When To Move Forward With Bankruptcy
If none of the above situations apply to you, bankruptcy may be a viable option. And if your debt is spiraling out of control, dont wait too long to declare it.
Below are a few red flags that can indicate your current financial situation is untenable. In these cases, bankruptcy may offer the only way out.
But Don’t Wait Too Long Either
Sometimes, however, it’s in your best interest to file for bankruptcy quickly. For instance, in most cases, if you have a wage garnishment in place, the sooner you file, the more money you’ll have to pay bills.
You’ll also want to file quickly when a creditor has a lawsuit against you. Your attorney will examine the complaint to determine whether it includes a fraud allegation. If so, the best bet will likely be filing for bankruptcy before the case goes to judgment. If the matter goes to judgment, you probably won’t be able to wipe out the debt in bankruptcy.
Also, once a creditor wins a money judgment, the lien rights that accompany it will allow the creditor to garnish your wages, attach your bank accounts, repossess your car, and foreclose on your house. In most cases, if you file for bankruptcy before the creditor wins the case, the bankruptcy will stop the pending lawsuit and wipe out the debt.
You should be aware that bankruptcy offers limited protection against liens, so it’s usually good to file your case before the creditor receives a judgment and liens attach to your property. Because this is a complicated area, if you’ve been served with a lawsuit, you should contact a bankruptcy lawyer as soon as possible.
A Way To Reorganize Your Finances
In many cases, like in the case of Rapper Fifty Cent, who recently filed for bankruptcy, a bankruptcy provides a way to continue working and earning a living, while paying off debt in an orderly fashion. In other words, bankruptcy provides a way to reorganize your finances, and emerge stronger than before.
In fact, there are ways that you can continue to retain your home and even your car in a bankruptcy. Filing for bankruptcy definitely means that you need to tighten your belt, make lifestyle changes, and become more frugal than before, but it doesnt mean that youre completely broke. To understand more about what bankruptcy can do for you, speak to a Dallas bankruptcy attorney.
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Will Bankruptcy Wipe Out Your Debt
Not all debts get discharged in bankruptcy. If you’ll still have to pay your most worrisome bills after filing for bankruptcy, then filing probably won’t be good idea. On the other hand, if filing for bankruptcy gets rid of enough debt that you’ll have more money to devote to nondischargeable debt, bankruptcy might still help.
Below are some debts that are either difficult or impossible to wipe out in bankruptcy. Also, creditors with these types of debt can use collection techniques like wage garnishments or bank levies even without a judgment.
Do I Have To Be Broke To File Bankruptcy
by Will Geer | Sep 23, 2012 |
The answer to this question may surprise you. ;You actually do not have to be destitute to file bankruptcy. Ideally, my clients would come to me before the bottom drops out from under them, but many wait until they are almost a year behind on their mortgage payments or a car has already been repossessed before seeking counsel from a bankruptcy attorney. ;In fact, you can even file a Chapter 7 case and have whatever non-exempt property you own liquidated by the Chapter 7 trustee administering your case to pay your unsecured creditors. I have seen creditors get paid out at 100% in Chapter 7 cases, though this is rare. Most are no-asset cases in which creditors receive nothing.
In Chapter 13 cases, you will have the option to pay back some of your debts over a 3-5 year period. ;In some cases, unsecured creditors will receive nothing, while in others, all of your creditors will receive 100% of what you owe them, only with no fees and interest accruing during the plan period.
Chapter 11 is another animal entirely, as businesses need sufficient cash reserves to be able to whether a reorganization effort through bankruptcy. ;Individuals filing for Chapter 11 should take this same advice to heart, as Chapter 11 fees are much higher and cannot be paid out over the life of a plan like in a Chapter 13.
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Did You Know That You Have To Take A Course Before Filing
Before you can even file bankruptcy you are required to take a course on credit counseling. You can take this course online or you can go to a physical class. They also offer it over the phone and by email. There is a fee to take the course. Unfortunately, there is also a fee to file bankruptcy without taking the course.
Your Wages Are Going To Be Garnished
In extreme cases, a lender can get a court order to garnish your wages. That means they make an arrangement with your bank or employer to take money directly out of your paycheck. Your wages can only be garnished if you take home at least 40 times the minimum wage each week the equivalent of working full time at minimum wage. But since thats not much money to begin with, most people develop additional financial problems if a lender garnishes their wages and wind up increasing their debt with other lenders.
If youve received notice that a lender is attempting to garnish your wages, declaring bankruptcy will prevent this order from going forward, at least temporarily. Plus, you may be able to have the debt dismissed.
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The Filer Is A Corporation Or Llc
A business can file for bankruptcyand sometimes it makes sense to do so . Chapter 7 bankruptcy won’t wipe out the debt of a corporation or LLC, however. Instead, the trustee will liquidate the company assets and distribute the funds to creditors.
You can find out more by reading Chapter 7 Bankruptcy for LLCs and Corporations.
Protecting Your Financial Interests
Unfortunately, creditors often receive pennies on each dollar theyre owed, especially if their receivable amount is lumped in with the businesss general unsecured debt. Nevertheless, there are a couple of ways that individuals and companies can protect against bankruptcy losses, aside from weeding out business partners who are known to be in financial distress.;
One such backstop is inserting something called a retention of title clause in your sales contract. Such clauses give sellers like yourself the right to retain ownership of the goods you sell until youre paid in full. Otherwise, you could be listed as an unsecured creditor whos at the mercy of the trustee and whatever tangible assets the company has remaining to pay its debts.;;
Suppliers who conduct extensive business with a particular customer may also consider taking out trade credit insurance , which safeguards the creditor in case the buyer fails to pay because of a bankruptcy or other reasons.
Typically, TCI covers a certain portion of the unpaid debt, depending on the policy you take out. In addition to recouping unpaid receivables, some TCI policies provide protection against preference liability, wherein the trustee can recover payments that a creditor has received from the distressed debtor within 90 days of filing for bankruptcy.
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Get The Bill Collectors To Pay For
If youre being harassed by bill enthusiasts, they may be breaking the Federal Debt Collection ways Act or your states equivalent. If thats the case, you may be compensated $1,000 per example of harassment, plus damages that are actual plus lawyer costs and expenses.
This can need which you keep accurate documents and have now an attorney prepared to continue. Not absolutely all bankruptcy lawyers handle this sort of customer litigation, nonetheless they will refer you to definitely an individual who does.
Cent Filing For Bankruptcy Does Not Mean Hes Broke
Lauren is a writer living in New York City. Follow her at
Earlier this morning, The Washington Post;reported that;50 Cent filed for Chapter 11 bankruptcy protection and, as always, . Many people are assuming that he’s flat brokeespecially in light of a recent lawsuit where a;jury ordered him to pay $5 million to a woman who sued over a sex tape that was posted without her permission. And his;boxing promotions company, SMS Promotions, filed for Chapter 11 bankruptcy back in May. But that’s probably not exactly the case. In the court docs, his assets and debts were each listed in the range of $10 million to $50 millionwhich automatically puts him into Chapter 11 territory based on the monetary amounts.;Typically Chapter 11 bankruptcy simply means a reorganization of one’s assets and debtswhich isn’t saying they haven’t been poorly managed up until now for 50but in light of the recent lawsuit against;Lastonia;Leviston, the mother of Rick Ross’ child,;this will give him some time to repay that $5 million.;
A few hours ago, 50 Cent’s attorney, William A. Brewer III, partner at Brewer, Attorneys & Counselors, issued the following statement to;Variety:;This filing for personal bankruptcy protection permits Mr. Jackson to continue his involvement with various business interests and continue his work as an entertainer, while he pursues an orderly reorganization of his financial affairs.”
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Does Filing For Bankruptcy Keep Broken Leases Off Your Credit Report
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When you file for bankruptcy, you receive an automatic stay, which requires that any and all creditors stop contacting you in order to seek payment on debts. When you receive your bankruptcy discharge, all eligible debts included in the bankruptcy filing are no longer your liability. These are two of the most common benefits of filing for bankruptcy, but some wonder if bankruptcy could possibly offer another benefit by keeping broken leases from reporting to their credit reports.
If you have broken leases and you file for bankruptcy, will those broken leases still show on your history after you file?
Often when an individual is considering bankruptcy it is in an effort to obtain a fresh start. In a lot of cases, this will include a relocation, which could mean a broken lease. So it isnt overly surprising that the question of broken leases and how theyre affected by bankruptcy would come up.
Bankruptcy will discharge your legal obligation to repay the debt associated with the leases. You simply have to make sure that the debt is listed in full with all pertinent information on the list of creditors in your bankruptcy filing and there should be no problem with its inclusion.
How Long Does Chapter 7 Bankruptcy Take
Most people can file their bankruptcy forms within one week if theyâre organized. The 341 meeting with the trustee who oversees your case takes place about one to two months after you file.
If all goes well, two to three months after your meeting with your trustee, youâll get a letter in the mail that your debt is officially discharged. This means that that Chapter 7 bankruptcy from beginning to a discharge of your debts takes about 3-5 months.
Withdrawing From Your Retirement Accounts Or Home Equity
This money will be protected when you file a bankruptcy case. If you use it to fund your case, you may incur penalties for early withdrawal or high tax bills. Using home equity loans can put your home in jeopardy if you have trouble making the payments later. The disadvantages outweigh the advantages of this approach unless you owe significant amounts of money that will be discharged.
Most Of Your Debts Are From Recent Income Taxes Court Judgments Child Support Or Student Loans
Bankruptcy treats different kinds of debts differently. Income taxes, court judgments, child support, and student loans are some examples of debts that cant be erased in bankruptcy in all but the most extreme cases. If a large proportion of what you owe is made up of these debts, bankruptcy will probably not be advantageous for you.
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How Much Does Chapter 7 Bankruptcy Cost
The bankruptcy court requires a $338 filing fee. If you earn below 150% of the Federal Poverty Line, you may qualify for a fee waiver. People who are on social security or unemployed usually qualify for a fee waiver. You can pay the fee in installments if you make a request and the court agrees.
The two online personal finance courses each cost between $10 and $50, depending on the provider you choose. You can also qualify for a fee waiver for these courses, based on your income.
If you hire an attorney, the most expensive cost in bankruptcy is your attorney fee. It costs an average of $1,500 to hire a bankruptcy attorney for a Chapter 7 case.
Cent’s Bankruptcy Is A Lesson In Valuing What You Earn
Most people look at hip-hop star 50 Cents filing for Chapter 11 bankruptcy protection and cant imagine how anyone that rich and famous can possibly end up broke. Well, hes not really broke not by a long shot but well sort all that out in a minute. ;
But you know what gets me? That a guy earning $185,000 a month from royalties and investment interest thinks its cool to stiff his debtors to the tune of at least $28 million. How low-class can you get? ;
In any case, lots of fabulously wealthy people go belly up, so its definitely worth understanding why its darn common, especially among star athletes, musicians, and actors who come into lots of money very quickly.
Famous examples include Burt Reynolds, Kim Basinger, Willie Nelson, and basketball star Scottie Pippen. My personal favorite is boxer Mike Tyson who, get this, somehow managed to burn through $400 million. As an aside, guess who now lives in Tysons old Hartford, Conn., mansion? None other than 50 Cent.
How does that happen? I call it the easy come, easy go syndrome. People never value what comes too easily. And by value, I mean emotional value. They dont feel the value, so its not really special to them deep down where it counts. And because it doesnt feel special, they dont treat it that way.
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Your Car Loan If You Want To Keep Your Car
If you are paying off your car, the loan is secured by your car. When you file for bankruptcy, under the new bankruptcy rules, you can reaffirm your car loan.
The good news is that if you agree with your car loan creditor to repay all or part of your loan, the creditor wont take your car.
Of course, you must make payments according to the reaffirmed car loan.
What Documents Do You Need To File For Bankruptcy
Theres a heck of a lot of paperwork and forms and documents involved in bankruptcy, but lets talk about what you need to gather up at the start:
- Tax returns for the past two years or four years
- Income documents
- Mortgage information
- Vehicle information
- Retirement information
- Other documentation showing any other debts or expenses, like alimony or child support
Yes, thats a lot. Bankruptcy is not an easy out! Also, your particular state or court system may require more. Get ready to do a lot of hunting and have a lot of patience here.
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Tips To Avoid Filing Bankruptcy
Bankruptcy is intended as a last resort for people who have debts they cannot pay off through other means. That is one reason the credit penalty is so severe if you can avoid bankruptcy, it is usually in your best interest to do so. Here are a few tips to avoid filing bankruptcy.
The first tip is to try and cut your expenses as much as possible. If you arent able to balance your budget so that your income is more than your expenses, you may find that bankruptcy does not give you the clean start youre looking for. You can also try to negotiate with your creditors to see if they will accept an alternative payment plan.
Depending on the types and amounts of your debts, you might also consider debt consolidation. You might be able to consolidate your debts by applying for a personal loan and using the proceeds to pay off your other debts. You can also work with a company that specializes in debt consolidation. If you work with a company, find one that has positive reviews and does not charge an excessive amount of fees.
Don’t File When You Are About To Receive Substantial Assets
You should reconsider filing bankruptcy if you are about to receive an inheritance , a significant income tax refund, a settlement from a lawsuit, or repayment of a loan you made to someone else. Why? Because once you receive the funds, you might not be bankruptespecially if you could use this money to settle with creditors and get out of debt on your own. If you find yourself in this situation, consult with a bankruptcy attorney to discuss your options.
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