Bankruptcy is a commonly known word that will relieve you of some or all of your debt. If you are facing possible bankruptcy and have items that you don’t or can’t see yourself getting rid of, then this article is for you. I will show you how you can file a bankruptcy proceeding without losing all of your assets.
Discuss With A Bankruptcy Lawyer
The first thing that you should do if you are considering bankruptcy is to talk to a bankruptcy lawyer so that you will know all of your rights and how the procedure will fall into play. A bankruptcy attorney will know how to get you on the right foot to filing the procedures and what all is required of you once the process gets going.
There will be a few things that you will need to do before the procedure goes into effect. Some of these procedures may require you to take a class or two and get all of your documents together.
Get to know your assets and learn what the difference is between personal and business assets. When you go in for your initial consultation with the attorney, they will explain everything to you and what is allowed to be added on the bankruptcy and what is not allowed.
There will be certain things that you will be able to keep such as clothing, a vehicle, your home; these are all items that you will want to talk about with your attorney to see how much you will be able to keep.
In most cases, you will be able to file bankruptcy on part of your debt and keep things like a new vehicle as long as you are willing to pay it. Keep in mind that you can only file bankruptcy once every few years depending on the type of bankruptcy that you file so you want to make sure that you take advantage of all the debt relief that it can offer you.
If you do decide to keep certain things, you may still be eligible to file a Chapter 7 Bankruptcy. If you file Chapter 13, you could possibly keep most of your items and continue to pay them off if your debtors will allow for this.
Support groups are also a big help when it comes to filing bankruptcy. Support groups can offer valuable information that you may have not known about and it will give you the opportunity to ask questions about the bankruptcy procedure.
If you happen to run into questions and you still need help, consult with your bankruptcy attorney and if you do not have an attorney, most of them will offer you a free consultation which will allow for you to get a price estimate and to ask questions.
When You Should File For Bankruptcy?
Filing for bankruptcy is ideal for those that are struggling with personal debt that is more than they can handle, people that are running a business that is about to go under, and small towns, counties and government districts that can’t handle their own money management.
Declaring Chapter 7 and Chapter 13 Bankruptcy for Personal Debt
People who are struggling with personal debt are going through emotional and financial turmoil all the time. Not only are they having a hard time getting approved for loans for things that everyone needs like homes and cars, but they are also constantly being harassed by creditors to pay bills with money that they do not have.
Many people say that bankruptcy itself is emotionally stressful, however, struggling with finances can be way more frustrating for some people. Though your credit might suffer from filing bankruptcy, chances are, your credit is already shot anyway if you are struggling financially. Bankruptcy allows people with financial issues to make a fresh start.
You are then required to learn how to manage money more effectively and by law, your creditors have to leave you alone. You might have to liquidate some or all of your assets in an attempt to pay off your debts, or you might have to go onto a repayment plan.
Either way, the government wants to you to pay something towards your debt some way, even if you do file for bankruptcy.
However, emotionally, it can be a relief not to have excessive debt hanging over your head every day. It might also be quite a wonderful thing to not receive constant bills in the mail and phone calls asking you for money on a daily basis. This type of harassment can make you feel like a failure and cause depression.
Declaring Chapter 11 or Chapter 12 Bankruptcy for Businesses, Farms, and Fisheries
If you run a business, farm or fishery and you are going under. You might have no other choice but to file for bankruptcy. This happens to more businesses than you might realize and you should not feel shame in filing if you must.
The nature of the business is that it’s usually unpredictable. You can never know how the economy is going to change and what people will be interested in tomorrow. Imagine how many typewriter manufacturers might have had to file for bankruptcy in previous decades when a computer became a part of almost all US households. Life changes, society changes and sometimes business is left behind.
Declaring Chapter 9 Bankruptcy for State Municipalities, Districts, Cities and Towns
For some local governments, finances can get out of control. Because bankruptcy is a federal procedure, some states have to file for bankruptcy when they get trapped in cycles of overspending or when their economy has reached their breaking point.
In some states, one factory might be the only one that employs over 50% of the population. If a factory like this were to shut down, thousands of people would have to go on unemployment and receive other benefits in order to survive. In order to support strain like this, towns, cities, and districts can declare bankruptcy as well.
If you are unsure whether a bankruptcy filing is the right choice, this is understandable. There is a lot of stigmas attached to the practice.
However, if you must do it, just get the process over with. In a few years, it will be a thing of the past. The first years might be hard and you might face challenges as you rebuild your personal, business or district’s credit and reputation, however, in less than a decade, you have a much greater chance at success than you ever will if you don’t file.
Chapter 11 Bankruptcy and Debt Discharge
A debt discharge occurs after the successful completion of a Chapter 11 bankruptcy process. It frees the debtor from certain debt obligations. Once the debt discharge occurs, the creditors who lent the discharged debts can no longer pursue their collection efforts in any form.
However, it is important to note that if a discharged debt is subject to a valid lien (a charge on an asset), and that lien could not be avoided in the bankruptcy process, then it will continue to remain in force even after the bankruptcy is over. Secured creditors holding such a lien will enforce it.
Chapter 11 bankruptcy debt discharge occurs when the business executes its reorganization plan per its terms. Typically, a company is given up to five extra years for business debt restructuring. So, the discharge can occur anytime within this period.
There are cases when the debt discharge has occurred within 6 months from the date of the petition. If the business does not execute the plan as per its terms, the Chapter 11 bankruptcy process fails and there can be no debt discharge.
The debt discharge order is mailed to the debtor, creditors, and all related parties. Creditors are specifically informed that if they pursue their collection efforts, they will be held in contempt of court. A Chapter 11 bankruptcy debt discharge can be revoked by the court if it is discovered that the business indulged in fraud in order to obtain the discharge.
There are also specific concessions for people who are disabled or on active military duty in a combat zone. Such exemptions may or may not be valid and it’s best to consult an attorney about these.
Business owners must note that all debts cannot be discharged.
Debts that cannot be discharged remain payable even after the Chapter 11 bankruptcy process is complete. The US Congress has specified such debts as priority debts that cannot be discharged for public policy reasons (meaning that their discharge will cause financial harm to the general American public).
Such debts also cannot figure in a business debt restructuring plan of corporate bankruptcy. Here are the types of debts that cannot be discharged:
- All kinds of federal and state taxes due.
- Debts not listed by the business in their bankruptcy petition/reorganization plan.
- Spouse support, alimony and child support.
- Debts for causing deliberate and malevolent injuries to another person or property.
- Fines and penalties due to the government.
- Employees’ benefits.
- Debts incurred because of injuries caused when the business owner was driving DUI/DWI.
- Guaranteed or government-funded educational loans.
- Debts due to retirement plans that grant tax advantages.
- Specified cooperative housing fees that are due.
This is how debt discharge in a Chapter 11 bankruptcy works.
Business debt restructuring involves repayment of debts in order of their priority – priority debts come first, followed by secured debt, semi-secured debt and then the different types of unsecured debt. The reorganization plan must include all debts and must be drafted by an experienced attorney who is adept in representing business owners in a Chapter 11 bankruptcy.
Small businesses very rarely explore bankruptcy except when there are serious financial pressures. If your company has slipped behind with lenders and you are looking at chapter 11 bankruptcy, there are additional possibilities including business debt consolidation or debt management assistance.
What You Might Not Know About Bankruptcy
If you are over your head with debt and you are thinking about filing for bankruptcy it is important to know what you are getting into, what bankruptcy really means and what it entails.
Many people just see bankruptcy it as the easy way out of their money problems, even when they are aware of all the negative consequences bankruptcy creates such as a huge drop of up to 250 points on your credit score.
Bankruptcy is a federal court process that allows you a chance to eliminate or reorganize your debts by either discharge, which typically means selling your assets, or by setting up a repayment plan.
This seems like an easy way out, even if your credit score takes a hit, but before you take that easy road out of town, first it is important to understand why it is wise to try and avoid bankruptcy.
Credit scores: what you probably didn’t think about
You have decided that you are going to file bankruptcy and you are prepared to face the consequences of your credit score dropping anywhere from 200-250 points.
You are also prepared for bankruptcy to remain on your credit report for up to 10 years and the likely hood of you being approved for any kind of credit or loan in the next 5 is highly unlikely. What are five years right? Wrong.
What you probably didn’t think about is even after your bankruptcy is taken off your credit report, questions like “have you ever filed for bankruptcy, if so when” will be asked on almost all types of financial forms that you will encounter.
So even though technically your bankruptcy is gone it will still follow you throughout your whole life. Before you make a definite decision, it would be wise to contact Phoenix mortgage brokers or your mortgage broker to see if any other options exist.
Not all debts are equal in the eyes of bankruptcy
Another important thing to consider before you set your decision about bankruptcy in stone is that not all debts can be eliminated. Debts owed such as back taxes, student loans, child support, alimony support, and student loans cannot be swiped out through filing bankruptcy.
If you have debts such as these it is not a good idea to file bankruptcy, instead, it would be wiser to contact your creditors and see if they can assist you with a new payment plan or a debt settlement.
Things You Can’t Take Away Once Declared Bankrupt
When you are struggling financially it’s a very scary time because you don’t know how you’re going to stay on your feet. Eventually, you might have to declare bankruptcy because you don’t have any other choice.
When someone first realizes they are going to become bankrupt they panic. They think every last thing they own will be taken away from them and they will end up with nothing. This is obviously very scary, especially if there is family involved.
You might lose a few things which you can’t do anything about, but I want to let you know that all hope is not lost. There are some things nobody can take away from you. I’m not talking about your freedom or your happiness.
I’m talking about physical possessions and money that is rightfully yours to keep. You will be left with more than you think and we can go through a few of them now so you will definitely realize you’re not going to be left with anything.
Cash and property
You don’t get to keep all of your cash and property, but you will get to keep some up to a certain amount. This will change depending on where you live, so you will need to work out the details on your own. You just need to realize that there is hope and if the worst should happen you won’t lose everything. You will have enough left to pick yourself up and start again.
Work related items
Can you imagine what would happen if they took away all of your tools? You wouldn’t be able to work and that would mean you couldn’t earn money. That would never be allowed to happen, so you will be allowed to keep your tools. You also get to keep your uniforms and books. You can basically keep anything you need to earn a living, but it will also only be up to a certain amount.
You’re not allowed to keep as many of your household furnishings, but you are allowed to keep enough to get by. This also includes clothing, pets, appliances, and other personal items. I know it’s not nice to think about losing things you enjoy having, but at the end of the day they are only materialistic possessions and you will eventually save up enough money to get everything back.
Nobody is going to take away any health aids. Can you imagine the uproar if people were losing their wheelchairs and walking sticks when they were declared bankrupt? There would be riots in the street, but don’t worry because it will never happen. If you do have anything wrong with you it’s OK to feel safe. Your health will always be protected.
Money payable to you
Are you due to any compensation due to an injury? Do you have any money coming your way from a court judgment? Do you have any insurance benefits? All of these are yours and nobody is able to take them away. I hope you’re feeling a little better now and you realize bankruptcy is not the end of the world, but we’ll look at one last thing that is protected.
There is a huge list of things that are protected and that means nobody can legally deduct them from your check because of a court judgment. Most pensions are safe, so if you’re retired you are not left with anything. If you are unemployed your unemployment benefits are also safe. Please understand that this doesn’t mean all of these are safe from child support and alimony.
Are you still stressed out?
Bankruptcy is going to be painful, but once you get through it you can change your life and improve your financial situation little by little. At the very least you now know you’re not left with anything.
How to Repair Your Credit After Filing Bankruptcy
The decision to file bankruptcy is one that has many ramifications, especially to your credit score. However, the good news is there are steps you can take to repair your credit after filing bankruptcy that will restore your good credit score and your ability to utilize credit when you need it.
How to Know When Bankruptcy is the Right Choice for You
Considering bankruptcy is often a sign that you are beginning to drown in bills and ever-growing debt. Bankruptcy offers a smart solution to the impossible debt by creating a fresh financial start in life. The trick is knowing whether bankruptcy is the right choice for you.
Types of Bankruptcy
The first step is to understand the types of bankruptcy that are available. There are generally four types of bankruptcy: chapter 7, chapter 11, chapter 12 and chapter 13. Chapter 7 is most commonly used for individuals seeking to file personal bankruptcy.
If Chapter 7 bankruptcy is successful, most of your debts will be wiped away and you will owe nothing to those creditors. Chapter 11 is reserved primarily for business or individuals with an exceptionally high amount of debt.
Generally, chapter 11 results in a reorganization whereby debts are paid off slowly over time. Chapter 12 is reserved for farmers and fisherman. Chapter 13 is another type of reorganization whereby your debts are reduced, allowing you to make affordable payments on them.
Since chapters 7 and 13 are most commonly used, information on these types of bankruptcy will be most helpful in determining whether the filing is the best route for you.
Benefits and Drawbacks to Bankruptcy
Chapter 7 bankruptcy is perfect for individuals who have few valuable assets they wish to keep. An obvious benefit to Chapter 7 bankruptcy is that almost every debt is erased.
Your property that is not exempt is sold to satisfy your creditors. The drawback is that you may lose your car or house if you file under Chapter 7, as these items may not be considered exempt property. If you qualify for chapter 7 bankruptcy, most of your other property will be exempt.
Chapter 13, on the other hand, allows you to keep property and simply file a plan with the court outlining how you will continue to make payments to your creditors. Realistically, if you are falling behind on mortgage payments, but desire to keep your home, then chapter 13 Bankruptcy is a good option.
So is Bankruptcy Right for You?
If you feel that you cannot escape your debt and creditors are constantly calling, bankruptcy is a good option. It prevents creditors from taking any action to collect on their debts. However, before making any decision, your first move should be to consult a bankruptcy attorney who can give your case the personal attention that it deserves.
Establish New Credit as Soon as Possible
While it is true that you will have to wait for a period of time before you can get new credit in your name after bankruptcy, it is important to establish fresh, new credit as soon as you can. The best way to do this is by applying for a small, secured credit card that has a low limit.
Once you receive the card, purchase things that you would normally use every month on that card such as gas. Then, you make sure that the card is completely paid off every month. This will go a long way to increase your credit score quickly.
Pay Close Attention to Your Credit Report
Be sure to get a copy of your credit report from all three credit bureaus to make certain there is no activity on your credit report that is suspicious or being reported incorrectly.
You want to make sure that anything you included in your bankruptcy shows up on the report as included. As debts are taken care of through the bankruptcy, depending on which type you filed, you should closely monitor your credit report to make sure all debts are being properly reported as the bankruptcy instructed.
Establish a Budget and a Savings Account
One way to hopefully prevent more financial trouble in the future is to establish a monthly budget. Decide how much money you need to be sure that all bills are paid and that all essential items are met for your household.
That amount of money should be set aside each month. The remainder of your income should be placed in a savings account that you build over time. When the opportunity comes to purchase a home or a car, a solid savings account says a lot to a lender regarding your financial stability.
Furthermore, the savings account will help you refrain from using credit for non-essential purchases in the future.
Pay Your Bills When They Are Due
Make sure that none of your bills are paid late, as that can reflect negatively against you on your credit report. You must have a complete understanding of every bill’s due date and how much is due well before it needs to be paid. It is also a good idea to consider having your bills automatically drafted from your account. However, be sure the money is there, as overdraft fees can impede your overall credit profile.
While some may feel as though it is impossible to repair your credit after bankruptcy, the good news is it is very achievable. With some determination and consistent behavior, you can build your credit to what it once was prior to your bankruptcy.
Services to Help you Repair
Even when you have done the previous steps, finding a service to help you repair your credit can also be beneficial. These services can help you with bankruptcy, identity theft, and establishing new credit. There are many companies out there like https://www.creditreport.com/reviews and others that can assist you in repairing your credit after filing for bankruptcy.
4 Pointers to Recover from Bankruptcy
Having a huge amount of debt can be overwhelming. You owe an enormous amount of money to credit card companies and lenders, and you can no longer make payments. You feel like you have no other option than to file for bankruptcy.
After bankruptcy proceedings, your credit and reputation are ruined, and you are just trying to get your normal life back. Therefore, if you have filed for bankruptcy, here are four tips to help you recover.
1. Take financial management classes
Before you filed for bankruptcy, you were required to attend credit counseling. After the bankruptcy proceedings are completed, it is a good idea to take additional classes to help you manage your money. You need to make sure you do not make the same mistakes, so these classes can help you control your money, so your finances will not spiral out of control.
2. Get a secured credit card
With a secured credit card, you deposit money into your account, and you cannot exceed that amount. After bankruptcy, it might be difficult to obtain an unsecured card, and if you are approved for one, the interest rate will be very high. A secured card can help you raise your credit score because it will show creditors that you can be trusted to pay your bill.
3. Pay your bills on time
It is important that you pay all your bills before the due date. Your credit score will gradually start to increase, so the lender will see that you are acting responsibly. Pay your rent, utility bills, loans or any other bills on time, and you will start to rebuild your credit.
4. Come up with a budget
You need to form a budget and make sure you stick to it. Make a list of all your bills each month and how much money you will need for gas, entertainment, and food. You do not want to spend more money than you make. You also want to avoid getting into financial trouble again.
Bankruptcy can be intimidating and scary, but it was your last resort, so you hired a Chapter 7 Attorney. The effects of bankruptcy are temporary, and you can recover. You want to put your bankruptcy in the past as quickly as possible, so you need to get your finances and credit moving in the right direction. Therefore, take the proper steps to recover from bankruptcy, and you can look forward to a brighter financial future.