Is Bankruptcy The Solution?
If you have been unemployed for the last several months and struggling to cope up with the seemingly insurmountable bills, you may want want to contemplate about filing for bankruptcy.
While many creditors will work with a person in hardship cases, some will not and at other times the amount involved is so much there is no alternative.
Typically, when individuals think of bankruptcy, we think of what is referred to as chapter 7, which is relief from debt. Other types include Chapter 11 for businesses to undergo reorganization and Chapter 13 for restructuring debt.
In Chapter 7 bankruptcy, there is no mention of a debt repayment plan in contrast to the other types. A bankruptcy trustee assesses your property and determines what may be exempt, such as a home, car, or property under a lien for which you wish to reaffirm the debt. Non-exempt assets which include any luxury items bought on credit for the past three months, or extra vehicles for which there is no lien attached, shall be collected and sold in order to pay off part of your debt. The Bankruptcy Code authorizes the debtors to hold on to certain “exempt” assets and draw on any unclaimed equity on their home in order to decrease the value of other non-exempt assets which they wish to maintain.
To evaluate if you would qualify for Chapter 7 relief, assessors use a so-called means test which analyzes your average income for the past six months. You are guaranteed to qualify for Chapter 7 if you score below your state’s median income, no matter what the actual amount of your obligation is. However, those who took some form of credit counseling during the past six months or dropped out of a bankruptcy case voluntarily or were unable to comply with the requirements, will not be able to apply for Chapter 7 relief.
Bankruptcy is a complicated matter which demands a lot of paperwork, so it would be wise for you to hook up with a local lawyer or firm specializing on bankruptcy who can work with you via the internet and by phone.
The case begins with an official petition being filed, relevant schedules and a statement of your financial position in bankruptcy court. Once the petition has been officially filed, creditors are no longer able to go after your debts by either sequestering your property or filing cases against you. Creditors who are found to have violated this stay will be charged in contempt of court and mandated to pay you appropriate damages.
Even though bankruptcy seems like a win-win solution when you have creditors on the phone, there is definitely a huge downside to it. Because non-exempt properties will be sold in order to pay off your debts, it’s possible you might lose that vacation home or family heirloom; it will reflect on your credit history for 10 years and will form part of public record; and the cost of bankruptcy itself is quite high with the inclusion of court fees, trustee’s fees, consumer counseling and financial education courses, and we haven’t even talked about the cost of hiring an attorney yet.
If you believe that Chapter 7 may provide the answer for you, then start assessing by researching the means test for bankruptcy in your state and weigh your income against the state’s income threshold. If you don’t make the cut, find other possible solutions by getting in touch with creditors and debt counselors. When you’re still undecided or believe that is the course for you, set up an initial appointment with an attorney to discuss the process. Once all the facts have been thoroughly considered then it’s time to make your final decision.
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Filed under Uncategorized by on Jul 27th, 2010. 
