Bankruptcy Protection is a legal process and a last alternative to overwhelming debt however the consequences and bad effects on your credit history will not make it worth it in all circumstances. Bankruptcy information is critical to making this important decision.
Debt Settlement is proving to be a better option for many consumers. Declaring bankruptcy has serious consequences, including lowering your credit scores however in some cases, it may make the most sense. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief.
Please complete the form to schedule your free credit and debt counseling appointment.
Chapter 7 and Chapter 13 Bankruptcy Protection
Filing for bankruptcy under Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they might otherwise lose through the Chapter 7 bankruptcy process. In Chapter 13, the court approves a repayment plan that allows you to pay off your debts over three to five years, without surrendering any property.
After you have made all the payments under the plan, your debts are discharged. As part of the Chapter 13 process, you will have to pay a lawyer, and you must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief.
Counseling and Bankruptcy Protection
You must get Credit Counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at the U.S. Trustee Program. Before you file a Chapter 7 bankruptcy case, you must satisfy a “means test.” This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program. Filing fees are generally several hundred dollars and attorney fees are extra and vary.
Bankruptcy Protection Code
The Bankruptcy Code has undergone various changes over the years. In 1934, it was described to benefit the debtor who have maintained their honesty in admitting to the unfortunate events that led them unable to pay off their financial obligations. This was meant to give them a fresh start – to rebuild their losses and start anew – without the pressures of mounting debts and harassing creditors.
Bankruptcy Information You Need
The country is divided into 90 bankruptcy districts. All the States have one – some even more than the others. A US bankruptcy judge presides over every case and delivers the final decision. They decide if the debtor should be awarded a discharge of debt and how they should file to declare it. Most of the time, the debtor will not even meet with this judge. The only meeting that they will have in connection with this case is during the 341 meeting wherein the creditors will also come in to question them.
The Bankruptcy Code holds 6 different cases where individuals, organizations or groups can file.
Chapter 11. Bankruptcy Reorganization
This type of bankruptcy filing is commonly used by companies and other commercial businesses that wish to create a reorganization that is sanctioned by the courts. The intention of this is to repay the creditors while still being able to financially afford to continue with business operations. This plan must be provided for by the debtor within 120 days after the filing of the case. They are also responsible for providing a disclosure statement to the creditors that will allow them to evaluate the reorganization plan. If the court approves of the plan, the result is a new plan that will involve the repayment of only a percentage of the original balance owed – while the rest will be discharged.
Chapter 12. Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income
The name of this chapter is somewhat self explanatory – at least for the people involved. Here, the debtor is asked to provide a plan that will contain how they will pay off their debts through a payment schedule that will not last more than 3 years. The court does have the right to increase this term to 5 years if there is a need. In this case, a trustee is involved to help disburse the payments to the creditors – in accordance to the approved plans by the court. This arrangement allows the business to continue while the repayment is going on.
Chapter 9. Adjustment of Debts of a Municipality
This mode of bankruptcy is specific to municipalities and other forms of it such as villages, etc. This type allows for re-organization of the filing party. This means that with the court’s approval, they only fulfill a portion of their financial obligation to debtors and the remaining balance is stricken off the books.
Chapter 15. Ancillary and Other Cross-Border Cases
This type of bankruptcy directly deals with insolvency that occurs beyond the borders of the United States. Its objective is to apply the rule of bankruptcy law of the US and as need be, the laws of other countries as well. This gives the business entity filing for bankruptcy the chance to be tried for US and country specific bankruptcy law applications.
What are the Different Bankruptcy Laws Affecting You?
There are two bankruptcy laws affecting the personal finances of individuals; Chapter 7 and the most recent Chapter 13.
Chapter 7. Bankruptcy Liquidation
This method of the bankruptcy law for individuals involves liquidating all assets to pay off obligations. When used, the court assigns a trustee to help the debtor liquidate all available assets. This supervision is needed to ensure that everything that transpires is subjected under law accepted procedures.
This of course takes a second lien on particular exempt properties by the debtor. Secured creditors usually are the first in line of getting cash settlement in cases that the debtor has assets to convert. In most instances though, the debtor does not usually have enough assets to pay-off their obligation. In these cases, their debts are just discharged by the courts for debts that are considered dischargeable.
There have been efforts to prevent the abuse of this bankruptcy law through amendments and putting in a so called “means test” for the debtor. This includes conducting a thorough investigation to determine if the income of the filing party, usually an individual, is in excess of certain benchmarks of the court. Once proven that they are well way beyond the threshold, they might not be considered for the relief of Chapter 7. Instead, they will be under Chapter 13.
Chapter 13. Adjustment of Debts of an Individual with Regular Income
Anyone who is not permitted to file for bankruptcy under Chapter 7 will be directed to Chapter 13. We’ve mentioned previously the “Means Test” and this refers to the measurement of a person’s income. If you have a regular source of income and that is within the middle and high income bracket, you will not be allowed to have your unsecured debts discharged immediately. The upside is the debtor is allowed to keep some of their valuable assets.
Instead of liquidating all assets, a plan is set and be proposed by the debtor that will stretch for 3 to 5 years. This repayment plan will be approved only by the court through the bankruptcy judge. The approval depends on whether the plan meets the confirmation requirements as stated under the Bankruptcy Code. The total debt to be paid will be based on the income that is anticipated over the repayment plan, after which the rest of the debt is considered discharged.