When Do You File for Bankruptcy?

Posted by Download On Selasa, 24 April 2012 1 komentar
By Jocelyn Kinder


If you have been out of a job for the last few months and are now faced with a substantial amount of bills that you have no idea how to pay, you may start entertaining the idea of filing for bankruptcy.

While many creditors in fact are lenient enough in treating people who are on financial hardship, it cannot be denied that some would also be understandably harsh especially when the amount involved is very significant.

By default, people automatically think of what is referred to as Chapter 7, relief from debt, when the word bankruptcy is mentioned. There are two other types however: Chapter 11, which allows businesses to realign their debts or reorganize, and Chapter 13, which is another type of restructuring program catered to sole proprietorships or individuals who are not qualified to file under Chapter 7.

In chapter 7 bankruptcy, there is no plan for repayment of debts as in other types. A bankruptcy trustee assesses your property and determines what may be exempt, such as a home, car, or property under a lien for which you wish to reaffirm the debt. Nonexempt assets, which could include any luxury items purchased on credit in the last 90 days or "spare" vehicles on which there is no lien, may be gathered and sold to pay a portion of the debt. The Bankruptcy Code allows debtors to keep certain "exempt" property and to use unclaimed equity in a home to essentially buy down the value of other nonexempt property they wish to retain.

A means test, which scrutinizes your average income over the past six months, is employed to assess if you can qualify for Chapter 7 relief or not. You are guaranteed to qualify for Chapter 7 if you score below your state's median income, no matter what the actual amount of your obligation is. You are not eligible to file for Chapter 7 however if you underwent credit counseling in the past six months or had a bankruptcy case dismissed because you were unable to comply with the requirements or dropped out of the case by your own preference.

Since bankruptcy is a complicated case which necessitates tons of paperwork, it would be prudent for you to look for an attorney or firm specializing on bankruptcy based locally to work with you regularly online and by phone.

The case will begin with the filing of an official petition, schedules and a statement of financial affairs in bankruptcy court. Once the petition has been officially filed, creditors are no longer able to go after your debts by either sequestering your property or filing cases against you. Any creditor who violates this stay, even a utility shut-off, can be held in contempt of court and ordered to pay you damages.

While bankruptcy may sound like a win-win when creditors are on the phone, there is a downside. There's a very real possibility that you could lose that vacation home or family heirloom as non-exempt assets will be sold to pay off the creditors; it forms part of your credit history for 10 years and will also become part of public domain; and the bankruptcy process itself is very costly with a mixture of court fees, trustee's fees, a financial education course and consumer counseling, not to mention the cost of hiring a lawyer.

If you believe that Chapter 7 may provide the answer for you, then start assessing by researching the means test for bankruptcy in your state and weigh your income against the state's income threshold. If you cannot meet this test, then look for other solutions by contacting creditors or debt counselors. If you still can't make up your mind try asking for an appointment with a lawyer immediately in order to discuss the procedure. Once you have all the facts, the final decision is up to you and one only you can make.




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1 komentar:

Anna Smith mengatakan...

Every one wants debt relief.. Bankruptcy is one of the option for this but it has many serious consequences as well.. So we should be careful while filling for bankruptcy.

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