Bankruptcy Information Corner

When it comes to bankruptcy, the general perception of it is that it's a bad thing, which is not an unexpected reaction, and it's not that I intend to promote bankruptcy or raise that perception to a more positive one in this article, but it has its benefits and they're often misunderstood. Bankruptcy has severe consequences when it comes to your credit, no doubt, but it also is the lifeline that can rescue you from the depths of that, which we can not always prevent, debt. I get the sense that there are still many people who make a lot of assumptions about this subject. The following are some of the most common questions and myths I found in my own research and I'd like to share them with you.

Who can file for bankruptcy? - Any one or any company, corporation, or business unit who can no longer afford to pay their creditors. There are different chapters in the US bankruptcy code that will cover just about everyone. The most filed is chapter 7, which is what most individuals will file. This chapter allows you to discharge most of your debts without any further obligation to repay them. Chapter 13 allows individuals to reach new terms with their creditors rather than discharge the debt, and chapter 11 will give partnerships, companies and corporations, similar benefits where the debt is not discharged either but re-arranged under new terms of repayment, that allow the debtor to make more manageable payments for the next 5 years.

Will I be able to get credit after bankruptcy? - You can in fact get a credit card after you get discharged and it is often recommended in order to start building a history of positive credit again. There are options in which you could use a prepaid credit card, that only allows you to spend what you deposit in your account so there's no way to over charge. You also can get a regular credit card, but more than likely it'll be from a sub-prime lender who will almost always impose a much higher interest rate on your card. So it's an option but just remember that it will cost you more.

Bankruptcy is a private matter - Actually no, bankruptcy is very much public record, anyone wanting to find out if you have filed for bankruptcy can in fact find out. The courts really make this easy through a program called Pacer, which allows pretty much anyone to access court records for a fee. This is how you'll end up getting offers from local car dealers, and you may even get calls, since they know that in bankruptcy cases people liquidate assets, they're betting you had to surrender your vehicle. Often you may hear them say that they don't care about your bad credit, so be careful with those sub-prime rates. You'll also get lots of offers from law firms and agencies that "specialize" in credit repair after bankruptcy. This one you must consider carefully.

My credit report can be fixed after bankruptcy - This all really depends on each situation. Some agencies can really help, but that won't be true for everyone. Keep in mind that your bankruptcy file will be an accurate entry, so removing it from your credit report is not likely to happen by anyone's efforts. However inaccuracies like debts that should be labeled "Included in bankruptcy" and are not, can be targeted for repair. It's important that you pay close attention and investigate a company that "guarantees" results. You have to ask yourself, what exactly can these agencies tell the credit bureaus that will make them reverse my negative entries or that of my bankruptcy case? It sounds like a good idea, and I think that's the reason why there is so much fraud in credit repair. Be very careful with this one and the same goes for those agencies that tell you to stay away from bankruptcy and go with their programs that promise to pay off your debts in only a few years for pennies on the dollar. They charge high commissions and may only help you sink yourself into more debt.

Filing bankruptcy gets rid of all my debts - Not all of them. Bankruptcy courts are only concerned with your secured and unsecured debt. Under chapter 7 all of your unsecured debt will be discharged for good. Secured debt on the other hand you'll need to continue paying for or surrender the collateral upon discharge. However things like debts from lawsuits against you, child support, alimony, student loans, state taxes and federal taxes will not be discharged. The federal government offers a benefit that only certain people will qualify for. If you have a federal tax bill that's older than 3 years from the time you file your petition, then that tax bill may be discharged. Check with the IRS yourself to make sure if you qualify.

Bankruptcy will take away all my belongings - Not really, when you do file for bankruptcy, you will have a trustee assigned to your case. One of the functions the trustee has is to find assets he can liquidate to pay your creditors; this is especially true in chapter 7. However, most people who file chapter 7 are usually already flat broke and have very few assets worth liquidating. For example if your car is still new and it's paid off, it could be seen as an asset that can be liquidated. If it's a few years old and had moderate to high mileage, the trustee will consider it exempt. Stocks, bonds and other paper assets can also be liquidated, but your individual retirement account is exempt, whether it's an IRA, Roth IRA or 401k. All your other possessions, such as your kitchen goods and appliances, your wardrobe, and your trinket collection will be exempt as well. So don't sweat this one too much.

I can max out my credit cards before filing - NO! And I mean no, do not make this mistake. The other function the trustee has in your case is to make sure that you are in fact in real financial hardship. Your credit cards spending record will be analyzed and if it shows things like iPods, Computers, Vacations, and any other leisure items, it will be very hard to convince the court that your case is legit. Worse yet, you could be found guilty of fraud on the spot and find yourself in a lot of trouble. So don't do it. Stop using your credit cards at least 90 days before you file.

How often can I file bankruptcy? - You can only file once every ten years. But don't go making a habit of this, a lot of people do this and it's not a good way to live. You should be learning from this experience not repeating it. You should be doing all you can to get your credit to a healthier state which will not be easy. It will take years and lots of effort so the sooner you start the better for you.

I Hope this has been helpful to you. If this is something you are considering you should also check out these alternatives, and spend some time reading up on the subject. Bankruptcy can be complex and straight answers are not always easy to find. To make your finding answers a little easier, use the " " in your searches, for example: "how to file bankruptcy." This will tell the search engine that you're only interested in viewing documents that contain this exact phrase and in this exact order.

Good luck!
www.bankruptcyahead.com
"It's only when the tide goes out that you learn who's been swimming naked."
Warren Buffet

Back in 2002 when I bought my condo, there was no sign we were entering the beginning stages of the subprime crisis. I knew I was making the right decision to buy a place while I could still afford one. I saw the market jump significantly in the next two years and all along I had this feeling that this rapid growth of the market could not be normal and it can't benefit everyone. I figured that at some point I would have to sell my condo and I would most likely want to sell it at fair market and maybe just a tad more.

Would someone really be willing to pay me double the price of what I paid for it? This really puzzled me, and even though I thought it would be great to make that much money, I couldn't help to feel concerned for whoever got to buy my condo. Will they buy with sub-prime or conventional loans? How will they manage such a large monthly payment? Will they continue to enjoy the market growth like I did?

It can't grow forever, what goes up must in deed come down, and that's what we're witnessing here. It's a nose dive of a decline for the housing market and it really is difficult to watch. The same thing goes for the stock market, there's usually a period of aggressive growth that must eventually fix itself. I trade very moderately in the stock market so I keep up with it, but it's definitely not a huge worry for me.

The housing market is now suffering from a subprime mortgage crisis, which in turn has an impact on the overall economic growth. As more mortgages default and there's less confidence in spending, we're ending up with a surplus of homes across the country, causing a very dramatic decline in new home construction and prices of homes. All of this contributes to the downward pressure on the overall growth.

Interest rates on a number of subprime and ARM loans are due to go up through 2008. However, to the benefit of home owners who may be finding themselves on the brink of bankruptcy, the US treasury, backed by US legislators, is enabling the deferment of interest adjustments in order to begin working towards stimulating the economy and re-establishing confidence in consumers and financial markets.

To begin a resolution to the subprime crisis, one of the measures that can be taken in the future through legislation is to limit the different products that revolve around these types of loans and to revisit the formula to qualify consumers for these types of loans. The US treasury should reinforce and recommend that lenders and borrowers stick to the conventional style of mortgaging, because when this sector suffers it impacts all. Salaries will need to keep up with inflation and unemployment needs to stay low. Finally, the housing market's steady decline needs to be interrupted as soon as possible, but this won't be possible without more aggressive efforts of the US treasury and the government.

Good luck!
www.bankruptcyahead.com

"It's only when the tide goes out that you learn who's been swimming naked."
Warren Buffet

For many people the subject of bankruptcy is still rather obscure, not something most anyone would want to investigate since no one wants to admit that they could be the next casualty. Knowing how to file for bankruptcy or at least knowing how bankruptcy works and the benefits it can provide is something everyone who handles money should know at least at a basic level. This is a broad subject in many ways, there are different chapters in the bankruptcy code and the terminology is not always self explanatory.

In this article I don't discuss alternatives to bankruptcy, I'm assuming you're already at the end of your rope and are looking for the information you need to determine for your self whether you should file or not. This is hard to do when your situation is causing you stress, but here's some help.

Assessing your own situation:
Starting with the very basic stuff, where are you now financially? Look at your monthly bills, this should include your mortgage or rent, utilities, personal loans, credit cards, medical bills, child care etc, add them up and then look at your total monthly income. If your total monthly expenses meet or exceed your total monthly income then you're likely to be struggling at this moment and you could be a candidate for bankruptcy, especially if you have adjustable rates on any of these debts. Ideally you should be able to retain at least 10% of your take home pay for yourself; anything less than that is an indication that you have too much debt.

How to file:
Doing it yourself will save you money, by visiting a federal bankruptcy court near you and picking up the forms yourself, or downloading them from the US Courts Website. This will save you some money though you'll have to pay the $299 filing fee with the court when you submit your forms. Make sure you provide the following as well:

Documentation - Beginning with your tax returns, they'll need to be analyzed to see your income history. You'll need to provide tax returns for the previous three years. Along with this, you'll need to provide income and asset information along with a break down of all your month expenses, names of creditors and in many cases your credit report.

Filing - the fees for filing bankruptcy depend on the type of bankruptcy you'll file, as far as the court's fees are concerned, if you file chapter 7 you'll need to pay $299 to the court when you submit your paperwork. If you file chapter 13, the court fees are $235 and an additional $35 for administrative fees.

Bankruptcy counseling - This is a requirement, you'll need to take the first part of the course before you file and the second part of the course before you get discharged. You should look at the US Trustee approved agencies for an online agency where you can sign up for the course.

These are basically all of the things you'll need to begin your process, once you've submitted your petition and paid the fees, you'll receive an appointment letter for you to show up to court and meet with the trustee assigned to your case. Your appointment is usually 30 from the day of your petition.

You could hire a lawyer to represent you, which is in my opinion the best way of doing this. However these services are expensive, so you need to plan ahead and save money if you're going to take this route. Whatever method you choose you should have the basic knowledge on how to file for bankruptcy, and always double check your paperwork before you sign it.

www.bankruptcyahead.com

"It's only when the tide goes out that you learn who's been swimming naked."
Warren Buffet