such as mortgage and car payments, are deducted from your average monthly income to determine your monthly disposable income. This amount is then multiplied by 60 to determine the amount you could pay over 5 years. You must also obtain approved credit counseling before you can file.
Filing Chapter 7... A bankruptcy starts with the filing in bankruptcy court of the official petition and a lengthy document called a "Statement of Financial Affairs." This statement contains extensive schedules requiring a detailed list of all your debts, including: all priority debts (including taxes), all "secured" debts (including home mortgages and auto loans) that have property as "collateral", and all unsecured debts of any kind. Debts that are not listed in the statement will not be discharged at the completion of the bankruptcy proceeding. Failing to list assets in an attempt to hide them from creditors may result in serious consequences, including the denial of discharge or charges of bankruptcy fraud.
A trustee takes control... of any property you do not get to keep, sells the property, pays the expenses to administer the case, and then gives any remaining money to creditors according to the priority of the claims.
A 341 Hearing... after the bankruptcy is filed, you must appear at the "first meeting of creditors" (also called a "341" meeting ). The trustee and creditors can ask you questions under oath about your property and debts. Creditors have 60 days after the 341 meeting to convince the bankruptcy court you shouldn't be allowed to cancel your debts.
What Can I Keep?
You can keep:
Your home, if you don't have more than $50,000 equity in the house
Your motor vehicle, if you don't have more than $2,550 equity in the vehicle
Appliances, furnishing, clothing and food
Jewelry, family heirlooms and art up to a total of $6,750 in value
Unemployment, disability, workers' compensation and social security benefits
Retirement plan and life insurance proceeds
Business partnership property
Tools of your trade, up to $6,750 in value
Bank deposits from Social Security Administration up to $2,700
Chapter 13 Bankruptcy... Rather than wiping out debts immediately, this option allows you to reorganize them so you have time to pay. For a Chapter 13 bankruptcy, you'll need a stable income. The court will apply living standards, a means test, set by IRS regulations to determine what is reasonable for you to pay for living expenses, including housing and food, to find out how much you have remaining to pay your debts. The filing of the Chapter 13 petition must be accompanied by a proposed payment plan extending up to five years. All tax returns for the four years prior to filing must be filed. The trustee will review the proposed plan for accuracy and feasibility. The proposed plan is distributed to creditors, who have the right to object to the plan if it's unreasonable. If the plan is approved, you can keep all your assets during the period of the plan. You make monthly payments to the bankruptcy trustee, who distributes the funds to the creditors according to the plan. If the plan is completed as approved, your unpaid debts are "discharged."