Should I File Bankruptcy?
Can I Keep My House after Bankruptcy?
Credit Card Debt, Chapter 7, Chapter 11
- Should I File Bankruptcy?
- What Is Filing Bankruptcy?
- When I File Bankruptcy, What Property Can I Keep?
- When I File Bankruptcy, Can I Keep My House?
- What Is Filing Chapter 7 Bankruptcy
- What Is Filing Chapter 13 Bankruptcy
- Should You File Chapter 7 or Chapter 13 Bankruptcy?
- The Advantages of Filing Chapter 13 Bankruptcy
- Filing Bankruptcy Will Not Erase Some Debts
- Some People Cannot File Chapter 7 Bankruptcy
- How Often Can I File Bankruptcy?
Should I File Bankruptcy?
You should file bankruptcy if you can't see another way out of your financial trouble. You should file bankruptcy if are drowning under piles of debt you cannot possibly repay. People file bankruptcy for many reasons. Sometimes it is the only choice for people who have lost their jobs, face large medical bills, or experience a disability, a divorce or identity theft. But most personal bankruptcies, at least 60%, involve substantial medical bills. Misfortune is undeserved and unpredictable. Bad things can happen to good people.
You should file bankruptcy or at least consider bankruptcy, if you face garnishment of your wages, harrassing calls from creditors, repossession of your goods, or the threat of foreclosure on home and property. You may also want to consider bankruptcy if you face lawsuits, illness and disability, the suspension of your license or divorce.
If you file bankruptcy, it will not cancel your home mortgage debt, and you must still make monthly mortgage payments. See below for more.
If you want to file bankruptcy you are not alone. In 2008, there were 1,117,771 bankruptcy filings in the United States courts. For individuals, there are two categories of bankruptcy available. You can choose either Chapter 7 bankruptcy or Chapter 13. 744,424 bankruptcies were Chapter 7 bankruptcies, and 362,762 were Chapter 13. In 2008, over 96% of all bankruptcy filings were non-business filings, and of those, approximately two-thirds were Chapter 7 cases.
What Is Filing Bankruptcy?
What is filing bankruptcy? Filing bankruptcy a legal procedure for people who cannot pay off their debts. It is a legal way to be relieved of debt, or to manage your debt on longer terms. Bankruptcy laws were created by Congress and are administered by federal courts. Bankruptcy is stressful, but sometimes a person has no choice but to file bankruptcy and get a fresh start. In the olden times, people who couldn't pay their debts were put in jail until they could pay. Thankfully, debtors' prison is obsolete.
When I File Bankruptcy, What Property Can I Keep?
When you file bankruptcy you are allowed to keep some personal items, household goods, your home and the equity in your home and other assets. These are called "Exempt Property." The items of exempt property vary from state to state.
The property you can keep includes some equity in your home and car, retirement funds, welfare benefits, disability benefits, and most household goods, furniture, furnishings, clothing, appliances, books, and musical instruments. Luxury goods and luxury cars are not exempt property, and you cannot keep them. But if you file bankruptcy under Chapter 13, you can often keep all your property, because you will follow a court plan to repay most of your debt.
When I File Bankruptcy, Can I Keep My House?
If you file bankruptcy, it will not cancel your home mortgage debt. You can keep your house, if you continue to make the mortgage payments every month. If you fall behind on your mortgage payments, the bank can still foreclose on your home and sell it. But if you are behind on your home mortgage payments, and expect the bank to foreclose, filing bankruptcy will postpone the home foreclosure. Some people, who face home foreclosure, file bankruptcy, so they can live in their home for a short time without paying rent or mortgage payments.
Suppose you file bankruptcy and your house is worth more than you owe on the mortgage. The court may want to sell your house, pay off the mortgage and use the extra money to pay off your other debts. Each state has its own rules for when you can keep a home and its equity.
Suppose you file bankruptcy and your house is worth less than you owe on it. You can keep your home when you file bankruptcy, but you must continue making the mortgage payments to the bank. Some people in a financial crunch feel that this is the time to let the bank foreclose on the house.
What Is Filing Chapter 7 Bankruptcy
Filing Chapter 7 bankruptcy relieves you of most of your debt. The alternative to Chapter 7 is Chapter 13 bankruptcy. If you file Chapter 13 bankruptcy, you will follow a plan to repay most of your debts. When you file personal bankruptcy, you can choose either Chapter 7 or Chapter 13.
If you file Chapter 7 bankruptcy, a trustee will sell most of your assets and distribute the proceeds to your creditors. Then the balance of most of your debt is discharged, and made null and void, and never has to be repaid. You should file Chapter 7 bankruptcy if you have large credit card debts or other unsecured debt you cannot repay. In Chapter 7 bankruptcy, if you have sufficient equity in the home, the bankruptcy trustee may sell your home to repay unsecured creditors. And if you're behind on your mortgage payments, the lender can eventually go ahead with a foreclosure.
What Is Filing Chapter 13 Bankruptcy
When you file Chapter 13 bankruptcy, you file a plan to pay off your own debts over three or five years, and the court approves your plan. Most, but not all of your debts, has to be repaid, depending on what you can afford. Some debts don't have to be repaid, or only repaid partially. When you file Chapter 13 bankruptcy, you are allowed to keep your property. In Chapter 13 bankruptcy, you repay your debt according to the agreed upon plan. At the completion of the repayment plan, the remaining debt is discharged. If you owe back child support and alimony, it must also be repaid.
Should You File Chapter 7 or Chapter 13 Bankruptcy?
Which form of bankruptcy should you choose, Chapter 7 or Chapter 13? Do you have large medical bills, lots of credit card debt, and unsecured loans? Is the total of these debts more than you could repay, even with more time? Then you will benefit most from Chapter 7. Chapter 7 bankruptcy will eliminate your credit card debt, medical debt, the debt you owe on property that was repossessed or foreclosed, and other unsecured debt.
If you think you could repay most of your debts with more time, but if you want to stop the calls of collection agencies, or you want to stop the bank from foreclosing on your home, then Chapter 13 will help you.
When you file either Chapter 7 and Chapter 13, your creditors must stop all collection and foreclosure actions during the process. This is called an "automatic stay."
The Advantages of Filing Chapter 13 Bankruptcy
File Chapter 13 bankruptcy if you want to stop the bank from foreclosing on your house. However, you must catch up on all the mortgage payments you've missed. The bank must accept the plan you submit to make up missed monthly mortgage payments over time. You must show the court that you have enough income to catch up on your debts. But there are other ways besides Chapter 13 bankruptcy to deal with the threat of home foreclosure. You should look into them before you file bankruptcy.
- If you have assets you don't want to give up, use Chapter 13 bankruptycy rather than Chapter 7. Chapter 13 allow you to keep nonexempt property as well as exempt property. You don't have to give up any property because you will follow an approved debt repayment plan.
- If you owe more on some assets than they are worth, Chapter 13 will allow you to pay off only the debt equal to the value of the asset and will discharge the excess debt. For example, if you owe $30,000 on a car loan, but the car is only worth $20,000, Chapter 13 will relieve you of the $10,000 debt. This is called cramming down secured debt. Under the new bankruptcy law, you can cram down car loans only if they are older then 30 months.
Filing Bankruptcy Will Not Erase Some Debts
You should not file bankruptcy for certain debts. Bankruptcy will not erase back child support, alimony payments in arrears, back taxes, and student loans. Sometimes, but only rarely, you can get relief from student loan debt if you can prove that repaying it would be an undue hardship. It is also rarely possible to get back taxes discharged in bankruptcy. And bankruptcy
does not eliminate liens on your property, so a secured creditor can still repossess the property.
Bankruptcy will not cover debts you forget to list in your bankruptcy papers. Bankruptcy will not help debts related to personal injury or death caused by your DUI, traffic fines and criminal restitution. It will not cover debts you incurred through fraud or lying.
Some People Cannot File Chapter 7 Bankruptcy
Who can file Chapter 7 bankruptcy? The new bankruptcy law makes it harder to choose Chapter 7 to clear away your debts. If your monthly income is less than the state median income for a family of your size, you may choose Chapter 7. However, if your monthly income is larger than the state median, you must pass a "means test" in order to choose Chapter 7. If the means test determines that you have enough disposable income to repay some of your debt, you cannot choose Chapter 7, but must rely on Chapter 13 bankruptcy.
How Often Can I File Bankruptcy?
You can file Chapter 7 bankruptcy only once in eight years and Chapter 13 only once in six years.
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