Debtors frequently ask if they should file Chapter 7 or Chapter 13 Bankruptcy.

This personal bankruptcy story was posted on the internet in July of 2011:

“My wife and I are on the brink of financial disaster. Unfortunately, it is of our own doing. We really need advice. We both have normal jobs, with roughly $70,000 in credit debt, and a HELOC for $73,000. We have maxed out the cards from years of frivolous spending and my wife’s small business. Our cars are 8 and 11 years old, and we have no significant assets other than our house. After factoring in the HELOC, 1st mortgage, and current value… we have approximately $5,000 equity in our home…Do you think we should file Chapter 7 Bankruptcy? We are afraid we will lose our home and cars.”

Can these debtors file Chapter 7 Bankruptcy? To file Chapter 7 Bankruptcy debtors must pass an income and means test which was implemented into bankruptcy law in the 2005 changes. Means testing refers generally to the eligibility for relief for debtors who have sufficient financial means to pay a portion of their debts.

The means test is perhaps best recognized in the United States as the test used by courts to determine eligibility for Title 11 of the United States Code. Debtors whose income is below the state’s median income are not subject to the means test and are eligible to file Chapter 7 Bankruptcy if they qualify on all other legal grounds.

There are two types of bankruptcies most individuals can file- Chapter 7 or Chapter 13 bankruptcy. Chapter 7 Bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships.

Chapter 13 Bankruptcy is the second bankruptcy available to individuals and is called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts.

Filing Chapter 13 Bankruptcy has certain advantages. Chapter 13 Bankruptcy may allow you to: save your home from foreclosure, to reschedule secured debts, to provide protection for co-debtors, to consolidate your loans under one plan, to keep non-exempt property, to extend certain tax obligations, student loans, or other such qualifying debts, and to qualify for bankruptcy relief.

Filing a Chapter 7 will not offer all of these benefits. If you have assets you want to keep, you currently have an income, and you want to try to pay your creditors what is reasonable, you may want to consider filing Chapter 13 Bankruptcy. If you do not have many assets, you do not have a mortgage, you just want to get out from under the burden of your debts, and you qualify, you may want to consider filing Chapter 7 Bankruptcy.

Whether you are considering Chapter 7 or Chapter 13 Bankruptcy, contact a bankruptcy lawyer. If you need relief from the stress of debt and you live in or around the metropolitan area of Bakersfield, California, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

Last week, banking executives and state attorney generals met in Washington, D.C., to discuss the foreclosure abuses that have occurred during the housing crisis. Other news stories include the debt ceiling crisis and the Congressional Budget Office report declaring the national debt will be 101% of our Gross Domestic Product by 2021. What does the looming bank settlement have to do with our national scene?

The banks are meeting to atone for their foreclosure abuses. The states, responding to complaints by thousands of homeowners, are discussing a settlement which could be as high as $20 billion. Several problems lie ahead for both the attorney generals and the bank defendants.

The banks are concerned that if they settle they might still have lawsuits filed against them. They contend it will be like having to pay twice for the same offense, and they are asking for a waiver. Some fear the temptation for the attorney generals will be to settle for the money and protect the banks from future unrelated liability. There has been a lot of discussion about how the attorney generals will prosecute the banks if a settlement fails.

The question is whether the banking abuses were civil or criminal. Civil suits would benefit homeowners, to some extent, if allowed, but criminally prosecuting the dispute with the banks might add $20 billion or more directly into state coffers, a much needed boost for financially strapped state budgets.

When our Federal Government is so strapped for cash they cannot balance the budget or pay down our national debt, it is surprising they have not already jumped into the banking settlement fray. Despite states receiving billions of dollars from the tobacco industry, it did not stop the Feds from suing the tobacco companies for violation of advertising laws.

For the homeowners involved in the abuse scandal, whether the settlement is concluded or whether they are allowed to file suits, their mortgage loans will still be due. Few homeowners will be able to escape eventual foreclosure. Filing bankruptcy will be their most viable option to either save their home or start over.

When banks defraud their customers, when states think more about coffers than their citizen’s rights, and when the Federal Government won’t take responsibility and meet their financial obligations, it is nice to know that debtors may be able to file for bankruptcy protection.

Bankruptcy laws can be complicated. If you need relief from debt and you live in or around the metropolitan area of Akron, Ohio, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

Chapter 7 Bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A court-appointed trustee gathers and sells your non-exempt property and uses the proceeds from the sale to pay your creditors. Most Chapter 7 Bankruptcies are “no-asset” cases and the debtor will not have any non-exempt property for the trustee to sell.

Before you can qualify for Chapter 7 Bankruptcy you might have to take the Means Test. This test was implemented into law in the 2005. Means testing refers to the eligibility for debtors who have sufficient financial means to pay a portion of their debts.

The means test is perhaps best recognized in the United States as the test used by courts to determine eligibility for Title 11 of the United States Code. Debtors whose income is below the state’s median income are not subject to the means test. A Means Test calculator is provided to the debtors who are above the median income in their state, and it includes a formula designed to keep filers with higher incomes from filing for Chapter 7 Bankruptcy. Although a complicated formula, the bankruptcy means test is rather generous and many debtors have no trouble meeting its requirements.

The debtor or debtors wanting to file for Chapter 7 Bankruptcy will not only be subject to the means test for individual debtors but must not be a part of any of the following circumstances:

• An individual cannot file Chapter 7 Bankruptcy or any other chapter if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
• No individual may be a debtor under Chapter 7 Bankruptcy or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group session.
• No debtor may file Chapter 7 Bankruptcy if they have sufficient income to pay their debts or their income is higher than the median income for their area.
• No debtor may file Chapter 7 Bankruptcy if they have defrauded their creditors. A bankruptcy court may dismiss their case if they think the debtor has tried to cheat their creditors or conceal assets.

Bankrupty can be used to discharge certain debts and may give an individual debtor a chance to start over. After filing bankruptcy, the debtor has no liability for discharged debts, although not all debts are discharged. Bankruptcy discharge also will not stop a lien on property. Under Chapter 7 Bankruptcy, a discharge is only available to individual debtors, not to partnerships or corporations. Nevertheless, Chapter 7 Bankruptcy can be a good remedy for businesses under certain circumstances.

Bankruptcy laws can be complicated. Contact a bankruptcy lawyer if you have questions. If you need relief from the stress of debt and you live in or around the metropolitan area of Syracuse, New York, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney who will answer your bankruptcy questions.

Most bankruptcy lawyers will tell you it is not a good idea to reaffirm a debt when you file for bankruptcy. There are advantages and disadvantages for reaffirming. Should you reaffirm?

For those of you not familiar with the term, a reaffirmation agreement in United States bankruptcy law refers to an agreement made between a creditor and the debtor that waives discharge of a debt that would otherwise be discharged in a pending bankruptcy proceeding.

There are reasons why some people think reaffirmation is a good idea. They think it will improve their credit scores and enable them to keep their assets that might otherwise be seized or foreclosed. Sometimes, the assets are automobiles the debtor needs for employment or a home they love.

Technically, the automatic stay of a bankruptcy will stop foreclosures and seizures made by creditors on secured loans. Creditors often put bankruptcy clauses in their loan contracts that state filing bankruptcy is a default of the loan, even though the debtor has made all the payments on time. So, many homeowners who want to keep an asset see affirmation as an advantage because the new agreement guarantees the company will not foreclose or seize the property after bankruptcy proceedings are finished, as long as the debtor continues to make timely payments on the asset.

Here are some reasons many bankruptcy lawyers think reaffirmation might be a disadvantage:

• Reaffirmation does not improve your credit score. Bankruptcy has a negative impact on your credit and reaffirming does not change that, only timely and consistent payments.
• Reaffirmation agreements are normally made in the favor of creditors. You have already filed a bankruptcy on a secured agreement, and the same creditor is not likely to take a “beating” on the second agreement just because you want to keep the asset.
• Reaffirmation agreements are not required by law. Bankruptcy laws are for your protection and do not include reaffirmation agreements. As a matter of fact, you and your attorney have to sign a waiver to the bankruptcy court that the reaffirmation is in your best interest before the Court will allow it.
• Assets which have a reaffirmation agreement cannot be discharged in bankruptcy. When you reaffirm an asset during bankruptcy proceedings, you are giving the creditor a waiver on bankruptcy discharge. That is why a lawyer has to sign-off when an agreement is made. Any default of the reaffirmation agreement will not be covered by your bankruptcy.
• Reaffirmation agreements do not guarantee you will repay the loan. Bad things can happen to good people. If you waive your rights to discharge and you default on the new agreement, the creditor can sue you for the full amount of the loan. If sued, a judgment will generally be rendered in the creditor’s favor, allowing the creditor to go after any of your assets to satisfy the debt. You will no longer have the protection of the automatic stay of bankruptcy, and you will have to wait out the appropriate time frame before you can file bankruptcy protection again.

Whether you reaffirm or not, sometimes it is best to start over. You don’t have to reaffirm, so why would you tell your creditor that, despite your bankruptcy, you will pay them and give them the opportunity to sue you if something happens and you can’t pay them? When you sign a reaffirmation agreement, that is exactly what you are saying to your creditor.

If you need relief from the stress of debt and you live in or around the metropolitan areas of Albany, Schenectady, or Troy, New York, contact us at www.betterbankruptcy.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

Is bankruptcy for deadbeats and slackers or can it be a step toward solvency? It is up for debate, but filing bankruptcy can viewed as a step toward solvency, and here is why, since bankruptcy laws were designed to help honest individuals and businesses to work their way out of an unfortunate dilemma, bankruptcy can alleviate debt between two parties.

Instead of asking whether or not filing for bankruptcy protection is a viable solution to insolvency, the more important question to ask yourself is how bad things need to get before deciding to petition the courts for bankruptcy. Many bankrupt debtors wait way too long to decide to file.

Fear of personal failure and dread of ruined credit may delay too many bankruptcy filers. Many debtors empty retirement accounts and sell valuable assets to pay off their debts, often too little and too late. Their fears can prevent them from taking advantage of the financial protection offered by bankruptcy, which may allow them to erase most of their consumer debt while preserving assets like retirement accounts and sometimes even a home and car. Instead, many people delay filling until they are truly desperate.

How do you know if you are bankrupt? You are completely financially bankrupt if your current sustainable income plus any cash reserves will not pay all of your living expenses, pay interest on outstanding loans, and reduce some of your principal on those loans while paying on them for five years. Depending on which state you live, the formula should not consider the current value of your assets owned outright, including any retirement accounts. Paying off debts for five years is chosen because five years is the maximum legal number of years a United States Bankruptcy Court allows an individual to work their way out of bankruptcy protection.

The reason your assets owned outright are not considered in determining whether you are bankrupt or not is a practical one. The reason you file for bankruptcy protection is to deal with your creditors and protect what assets you own. Liquidating your assets to pay-off creditors is not only impractical, it can be a very bad idea. Waiting until your resources are entirely depleted defeats an important purpose of bankruptcy protection, which is to help you rebuild finances.

Bankruptcy laws are complicated, undergoing a major overhaul in 2005. Many debtors are confused about their financial options. Do you worry about the possible outcomes of filing bankruptcy? Do you wonder when is the best time to file bankruptcy? Contact a bankruptcy lawyer for more information. 

If you need relief from stress associated with debt, and you live in or around the metropolitan area of Birmingham, Alabama, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

Student loans are difficult to discharge in bankruptcy, but contrary to popular belief, they are not entirely impossible. To have a student loan discharged, you must show that payment of the debt will impose an undue hardship on you and your dependents. Courts use different tests to evaluate whether a particular borrower has shown an undue hardship, but if you can successfully prove undue hardship under the court’s criteria, your student loans may be completely canceled.

Whether a student loan is discharged based on hardship is not automatically determined in the bankruptcy process, so you must file a petition called an adversary proceeding to get a determination. The very act of filing for bankruptcy has an immediate effect on your student loans. Filing automatically protects you from collection actions on all of your debts, including student loans, at least until the bankruptcy case is resolved or until the creditor gets permission from the court to start collecting again.

What happens when you can’t pay your student loans? When an institution who made the student loan feels like it can no longer collect a student loan, it can contract the collection work to an outside collection agency. The collection agency promises to collect, usually on a commission basis.

Most of the time, collection agencies have the power of attorney to collect their debts. That means whoever owns the debt can hire a law firm and sue you for collection.

A collection agency may demand payment in full, but to collect in full, they would have to have a court judgment. That means they would have to make a lawsuit against you in court. If and when they get a judgment by winning the lawsuit, their options, depending on the state in which the debtor lives, can include garnishment of wages, liens on personal property, and in some cases, seizure of some assets.

Before collectors would be able to pursue remedy of a judgment, they would have to know how many and where your assets are to make any difference, but even finding the assets does not guarantee collection. Any secured assets cannot be seized because they will already have existing liens.

Having your wages garnished is usually the most successful action of judgment. Debtors cannot hide their employment, an employer, by law, is legally obligated to obey a court-order to garnish the debtor’s wages if the state in which the debtor lives allows it.

Student Loans are some of the most difficult loans to deal with if you are bankrupt. Due to powerful lobbying groups, private student loans enjoy the same protection as federal loans. Student loans are usually not discharged when you file for bankruptcy, and it is very difficult to prove undue hardship. Trying to get a student loan discharged is something I would not recommend doing without the advice of a bankruptcy lawyer.

Bankruptcy laws can be complicated. If you need relief from the stress of debt and you live in or around the metropolitan areas of Richmond or Petersburg, Virginia, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

In 1980, the Federal Government passed a special law which allowed national banks to ignore state usury limits and peg the rate of interest at a certain number of points above the Federal Reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers have their own rules. That means that the laws in most states do not have enough teeth to regulate credit card debt. As a result, many debtors can only relieve exorbitant debt from various banking institutions by filing bankruptcy.

Credit card debt is one of the leading causes of bankruptcy, but if you are “collection proof” and you do not have enough assets for creditors to collect, you may not need to file for bankruptcy protection at all. All states have a statute of limitations on debt collection.

Statute of limitations are delineated into four categories which include: oral contracts, written contracts, promissory notes, and open-ended accounts. The latter category deals with credit card debt.

For Michigan, the statute of limitations for oral contracts is six years, and written contracts is six years (as long as you do not make payments during the time frame). The statute of limitations for promissory notes is six years, and the statute of limitations on open-ended accounts is six years. Any written acknowledgment or payment restarts the statute of limitations for the debt.

Going to court and winning a judgment against a debtor is another matter. A judgment in Michigan carries a statute of limitations of ten years. The creditor must renew the judgment before the time frame ends if they want to keep an attachment or lien alive. Partial payments do not affect the ten year limitation on enforcing or renewing judgments. Judgments normally carry a state mandated interest that will accrue until the judgment is satisfied.

Not all collection agencies play by the rules. Creditors may call you after the statute of limitation expires and try to get you to acknowledge you owe the debt. If they can get you to acknowledge your debt, and it is a qualifying debt like a credit card debt, the statute time for limitations begins new from that day forward. So, what do you do when these agents call? Ask them to send you paperwork to verify exactly what debts they claim you owe along with dates of the claimed debt. If it is debts that have passed the statute of limitations, you might want to get their mailing address and send them a cease and desist letter to stop collections. You can explain in the letter why you do not owe the amount. If they cannot verify the claim, you might want to send the collection agency a cease and desist letter anyway.

The Fair Debt Collection Practices Act (FDCPA) protects consumers by providing a fair playing field. The FDCPA states all collection agencies must verify any debts they claim you may owe. If a debt is out of the statute of limitations or is unverifiable, the collection firm is prevented from pursuing the loan in a harassing manner. Continued violations could result in fines for the violators, court, and attorney fees.

If you have assets to protect from creditors and your debt has not reached the statute of limitations, you may have to file for bankruptcy protection. Bankruptcy laws can be complicated. If you need relief from the stress of debt and you live in or around the metropolitan areas of Grand Rapids, Muskegon, or Holland, Michigan, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.