Introduction to Bankruptcy
There are many reasons for financial difficulties, such as loss of a job, death of a bread winner or too many credit card purchases. Money problems can be emotionally wrenching and seriously damage family relations. However disturbing the idea of bankruptcy might initially seem, in fact, bankruptcy laws are there to help those who are unable to pay their bills. This website reviews your alternatives under the bankruptcy laws. Your lawyer can advise you about your options so that you can get the ‘maximum advantage of the bankruptcy laws.
Alternatives to Bankruptcy
Ask us about the alternatives to seeking relief under the bankruptcy laws. One alternative is to contact your creditor:s to request a discount or additional time to pay. Another alternative is toseek the help of a credit counseling service. ‘These organizations, whether public or private, can help you manage your bills and work out an arrangement with your creditors. A third alternative is to borrow money to payoff your debts, replacing them with a single loan and one monthly payment. Such-refinancing can make sense if the repayment period is extended at alower interest rate, Each of these alternatives has benefits and disadvantages that we.can explain. You may find that bankruptcy is your best option.
Choosing a Bankruptcy Option
There are two options under the bankruptcy laws: a liquidation or a repayment.plan,
In a liquidation, also called a Chapter 7 bankruptcy, you sell your property and use whatever cash is generated to fully satisfy creditor claims, You will be allowod to keep certain kinds of property under the exemptions allowed by federal and state bankruptcy laws. The definition of “exempt property” differs in each state, andit can include clothing, furniture, household appliances, tools of your trade and-perhaps your home or car.
In a repayment plan, sometimes called a Chapter 13 bankruptcy, you pay a portion of your monthly income to a trustee for distribution to your creditors. A repayment plan is useful when you are behind on your home or car loan. The repayment plan can be used to extend, for up to 5 years, the time period for paying your bills and might allow you to pay less than you owe. The extended payment period has the advantage of allowing you to make smaller payments. You will be allowed to keep partof your monthly income to pay for living expenses like food, clothing,
rent and medicine.
To qualify for a Chapter 13 repayment plan, you must have regular income and your unsecured debts must not exceed $100,000. If your unsecured“debts exceed$100,000, you may be‘ able to qualify for a repayment plan under Chapter 11. Bankruptcy proceedings tinder Chapter 11 are more complicated than those availableunder Chapter 13.
After you begin a bankruptcy liquidation, you may not start another Chapter 7 Bankruptcy for 6 years. There is no waiting period after a Chapter 13 bankruptcy.
We can study your situation and advise whether to seek a liquidation or repayment plan, The best bankruptcy alternative for you depends on a number of things, including the source of your
income, the amount and. types of your bills, your desire to protect your cosigners and guarantors, and the importance toyou of maintaining your record of paying yourdebts.
Dealing with Creditors
Your lawyer can help you deal with your creditors before, during and after bankruptcy proceedings. Before starting bankruptcy proceedings, you are protected by laws that prohibit creditors from harassing you to collect money. Bill collectors may not contact you at unreasonable times at home, and they may not embarrass you by telling your friends, relatives or employers about your debt. Bill collectors may not contact you at work if they know that your employer disapproves. If you have a lawyer, bill collectors may only contact your lawyer.
During bankruptcy proceedings, you will receive additional protection from bin collectors. At the. beginning of the proceedings, the court will order your creditors to stop their collection activities, including lawsuits, wage garnishments, repossessions and telephone calls demandingpayment. It is unlawful for your employer to fire you for seeking bankruptcy protection.
After the bankruptcy proceedings have been, completed, you must take care when dealing with creditors. Some creditors may try to collect debts that were discharged by the bankruptcy proceedings. These creditors may ask you to renew the debt by signing an agreement to pay it. Consult your lawyer when you are contacted by creditors so that you do not inadvertently obligate yourself to pay an old bill that was discharged by your bankruptcy proceedings.
Working with your Trustee
The bankruptcy court will appoint a trustee for your case shortly after bankruptcy forms are filed, In a liquidation proceeding, the role of the trustee is to sell your property and distribute the proceeds to your creditors. The trustee can also set aside fraudulent transfers and preferential transfers made to creditors within the 90 days prior to the bankruptcy proceedings. The trustee will also determine which items of your property are exempt from sale to pay your debts. In a repayment plan proceeding, the trustee coordinates the arrangements between you and your creditors. The trustee will collect payments from you and distribute them to your creditors. The trustee is also responsible for approving any new credit obligation’s that you, undertake before the completion of your repayment plan.
Keeping Your Property
We will advise you about the protection available for your property with a bankruptcy proceeding. For example, in a liquidation proceeding, the bankruptcy laws allow you to keep your-exempt property.
Prior to beginning bankruptcy proceedings, your lawyer may advise that. you sell some of your nonexempt property and use the cash to purchase exempt property. Although you may convert your nonexempt property into exempt property, you will be subject to severe penalties if you try to hide your property.
In a liquidation proceeding, you may be able to keep mortgaged property like a home or car if you “reaffirm” your loan with your lender. Reaffirming the loan means that you agree to pay it in full. The “reaffirmed” loan will not beaffected by the discharge that you receive at the completion of the bankruptcy proceedings.
Any property that you receive after 180 days from the start of the bankruptcy proceedings is yours to keep, including inheritances, gifts and life insurance. Your lawyer may recommend that you speed up your bankruptcy filing if you expect to receive a substantial amount of property in the near future.
Effects of the Bankruptcy
The end of your bankruptcy proceedings can provide you with a “fresh start,” The court order will end your responsibility for dischargeable debts, The order will not affect nondischargeable debts such as alimony, child support, educational loans, taxes or debts that you incurred by deliberately injuring someone. After the bankruptcy, your creditors may no longer try to collect the discharged debts. Your bankruptcy proceedings will be noted on credit records for up to 10 years after your bankruptcy filing. During that time-Ienders, stores and finance companies may consider your bankruptcy among the many factors they review when you apply for a loan, or credit card. Surprisingly, since you cannot file again for Chapter 7 for 8 years, it may be easier for you to obtain a mortgage loan or installment credit for an auto or home appliance. An application for such credit is easier if you wait at least a year before applying for credit and show a history of paying bills on time after the bankruptcy.
Fees and Expenses
The bankruptcy courts currently .charge a small filing fee to cover court costs. The fee is paid to the clerk when you file your bankruptcy forms at the courthouse: Additionally, thetrustee will receive a fee of about 10% of the amounts paid to your creditors if you choose a repayment plan.
The fee charged by your lawyer will depend on the complexity of your case. In bankruptcy matters, a lawyer’s expertise usually results in savings that far outweigh the amount of legal fees.
Conclusion
You may need the protection of the bankruptcy laws if you are unable topay your bills on time. Bankruptcy proceedings can help protect you against aggressive bill collectors and preserve as much of your property for you as possible.
A lawyer can advise you about your bankruptcy, options and help. you make the best of your situation. If you cannot manage your bills, call your lawyer immediately to learn about your rights and avoid missing advantages that can be-lost with the passage of time.