Is It Bad To File For Bankruptcy

How Does Bankruptcy Affect Assets And Liabilities

Depending on how you choose to declare bankruptcy, your assets and liabilities will be affected in different ways. In a Chapter 7 bankruptcy, many of your assets are up for liquidation to pay your creditors with the proceeds. In Chapter 13, you retain assets while working on a repayment plan for your outstanding debts.

See how bankruptcy affects assets and debts in the following debtee categories.

Small Business Owners

For small business owners with lots of personal debt, bankruptcy may help them continue to stay in business. It’s important to note that business debts aren’t alleviated with Chapter 7 or Chapter 13 unless you’re a sole proprietor and are personally responsible for them.

• Chapter 7: For sole proprietors, business and personal debts can be wiped out in a single bankruptcy case. You’re not obligated to meet income requirements if your business debt exceeds your personal debt.
• Chapter 13: Your business assets aren’t liquidated, but only your personal liability for business debts can be wiped out. The business remains responsible for its debts.

Some business assets can be exempt from Chapter 7 bankruptcy filings. For instance, if your business is service-based and doesn’t maintain equipment or significant inventory, you can likely continue to run your business after discharging business debts through bankruptcy.

Student Loan Holders

Mortgage Holders

What Is Chapter 13 Bankruptcy

Chapter 13 Bankruptcy is a desirable option for people who want releif from the high levels of secured debts on payments from valuable properties that they have acquired without losing that asset or secured debt. It helps give the client breathing room to get caught up and discharge a portion of the debts that while keeping their property and secured assets.

Chapter 7 Wipes Out Debt Quickly

There are many different types of bankruptcy, . Itâs the one most individuals and married couples file. One reason itâs popular is that itâs the quickest. When you file bankruptcy under Chapter 7, you can get a bankruptcy discharge in as little as 4-6 months. A discharge is the court order that wipes out certain debts.

Most unsecured debt can be discharged in Chapter 7. Thatâs debt thatâs not tied to property. It includes credit card debt, medical bills, personal loans, old utility bills, some old income tax debts, payday loans, and old rent or lease payments. You arenât required to pay back any of the debts that are discharged in your Chapter 7 case. When you receive the bankruptcy discharge, any debts that are discharged are gone forever. Itâs illegal for creditors to try to collect a discharged debt.

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We Can Help You Fight Back

The big data collection networks and creditor companies have reach to the resources that is usually not available to individuals. We have blended our decades of experience and technological approach to devise solutions that bring us to the level of these networks and companies.

If student loans, medical bills, personal loans, mortgages, or any other loans have triggered wage garnishment, we are here to help you fight back and release from it.

What Is Chapter 7 Bankruptcy

Chapter 7 bankruptcy allows you to become debt-free through whats often referred to as a liquidation process. When using this approach, your debt is discharged and your nonexempt property is typically sold with the proceeds distributed to creditors.

Though it varies by state of residency, personal possessions that may be considered nonexempt and thus sold to cover your debts could include your home, pension, car, personal belongings, coin collection and even jewelry. Each state has a set of its own exemptions, and in some cases, youre allowed to choose between your state exemptions and federal bankruptcy exemptions laid out by Congress.

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What Happens When You File For Bankruptcy: What Bankruptcy Can’t Do

Bankruptcy doesn’t cure all debt problems. Here’s what it can’t do for you.

Bankruptcy doesn’t prevent a secured creditor from foreclosing or repossessing property you can’t afford. A bankruptcy discharge eliminates debts, but it doesn’t eliminate liens. A lien allows the lender to take property, sell it at auction, and apply the proceeds to a loan balance. The lien stays on the property until the debt gets paid. If you have a secured debta debt where the creditor has a lien on your propertybankruptcy can eliminate your obligation to pay the debt. However, it won’t take the lien off the propertythe creditor can still recover the collateral. For example, if you file for Chapter 7, you can wipe out a home mortgage. But the lender’s lien will remain on the home. As long as the mortgage remains unpaid, the lender can exercise its lien rights to foreclose on the house once the automatic stay lifts. Learn about judgment liens and other liens in bankruptcy.

Bankruptcy doesn’t eliminate child support and alimony obligations. Child support and alimony obligations survive bankruptcy, so you’ll continue to owe these debts in full, just as if you had never filed for bankruptcy. And if you use Chapter 13, you’ll have to pay these debts in full through your plan. Learn about nondischargeable obligations.

Bankruptcy doesn’t eliminate other nondischargeable debts. The following debts aren’t dischargeable under either chapter:

What Are Potential Effects Of A Discharge

The immediate effect of a bankruptcy discharge is that your credit score will plummet and a notation will be added to your credit report saying you failed to pay your debts as agreed. That will stay on your credit report for 7-10 years.

How far your credit score plunges depends on where you stood at the time of the discharge. If you were above 700, for example, figure on a 100 to 150-point drop. If you were at 600, its more likely to be 75-100 point drop.

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You Will Be Discharged From Bankruptcy

A discharge releases you from the legal obligation to repay the debts you had as of the date you filed for bankruptcy, except for specific types of debts that are excluded by law. These include alimony and child support payments, student loans , court-ordered fines or penalties, and debts arising from fraud.

The timing of your discharge depends on a number of factors, including whether this is your first bankruptcy, and whether you are required to make surplus income payments.

Timing of your discharge from bankruptcy

If this is your first bankruptcy and you are not required to make surplus income payments , you will be eligible for an automatic discharge from bankruptcy in nine months. If your surplus income is higher, your bankruptcy will be extended to 21 months and you will be required to make payments from your surplus income.

Your discharge from bankruptcy will happen automatically if

• the discharge is not opposed by the LIT, a creditor or the Office of the Superintendent of Bankruptcy
• you have attended the mandatory financial counselling sessions and
• this is your first or second bankruptcy.

To ensure that a greater percentage of debts is repaid to creditors, the following standards set out when an automatic discharge will occur.

Discharge hearing

Limits If Your Bankruptcy Case Was Dismissed On Prejudice

If your case is dismissed with prejudice, you may face additional restrictions when it comes to filing for bankruptcy twice. Common causes of bankruptcy cases being dismissed this way include:

• You disobeyed court orders
• You dismissed your bankruptcy once a creditor motioned for relief from the automatic stay
• Delayed creditors

When it comes to dismissing bankruptcy cases with prejudices, judges can practice discretion. As a result of your behavior that abused the bankruptcy system, you can be barred from being able to file for bankruptcy ever again, banned from discharging debts, and more.

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Why The Bad Reputation

Filing for bankruptcy has a bad reputation in many circles due to the fact that it damages your credit and involves discharging debts that will likely never be repaid. Sure, Chapter 7 bankruptcy isnt great for your credit score and will appear as a public record for 10 years after filing. However, most consumers who file for bankruptcy have already had their credit damaged by a series of late payments.

Whether your bankruptcy filing can be labeled as bad is really a function of whether you intend to defraud the system or whether you have a moral obligation to pay debts that you plan to discharge in bankruptcy. There are many types of debts that are eliminated by filing for bankruptcy. For example, perhaps your primary debts are a $50,000 credit card balance and a $10,000 personal loan that you owe to your brother that he loaned to you while he was having financial problems of his own. If you file for bankruptcy, both the credit card debt as well as the debt to your brother will be eliminated. Filing bankruptcy to discharge credit card debt at 29% interest would not be considered bad by most people.

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Chapter 7 And Chapter 13

When you plan to file for bankruptcy, there are two different types that you can file for. Though the result of both is the same, there are a lot of differences in both.

Chapter 7

Filing for chapter 7 bankruptcy gives a permit to an individual to discharge their secured debts. Unsecured debts are mostly considered a consumer and household debts. Credit card debt, medical debt, auto loans, and mortgage debts are some debts that come into this category. Very limited debts are not covered under chapter 7 bankruptcy- Debts like student loans, child support, and certain types of taxes are some non-dischargeable debts not covered. Chapter 7 is also known as liquidation bankruptcy. Chapter 7s eligibility is determined by a means test. Any individual whose income is below their states median income can qualify for a chapter 7 bankruptcy. When you file for chapter 7 bankruptcy, an automatic stay gets into effect for all of your creditors. An individual is relieved from the nagging of the creditors for a while. In Chapter 7, debts are re-paid by liquidating the Assets of the debtor.

Chapter 13

Apart from all of this, only an attorney can help you determine whether you should file for chapter 7 or chapter 13. Seeking an attorney at the right time is the best decision to make before filing. You can also contact Recovery Law Group from Los Angeles& Dallas, TX for the Same. Contact .

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Negotiate With Your Lenders

Whatever form of debt you hold, its possible to negotiate with your creditors. You might be able to get a one-month extension on your car payment, have some of your interest-only credit card debt forgiven or obtain a mortgage modification.

I would always advise trying to negotiate with your creditors directly first before just filing for bankruptcy, Tannery said. Because you may be able to gain the result you need without having to use the bankruptcy court.

When Filing For Bankruptcy Is A Good Idea

There are situations in which filing for bankruptcy is a good idea. If you have lots of unpaid debts with large banks, like Capital One, Chase, etc. These big banks can and will sue you over large unpaid debts because they have the resources, and they suffered the full loss. If you have many accounts owned by big banks, bankruptcy may be a great option. Or, if youre facing foreclosure, liens, etc., bankruptcy could help you.

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How To File For Bankruptcy

Sabino and Tannery both warn strongly against trying to file for bankruptcy on your own.

If you think filing for bankruptcy is right for you, get in touch with a bankruptcy attorney who represents debtors. Tannery recommends bringing all the financial information and paperwork you can gather with you. Make a list of exactly what you owe.

If you and your attorney decide filing for bankruptcy is right for you, the first step will be filing a petition with the clerk in whichever jurisdiction you live . The petition involves basic demographic information such as your name, address and contact information, Tannery said. After filing the petition, you have 14 days to file all your required schedules.

Your schedules essentially have all of the big details about your financial life, Tannery said. They show all of your assets, all of your liabilities, all of your secured creditors and unsecured creditors.

One schedule includes your income and all your expenses broken down. This includes your gross monthly pay, how much goes to health insurance, how much goes to your 401, how much goes toward household expenses and other items. Your schedules are what show the court and the bankruptcy trustees and your creditors exactly whats going on in your financial world, Tannery said.

Sabino said the most important thing to remember is that filing for bankruptcy isnt a cure-all. After filing, you will need to learn about and maintain good financial discipline.

Is Filing For Bankruptcy Bad Beginners Guide

No filing for bankruptcy is a good thing, not bad at all 99% of the time. You get to lose debt and increase your FICO score. The other 1% can be comical when debtors do not follow the rules. You will find a little comedy sprinkled throughout this article.

The good news is that most of you think bankruptcy is wrong. But bankruptcy is a financial tool to increase your personal net worth and improve your credit report when your income and assets are low and debt is high.

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When To Stop Digging A Hole You Can’t Escape

Most of us feel we have a moral obligation to pay what we owe if we can. But typically that ship has sailed by the time people realize they need to consider bankruptcy. They can continue trying to chip away at debts they may never be able to repay, prolonging the damage to their credit scores and diverting money they could use to support themselves in retirement. Or they can recognize an impossible situation, deal with it and move on.

If you can pay your bills, obviously you should. If youre struggling, check out your options for debt relief. But bankruptcy may be the best option if your consumer debt the kinds listed above that can be erased equals more than half your income, or if it would take you five or more years to pay off that debt even with extreme austerity measures.

Heres what you need to know:

You need a bankruptcy attorney: Its easy to make a mistake in the complicated paperwork, and an error could cause your case to be dismissed. If that happens, you end up with no relief but still have credit scores tanked by the bankruptcy filing.

Dont wait too long: Theres a misconception that people file bankruptcy at the drop of a hat or when they still have other options. The reality for most is quite different. Some drain assets, such as their retirement accounts, that could have been protected from creditors in bankruptcy. People throw good money after bad until they have no money left to seek relief.

What Happens When You File Chapter 7

Chapter 7 is one of the most common types of bankruptcy. In a Chapter 7 bankruptcy, you will:

• Forfeit many of your assets to be sold for cash
• Pay your creditors with the money from your asset liquidation

There are certain assetssuch as a limited amount of cash, clothing, household items, and a carthat you are allowed to keep, but these exemptions vary depending on the state you live in.

Once your assets are liquidated and creditors are paid, any remaining debts you owe are forgiven unless you’ve reaffirmed the debt. Debt reaffirmation is when you voluntarily waive protection through the bankruptcy discharge and agree to remain responsible for the debt. Reaffirmation is chosen to retain certain assets and avoid liquidation.

Not everyone can file a Chapter 7 bankruptcy. If your income is too high, you may be required to file a Chapter 13 bankruptcy instead.

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Should I Declare Bankruptcy

There is a reason bankruptcy is called the nuclear option for debt relief. It should only be considered if you already have tried and failed to make a dent in your debt obligations using other debt-relief options.

If thats the case, consider the pros and cons before deciding to push the button.

Which Type Of Bankruptcy Is Best For You

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