Archive for the ‘Filing Bankruptcy’ Category

Here are the final 5 terms you may want to be familiar with if you decide to file for bankruptcy.

Discharge – A discharge of debts is when the court has erased the debts of a person or business that has filed for bankruptcy. A discharge of a probate administrator is the release of an executor or administrator from any further duties that are connected with the probate of an estate.

Head of Household – The person within a single household who maintains and supports one or more people who are closely related to him or her. The people that are being supported need to be related by marriage, blood or adoption. In some states a single person who supports him or herself is still considered to be the head of household.

Injunction – A court order that forbids an action that is harmful. An injunction could be an order for an abusive person to stay away from a specific person that they have been abusing.

Repossession – A creditor who has sold goods to a buyer taking those goods back because the buyer did not keep his or her end of the contract. Typically the buyer has failed to make one or more payments on time and cannot work out a solution with the creditor.

Tangible Personal Property – Personal property that can be touched or felt. This includes jewelry, cars, clothing, furniture, etc. Bank accounts and cash do not count as tangible property.

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.

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.

The appeal of Chapter 7 is the fact that most of your debt will be discharged. With a wave of a magic bankruptcy wand, your debt will disappear right before your very eyes. Sounds too good to be true, right? Chapter 7 is great in some ways, but your debt doesn’t disappear into thin air without a price. You might end up losing any homes, heirlooms, investments, stocks, jewelry, expensive clothes or artwork that you own. And alimony, student loans, child support and legal fines aren’t dischargeable.

People file for Chapter 13 if they make too much to file for Chapter 7 or if they have debts that they are unable to discharge. This is also a good option for those that are looking to keep any property they own because they’ll be given the chance to continue making payments toward their debt over the course of 3-5 years.

It’s best to talk with a professional before deciding to file for Chapter 7 or 13. Consulting with a good bankruptcy lawyer is advisable before going ahead with any paperwork. Determine what you want to get out of the bankruptcy and if your debts are dischargeable before making your final decision.

Like Chapter 7, Chapter 13 comes with mountains of paperwork that will need just about every detail of your financial past. And thanks to the new law, documentation is required as well. Be prepared to start digging for all those receipts you’ve filed away over the years and hold tight to your patience.

With Chapter 13, the benefit is that you get to keep your property, but you will have to pay off your debt in three to five years. Keep in mind that you cannot file if your unsecured debt exceeds $269,250 or if your secured debt exceeds $807,550.

Otherwise, if you choose to go the Chapter 13 route, you will need to provide the courts with the same information as you would if you were filing for Chapter 7. This means, you’ll need to tell the courts about:

Any property you own
Your current income and your employer
Current living expenses
Your debts
Any property you sold or gave away in the last two years

With Chapter 13, you’ll also need to provide a detailed plan on how you plan to pay off your debt. If you don’t have an action plan, you’re going to need to get one, because you will only have three to five years to pay everything off. Once your plan has been heard by the judge, he or she can approve or reject it.

Once approved, you will make your payments to a court appointed trustee. Then, at the end of your action plan, you will have the option to modify it if you have not been able to pay off all of your debt. You can also try filing for Chapter 7 at this point too.

Before you decide to file for Chapter 7, decide if it’s worth the risk of losing any property you own. It’s going to depend on your state’s Property Exemption Law whether or not your property will be seized after you file.

The reason why Chapter 7 is so popular amongst filers is the fact that it discharges most of your debt and gives you a chance to start anew. As soon as you file, your creditors can no longer contact you about the debt you owe them. This means that for the time being, creditors cannot seize your property or shut off your utilities.

The entire bankruptcy process usually lasts about four to six months. During this time, you are going to be filling out miles and miles of paperwork and providing a lot of documentation. Some of the information you are going to be providing includes:

Any property you own
Your current income and your employer
Current living expenses
Your debts
Any property you sold or gave away in the last two years

You will be appointed a trustee by the court that will examine your property and any exemption claims that you are making. This person will also see to it that all of your creditors get paid. During the filing process, the bankruptcy court will have control of any property you own, but you will control any property or income you obtain after.

At the end of your bankruptcy proceedings, most of your accrued debt will be discharged and you will be free to start over again.

In the wake of the new law, many people have ruled out filing for bankruptcy and are opting to try and pay their debts down themselves instead. This may or may not be a good idea, because it can be very hard to dig yourself out of financial trouble on your own. And despite your best efforts, your credit score probably will just keep heading further and further down south.

To help repair your finances, you might want to consider filing for bankruptcy. But, don’t let the new law scare you out of filing if you believe it would be the best option for you. It’s true that it will now be a little harder to file and that there are more paper work and hoops to jump through than ever before, but bankruptcy can still be that fresh new start you’ve been dreaming of.

Many people that file bankruptcy find that it takes only three to four years after discharge for their credit score to be repaired. If fact, their credit scores are reaching ideal levels, which enables them to get loans for the things they want in life, a dream home, car or vacation. After their bankruptcy discharge, the people that used their money to make down payments on large items, rather than trying to pay off old debt, are the ones that were able to repair their credit the fastest.

If you decide to forgo the bankruptcy option and try to get a handle on your finances yourself, be careful. You might be facing years and years of financial trouble because most lenders will be cautious of people that have a pile of debt and a low credit score. To help yourself climb out of the money pit you created, use your credit card to make small purchases and always pay them off swiftly. If you don’t have a credit card anymore, apply for a secured card with a low limit and make sure it reports to all three of the credit bureaus.

Before you make your decision on whether or not to file, consider the repercussions. Figure out just how large your debt is and how long it would take you to pay it off. Then, read up on the new bankruptcy law and talk with a lawyer before coming to any conclusions. Educating yourself on both options will help you make the decision that will work best for your long-term financial situation.