There are a number of ways of filing for bankruptcy in the US, and they are referred to as “chapters”. With 85% of debtors filing under chapter 7, this is the most popular form of bankruptcy in the US, probably as it removes all debt (there are some exceptions like tax, alimony and student loans to name 3), unlike the second most common form of bankruptcy, chapter 13, where debt is repaid by means of a legally enforced repayment plan.
Even though all the individuals possessions are sold under chapter 7, the end result of freedom from debt makes chapter 7 the most popular for the debtor, but perhaps the least popular for the creditor.
Unfortunately for the creditors, a chapter 7 bankruptcy will often leave them financially out of pocket by a large amount.
Now this may be unavoidable, however, it may be that an individual can, in fact, afford to repay their debts if they are rescheduled under a chapter 13 filing, which is essentially a repayment plan over a 3-5 year period.
Therefore, 2005 saw the introduction of a compulsory means test for individuals seeking chapter 7 bankruptcy, failure of which would automatically push them into a chapter 13 filing, which is a 3-5 year repayment plan.
The means test was introduced to ensure that only those who genuinely cannot repay their debts can claim chapter 7 bankruptcy.
The means test works by taking the applicants average earnings over the past 6 months before filing, and deducting certain monthly expenses to arrive at the net “disposable income”.
The first stage of the test is to see if the applicant’s disposable income for the previous 6 months is less than the median income for a same sized household in the same state. If it is you can go straight into chapter 7. If not, the applicant is to some extent at the mercy of the court, who decide whether the amount of the applicant’s disposable income is sufficient to make some repayment of their unsecured debt. The applicant can often find that the court considers that they can, but in reality it leaves the applicant with very little money to live on, making life tough financially.
If you income is found to be greater than the median then you have to go through some complicated calculations. The problem an individual faces once they fail the first part of the test, is determining if your “disposable income” figure is sufficient, after paying monthly “allowed” expenses, to pay at least a proportion of your unsecured debts (credit cards for example).
The calculations are complex and vary from state to state. It is worth the expense of hiring a legal professional to help guide one through the legal process and get the best possible outcome.
Bankruptcy is a difficult step, in spite of what other people might say to you. It can destroy your financial postion as your credit score drops. Although chapter 7 is the most popular form of bankruptcy, it might be worth looking at chapter 13 bankruptcy law. If you would like further free information and advice, visit www.chapter13bankruptcylaw.net.
According to a recent story in the Orlando Sentinel, Orlando home values continue to decline. As an Orlando bankruptcy lawyer, I have witnessed this first hand. Now, I know you didn’t need the Sentinel to tell you that, but I digress.
Unfortunately, the same can be said for real estate in almost all areas of Florida. It seems everyone is underwater on their homes. In the past few years, many of my Orlando bankruptcy clients have benefited from the ability, in a Chapter 13 case, for their Orlando bankruptcy lawyer to file a motion in their case which allows them to completely wipe out the balance owed on a 2nd mortgage.
In order to qualify for this “lien stripping”, you must prove that your current home value is less than the current balance of your 1st mortgage. In most cases, an appraisal from a certified appraiser is sufficient evidence. Recently, David Leibowitz, a bankruptcy lawyer practicing in Illinois and Wisconsin reviews the choices people have when eliminating a 2nd mortgage.
Here in Orlando, a recent opinion was issued by a Bankruptcy Judge that says you can only strip off a 2nd mortgage in a Chapter 13 bankruptcy case. This type of relief is not available in Chapter 7 cases. Also, you must successfully complete your Chapter 13 payment plan, and receive your Discharge Order from the Court before the mortgage will be totally gone.
Eventually, we should start to see a reverse in the declining home values plaguing Orlando, Florida, and the rest of the county. At that time, those who took advantage of the lien stripping option in Chapter 13 bankruptcy and successfully completed their payment plan, will, hopefully, again have equity in their homes.
With the help of an experienced Orlando bankruptcy lawyer, my clients can achieve this goal, as well as other goals such as eliminating credit card debt and saving money on car loans, all by filing Chapter 13 bankruptcy.
Do you have questions about filing for bankruptcy? Check out K. Hunter Goff’s FREE eCourse. Hire an experienced bankruptcy lawyer to work for you.
Depending on your circumstances, and Individual Voluntary Arrangement, or IVA, could be the best solution to your debt and keep you from bankruptcy. IVA’s have many advantages for a debtor, but there are disadvantages as well which can be hindering, so it is best to research all possible debt solutions.
To qualify for an IVA, you must be at least 15,000 in debt and you must have a regular income. If your income doesn’t leave anything left over after your essential monthly bills, bankruptcy may be the better option. An IVA is a legally binding agreement arranged through an insolvency practitioner between you and your creditors, and can last for up to five years.
With an IVA, your insolvency practitioner meets with your creditors and presents them with a plan of repayment. The creditors will usually agree to plan to reduce your debt to pence per pound, sometimes up to 75% less than the original debt. At least 3/4 of your creditors must agree to accept the plan for it to become legal. If they don’t, the practitioner must amend the terms until an agreement is reached. Once it is approved, you pay a monthly sum that is split between the creditors. Part of the insolvency practitioner’s fees will come from that monthly sum.
To a debtor, an IVA’s advantages can be great. Unlike bankruptcy, those in an IVA do not risk losing their home. Your debt is usually reduced by a large amount, you pay no interest fees, get no calls from creditors, and the fees charged by the insolvency practitioner are usually less than the fees you would pay in bankruptcy. Payments you make toward your debt are income based, and can fluctuate with your income. Although both a bankruptcy and an IVA stay on your credit report for six years, an IVA looks better to future creditors and carries fewer stigmas. During an IVA, you are allowed to apply for credit.
Although less costly than bankruptcy, compared to other debt solutions, an IVA can be expensive. Insolvency practitioner fees are high. If you choose this method, be prepared to have your finances closely scrutinized for the duration, and be prepared to explain any income anomalies to the insolvency practitioner. Also, be prepared to hand over an extra money that comes your way during the agreement, like pay bonuses or inheritances. If you should fail to meet the IVA terms, you may be left with bankruptcy as your only alternative.
If you liked this, try : IVA
One should always first consider alternatives to bankruptcy.
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act brought in legislation making it compulsory for an individual to obtain credit counselling within 180 days of filing for bankruptcy.
This counselling is intended to make the individual aware of alternatives to filing for bankruptcy.
The most common bankruptcy types are what are referred to as chapter 7 and chapter 13 bankruptcy.
Chapter 7 bankruptcy involves the selling of almost all of one’s personal posessions, but despite this, it is the most popular option.
Should any debt still exist after selling all relevant possessions, this is cancelled, allowing a completely clean slate – however, some debt, such as tax, cannot be written off.
If an individual does not want to be forced to sell all their assets, chapter 13 bankruptcy removes this need altogether, by putting in place a repayment plan, debts being paid in full over a 3 – 5 year period.
The changes brought in in the 2005 legislation means that all applicants for chapter 7 bankruptcy have to undergo a means test, to ensure that they genuinely cannot work out a repayment plan.
Given the complexities of filing for bankruptcy, including deciding the best type of bankruptcy to apply for and filling in the initial legal means test, a lawyer is essential.
Also, once a lawyer is acting for you, “automatic stay” comes into effect. This means that creditors can no longer approach you for money. All creditors have to deal through your lawyer.
You will be required to draw up a list of debtors and a list of your assets. These will be reviewed at the meeting of creditors (what’s called a”341 Meeting”). where you have to answer a series of questions on oath.
In a chapter 7 case, the court decides whether there are assets that can be sold to pay creditors. Once these assets are sold and the money distributed amongst the creditors, any outstanding debts are wiped out.
If, after the means test, it is shown that an individual is in a position where full repayment of debt can be made over a 3- 5 year period, a chapter 13 filing is made and a repayment plan introduced.
60 days after the 341 meeting, your creditors can challenge the discharge or aspects of it. If no petitions are received by the court, a notice of discharge of debt will follow within a few days under chapter 7. In the case of a chapter 13 filing, notice of discharge is issued 30 – 60 days after the repayment plan has been completed, and verified by the court.
If you are contemplatinghow to claim bankruptcy, I strongly advise that you visit www.howtoclaimbankruptcy.net for more free information, including advice on how to rebuild your credit score after bankruptcy has been discharged. Check here for free reprint licence: How To Claim Bankruptcy Today.
That’s pure true that we have many debt relief ways to choose from, but everything depends from the obligators no matter which option and alternative he or she will choose. Mostly individuals consider that in cases when they are pressed by heavy debts, the only way left for them is file for bankruptcy. They just choose and decide without examining some other debt methods. But you can have your debt plans due to your obligations, and still you have to do some researches on this kind of companies.
Let’s see and talk about all existing debt relief programs, obligator is able to choose from them any one he or she wants and which is suitable for his or her obligation amount.
First option is debt consolidation. This plan can assist the obligator to collect all his or her debts together that have higher interest. After this the debt consolidation firm gives you a credit with lower rate of interest for paying the multiple credits. Other words, this means that you will get a credit from the company to eliminate all your obligations. It will couple of years for the obligator by reason of the fact that the credit rate of interest is less.
Second option is credit counseling. With an assist of this process the obligator has a chance to decrease the credit rate of interest. Let’s describe this process, the loan counselor contacts your loaner and tries to achieve deducting in your present interest amount, but all the rest stays the same. Such plans can be very useful for those obligators whose debt amounts are not so big.
Third option is debt settlement. This way is all concerned about the process of negotiations with your lender for lessening of your present debt. The financial company makes deal with your creditor to make lessening in your whole debt amount. In case if all things will go fine, the obligator is able to receive discount even around seventy percent. This kind of option is really suitable for those debtors who have a real big debt amount.
Forth option is bankruptcy finally. This is the most consumptive and long lasting financial plan. All the things are depended on the court and which kind of decision it will make for the obligator at the end. You can receive a debt relief at the incipient level, which means that you can be free from your obligations, but after you will surely face many other problems in case if you will choose this wrong way. You won’t be able to find even one bank which will give you a credit in the future and all because you have negative credit reputation. It can take all your life to turn back your good one.
Practically all of us remember the times when it was possible to buy a thing even if one hadn’t got enough money. Loan was a simple way out. It is little wonder that today many of those who hunted for a loan, are searching for how to avoid bankruptcy.
People who managed to get into the condition when their expenses exceed their earnings, definitely must search for ways to avoid bankruptcy.
Being in such condition it is wise to use any tools to get over it. Take advantage of such wonderful chance as the Internet technologies. Using them at full capacity might give great results. Working with search engines, forums, social networks,web sites one will find a number of tips to avoid bankruptcy and a great deal of other relevant info. Also signing up for RSS on this blog will help to be aware of new publications and tips on the topic.
