If You Have An Opportunity To Modify Your Mortgage
These days, many people file for bankruptcy to delay a foreclosure. While bankruptcy can be a good solution in this situation, many people file much earlier than they need to, which makes it more difficult to obtain a mortgage modification. Once you file for bankruptcy, many lenders will refuse to enter into or continue negotiations over your mortgage. Because your bankruptcy will cancel the promissory note part of your mortgage , technically there will be nothing left to negotiate. If you might want to seek a mortgage modification in the future, you probably should avoid bankruptcy — at least until you know which way the modification winds are blowing.
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
If You Dont Have Any Assets At Risk
Even if you legally qualify to file bankruptcy, filing could be a waste of resources. Some people are known as judgment-proof, so bankruptcy may not be a good fit for them.
For example, a person with minimal assets and no income except for Social Security Income doesnt have collectible assets. Social Security Income cannot be garnished to repay delinquent debts, leaving the person with no seizable assets. In that situation, filing bankruptcy may not be a wise decision since their debts arent collectible.
Instead of filing bankruptcy, one solution can be to open a bank account exclusively for Social Security Income, which protects it from creditors. Then you can send a cease communication letter to stop collectors from calling.
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Consumer Overspending And Personal Bankruptcies
Staying consistent from the time we started surveying our bankruptcy clients through the Great Recession and its recovery, roughly one-quarter of bankruptcy filers indicate that their overspending and abuse of credit cards led them to seek bankruptcy protection.
Poor personal finance choices have always played a large role in the bankruptcy filings of any consumer-driven economy. As the economy strengthens, consumer confidence increases, and consumers begin to overuse their credit cards and spend more and more of their monthly incomes on consumer wants. This does not equate to fraud or abuse of the bankruptcy law, but it does indicate problems with financial decisions on a personal level.
As soon as economic conditions begin to deteriorate, these consumers living paycheck-to-paycheck have no savings funds to help them pay their debts, and their situations turn from bad to worse.
How To File For Bankruptcy
Youve decided to file for bankruptcy after exploring other options. You see filing for bankruptcy as the practical lifeline it can be if handled correctly.
Its as important to know what not to do while filing bankruptcy as it is knowing the proper steps to have a successful bankruptcy filing.
Filing for bankruptcy is a legal process that either reduces, restructures, or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue.
Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you cant afford to hire an attorney, you may have options for free legal services. If you need help finding an affordable bankruptcy lawyer or locating free legal services, check with the American Bar Association for resources and information.
Before you file, you must educate yourself on what happens when you file for bankruptcy. Its not simply a matter of telling a judge Im broke! and throwing yourself at the mercy of the court. There is a process a sometimes confusing, sometimes complicated process that individuals and businesses must follow.
The steps for filing bankruptcy are:
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What Are The Types Of Bankruptcy Filings
Bankruptcy filings in the United States fall under one of several chapters of the Bankruptcy Code, including Chapter 7, which involves the liquidation of assets Chapter 11, which deals with company or individual reorganizations and Chapter 13, which arranges for debt repayment with lowered debt covenants or specific payment plans.
Bankruptcy filing costs vary, depending on the type of bankruptcy, the complexity of the case, and other factors.
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Filing Bankruptcy: The Cons
Of course, filing bankruptcy also comes with many drawbacks. Given the complex nature of the process, we recommend contacting an experienced bankruptcy attorney to assist with your case.
You could lose assets of value
Depending on which type of bankruptcy you qualify for, your income, the equity in your assets and other factors, you may lose your home, your car and other valuable items. Your trustee may be required to sell these items to repay your creditors.
Bankruptcy can be expensive
Youll need to cover the costs of bankruptcy, including service and court fees. The average Chapter 7 bankruptcy case costs between $1,000 and $1,750 in out-of-pocket costs, while the average Chapter 13 bankruptcy costs around $3,300.
Federal student loans are exempt from bankruptcy
In most cases, federal student loans are not dischargeable there are some exceptions, but they are rare. Instead, if youre struggling to keep up with your federal student loan payments, you may have to look into forbearance, deferment or income-based payment plans.
You may still be responsible for some debts
While most debts can be discharged, there are some debts you will still be responsible for repaying. Besides federal student loans, certain other liabilities are not dischargeable, including taxes, alimony, child support, court orders and debts incurred through illegal activity.
If you have joint accounts, the other party is still responsible
You could face criminal charges if you arent honest
Am I Unsure How Much I Actually Owe
Uncertainty about your total outstanding debts is cause for concern. Whether your balances have grown larger and you’re unaware of the total, or you’ve forgotten creditors that have sent your debt to collections, you should consider alternative repayment options if you can’t tabulate how much you owe.
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Is There Anybody In Particular I Should Contact About These Options
Yes. If you are behind on your payments, the collectors for each of your creditors may already be calling or writing you. You might be more successful if you phone each creditor, ask for the collection department, ask and note the name of the person you talk to, and explain your intent to repay the account and your need to stretch out the number of monthly payments and reduce their size. You might offer to come to the collection department office to discuss your situation. Ask each creditor to agree to a voluntary plan for the repayment of your debts.
What Pg& Es Bankruptcy Means For Victims Of Pg& Es California Wildfires
It is a bad day for fire victims, they are being victimized twice, the first time when PG& E burnt their homes down and now because instead of investing in their recovery, they are investing in themselves. I think they are doing this now because they have spent millions to determine what is the best scenario for the share holders and they have found the best way for holding on to the most money and keeping it out of the hands of victims is bankruptcy.
Mike Danko
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What Happens When You File For Bankruptcy
There are a lot of misconceptions about what it means to file for bankruptcy, which can lead to unnecessary stigma.
For instance, there is a commonly held belief that those who file for bankruptcy are irresponsible when it comes to managing money. In reality, the high cost of medical expenses is one of the leading causes of bankruptcies.
Other misconceptions are that if you file for bankruptcy, you can lose all of your belongings or never be eligible for credit again. Neither of these statements is true. Your assets are often protected by federal or state exemption laws though you may have to sell some of your belongings in a Chapter 7 case and many bankruptcy filers are able to secure forms of credit again.
There are six types of bankruptcy, but the average consumer will usually file one of two:
- Chapter 7: This is the most common form of bankruptcy for individuals. With this method, valuable assets are liquidated to settle debts. Chapter 7 is typically split into asset cases and no-asset cases if you are determined to be a no-asset filer, you wont have to give up your belongings. Chapter 7 bankruptcy can stay on your credit report for up to 10 years, starting on the filing date.
- Chapter 13: This is the second most common form of bankruptcy that individuals file. With Chapter 13 bankruptcy, a three-to-five-year repayment plan is created. This form of bankruptcy can stay on your credit profile for up to seven years.
I Owe Money To Many Creditors What Should I Do
The problem of dealing with many creditors is that some of them might not want to give you more time to pay without knowing what the other creditors are willing to do. You can seek the help of a lawyer to negotiate an arrangement with your creditors. Or you can seek the help of a consumer credit counseling service . You can find the nearest CCCS by calling the National Foundation for Credit Counseling at 1-800-388-2227. These centers charge a small monthly service fee. However, creditors provide most of the support for financial counseling services.
The repayment plans arranged through credit counseling centers enable you to make monthly payments which are then re-distributed by the program among creditors until all your debts are paid in full.
Under a repayment plan through a financial counseling service, you still might have to pay interest charges on your debts. However, many creditors will waive interest charges and delinquency fees.
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Warwick’s Debt Grew Over The Years
Warwick ended up in such dire straits monetarily that she filed for bankruptcy in her home state of New Jersey in 2013, according to a Reuters report. She claimed that she only had $25,500 in assets, but she was in debt for $10.7 million. Most of that debt came from money owed to the Internal Revenue Service and that state of California for taxes. And a big chunk of this debt was actually made of penalties and interest.
At the time, Warwick had a limited income. She relied on what she made by touring, which varied, and she also received music royalties and a Screen Actors Guild pension, which brought in roughly $15,000 a month, according to the Star-Ledger. Warwick had more than $20,000 in monthly expenses, leaving her barely any funds to pay off her debt . This economic struggle was nothing new for the famed singer. Warwick’s financial crisis began more than a decade earlier, as her lawyer Daniel M. Stolz explained to the Star-Ledger. “It was a small liability in the 90’s but it kept growing and growing,” he said.
Medical Debts And Bankruptcies
It comes as no surprise to any American adult involved in paying medical insurance premiums that healthcare costs, insurance coverage, and out-of-pocket maximums have dramatically increased over the past twenty years. With these increases in household financial responsibilities for medical emergencies and services as well as prescription drug costs, the media has quickly pointed to medical-related expenses as the cause for increasing bankruptcy rates. However, surveys of our clients indicate that just one in five filers point to medical expenses as the cause of their financial crises.
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When Should I Declare Bankruptcy
When asking yourself Should I file for bankruptcy? think hard about whether you could realistically pay off your debts in less than five years. If the answer is no, it might be time to declare bankruptcy.
The thinking behind this is that the bankruptcy code was set up to give people a second chance, not to punish them forever. If some combination of bad luck and bad choices has devastated you financially and you dont see that changing in the next five years bankruptcy could be your best way out.
Even if you dont qualify for bankruptcy, there is still hope for debt relief. Possible alternatives include a debt management program, a debt consolidation loan or debt settlement. Each one of those choices typically require 3-5 years to reach a resolution, and none of them guarantees all your debts will be settled when you finish.
The decision shouldnt come down to how long Chapter 7 bankruptcy takes the process itself is only 4-6 months. The thing you have to remember is that bankruptcy carries significant long-term penalties. It is stuck on your credit report for 7-10 years, which can make getting loans in the future very difficult.
The flip side of that is there is a great mental and emotional lift when all your debts are eliminated, and youre given a fresh start.
Addictions And Personal Bankruptcy
Although our surveys suggest that just one in a hundred personal bankruptcies result from addictions , everyone understands that figures for self-reported addictions typically come in lower than the reality. A study by Napper, Fisher, Johnson, and Wood shows such self-reporting can range from 95% accurate on the upper end to barely 70% accurate on the lower end.
For gambling addicts, the figures likely fall far short of reported figures. We suspect actual bankruptcy cases caused by addiction likely range from 5% to 10%.
Unfortunately, filing for bankruptcy in such situations appears to play more the role of a bandage than of a cure. Even after bankruptcy, the individual will continue to struggle with the addiction, leading to further financial struggles that may not find relief through bankruptcy, since Chapter 7 filings are limited to once every eight years.
For anyone considering bankruptcy or struggling to protect their home, vehicles, wages, or other assets, we highly recommend you meet with an attorney who specializes in bankruptcy law.
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When Bankruptcy Is The Best Option
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.
Bankruptcy isnt the end of the world. It may even be good for you.
Bankruptcy stops collection calls, lawsuits and wage garnishments. It erases debt. And despite what youve heard, bankruptcy may help your credit scores.
But thats not the whole story. Most people struggle so long with their debt that their credit is already battered by the time they file for bankruptcy. And once they do, their scores typically rise, not fall. If the debt is erased which is known in bankruptcy court as a discharge scores go up even more.
Within a year, youre way better off, says Jaromir Nosal, assistant professor of economics at Boston College, who co-authored a study for the Federal Reserve Bank of New York about the effects of bankruptcy. Its a pretty rapid rate of recovery.
Why Did Marvel File For Chapter 11 Case Study: Bankruptcy And Restructuring At Marvel Entertainment Group Essay Example 2022
There are a few reasons why Marvel decided to file for Chapter 11 bankruptcy. One reason is that the company had a significant amount of debt. Like many media companies, Marvel took on debt in order to finance its operations and fund new projects. However, the company was unable to pay off this debt and it became a burden on the company’s finances.
Another reason for Marvel’s bankruptcy is the impact of the COVID-19 pandemic on the entertainment industry. The pandemic caused widespread shutdowns and led to a decline in box office revenue and other sources of income for Marvel. This made it difficult for the company to generate the revenue it needed to pay off its debt and continue operations.
In addition to these financial challenges, Marvel was also facing increasing competition from other entertainment companies. In recent years, there has been a surge in the number of streaming platforms and original content being produced, which has made it harder for Marvel to stand out and attract a large audience.
Overall, Marvel’s decision to file for Chapter 11 bankruptcy was driven by a combination of financial struggles, including a high level of debt and the impact of the COVID-19 pandemic, as well as increasing competition in the entertainment industry. By filing for Chapter 11, Marvel was able to reorganize its finances and restructure its debt, which allowed the company to continue operations and move forward.
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