Losing Paperwork In A Natural Disaster
Filing for bankruptcy after a natural disaster is common. But not only are jobs and property lost, but the paperwork required to file for bankruptcy can end up missing, too. Fortunately, provisions are made for such emergencies. When a bankruptcy debtor loses financial paperwork in a natural disaster, the bankruptcy trustee must:
- avoid taking action against a debtor who can’t produce documents
- grant reasonable requests to ease filing requirements, and
- take into account a decrease in income or increase in expenses.
Wages Benefits And Retirement Accounts
Wages that you earned before your filing date but don’t receive until after filing your case are usually only partially protected. Any post-bankruptcy earnings are completely exempt in a Chapter 7 filing.
Welfare benefits and retirement accounts are almost always protected– but only if you list them on your paperwork. Social Security, unemployment benefits, 401, disability benefits, veteran benefits, etc., are all protected by federal law.
However, if you have a lot of money saved in any of these accounts, it might be wise to talk to an attorney.
Debts Secured By Property
Schedule D: Creditors Who Have Claims Secured by Property is where you include a secured claima loan or obligation for which you have pledged a piece of property as collateral. If you fail to pay the obligation, called “defaulting,” the creditor typically has a right to take back the property through foreclosure or repossession. The most common examples of secured claims include your mortgage and car loan.
When you fill out Schedule D, include the creditor’s name and contact information, the nature and amount of the lien, date it was incurred, and the description and value of the property subject to the lien. If the lien amount exceeds the value of the property, list the difference in the unsecured portion column.
Click the link to view or download Form 106DSchedule D: Creditors Who Have Claims Secured by Property from the U.S. Court bankruptcy form webpage.
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Consumers Can Seek Chapter 7 Or Chapter 13 Bankruptcy
There are two types of bankruptcy that consumers can choose if their financial situation warrants it: Chapter 7 or Chapter 13 bankruptcy. The type of bankruptcy you choose will ultimately determine how long it remains on your credit report.
Chapter 7 bankruptcy essentially means any unsecured debt will be wiped out with certain limits and restrictions. The other type is Chapter 13 Bankruptcy, which calls for people to continue paying their debt for several years and afterward, a portion of that debt is discharged.
How Your Creditors Are Paid
The official receiver will take control of your assets unless an insolvency practitioner is appointed. An insolvency practitioner is usually an accountant or solicitor.
The person who takes control of your assets is known as the trustee. The law says you must cooperate fully with them.
The trustee will sell your assets and tell the creditors how the money will be shared. Creditors must then make a formal claim. You cant make payments directly.
If you have assets, money from the sale of these will be used to pay the costs of the bankruptcy process before creditors are paid. If your case is administered by the official receiver the following fees will all be deducted from the money realised:
- an administration fee of £1,990 if you applied for your own bankruptcy or £2,775 if someone else applied
- a general fee of £6,000
- 15% of the total value of assets realised
- a fee charged at an hourly rate where money is paid to creditors
If there are insufficient assets in your case the official receiver will still process your bankruptcy.
Next, money will be used for:
- certain debts in relation to employees, if you had any
- your other creditors
- interest on all debts
Any money left over will be returned to you. If everyone is paid in full you can apply to have your bankruptcy cancelled .
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How To Shred Your Documents
When you’re ready to dispose of your bank statements, make sure you actually shred them. Just ripping them in half, isn’t going to stop identity thieves from piecing together your personal information. Shredders are now small, portable, and cheap.
If your paper volume is enormous, shredding services can be bought. Some banks will shred your statements for free on request.
Records To Keep Indefinitely
Store personnel-related payments and associated documents, such as workers compensation, pension records and employee income tax withholdings, for as long as you can. If a past company employee files for unemployment benefits, applies for a new job, or has questions dating back to his time of employment, having these records accessible will be most valuable. All corporate-related documents should be kept indefinitely, even though the corporation is no longer in business. Such documents include the certificate of incorporation, board of directors meeting minutes, labor contracts, stock transactions, patents and trademarks, and any court-related documents. Records of corporation assets and accounts receivable and payable should be kept. The IRSs statute of limitations is three years from the filing date of the tax forms in which to audit returns. As mentioned, however, keeping records proving income and deductions should be retained indefinitely if possible.
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What About Electronic Records
In today’s digital age, both paper and electronic records are acceptable forms of documentation. Make sure that records you have scanned into your computer files are legible, however.
The IRS recommends you back up your paper documents electronically in case of flood, fire, or other disaster. Choose a method of electronic storage–whether on your computer, in the cloud, or on a thumb drive or external hard drivethat offers the most safety and security against identity theft. Make sure your computer is password protected, and consider using an encryption program like Microsoft BitLocker, Apple FileVault, or a third-party program. Choose a well-protected cloud storage program, and use a unique and complex password with two-factor authentication.
The Bankruptcy Discharge And Beyond: Life After Bankruptcy
Congratulations! You have received your bankruptcy discharge at the end of your Chapter 7 or Chapter 13 case. You are anxious to get a fresh start, but what should you do next? The good news is that there is life after bankruptcy. Here are a few steps you can take to rebuild your credit, ensure your financial future, and make sure you get the most from your new debt-free status.
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Where Your Home Is Located
When you don’t have any assets, and most of your debts are consumer debts, it is a good idea to file where you live. Consumer debts are personal obligations for things you used for yourself or family, including items and services such as:
- clothing for yourself or your family
- personal car payments, and
- home telephone and utility bills.
If the majority of your debts are a consumer in nature, it makes sense to file close to home. It will be difficult for the bankruptcy trustee appointed to administer your case or creditor to justify moving the location of your bankruptcy elsewhere
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Filing Bankruptcy When You Own The Car
A car loan is a secured debt, which means the car is collateral that can be taken back by the lender if you dont pay. When you file for Chapter 7 bankruptcy, you must list your assets on a form called Schedule A/B. Your car is an asset, because it has value. You must also file a statement of intention that that tells the court whether you plan to reaffirm your car loan, redeem the car or surrender it. If the statement of intention isnt filed within 30 days of when the bankruptcy is filed, the car loan is no longer part of the bankruptcy proceeding.
The first step to keeping your car if youre considering bankruptcy, is to determine its status. Youre either paying a loan, leasing or you own it free and clear. The status determines what you have to do to keep your car.
If youre making monthly payments on a car, its either a loan or a lease. If youre not sure which, check your agreement. If its a lease, you are renting the car and there are mileage limits that add costs when the lease ends and you return the car to the dealer.
If you are making monthly payments on a loan, the lender holds the title as collateral. Once youve paid for the car, you get the title and own it free and clear. If you cant make payments, the lender takes back the car back, which is repossession.
Being up to date on your car payments before you file for bankruptcy makes it much more likely youll keep your car when you file for either Chapter 7 or Chapter 13.
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In A Chapter 13 Bankruptcy What Happens To Property Im Buying On Credit
In a Chapter 13 bankruptcy, you may not have to give back, reaffirm, or redeem property youre buying on credit. Instead, you may be able to keep property youre buying on credit even if youre behind on payments. To keep the house where you live, you must make current payments. You get three to five years to catch up on missed payments.
Whether you may keep other property youre buying on credit depends on what you are buying and when you bought it. To keep a motor vehicle you bought within 910 days before you filed bankruptcy, you must pay the debt in full within three to five years. To keep a motor vehicle you bought more than 910 days ago, you get three to five years to pay the debt, or to pay what the vehicle is worth, whichever is less.
To keep other property you bought within one year before you filed bankruptcy, you must pay the debt in full within three to five years. To keep other property you bought more than one year ago, you get three to five years to pay the debt, or to pay what the property is worth, whichever is less.
Planning For A Better Financial Future
Set up a savings plan. In other words, pay yourself first. Even if it is only a few dollars per pay period, try to put aside a little for emergencies as soon as you are able. For many people who have been out of work or are otherwise financially devastated, it can be hard to imagine being able to save again. Still, a small amount can add up over the long run.
Ideally, you should eventually save six months of living expenses. However, having even a modest amount set aside in savings can help when the unexpected comes up. Start small and aim for a month’s salary in savings, then work up from there. Arranging for this money to be transferred directly from your paycheck to your savings account, so you never see it, will make it easier to save.
Quick Note: Never rely on credit as an emergency fund: If you have a savings plan, you can avoid one of the most destructive financial habits: using credit as an emergency fund. It is better to take a little money out of savings to replace the flat tire or the washing machine that died suddenly than taking on new debt.
Contribute to a retirement plan. If you already have a 401k or other retirement plan, try to contribute as much to it as possible. At the very least, kick in as much as your employer matches. Of course, if you can max out your contributions, so much the better. However, as with general savings, even small contributions add up over time.
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Proof Of Real Estate Fair Market Value & Mortgage Statements
If you own real estate, you’ll likely need to provide proof of the property’s fair market value. You might choose an online valuation, a broker’s price opinion, or a full appraisal, depending on the potential amount of equity or the guidelines of your district.
Also, plan to provide mortgage statements showing current loan balances and payment amounts. Some trustees also require the deed of trust and proof of home insurance.
Are The Records Connected To Property
Generally, keep records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.
If you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.
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Entities That May Request Past Records
The federal agencies that are most likely to request past document information are the Internal Revenue Service, the Department of Labor, the Social Security Administration, the Equal Employment Opportunity Commission and Immigration and Naturalization. Records for state agencies, such as the division of taxation and local municipalities should also be kept as long as possible, even after the business has ceased operation. Store files in a safe place, preferably in a location protected from fire, flood, theft and other loss. Someone other than yourself should also know where these important records are kept.
References
In A Chapter 7 Bankruptcy What Happens To Property Im Buying On Credit
If youre buying property on credit, and you are using the property as collateral for the debt, you may have to give it back to the creditor. In a Chapter 7, you may keep property youre buying on credit under certain conditions. If you are current on your payments, you may reaffirm the debt by agreeing to keep paying the debt even though you filed bankruptcy. However, if you are behind in your payments, you may have to file a Chapter 13 to keep property youre buying on credit. A final way to keep property is to redeem it. This means you pay the creditor what the property is now worth, not what you still owe on it.
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What Are The Alternatives To Bankruptcy
You may want to think about counseling and assistance from a nonprofit consumer credit counseling agency. They may be helpful if they can work out a plan with all your creditors that covers all of your creditors, reduces all of your debts, and pays off all of your debts within four years. The plan also should set a payment to repay your debts that you can afford and still pay all your other ongoing expenses.;; If you have no income or property that could be taken by a creditor with a judgment, then you are judgment proof. In this case, you may not need to do anything to protect yourself.
In A Chapter 7 What Happens To Property I Cant Protect From My Creditors
In a Chapter 7, property you cant protect from your creditors is sold and the money is used to pay your creditors. If property you own free and clear is worth more than you can protect from your creditors, you should probably not file a Chapter 7. If you have property you cant protect from your creditors, you may want to think about filing a Chapter 13.; If you think you have more than $25,000 in property for an individual or $50,000 for a married couple, you should consult counsel prior to filing bankruptcy to see if there are additional exemptions which may protect the rest of your property.
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How Long Do Bankruptcies Impact Your Credit Scores
Since your credit score is based on the information listed on your credit reports, the bankruptcy will impact your score until it is removed. This means a Chapter 7 bankruptcy will impact your score for up to 10 years while a Chapter 13 bankruptcy will impact your score for up to seven years. However, the impact of both types of bankruptcies on your credit score will lessen over time. Plus, If you practice good credit habits, you could see your score recover faster.
Also, how much your credit score decreases depends on how high your score was before filing for bankruptcy. If you had a good to excellent score before filing, this likely means your credit score will drop more than someone who already had a bad credit score.