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Chapter 7 Bankruptcy:
- What is a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start".
- How difficult will it be to file Chapter 7 under the new bankruptcy laws?
There has been much doom and gloom written about the bankruptcy means test under the new laws and how much more difficult it's going to be to file Chapter 7. It's true that there are more hoops to jump through under the new laws and it's true that the bankruptcy means test will result in some people having to file chapter 13 instead of Chapter 7. However, for the vast majority of filers Chapter 7 is still available with very little extra effort!
- What are the most common reasons for a Chapter 7 Bankruptcy?
The most common reasons for filing bankruptcy are:
- Unemployment: Large medical expenses; Seriously overextended credit; Marital problems, and;
- Other large unexpected expenses.
A Harvard Study reported that half of US bankruptcies were caused by medical Bills (MSNBC). The study was published online in February of 2005 by Health Affairs. The Harvard study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually Ñ counting debtors and their dependents, including about 700,000 children.
Chapter 13 Bankruptcy:
- What is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
- What is Chapter 13 and when can it be used?
Individuals may file chapter 13 bankruptcy petitions if they:
- Reside, have a domicile, a place of business, or property in the United States, or a municipality;
- Have a source of regular income; and on the date the petition is filed owe less than $290,525 in unsecured debts and less than $871,550 in secured debts. Note: The amounts given here are 2001 amounts. They are regularly adjusted to keep up with the cost of living.
Corporations and partnerships may not file a chapter 13 bankruptcy petition. If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition and should check 11 U.S.C. sec. 109(g).
Credit Counselors:
- I know I have to take an approved credit counseling course before I can file bankruptcy. How do I find an approved credit counselor?
Visit the U.S. Department of Justice Trustee Program to view a List of Credit Counseling Agencies Approved Pursuant to 11 U.S.C. § 111.
- If I use a credit counselor won't I get a better credit rating than if I go bankrupt?
No, you will not. It will cost you less money and you will rebuild your credit rating faster if you file Chapter 7 or Chapter 13. Be cautious if your are considering using a credit counselor. Also read about the problems of unscruplous companies in the credit counselling industry and the action the IRS has taken against "non-profit" credit counseling groups following widespread abuse.
General Bankruptcy Questions:
- Will my creditors stop harassing me?
Yes, they will! By law, all actions against a debtor must cease once the documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make payments.
- Will my spouse be affected?
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt. However, In community property states, either spouse can contract for a debt without the other spouse's signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouse's signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed.
- Who will know?
Bankruptcy filings are public records. However, under normal circumstances, no one will know you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years.
- Can my boss fire me for filing bankruptcy?
No. U.S.C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.
- How much am I allowed to keep?
You are allowed to keep certain assets - State Exemptions.
- What don't I keep?
In a bankruptcy, assets in excess of your allowed personal exemption, or non exempt assets such as, real estate, automobiles and boats will be liquidated by the trustee.
- I was bankrupt before. When can I file again?
A person can file Chapter 7 again if it has been more than 8 years since he or she filed the previous Chapter 7 bankruptcy.
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