Bankruptcy, Personal

Monday, April 10, 2006

Bankruptcy Basics

by: James H. Dimmitt

According to the American Bankruptcy Institute ýÿhousehold debt is at a record high relative to disposable income.ýÿ The Administrative Office of the U.S. Courts reported that the number of filings for the year ended March 31, 2003 ýÿexceeded 1.6 million for the first time in any 12 month period,ýÿ a 15.1 percent increase from the previous year.

There are two basic types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 Bankruptcy and Chapter 13 are legal proceedings that are available to a person to cope with a financial crisis. Personal bankruptcy must be filed in a federal bankruptcy court. You will have to pay about $160.00 in court fees. Attorney fees are additional.

Chapter 7 bankruptcy involves the liquidation of all your assets that are not exempt from the bankruptcy settlement. Exempt property may include automobiles, some household furnishings, and property needed for work-related use; for example if you were a mechanic the tools you use to perform your work would be exempt from the bankruptcy settlement. Exemption amounts vary from state to state.

Under this plan the court appoints a trustee to handle the liquidation of your non-exempt property. The trustee can sell or turn over your property to your creditors. The court discharges your debts and you are now debt-free. You are allowed by law to file a Chapter 7 bankruptcy once every six years.

A Chapter 13 bankruptcy allows you to keep property, like a mortgaged house (provided there are no liens on it) or a car, as long as you have a steady income. A Chapter 13 bankruptcy is a court-ordered and approved repayment plan to your creditors. This plan allows you to use your future income to pay back your debts over a 3-to-5 year period without surrendering any property. Once you complete payments under the plan, your debts are discharged by the court.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both provide exemptions that allow people to keep certain assets, although exemption amounts vary. A bankruptcy will not erase most child support, alimony, fines, taxes and some types of student loans.

Most financial experts agree that a bankruptcy should always be the last resort used for managing your debts. Bankruptcy has long lasting results. A bankruptcy remains on your credit report for a period of 10 years, making it more difficult to obtain credit in the future. You should also know that although your bankruptcy disappears from your credit report after 10 years, you may still be asked by future employers or lenders if you have ýÿeverýÿ filed for bankruptcy

Disclaimer: The information contained in this article is for informational purposes only. The author is not herein engaged in rendering legal, insolvency, tax, or other professional advice and services.

A Note About Personal Bankruptcy
by: ReliefLoans.com

Often times, if a creditor threatens to sue you, the most effective thing you can do is to tell him frankly that if he sues you, you'll have no other alternative except to file bankruptcy papers. In many instances, this will cause him to take a second look and to do whatever he can to assist you in paying him the money you owe, but over a longer period of time, and at smaller monthly payments. The absolute bottom line is that your creditors know only too well that if you do file for bankruptcy, their chances of receiving even half of what you owe is practically nil. Thus, it's in their best interest to do everything they can to help you to continue making payments on the amount you owe, regardless of how small those payments may be.

When a creditor does sue you, and gets a judgement against you, he can then get a court order directing the sheriff to seize your personal property and sell it, with all monies realized going to the creditor to satisfy your debt. When they see this about to happen, many people connive to make themselves "judgement proof." In other words, they hide their assets or move them out-of-state before the sheriff or marshall arrives. This is illegal, but is done as often as not.

Many creditors will attempt to "garnish" your wages. This is done by getting a court order directing your employer to set aside part of your wages or salary every pay period and turn it over to him. First, of course, he has to find out where you work; and even then, in most states, there are limits set relative to how much a creditor can garnish your wages.

If you have no job, and no visible assets, or you live in a state where your wages cannot be garnished, your creditors actually have very few ways of ever collecting from you.

Many techniques used by creditors and collection agencies are illegal. A creditor or agency can write letters to you; call you once a day in quest of a payment; and even knock on your door to ask about a payment. but he is forbidden by law to harass you or invade your privacy, or use deceptive means to get you to pay your bills. He cannot use foul and abusive language over the telephone, tell anyone other than you the reason for his phone call, inconvenience you or in any way threaten your job or your reputation in the neighborhood where you live.

Still, the best idea for reorganization and settlement of your debts when you find yourself in an untenable position, is in-person visits and explanations of your situation with your creditors, and a desire to explore other possible ways of mutual satisfaction without involving collection agencies or bankruptcy. Give it a try - it's a lot easier than most people realize.