Alternatives To Filing Chapter 7 Bankruptcy
If you are wondering if you should file for bankruptcy, there are many nonprofit consumer credit counseling organizations that have the ability to negotiate more favorable terms with creditors. Its particularly effective with credit-card companies. The repayment program will be managed expertly and fees could be avoided.
Here are some options:
Debt Management Plan Entering into a debt management program can provide relief from interest rates, late fees and penalties from creditors. Under a DMP, which is negotiated by credit counselors, you promise to pay back the full principal over time in an efficiently managed manner.
The debt management program provides an organized monthly payment plan. It provides an opportunity to handle the debt more efficiently than trying to sort it out yourself. By keeping the payments on track, it will be good for your credit score.
Some caveats: There is generally an enrollment and maintenance fee and the DMP is never a guaranteed option. Creditors have no obligation to participate.
Debt Consolidation This option reduces interest rates and combines all of your debts into one manageable monthly payment. Under debt consolidation, you take out a loan, which is used to consolidate and pay off all of your other debts.
Personal Loan for Bad Credit Yes, you can get a personal loan with bad credit, depending on your situation. You can expect high interest rates and should only consider this option if you can truly afford the monthly payment.
What Is An Automatic Stay
After you file for bankruptcy, you have the protection of an immediate, but temporary, automatic stay. The automatic stay can, for example, immediately stop a foreclosure, an eviction, car repossession, or wage garnishment. It can also stop debt collection, harassment, and disconnection of utilities.
The automatic stay may provide a powerful reason for filing for bankruptcy. In most of the situations listed above, the automatic stay can buy you a few days or weeks in which to figure out your next move. If your primary motivation in filing bankruptcy is to gain the benefits of the automatic stay, you donât need to file all of your papers at once. You just need to file the three-page petition, a signature declaration, and a listing of your creditors. In addition, within 180 days prior to filing, you will have to visit an approved credit counseling agency for advice and budget analysis. You will have to file a certification of such counseling when you file your petition. You have 15 days in which to file the rest of your papers. If you donât, your case will be dismissed.
More On The Meaning Of Bankrupt
Once bankruptcy is filed, all thebanks and others that you owe money to can no longer call you withthreatening phone calls or hassle with with ugly letters.
When you go bankrupt your debts maybe eliminated or restructured…depending on your individualsituation AND what kind of bankruptcy you file. In the law books thisis referred to as LIQUIDATION or REORGANIZATION.
For instance, let’s say you have twocar payments…
The courts may order that you sellone of your cars and allow you to keep the second car,provided you can make the payments. Your payments and loan may bechanged to help you afford it .
OR…If you’re currently working andhave a generous income you may not be required to liquidate anything.
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What You Should Do After Filing For Bankruptcy
In addition to following all court orders and plans that have been approved, youll want to get to work rebuilding your credit. Your credit report wont look clean for a while a Chapter 7 bankruptcy stays on your report for 10 years and a Chapter 13 slides off after 7 years.
And while its true that lenders might cast a wary eye on extending credit to someone with a bankruptcy on their credit report, you can still start implementing better financial wellness habits right away. Some places to begin are:
- Reviewing your : Make sure all the accounts show that theyve been discharged or are listed as included in bankruptcy rather than as delinquent or outstanding so creditors dont continue to harass you.
- Applying for an entry-level : A card with a low limit is a good way to get back on your feet credit-wise.
- Reinforcing smart financial habits: Ideally your credit counseling classes will offer smart strategies for responsible financial management, such as budgeting. One of the most important things you can do for solid credit is to pay your bills on time, every time. Create new habits and youll be well on your way to rebuilding your financial life with your bankruptcy behind you.
Filing For Bankruptcy You Must List All Of Your Assets
Basically, whenever you file bankruptcy, you are required to list ALL of your assets.
Your assets include the following:
- Your house
- Financial assets
- Other tangible items
Your assets may also include some things that are easily forgotten like bank accounts, life insurance, inheritance, and potential lawsuits.
A good bankruptcy attorney will give you some type of workbook to help you remember your assets. Take your time when filing this workbook out.
Forgetting to list an asset can cause you to lose that asset. Once you have listed all of your assets, your bankruptcy attorney will look at exemptions to determine if your assets are exempt.
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If You Have Good Credit It Will Likely Take A Temporary Hit
Those that are able to maintain their monthly payments and keep their credit score high before filing their bankruptcy petition will see their score drop initially. But, a bankruptcy filing often does more good than harm to the filerâs credit score. Plus, once their bankruptcy discharge is granted, they can begin increasing that pesky credit score immediately.
After The First Meeting Of Creditors
If there are assets which are not exempt, the trustee takes control of those assets. Often, the trustee will offer to sell back to the debtor any asset that has unprotected value.
From the sale of assets or the recovery of avoidable transfers, the trustee pays the expenses of the administration of the case, then distributes any remaining funds to creditors with allowed claims, according to the priority of the claims.
The trustee may review your income and expense schedule to see if you have enough money left after your current living expenses to pay something to creditors. More on substantial abuse.
Any wages the debtor earns after the case is begun belong to the debtor. Those post-filing earnings are beyond the reach of creditors who had dischargeable claims on the date of filing.
Generally, the only responsibilities the debtor has with respect to the bankruptcy after the 341 meeting is to cooperate with the trustee in providing any information requested by the trustee and to complete the required debtor education class.
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What Does Reaffirmation Of Debt Mean On A Credit Report
When you file for bankruptcy, all the accounts included and discharged will remain in your credit report for seven years. This will pull your credit score down, which will significantly affect your financial decisions down the road. Even if you pay some of your loans, the repayments wont appear on your credit report.
Reaffirmation can help you rebuild your credit after filing for bankruptcy. Once you reaffirm a debt, like a car loan or a mortgage, it will no longer be part of the bankruptcy-related information in your credit report.
If you managed to pay off the loan under the reaffirmation agreement in full, the positive account will remain on your credit report for 10 years. Likewise, making timely payments on your reaffirmed debt will help rebuild your credit.
How A Bankruptcy Discharge Works
A copy of the discharge order will be mailed to all your creditors, as well as to the U.S. Bankruptcy Trustee, the trustee who is personally handling your bankruptcy case, and the trustees attorney. This order includes notice that creditors should take no further actions to collect on the debts or they’ll face punishment for contempt.
Keep a copy of your order of discharge along with all your other bankruptcy paperwork. You can use a copy of these papers to correct credit report issues or to deal with creditors who try to collect from you after the bankruptcy discharge.
You can file a motion with the bankruptcy court to have your case reopened if any creditor tries to collect a discharged debt from you. The creditor can be fined if the court determines that it violated the discharge injunction. You can try simply sending a copy of your order of discharge to stop any collection activity, then talk to a bankruptcy attorney about taking legal action if that doesn’t work.
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What Happens To My Car Loan In Chapter 7
Much like with mortgages, the fact that the lien stays attached to the property leads us in an interesting position. Technically, you no longer owe the debt. The bank can never sue you for defaulting on your car loan. On the other hand, if you want to keep the car, you will need to pay the loan. If you dont pay the car loan, the bank can still repossess it even though the debt is discharged.
That being said, theres also some magic available in Chapter 7 with regard to vehicles. You can redeem the car if your car is worth less than the loan. That means you can keep it if you can pay the value of the car rather than the balance of the loan. Because cars depreciate so quickly, this can be very valuable. There are companies that offer redemption loans which act as a refinancing loan in most cases saving you significant money. It can also help you to re-establish credit.
If you dont want to keep your current car, you can also get a replacement loan. This allows you to surrender your car and get a loan for a new one . Yes, you can get a loan in bankruptcy. We have companies that we work with who specialize in these loans.
Bankruptcy Terms You Should Know
As you navigate bankruptcy, youll come across a variety of terms that may be unfamiliar. Understanding all of these terms makes navigating the process of bankruptcy much easier, and fortunately none of them are difficult to understand.
Heres a list of terms that you should know if youre trying to understand bankruptcy better.
Armed with knowledge of these terms, youll have a much greater understanding of bankruptcy moving forward.
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The Bankruptcy Trustee For Chapter 7 Bankruptcy
The court exercises its control through a court-appointed person called a “bankruptcy trustee.” The trustee’s primary duty is to see that your creditors are paid as much as possible of what you owe them. And the more assets the trustee recovers for creditors, the more the trustee is paid.
The trustee will examine your papers to make sure they are complete and look for nonexempt property to sell for creditors’ benefit. The trustee will also determine whether any financial transactions occurring the year before you filed can be undone to free up assets for creditors. In most Chapter 7 bankruptcy cases, the trustee finds nothing of value to sell.
Filing Chapter 7 Bankruptcy In Florida
Chapter 7 Bankruptcy is the legal procedure where the debtors unsecured debt is discharged after the debtors non-exempt assets have been liquidated. To file a Chapter 7 bankruptcy in Florida, a person must be a permanent Florida resident or own property in the state. Florida has three bankruptcy districts , and each of Floridas counties is assigned to one of the three bankruptcy districts. People must file bankruptcy in the district and local division where they reside.
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How Does This Type Of Bankruptcy Work
The process of a Chapter 7 bankruptcy isnt just a simple walk in the park. You will need to file it with the court. The court will then place an automatic temporary stay on your current debts. This stay makes creditors stop collecting payments, garnishing wages, foreclosing your property, repossessing your property, etc.
The court will take legal possession of your property then appoint a bankruptcy trustee to your case. A bankruptcy trustee has the job of reviewing your financial situation and assets. They will be the ones to oversee your bankruptcy. Some tasks that a trustee will perform includes selling your nonexempt property to pay creditors, arranging creditor meetings, and more.
The process generally takes between four to six month from the initial filing. The court will discharge your remaining eligible debts which means you will not be responsible for paying them.
Debt Discharge Comes After Selling Off Assets
Chapter 7 bankruptcy often involves the liquidation of assets in order to pay past debts. Only after this process is completed can you have qualifying debts discharged. Some property is protected from liquidation by federal or state bankruptcy exemptions. In fact, many people who file for Chapter 7 can keep a majority of their property. It will be up to your attorney and bankruptcy trustee to decide what you can keep, what deals you can make with the creditor, and what you need to give up in your bankruptcy case.
Once assets are liquidated, the courts tend to discharge debts right away. In the whole Chapter 7 bankruptcy process, this happens about four months after you first file in bankruptcy court. Keep in mind you need to complete educational classes on debt management in between filing and receiving the discharge, or the judge may dent your debt discharge.
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When To Consider Filing Chapter 7
If youve tried negotiating with your creditors, working with a credit counselor or consolidating your debt, but are still struggling to manage your debt, Chapter 7 bankruptcy might be your last resort.
Chapter 7 bankruptcy can help by acting like a pause button for some of your debts. Once you file your petition, some of your creditors could be temporarily stopped from most collection actions against you or your property.
But filing Chapter 7 can ultimately mean losing some assets. The law varies from state to state, and each state can classify property as exempt or nonexempt . So depending on where you live, your home, stocks, other investments as well as other nonexempt assets you have could be at stake.
If youre concerned about what you may have to forfeit, talk to a lawyer. Some assets, including 401s and pensions, may be exempt.
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What Does Bankrupt Mean: Chapter 7
Some of the details regarding goingbankrupt with a Chapter 7 bankruptcy:
Again, a Chapter 7 bankruptcy willlikely include some liquidation of your assets. The money will begiven to your debtors to pay for the debt.
If you have unsecured debt likecredit cards or personal loans from your bank, you may not have topay them back…those debts might be erased.
The state of California will usuallylet you keep necessary assets like clothing, furniture, appliances,and a car. After all, you still need to get back and forth to workso you can get your financial life back on track.
For debts that are secured you might get to choose howthe item is handled in the bankruptcy.
For example, if you’re makingpayments on a car you may choose to…
A Chapter 7 filing usually takesanywhere from 3 months to 6 months to complete.
If you’d like to learn more about howa bankruptcy will affect your personal situation talk to a qualifiedBakersfield bankruptcy lawyer here… 230-7900.
Chapter 7 bankruptcy is not foreveryone…
If you have a decent income or astack of cash in the bank, you may not qualify. You can probablystill qualify for Chapter 13 though.
Or, after talking to us, you may decide that you don’t even need to file at all. there are other options to bankruptcy.
And, for sure, it will keep the collectors from hassling you.
Florida Bankruptcy Means Test
The Florida bankruptcy means test is a complex formula to determine eligibility to file Chapter 7 bankruptcy. Debtors whose household income is under their states median income, and debtors whose debts are primarily business-related debts, are exempt from means test qualification. Bankruptcy debtors whose gross household income is above median income must pass the means test to file Chapter 7 bankruptcy.
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Chapter 7 Vs Chapter 1: Which Should You File
Before filing for bankruptcy, your first step should be contacting a professional to help you determine whether Chapter 7 or Chapter 13 is right for you. And of course, you must refer to the limits above to see if Chapter 7 is even a possibility. Otherwise, read below for some more considerations that might indicate whether Chapter 7 or Chapter 13 is better for your situation.
Chapter 7 might be appropriate if:
- It would take 5 or more years to pay off your debt even if you took all available measures.
- You have limited assets.
- Your problem debts total more than 40% of your annual income, so its unlikely youll be able to repay your creditors.
Chapter 13 might be the right choice if:
- Youre behind on your mortgage or car loan but would prefer to get current on payments rather than lose your property.
- You feel youd be able to be current on your debts if you had more time.
- You have nonexempt property that youd like to keep even at a cost.