Bankruptcy Filings - 2008

Author: Ryan Tenney

According to some recent stats, both personal & corporate bankruptcy filings increased from 2007 to 2008. Bankruptcies seem to be rising in many states & some people think that the numbers will only continue to rise in the immediate future...

In fact, in 2008, the number of bankruptcy filings is expected to exceed 1 Million! One of the more common reasons that some people file for bankruptcy are large medical bills that can't be easily paid back. Another common reason is the loss of a job. And finally, unsecured debt, like credit card debt, can get very large, very quickly, if not properly managed.

Furthermore, as many consumers have recently discovered, debt levels become unmanageable when they are the result of large increases in fixed expenses. If more money goes out than comes in every month, debt levels can become difficult to manage.

For instance, imagine a hypothetical consumer who signed up for an adjustable rate mortgage in 2005. If that consumer's mortgage payment was originally 00 per month & it readjusts to 00 per month, where will the 00 difference be made up? If that particular consumer doesn't get a substantial raise to cover the difference, how can the increased amount be paid every month? The extra 00/month has to come from somewhere....With current U.S. savings rate at 0%, is it realistic to think that people will be able to come up with the extra amount every month?

During the 1990s, some banks started extending generous credit lines to consumers through credit cards. Credit was easy to get & consumers used credit cards to purchase just about everything imaginable. The added reward points & bonus' made credit cards very convenient for a lot of consumers. Credit cards can make life easier for a lot of consumers because they make it easy to manage and track expenses.

However, as stated above, principal amounts & fees can compound very quickly if they are not paid off.

Nationwide, courts are seeing double digit increases in the number of people filing for bankruptcy protection. And, not surprisingly, bankruptcy filings are reported to have increased substantially in many states that experienced both the "housing bubble" & the resulting wave of foreclosures...Arizona, California, Florida & Nevada are four states that have seen double digit increases in the number of bankruptcy filings from 2007 to 2008.

Furthermore, according to some statistics, while some costs have increased recently, incomes have not kept up with increased expenses. Especially energy costs. Take a look at the latest gas or power rates. According to the latest BLS.gov CPI stats, energy costs have been increasing more than 15% per year for the last 6 years at least! Have incomes increased enough to match the increased expenses?

Probably not.

So, are expenses that over run incomes the reason why so many more people are filing for bankruptcy protection? These are not easy questions to answer today, given the apparent contradictions in both inflation and deflation, not to mention many other factors that aren't easily identifiable.

However, more people are apparently filing for bankruptcy protection & some experts think that the trend may continue.

Article Source: http://www.articlesbase.com/finance-articles/bankruptcy-filings-2008-541928.html

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Before filing for bankruptcy, it is crucial to understand all the facts. Since you may not be an expert in bankruptcy law, the questions you might have about the process have answers that are anything but clear. Not only are there different types of bankruptcy, Chapter 7 and Chapter 13, but there are also significant differences between the two.

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One of the most common questions about Chapter 13 bankruptcy is what happens if your financial situation changes during the duration of the plan? After all, a Chapter 13 plan typically runs between three to five years and there are a lot of things that can happen in that period of time. What happens if you or your spouse lose a job, get sick or in an accident and incur medical expenses, or have a change in family size?

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Fortunately, Chapter 13 bankruptcy offers a great deal of flexibility in the event of a change of income or expenses during the duration of the plan. Many times the court can agree to modify your plan to make it work. This often involves a lowering of monthly payments which debtors are obligated to pay.

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Other times, the changes may need to be made even before a first payment is sent. Sometimes debtors are still unable to pay their mortgage even with the restructuring of their debt in Chapter 13. In cases like this, a modification is necessary. If the situation that you are experiencing is only a short-term problem, the court may grant a moratorium in payments if it will allow you an opportunity to recover from an illness, one-time expense, or some other temporary cash flow problem.

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If your situation changes significantly for the worse, Chapter 13 has what is called a "hardship discharge". This happens when a Chapter 13 plan is confirmed but circumstances come up that prevent the debtor from completing the plan. However, there are stipulations to a hardship discharge which make it available only if: the failure to pay comes from circumstances beyond the debtor's control, creditors have received at least as much money as they would have received under Chapter 7 where assets are liquidated, and if modification of the plan is impossible.

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Bankruptcy can be complicated, which is why you need an attorney who can get things right the first time. A lawyer who works exclusively on bankruptcy and keeps up with the newest trends in the industry can put that knowledge to work for you. Let's face it, unemployment, garnishments, and repossessions can happen to anyone. When filing for bankruptcy in North Carolina, the attorneys at The Law Offices of John T Orcutt know what they are doing because bankruptcy is all they do and have a proven track record in succeeding. Call 1-800-899-1414 for a free consultation.

Filing bankruptcy is the last draw if you can't find any other solution to your financial and debt problems. This serious step keeps you protected from your creditors but you have to go through a lot of trouble for the proceedings. Federal bankruptcy law oversees the procedure, however, recent changes to the law have made filing bankruptcy more difficult.

The first thing bankruptcy law requires is that you contact a bankruptcy lawyer. A bankruptcy lawyer can be found through local and state bar associations (for referrals) or you can ask around for an attorney you can trust to do a good job. The next step is to collect all your financial papers and bring them to your bankruptcy lawyer's office. Don't forget to bring outstanding bills, bank statements, and paycheck stubs from the last six months, mortgage and car loan information, as well as tax returns.

All the paperwork that your bankruptcy lawyer will put together when filing bankruptcy is called a petition. The petition, according to bankruptcy law, must list every debt you currently owe. In the case that you purposefully leave out creditors, the court has the right to dismiss your case entirely, and you won't be given a chance to file for bankruptcy at all. This is a federal crime under bankruptcy law as well - never lie when filing bankruptcy.

Talk to your bankruptcy attorney about all the debts you have, both secured and unsecured, and ask whether or not some of your debts will still be around after bankruptcy has been filed. If they are all discharged you won't have to pay any of them after bankruptcy proceedings. Taxes, student loans, and child support are all payments it's extremely difficult to have discharged.

Be honest with your bankruptcy attorney about all the income you have been able to earn over the past 6 months, even if from a source other than your regular job and paycheck. This is another form of information that the law requires you include when filing for bankruptcy, so disclose all finances fully.

Find out if you should file a chapter 7 - this will depend on the type of debt you have, and the amount. A chapter 7 is also known as liquidation bankruptcy. If you don't fit under this category, you'll probably have to file a chapter 13 instead. A chapter 13 bankruptcy is referred to as an adjustment of debts petition. This option applies if you make a decent living and have fallen behind on secured debts, such as house payments, as this type of bankruptcy gives you a chance to catch up on the payments you owe.

Once all the paperwork has been compiled and everything has been checked over with a fine toothed comb, it's time to sign the petition in the appropriate places as a way of stating that the information you have provided is true. Nowadays you can file a petition online, which is very convenient, with your local district. Without an attorney the process can be daunting, and you have to do it in person or through U.S. Mail.

Consumers who file chapter 7 bankruptcy MN must be eligible.

Chapter 13 of the bankruptcy code gives debtors the opportunity to repay some or all of the debts that are in their name, in better terms, lower or no interest. Debtors have the ability to use income they have in the future to pay off creditors.

How Chapter 13 Works

A time frame of 5 years is allotted for debtors to be able to pay of their creditors in full. Your attorney will safeguard your interests, while the entire process is carried out under court supervision. A new interest free plan is approved by the court, which allows debtors to repay their creditors and still retain all of their property, unlike Chapter 7 bankruptcy. A list of transactions and time duration is created for this process. Thirty to forty-five days after the case has started, payments must begin to be made.

Making Sure Chapter 13 Is The Right Choice

To qualify for Chapter 13 you must have a regular source of income. You will need to prepare a budget, fill out forms and leadings, and appear for meetings with creditors and court hearings. After all of your payments have been made in full you will be eligible to receive a discharge from your debts and the plan will be terminated. To know if Chapter 13 Bankruptcy is the right choice for your financial interests, you will first need to fill out an evaluation form as with all Chapters of Bankruptcy. Your attorney will review your form and be able to guide you towards Chapter 13 or the solution that best fits your financial situation.

Chapter 7 Bankruptcy is known as straight bankruptcy as well as liquidation (converting assets into money) and it is the most common form of bankruptcy. Most, if not all debts are discharged within months of your attorney filing a bankruptcy petition. Chapter 7 of the bankruptcy code allows debtors who are in need of discharging debts within a situation of financial emergency to become free and clear of these debts and to become able to begin a fresh new financial start.

How Chapter 7 Works

The way Chapter 7 bankruptcy works is that a trustee is assigned to collect and to sell assets and non-exempt property to distribute the proceeds from these items to pay off creditors. In Chapter 7 the debtor receives a discharge from all dischargeable debts. These debts may include child support, most taxes and student loans under the filing of chapter 7 Bankruptcy.

Making Sure Chapter 7 Is The Right Choice

To know if you are eligible or to understand if Chapter 7 bankruptcy is right for your situation you must first complete an evaluation form. This form will have questions regarding your debt and financial situation. By filling this form out completely and accurately, your attorney will be able to review your financial situation and provide you with a solid answer on if Chapter 7 bankruptcy will be the best choice to be made .If in fact Chapter 7 is found to be the right choice for your financial well being a well laid out set of rules and procedures will be provided and your attorney will be able to process your bankruptcy petition.

Debts that become out of control can be a heavy burden for any consumers.

Most people who file for bankruptcy choose Chapter 7 instead of Chapter 13 because it's fast, effective, easy to file, and doesn't require payments over time. Chapter 7 bankruptcy usually takes the least time to complete. The process is over in about 4 to 6 months, commonly requiring only one trip to the courthouse by the person filing for bankruptcy to emerge debt-free.

However not every persons who are seeking of getting debt free by filling bankruptcy will be eligible to file under chapter 7. If you remaining income after subtracting what you will spend on certain allowed expenses and monthly payments for child support, tax debts, secured debts such as a mortgage or car loan, and a few other types of debts is sufficient to support the payment under chapter 13 repayment plan, then, you will not allow to file bankruptcy under chapter 7.

Check Your Eligibility Criteria

The first step to check your eligibility of filling chapter 7 bankruptcy is to measure your average income for past six months against the median income for a family of your size in your state.

Once you have calculated your income, compare it to the median income for your state (You can find the median income by state information from www .usdoj.gov/ust; click the Mean Testing Information). If your calculated average income is less than or equal to the median income of your state, you can file under chapter 7 bankruptcy, else you need to go through another eligibility test, called "Mean Test".

The "Mean Test" based on the outcome from calculated disposable income. To get your disposable income, calculate your average monthly income as describe in above paragraph. From that amount, you subtract both of the following:

Certain allowed expenses such as clothing, transportation, food and so on; in amounts set by the IRS (Note that this amount may be lower than your actual spending).

Monthly payments you will have to make on secured and priority debts. Secured debts such as mortgage and/or car loan; priority debts include child support, alimony, tax debts, and wages owed to employees.

If your total monthly disposable income after subtracting these amounts is less than $100, you pass the means test, and will be allowed to file for Chapter 7. If your total disposable income is more than $166.66 then your will automatically force to Chapter 13 unless your have a solid reason with proven facts that you are facing a special circumstances that aren't reflected in the calculations above. You may be allowed to file under chapter 7, but this is a case by case basic.

What if you disposable income fall in between $100 and $166.66? If your disposable income is in this range, you must figure out whether what you have left over is enough to pay more than 25% of your unsecured, non priority debts such as credit cards, student loans and medical bills. If not, you pass the means test, and Chapter 7 remains an option else you have flunked the means test, and will be prohibited from using Chapter 7.

Summary

You may like most of people prefer to fill the bankruptcy (if this is the option left for debt free) under chapter 7, because it doesn't require you to repay any portion of your debts, as Chapter 13 does. But first thing is your must be eligible and meet the requirement for chapter 7 to opt for this option.

Cornie Herring is the Author from "StudyKiosk-Credit Basics"- http://www.studykiosk.com/creditbasics. "StudyKiosk-Credit Basics" is an informational website on credit basics, debt consolidation and bankruptcy.

When you decide to file a Chapter 13 bankruptcy, the legal process grinds into gear. The petition, the document asking the court to bring you relief under chapter 13 of the United States Bankruptcy Code, is a simple two page form, signed by all debtors and the attorney. Once this form has been filed and the filing fee paid, you are given a docket number. From then on, all actions by creditors are under stay, except for those that are allowed by motion, in the bankruptcy court. Creditors can not demand money, take you to court over debt or foreclose or repossess your property.

A few days after this filing, you are required to submit a list of all your creditors and their addresses to the court. This document, the Matrix, must be followed within a week by the rest of the required paperwork, including schedules of assets and liabilities, income and expenses, your financial history and your plan for how you wish to reorganize all that under chapter 13, as well as the evidence that you will be able to complete the plan. After this process of initial submission of the Chapter 13 reorganization plan, you have the option of filing amendments to add creditors or modify the schedules or plans. Amendments may, however, involve the payment of additional fees to your lawyer, as well as extra fees to the bankruptcy court.

Unless your case has some contested issues which need to be heard before a judge, you will probably never have to appear in person. Instead, you will meet with a Chapter 13 Trustee, only one to three months after the initial filing of the petition. This is known as a 341 creditors meeting and everyone who is owed money will be invited to attend. At the meeting, the creditors will ask you questions about your financial situation. However, in most cases, few creditors ever attend and the guests are more likely to include only the big creditors and mortgage holders.

Your attorney will have to be at this meeting, to represent you and the person actually asking all the questions and coordinating the meeting will be the Chapter 13 Trustee. After this meeting, if there are no objections against it, all you have to do is to make sure you remit all the payments according to your plan and in a timely manner. Duration of time for making payments will depend upon your income and the size of your debt. By statute, all the reorganization plans must be between 36 and 60 months long. If you have enough income, the Trustee might demand that the plan be 36 months long and a larger portion of the available funds paid to unsecured creditors.

In general, if you have a little extra money one month, save it, rather than trying to pay a larger amount. If you miss a payment at a later date, you will not be given credit for any early payments made previously. However, if your income changes substantially, for a longer time, you need to inform the court and adjust your payments. Always make sure to pay on time. If you do not, one or more creditors or the Trustee will object and your case can be dismissed or converted to Chapter 7 and they may still foreclose with the permission of the court. Since you are already in a bankruptcy, one failed or late payment will leave you no recourse against losing your home. You will lose the protection of the court.

Filing a bankruptcy claim can be a very stressful procedure, specially when you do not really know what chapter to file for. And now with the new law, some individuals will not even have the chance to choose, they will either qualify for both chapters or just for Chapter 13. The idea behind this measure is to prevent wealthy families from filing for Chapter 7: now their options are limited. But those lucky ones who do have the chance to make a choice, are at a loss.

This article seeks to become a guide for those who are more inclined to file for Chapter 7. Here we will discuss the advantages this chapter has over the second most common chapter and the obvious disadvantages related to the latter. Enjoy!

Wonders Of Chapter 7 Bankruptcy

Chapter 7 is the most common type of bankruptcy and it is filed by most debtors when in need. But what is it about this specific bankruptcy type which makes it so appealing to most debtors? Well, first of all, its simplicity. It is easy to file and quick as you would not believe. We live in a fast turning world in which rapidness is a very valuable feature. For you to have an idea of how fast this claim can be, an average case takes between four to six months in being closed! No wonder why this chapter is so popular, huh?

Before getting your hopes up, you should know that not all types of debt can be discharged or wiped off your credit report. But this does not have much to do with the type of chapter you are going to file (there are some exceptions). Some debts cannot be written off at all, these are, for example, tax related debts, some types of student loans (usually those owed to the state), child support debts, spouse maintenance debts, etcetera.

Downside Of Chapter 13 Bankruptcy

We all know that the disadvantages of an object or a procedure cannot be counted as advantages of another, but in this case, I will make an exception. It is undeniable that Chapter 13 carries many advantages to it and has worked wonders for many debtors, but of course it depends on your particular situation.

In Chapter 13 bankruptcy, as opposed to Chapter 7, debts have to be paid off. There is no way around this. Repayment plans are planned out and debtors must stick to it in order for their debts to be discharged (once completely paid off, of course). These repayment plans may last up to five years. As discussed before in this very same article, time is a very important issue for many individuals, and having to put up with a bankruptcy case for such a long time might not appeal to a lot a debtors, specially if they are in need of a fast fresh start.

To Sum Up

Contrary to what you must think, I do not lean towards any of the two chapters. I believe it is a very personal decision which must be thought over carefully in order not to make mistakes you might regret in the future. This is not a issue which should be taken lightly. In any case, get advice from a lawyer: there is nothing better than discussing your options with a professional.

The term "Chapter 7 bankruptcy" is a term that is thrown about a great deal in the media, but clear and concise explanations of the term are usually not offered. Because of this, there is some confusion of what exactly chapter 7 bankruptcy actually is and this confusion sometimes leads to people making critical errors in judgment when the individual contemplates such a filing.

Certainly no one wants to become involved in bankruptcy proceedings. There is good reason for this. In order to enter bankruptcy proceedings, a person will have to have debts that greatly exceed his or her net worth and, in addition, have no visible or viable means of paying back the debts. When a person or corporation finds itself in such a position, there becomes the need to file for bankruptcy protection.

This is a legal situation and it requires the courts to rule in the matter. There are a number of different forms of bankruptcy such as chapter 11 bankruptcy and the more common chapter 7 bankruptcy. Since chapter 7 bankruptcy is more common for individuals, it is important that a detailed explanation of what chapter 7 bankruptcy actually is.

The Definition Of Chapter 7 Bankruptcy

According to the law and the United States court system, Chapter 7 bankruptcy refers to liquidation of assets that are not legally exempt from liquidation in order to pay off creditors and debtors. Chapter 7 is an option open to individuals, businesses, partnerships and corporations. There is, however, a special clause open to the individual within the framework of this chapter filing that is not available to the other entities. That special clause is known as a "discharge." What a discharge refers to is the freeing of the individual from certain debts.

Filing Chapter 7 Bankruptcy

On a baseline level, those filing for Chapter 7 must provide copies of tax returns; executed contracts and leases that have been expired; financial affairs statements; proof of assets and liabilities; and copies/schedules of current expenditures and income. For individuals there are additional items that must be provided to the court as well. These items include copies of credit counseling reports and repayment plan programs, employer payments and statements of income, interest payments on student loans, etc.

This is, of course, a brief overview and more detailed information is provided by the government and federal courts at the website uscourts. However, trying to figure out Chapter 7 protection by yourself is not advised and it would be far more prudent to seek the advice of a legal professional as well.