Bankruptcy is a very serious thing and you must not enter into the decision to file bankruptcy lightly. Bankruptcy has long-term negative impacts.
You will need to engage the services of a bankruptcy attorney in order to file a petition for bankruptcy.
Three situations are responsible for 80% of all bankruptcy cases filed, and they are largely beyond your control. Un-reimbursed medical expenses are the leading cause of bankruptcy. Job loss is second, followed by divorce. Often, any one of these factors may lead to another. Job loss may cause divorce almost as easily as disability results in unemployment. The progression is similar to a game of rock-paper-scissors with tragic consequences.
A joint study conducted by two major credit card companies found that approximately 5% of all bankruptcy cases involved intentional credit card abuse. Small business owners who fail, victims of crimes, and single mothers account for the majority all remaining cases.
Spend a day in the gallery of a bankruptcy court, if you dare. You will understand why ordinary people must file again. You will also wonder why the 2005 Bankruptcy Code amendments, designed specifically to punish small debtors and make filing more difficult, left only corporate privileges in Chapter 11 untouched.
If you find yourself facing an insurmountable financial situation, you too would probably consider filing bankruptcy. It is not only pointless, but is indefensible to expect a $15 an hour employee to repay $500,000 in medical expenses while disabled. Without regular income, Chapter 13 is not available. Moreover, can this person qualify for Chapter 7?
Qualification to file Chapter 7 depends on several factors. If you received a Chapter 7 discharge in the last eight years, you cannot re-file. If you received a Chapter 13 discharge in the last 6 years and paid less than 70% of all unsecured debts, you cannot re-file. If you had a previous case dismissed with prejudice in the last 180 days, you cannot re-file. If you fail the means test, you cannot re-file.
The means test disqualifies all people from filing Chapter 7 if income exceeds the median income in their state residency over the last six months. A $15 an hour employee is an excessively high earner in a few states, if monthly expenses are low, and cannot file Chapter 7.
If you qualify, Chapter 7 stops the nonsense. It exempts disability income from forfeiture when discharging medical expenses. Child support payments are not dischargeable and remain payable. A disabled debtor must always pay child support, as a percentage, from all income received.
The means test is a fluid measurement. It changes each month in response to actual income and expenditures. You have the power within your grasp to make better choices. These choices determine if you can file Chapter 7 over the next six months. You should start now.
Dave Clark is a lawyer who enjoys bankruptcy strategies questions. This article is for a client who asked, ?Can I file for Chapter 7 a second time?? & does ?Bankruptcy eliminate judgements?? Contact him through this website. Contact him at http://www.bankruptcystrategiesus.com/contact-us.html
Nobody wants to feel like they have no alternative to declaring personal bankruptcy. After all, the list of consequences of such a move is long and the reasons you are in a situation where you might be contemplating it in the first place have probably already given you much cause for stress. However, if you are in a position where you simply have no choice, you may want to just pause for a moment. Even if you have received legal and professional financial advice to back up your belief that you should be declaring personal bankruptcy, there are three reasons why you might just want to hold off on filing.
First of all, you might be expecting an income tax refund shortly. Bear in mind that if you declare chapter 7 now and receive an income tax refund afterwards, this could be seized to pay off creditors. If you receive the refund before declaring personal bankruptcy, the money is yours to deal with whatever essentials you require.
You may also want to delay filing if your debt accumulation is recent. A lawyer may advise that a large amount of debt accumulated and followed by immediate bankruptcy filing could resemble fraud and you may be well advised in that case to wait a while.
If you have recently been laid off or had a significant reduction to your salary, you might want to consider waiting a while before declaring personal bankruptcy. There is logic to this! When you file, your average income for the last 6 months is taken into consideration. And if you wait until a few months after a reduction in your income, you increase chances of securing chapter 7 bankruptcy eligibility. Therefore, holding off even just a few months could make a massive difference to your long term financial prospects.
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Find out more about declaring yourself bankrupt and what are the considerations you should take note of.
Before you make the decision to declare personal bankruptcy, there are a number of things you should familiarize yourself with and take into consideration. For example, ask yourself prior to your decision to declare personal bankruptcy, whether you have absolutely any viable alternatives. If you do not have any other way to resolve your situation, then you should probably go ahead.
However, you should note that in 2005 there were some fairly controversial changes made by Congress to bankruptcy law. These changes were brought about by extensive lobbying by the credit industry. While many people who were eligible before the changes still are, it is now substantially more complicated to declare personal bankruptcy than it was. Essentially, the changes have been designed to really make absolutely certain that anyone filing really has a genuine need and definitely cannot afford to repay debts, before allowing them to declare chapter 7.
Chapter 7 bankruptcy is what most people consider to be ‘bankruptcy’ whereby many debts are simply wiped out without any need for a repayment plan. The changes of 2005, however, mean that before you will be able to declare, your income will be considered. If your income is below the median for the state in which you are filing, you should be granted declaration. However, if your income is higher then you will be required to go through a complex and detailed means test to document your finances in full detail.
If your means test deduces that you are not in full need of chapter 7 bankruptcy, then you can be ordered to file chapter 13 bankruptcy, which essentially works out a repayment plan for you for the outstanding debts you have. And though this will often mean an eradication of outstanding service charges and a lower interest rate, you will still have to pay back outstanding debts.
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Find out more about declaring yourself bankrupt and what are the considerations you should take note of.
When is the right time to file personal bankruptcy? This is a personal question that must be answered on a case by case basis. My general thought is that if a person can bail himself out of debt within a period of six months, he should not file a bankruptcy. The hit on his credit rating will not be worth the fresh start. On the other hand, if the person cannot bail out within six months and the prospects for getting out of debt seem bleak, then filing Chapter 7 bankruptcy is probably the better idea.
Many of my clients worry about their credit after filing bankruptcy. They worry about getting financing for an auto, a house or even an apartment. What they fail to consider is that they cannot get credit now under their current financial situation. They must correct the negative credit information, get out from under their debt and try to re-establish credit in the future.
It usually takes approximately two years to qualify for a decent mortgage after filing Chapter 7 bankruptcy. One can obtain an auto loan within 120 days of filing a bankruptcy. One can lease an apartment immediately upon a showing of an ability to pay the rent along with a modest security deposit. Thus, there is a life after bankruptcy. In fact, as many of my client will attest, a pretty darn good life. A life free from creditor harassment. A life full of opportunity to start anew instead of a life of down and outs. One must make that tough decision to self-evaluate their financial situation. Can the person continue to live under the same financial conditions day after day? Is there a light at the end of the tunnel? Does the person even know that he is in the tunnel?
Another factor to consider is the type of debt that one has. If the debt is exclusively student loans, a bankruptcy will not help. Student loans survive a bankruptcy filing and are generally held to be non-dischargeable. If the debt is for past due maintenance, alimony or support, do not consider a Chapter 7 bankruptcy. The debt will simply not be eliminated. However, if the debt is mostly unsecured debts, such as credit card debt, personal loans, services and utilities, then Chapter 7 bankruptcy may be a good option.
To qualify under the current laws, a person must be either earning less than the median amount for a family of his size or qualify under the strict means test. In essence, if someone has the ability to repay all or a portion of his debts, the court will mandate that it happen. If someone attempts to file a Chapter 7 bankruptcy case, despite his ability to repay, the case will likely be dismissed by the United States’ Trustee.
David M. Siegel is the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy. He is a member of the American Bankruptcy Institute and currently practices bankruptcy law in Chicago and its surrounding suburbs.
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