Archive for the ‘Bankruptcy Tips’ Category

Here are 5 more bankruptcy terms you should be familiar with if you are thinking of filing for bankruptcy.

Estate - The total of all of the property owned by a person who has died

Exempt Property - Possessions that a person may keep when they file for Chapter 7 bankruptcy or lose a lawsuit to a creditor. Typically, these items are clothing, vehicles worth less than $2500, household furnishings and Social Security payments.

Foreclosure - When the mortgage on a property is in default, the property is sold to raise money to pay the unpaid balance of the loan to the creditor. The person who has defaulted on the loan is forced to leave the property

Lien - A legal claim against a property made by a creditor because of a debt owed by the property owner. The lien must be paid when the property is sold. There are liens called security interests which the property owner agrees to in order to guarantee repayment of a loan they have taken out such as a home, auto or personal loan. There are also nonconsensual loans to which the property owner did not agree such as judgement liens, tax liens and mechanical liens.

Nonexempt property - Possessions that a person may lose when they file for Chapter 7 bankruptcy or lose a lawsuit to a creditor. These are typically items that are valuable enough to satisfy debts such as vehicles that are paid for, valuable furs, electronic equipment, and the equity in your home.

When you are filing for bankruptcy, there are a few terms you should understand. I’ll cover 5 in this post and 10 more in subsequent posts.

Assignee - A person or company to whom property rights are transferred. For example, an assignee may take over the lease on an apartment if the original tenant wants to leave before his lease is up. The assignee will assume all the rights to the property as the tenant including the responsibility to pay the rent and utilities, but would not be the one legally responsible if they failed to keep up their end of the bargain. The original tenant is still the responsible party legally.

Beneficiary - A person or group who is entitled to receive benefits from a legal device such as a will, trust or an insurance policy. A beneficiary can also be the person who receives the benefits of a contract between two other people.

Cash Surrender Value - On the voluntary termination of an insurance policy, the amount of money available before the policy’s benefits become payable. In other words, the amount of money you would get if you sold the policy back to the insurance company.

Co Signer - A person who signs a loan document, lease or credit application as a secondary borrower agreeing to be responsible for the debt if the primary borrower does not make the agreed payments.

ERISA - The Employee Retirement Income Security Act is a federal law that regulates private pension plans that are supplementing Social Security. ERISA requires employers to provide employees with full information regarding their pension rights, sets minimum standards for these plans, ensures that the administration of these funds is clear to the employees, and provides some protection for workers if the plan cannot pay the benefits that they were entitled to.

You’ve decided to file for bankruptcy. Now you are thinking that you could save a little money by representing yourself in court. Is that really such a great idea? There are many books out there that explain how to file for bankruptcy. You could probably fumble your way through it, but it’s not in your best interests to try to represent yourself. You are trying to get relief from debts and you will want to make sure you have followed all of the laws and gone through all of the proper procedures to fully receive the relief you are looking for and ensure that it is done in a timely manner. Every state and even every court within those states has there own requirements, interpretations of laws, and exemptions and these are changing constantly. A good lawyer who is familiar with bankruptcy in your state should know what these differences are.

If you decide to go ahead and represent yourself, remember that you will need to spend a lot of time working on your case to ensure that you do everything correctly. Spend time at the library reading books about bankruptcy and time at the courts to familiarize yourself with the process and the small quirks that every different court may have.

Some people file for bankruptcy in an effort to save their home from going into foreclosure. But does that work? In some cases it will, but in some cases it won’t. If you are filing for Chapter 13 bankruptcy, there is a good chance that you will be able to keep your home because you will be required to continue making mortgage payments as well as paying back the payments you have missed. But if you are filing for Chapter 7 bankruptcy, filing may not help to save your home. The biggest determining factor is based on how much equity you have in your house and whether that equity amount is within the allowed exemption amount.

The first thing you must do is figure out how much equity you have in your home. Once you find out how much your home is currently worth, subtract the amount you still owe from that amount. That will tell you the amount of equity you have. For example, if your house is worth $200,000 and you have $185,000 worth of mortgage loans still owed, your equity would be $15,000.

The current federal homestead exemption is $18,450. Some states have their own homestead exemption amounts as well. So you will want to know what your states’ exemption is as it may be more or less than the federal exemption. If you have less than $18,450 in equity in your home, you may be able to keep it. But if you owe more than the exemption amount, you may be at risk of losing your home.

You may still be able to keep your home if you can pay the difference between the exemption amount and the equity you have from sources other than your bankruptcy estate (chances are you cannot do that though if you are filing for bankruptcy). If the cost of selling your home would be more than the nonexempt equity amount the trustee of your case may allow you to keep your home as well.

Note that there are some types of dwellings that do not qualify for the homestead exemption in certain states such as mobile homes and coops. And some states base their exemption on the lot size of your property.

Before deciding to file for bankruptcy to try to save your home, become familiar with your states’ exemptions to try and determine if filing for bankruptcy will allow you to save your home.

Once you file for bankruptcy, an automatic stay is immediately put into place. An automatic stay temporarily stops your creditors from being able to take any action against your income or property. It also freezes any lawsuits pending against you.

There are a few different kinds of lawsuits or actions by creditors that an automatic stay will not stop. It will not stop any criminal proceedings or any attempts to collect alimony or maintenance or support from property that you acquired after filing for bankruptcy or exempt property.

If you file for Chapter 7 bankruptcy, friends or relatives who have co-signed for a loan are not protected by the stay. They can still be contacted by the creditors to collect the full amount due. If you file for Chapter 13 bankruptcy, the stay may protect your co-signers if they cannot benefit from the debt proceeds, the debt was not incurred in the ordinary course of business or the debt is a consumer debt.

Your creditors can file for a Motion for Relief from Stay which would exempt them from the stay and make it so they still have the ability to collect the debt. They may do this if they feel that the property securing your debt is at risk or depreciating quickly or if there is a consensual lien against your home and you are unable to pay the mortgage payments to pay off the debt. You are allowed to file an Objection to their application for Relief from Stay.

Note that due to recent changes in bankruptcy laws, landlords are still able to pursue eviction even if a stay is in place.

If you are thinking about filing for bankruptcy, it is important to examine all of your debts and figure out if they are secured or unsecured debts. It’s important to know this information because each type of debt is treated differently depending on which bankruptcy chapter you file under. Not all debts are removed just because you filed for bankruptcy.

Secured debts are debts that are linked to some type of property that you own securing payment for the creditor by giving them the property if you default . For example, mortgages are secured debts because if you default on the loan, the bank can claim your house. Other examples of secured debts are auto loans, furniture loans, and computer loans.

One type of secured loan is a nonconsensual lien where a 3rd party has legally placed a lien against your property because of nonpayment of your debts to them. For example, if you owed taxes to the IRS, they could put a lien against your property meaning that you could not sell or transfer the property without paying your debt to them first. You could also have a lien put against your property if you hired a contractor to add a room on to your house and then chose not to pay them. They would have the right to legally put a lien against your property.

Unsecured debts are debts such as credit cards and cash advances where there is no collateral if you default on the loan. Student loans, medical bills, lawyer fees, rent and/or utility payments, and health club memberships are a few other examples of loans that are generally unsecured.

Note that if you are required to sign a security agreement when signing up for a new credit card, you should read the terms carefully. Not all credit cards are unsecured, and you could be signing an agreement that your property will be used as collateral, therefore securing the loan.

If you can’t pay your bills and the letters are piling up in your mailbox, the most important thing to do in this situation is to stop ignoring them. Letting your bills pile up isn’t going to solve anything…in fact, it will eventually ruin your credit. But, before you’re turned over to a collection agency, there are a few things you can do.
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If you are in debt and worried that bankruptcy is just around the corner, consider enlisting the help of your local credit union. Credit unions are there for just this reason…they help their members get out of debt and back on track financially. So before you take that big step of filing for bankruptcy, talk to a credit union and see what they can do for you.

You will be assigned a financial manager and this person will be the one that gives you financial advice. They will make sure that all your bills are paid through the credit union and a savings account will be set up for any extras that you need.

Depending on how large your debt is, your financial manager might give you a debit card that has a limit on it. You can use this card anywhere, but when you reach a certain amount, you won’t be allowed to purchase anything else. This will keep you from overspending the money you should be saving.

All of your bills will be paid by the credit union…meaning you just have to make the money and your financial manager will be the one that gets it to the different creditors.

To locate a credit union in your area, check out your phone book or do a search online. You can also ask for recommendations from friends and family to see if they know of a good credit union for you to join.

Bankruptcy isn’t the end of the world, but it’s also something you shouldn’t take lightly. Do whatever you can to try and improve your financial situation before you decide to file for bankruptcy, including joining a credit union. It’s worth a try and it just might turn things around for you financially!

Bankruptcy isn’t for everyone and you shouldn’t file only because you’re in debt right now. Bankruptcy should be your last resort and a decision you’ve made only after all other options have been exhausted.

Take a good look at the debt you’ve accrued and decide if it’s something you can dig yourself out of on your own or if it’s permanent. If you’re so far in over your head that it’s not feasible that you’ll ever be able to pay it off, then bankruptcy might be for you. But, if you can determine that your debt is only temporary, devise a financial plan on how to lower it.

One of the most overlooked alternatives to filing bankruptcy is contacting creditors to see if they will work with you. Generally, people look at creditors as money hungry monsters that will stop at nothing (aside from murder) to get the debt that is owed to them. What we all need to remember is that they are people too and they often will work with you rather than have you file bankruptcy. Write them a letter or call and ask them if they will consider lowering your payments, letting you skip a payment or change your due debt. Remember that you can always send a lower amount than your minimum payment if absolutely necessary. This is much smarter than skipping a payment altogether.

Research different debt counseling companies in your area and find a legit one that can help you dig yourself out of debt. You will eventually have to do this anyway if you file bankruptcy (thanks to the new bankruptcy law) so, you might as well give it a try when it can still benefit you.

Last but not least, don’t get overwhelmed. It’s best to work on paying off one debt at a time. Pick your highest debt and pay that one off first and then work on your smaller ones. By doing this, you will feel like you’re actually getting closer to lowering your debt then you would otherwise.

Did you know that millions of people don’t claim their tax refunds each year? This means that tax refunds are just sitting at the IRS, waiting for their rightful owner to come give them a home. The good news is that you can still receive the money you are owed- all you have to do is visit www.irs.gov

Click on the “Where’s My Refund” link and be sure to have your social security number, filing status and refund amount handy. Chances are that with an update of your address, you’ll have your money in no time!

Although we’re barely getting started in 2006, it’s never too early to start thinking about your financial footing in 2007. To keep your finances in line and under control throughout this year and into the next, try following these tips:

-Pay off debt. If you are swimming in credit card debt, it’s time you put a stop to this madness. Be sure to pay off the card you have with the highest interest and don’t forget about auto or school loans!

-Instead of blowing this year’s tax refund on a shopping spree, put it into a savings account or a retirement fund for later!

-Put your refund away for college- whether it’s for you or for your child.

-Open up an emergency savings account. Start putting aside a little money into this account for those times when your car breaks down or you unexpectedly lose your job.

-Be credit card smart! Only use your card if you have the means to pay it off in full or at least by half, each month.