Some Very Basic Bankruptcy Info

March 28, 2011 - 19:46 by bankruptcylawyer

Bankruptcy laws were created to help people that can’t pay their creditors get a clean slate of the debts they owe.  Depending on the bankruptcy chapter filed, this happens either by potentially liquidating the filer’s assets to pay debts, or by entering into a court supervised repayment plan. In some bankruptcy filings, both liquidation and repayment are used simultaneously.

When individuals or married couples file for bankruptcy, it’s referred to as a “personal” or “consumer bankruptcy”. The most common types of personal bankruptcy are Chapter 7, and Chapter 13 (chapters of the United States Bankruptcy Code).  All bankruptcies must be filed in federal court.  While bankruptcy information prevalent all over the Internet, one importnat aspect to note is that bankruptcy a federal matter; no bankruptcy can be filed in any state court.

Chapter 7 Bankruptcy

Chapter 7, also known as “liquidation bankruptcy," is the most common type of personal bankruptcy filed. It’s available to individuals and married couples who file jointly. Chapter 7 eliminates all of the filer’s dischargeable debt, leaving the person or couple debt free in most instances after the bankruptcy is concluded.  Student loans and government fines such as parking tickets are not eliminated in a Chapter 7. 

The court cost, or filing fee, for Chapter 7 is $299. A Chapter 7 can only be filed once every eight years, at it typically takes 4 months or so to run its course.  Completing credit counseling with an agency approved by the United States Trustee is required to successfully file a Chapter 7 bankruptcy and receive a discharge. (For a list of all approved agencies in your state, see the U.S. Trustee's website and select "Credit Counseling and Debtor Education.")

A “Trustee” is appointed by the court in each Chapter 7 to monitor the case and represent the creditors listed within one’s bankruptcy petition. It is the Trustee’s job to gather and sell any “nonexempt property” for repayment to the creditors. “Nonexempt” refers to what assets your state says you can keep through a bankruptcy process. You're able to keep any "exempt" property when filing Chapter 7, such as a certain amount of cash, household goods, etc.             In a majority of Chapter 7s filed nationwide, none of the filer’s assets are liquidated by the Trustee and all dischargeable debt is eliminated.

To successfully file a Chapter 7 bankruptcy, a person or couple must qualify financially. If one earns less than the median income for a family of their size in their state, they can file for Chapter 7 without any further issues. However, if one’s income for their family size is above their state’s median income, their household’s income and expenses must pass the bankruptcy court’s "Means Test" to qualify for Chapter 7.  Those who can’t qualify for Chapter 7 must file a Chapter 13 bankruptcy.

Chapter  13 Bankruptcy

Chapter 13 is also known the “repayment plan” or “wage earner’s bankruptcy”. In a Chapter 13 one files a plan showing the bankruptcy court how they’ll repay their debts over a five year (60 month) period. A monthly consolidated payment is made by the filer to the Bankruptcy Trustee who then disperses that payment out to the filer’s creditors. Because the filer’s plan requires regular monthly or even biweekly payments, Chapter 13 is usually only appropriate for those who have a stable source of monthly income.

Filing a Chapter 13 stops all collection activity against the filer and it is often preferred by people who have a valuable asset, such as a home in foreclosure that they want to keep. The Chapter 13 plan allows the filer to catch up on overdue payments, such as mortgage arrears. It is also often filed by individuals and married couples who want to keep an asset such a house that may be liquidated in a Chapter 7, or by those who have filed a Chapter 7 in the last eight years.  It can also be filed to stop IRS collection of unpaid taxes.  Chapter 13 is also usually the only option under the bankruptcy code for those prospective Chapter 7 filers who don’t pass the “Means Test".

The filing fee for Chapter 13 is $274. There is technically no legal limit to the amount of times one can file Chapter 13 within a given timeframe, although most courts discourage repetitive filers. Completing credit counseling with an agency approved by the United States Trustee is also required to successfully file a Chapter 13 bankruptcy and receive a discharge. (For a list of all approved agencies in your state, see the U.S. Trustee's website and select "Credit Counseling and Debtor Education.")

Chapter 13s are typically much more complex legal proceedings than Chapter 7s and should never be filed without the assistance of an attorney.

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How Much Does a Bankruptcy Attorney Cost?

March 6, 2011 - 19:10 by bankruptcylawyer

The role of an attorney in a Chapter 13 bankruptcy is significantly more involved than his role played in a Chapter 7 bankruptcy.  The legal analysis required, amount of time spent in court, length of representation, and complexity are all greater than the responsibilities of a Chapter 7 bankruptcy attorney.  Because of this, a Chapter 13 bankruptcy is typically more expensive than a Chapter 7 bankruptcy.  The fees are also structured differently.

Cost of a Chapter 13 Bankruptcy Attorney

The cost of a Chapter 13 bankruptcy attorney varies geographically, but the typical fee is between $2200 and $3200 for the 3-5 years that the attorney will be representing you.  The good news is that the majority of bankruptcy attorneys do not require the full fee before filing your case, and include the majority of their fees in the bankruptcy repayment plan.  The attorney then gets paid by the bankruptcy trustee after your case is filed, similar to your other creditors.  Some attorneys will only require the $274 federal filing fee to file the case and allow all of their fees to be paid through the plan.  In this case, the Chapter 13 bankruptcy attorney is taking a risk by doing the majority of the work before getting paid and has a strong incentive to get your Chapter 13 bankruptcy getting confirmed and eventually discharged.

Cost of a Chapter 7 Bankruptcy Attorney

For comparison, lets take a look at Chapter 7 bankruptcy fees and how they are structured.  Less legal work and attorney time are required in a Chapter 7 bankruptcy, so the fees are less, but are usually required to be paid-in-full before the case is filed.  Otherwise, the fees owed to the attorney could just be included in the bankruptcy and the attorney would have no way of collecting his fees.  The cost of a Chapter 7 bankruptcy attorney varies geographically, but typically are between $800 and $2500.  The fee is based on the estimated amount of time the bankruptcy attorney anticipates spending on the case.  Payment plans vary, but many firms allow you to retain their services for as little as $100.   This won’t get your case filed, but can give you some immediate relief by allowing you to refer any collection calls to your bankruptcy lawyers office.   After retaining a Chapter 7 bankruptcy attorney you can stop paying any creditors that you plan on including in your bankruptcy.   Hopefully, this will free up some additional funds so you can enter into a payment plan with the bankruptcy attorney on the fee balance remaining.  Payment plans as long as 4-6 months are not unusual.  After the attorney fees and $299 federal filing fee are paid, your attorney will file your bankruptcy in Federal Bankruptcy Court.  

- BKHQ Bankruptcy Lawyer

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Medical Bankruptcy

February 4, 2011 - 04:09 by bankruptcylawyer

Medical Bankruptcy

Medical bankruptcy is a general term referring to the cause of why somebody had to file bankruptcy.  Medical bankruptcy is not a legal term and you technically can’t file a “medical bankruptcy."  If you have a lot of medical bills and need to file bankruptcy, you would file either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy, and you would include all of your medical bills along with your other unsecured debts.  They would be discharged at the conclusion of your bankruptcy, just like an unsecured credit card or loan.  You are required to list all of your creditors, including medical bills, when you file bankruptcy.  

Filing for bankruptcy due to medical conditions is one of the most common reasons for filing bankruptcy.  In fact, according to an article at CNN about a Harvard Medical School study, over 60% of all medical bankruptcy filings are linked to medical bills, with seniors and single mothers being at the highest risk.

Medical bills can easily be thousands of dollars, and without insurance, many incomes simply aren’t enough to ever repay the debt.  Many individuals who do have health insurance also need to seek out bankruptcy protection because a percentage of the total bill is often the responsibility of the patient.  In fact, studies have shown that nearly 80% of all bankruptcy filers had health insurance. 

Can my doctor refuse treatment if I file medical bankruptcy?  Sometimes doctors will no longer continuing treating you if you have filed bankruptcy on a debt owed to them.  However, under federal law, a hospital that receives federal funding cannot refuse treatment based on non-payment of a past due bill.  If this is a concern, I would recommend contacting your doctor and explaining that you need to file bankruptcy and that your bankruptcy attorney has advised you that you must include all of your creditors.  Then simply ask what their policy is.  At a minimum, the doctor will typically come to some sort of a payment arrangement that is acceptable to you both.

Nobody sets out in life planning on filing bankruptcy, but a major injury or long-term injury can easily cost $30,000 or more in out of pocket expenses.  For the majority of us that are living paycheck to paycheck, repaying a debt like this just isn’t a reality and bankruptcy might be the best answer.

Consult with a local bankruptcy attorney to determine if you need to file medical bankruptcy. 

- BKHQ Bankruptcy Lawyer

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Cheap Bankruptcy

January 18, 2011 - 05:39 by bankruptcylawyer

Many people begin their search for bankruptcy information looking for an inexpensive way to file a cheap bankruptcy.  They ask “How can I afford to pay a bankruptcy attorney when I’m already overwhelmed with bills?”  Read on to find out the cheapest ways to file bankruptcy and then the smart way to file bankruptcy. 

The cheapest way to file bankruptcy is to file it by your self, called a Pro Se filing.  You can generally get the required forms at your local bankruptcy court and many courts offer free legal assistance to pro se filers.  It is also possible to file a motion in court to request that the filing fee either be waived or paid in installments if you qualify.  Unfortunately, the cheapest way to file bankruptcy isn’t always the best way to file bankruptcy.  Many pro se filers find themselves in a mess when faced with the intricacies of the bankruptcy code and it’s simply not a risk worth taking. 

The next cheapest way to file bankruptcy would be to hire a bankruptcy petition preparer’s services.    A non-attorney will gather all of your documents and prepare the bankruptcy petition for you.  For simple cases for individuals with limited assets or income, this is a good low cost alternative to hiring a bankruptcy attorney, but you won’t have the confidence of knowing a qualified bankruptcy attorney has reviewed your case.  The problem is that you might think you have a simple case and realize that’s not the case when you run into issues with the trustee. 

Most people would prefer to have a bankruptcy attorney representing them, but think they can’t afford an attorney.  Bankruptcy attorneys often have very competitive fees and can be retained for as little as $100.  After you have decided to file bankruptcy, its likely your attorney will advise you to stop paying all the creditors that will be included in the bankruptcy and set you up on a payment plan based on your budget.  Set up several consultations with local lawyers and compare their fees.  Bankruptcy attorney fees aren’t set in stone either, so negotiate and find the cheapest bankruptcy attorney that you feel comfortable is going to fulfill your legal needs. 

A cheap bankruptcy can quickly turn into a costly bankruptcy so make sure that you find an bankruptcy attorney that is going to give your case enough individual attention.  The cheapest bankruptcy lawyers are often inexperienced attorneys starting out or large “bankruptcy mills” where you can expect to be one of many clients and have limited interaction with your lawyer. 

- BKHQ Bankruptcy Lawyer

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Declare Bankruptcy

December 7, 2010 - 16:50 by bankruptcylawyer

Filing Bankruptcy

The process of filing bankruptcy can be drastically simplified by hiring a local, qualified bankruptcy lawyer. There are many rules related to the federal bankruptcy codethat make trying to file bankruptcy yourself extremely difficult. For example, each state has its own long list of bankruptcy exemptions, and the courtroom meetings can sometimes be difficult without the help of qualified legal bankruptcy counsel.

Declaring Bankruptcy

After you begin the process of declaring bankruptcy, your creditors are legally required to stop calling you. This is one of the largest benefits of filing bankruptcy. It offers you the ability to potentially repay your debts in an affordable manner, relieving much of the stress associated with falling behind.

File Bankruptcy

How long does it take to file bankruptcy? The process can take months. A qualified attorney can help you navigate the tiresome legal process. While it is possible to file bankruptcy yourself, some of the intricacies of the federal bankruptcy code and the local exemptions make hiring an attorney worth it. The stress relief can be worth it in and of itself.

Claiming Bankruptcy

There is technically no difference between "claiming bankruptcy" and "declaring bankruptcy." Both phrases refer to the process of reducing or removing debts you may owe to creditors. The sources of the debt can come from many different areas of life such as medical bills, excess credit card debt or even store credit cards. Local bankruptcy lawyers can clarify which of these bills can be restructured and which can be completely forgiven -- relieving quite a bit of stress.

File Bankruptcy Online

Consumers cannot really "file bankruptcy online," but it is possible to be connected to a local attorney through a website such as Bankruptcy HQ. The website can connect you to a local bankruptcy lawyer who will provide a no-cost consultation regarding your financial situation. It's one of the quickest way to determine if bankruptcy may be a viable option for you.

File Bankruptcy Yourself

While bankruptcy is not a joking matter, there is a scene from the NBC hit show "The Office" where the infamous office manager Michael Scott thinks he can file bankruptcy yourself by simply yelling "I declare bankruptcy!" We'd be fools not share this interesting remix of Steve Carrell's portrayal of the famed Michael Scott -- quite possibly the most clueless boss in history.

Michael quickly learns the truth that his enthusiastic "declaring" of bankruptcy doesn't quite work the way he thinks it does. Michael would be best served by consulting with a bankruptcy attorney to help him through file for Chapter 7 or Chapter 13 bankruptcy protection. But there is one thing worth noting about Michael's actions -- he is cutting up his credit cards, which in terms of reducing his excess spending, will likely do the trick. At least he's got one thing right.

The Remix

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One of the many invaluable benefits of filing a Chapter 13 bankruptcy is what’s referred to commonly as the “Cosigner Stay”. From my experience, not many of my Chapter 13 clients realize when their case is filed that the cosigners on many of their debts are also protected from creditor collection

Chapter 13 federal bankruptcy law protects individual cosignors on consumer debts where applicable.  So, in the common situation where you have a cosigner on your mortgage, car payment, credit card, and personal loans – the filing of your Chapter 13 bankruptcy often prevents and stops any collection activity by these creditors against your cosigner.   The protection begins as soon as the case is filed, and lasts as long as the case is open and running.  Cosigner protection will stop however if the bankruptcy court grants relief from the stay. 

Two basic requirements must be met for the Cosigner Stay to apply:
 
First, the “stay”, or protection created by the filing of the Chapter 13 bankruptcy, does not apply to all types of debt.  The debt must be what’s called and classified as a “consumer” debt. In all instances, car payments, credit cards, and personal loans fall into this definition and the cosigners on these debts will always be protected. Tax debts and debts for professional services, such as attorney fees are not considered consumer debts and therefore won’t receive Chapter 13 cosigner protection. Depending on where you live (more specifically, what jurisdiction your Chapter 13 is filed in) will determine whether your mortgage debt is considered a “consumer” debt and whether the Cosigner Stay applies.

The second requirement that must be met is that the cosigner must be an “individual”. This simply means businesses or business entities do not qualify for cosigner protection. 

Keep in mind that cosigner protection stops and ends if the bankruptcy court, in favor of the creditor, grants relief from the stay, or the Chapter 13 is closed, dismissed, or converted to another bankruptcy chapter.  The Cosigner Stay applies only to Chapter 13 bankruptcies and never to Chapter 7 or Chapter 11 bankruptcies. 

Click here for more information on the Cosigner Stay or to speak with an experienced bankruptcy attorney.

 

Attorney Andrew Partridge
BankruptcyHQ.com

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850,912 Bankruptcies and Counting…

April 17, 2008 - 22:17 by rwaple

850,912 – That’s the number of personal and business bankruptcy filings in 2007. When put in context of a nation of 300 million people operating thousands of businesses, that might not seem like a large number. But, when measured versus 2006, that is a 38% increase. I find this very interesting because wasn’t it not too long ago that the Feds enacted some bankruptcy reform legislation which was intended to stem the tidal wave of mainly personal bankruptcy filings in the USA?

We’ve heard this story before from the Federal government regarding the alarming rise in consumer bankruptcy filings and the need to legislate a way out of it. Late in 2005 they did legislate their way out of it with the . In all fairness the bankruptcy filing rate did decline following this legislation from previous years, but primarily due to the rush in filing the 2005 law change incited. However, probably just about the time the Feds were conjuring up this new bankruptcy reform legislation, did you notice how hot the housing market was in the USA? It was smoking hot around that time. Rates were low, inventories were high, sellers were selling and the buyer’s buying. But the Feds were making it more difficult for the American consumer to file bankruptcy. I’ve read that some in the Congress today are considering pushing more bankruptcy reform legislation to help with the current sub-prime crisis. I find that very interesting.

The housing market is not so hot these days. Bankruptcy filing rates are predicted to rise by staggering rates the next year or so. Foreclosures are at all time highs. Ordinary folks cannot keep up with their mortgage payments and even worse, many properties are losing value. People’s equity in their homes is less than what is owed on their loans these days. That is not a good situation to be in. Those consumers who were duped into loans too large for their budget have every right to be livid with both the greed driven lenders who perpetrated these shams, and the government for being too lax on the regulations. People, many people, have and are going to continue to lose their homes because of this crisis. The bottom line is, the economic situation is grim and bankruptcy is an option for many people to help with tough times. Before the Feds make it more difficult for you to file, consider speaking with an attorney today.

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Bankruptcy and Income Tax Refunds

January 29, 2008 - 19:13 by rwaple

Tax refunds are generally considered to be assets and can be taken by the bankruptcy trustee and distributed to your creditors. However, in many States it is possible to exempt all or a portion of the refund and protect it from your creditors. The Earned Income Credit portion of your refund can also be completely exempted in some States.

Another strategy often to protect your income tax refund is to “spend-down” your refund on necessities prior to the filing of the bankruptcy. Since the money is spent, it is no longer considered an asset, and the purchase of necessities generally does not create any new assets. But be careful, some states take a pro-rated portion of your income tax refund as a matter of practice and you'd find yourself owing the trustee even if you spent down your refund on necessities.

In Chapter 13 bankruptcies, some jurisdictions require that you turn over a portion of your income tax refund each year. In other jurisdictions, you are allowed to keep your income tax refund each year.

As you can see, the laws in each state do vary significantly in this area of bankruptcy law, so be sure to consult with a bankruptcy attorney familiar with the local laws before receiving your refund. Bankruptcy Laws in Your State

Many bankruptcy attorneys often see a large rush in filings during the 1st Quarter, when people receive their tax refunds and are able to pay their bankruptcy attorneys to get their cases filed. This is a legitimate way to spend-down the refund and a good way to pay for a bankruptcy filing. I expect that the anticipated economic aid package that will give most working Americans between $600 and $1200 will also cause a boost in bankruptcy filings.

- Richard J. Waple
http://www.bankruptcyhq.com 

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Good Debt vs. Bad Debt: The Pizza vs. Your Mortgage

December 4, 2007 - 20:15 by rwaple

Admit it, you’ve all been there.  It’s midnight, you spent all your cash on the $2 special at the pub, and you and your crew are starving.  “No problem,” you declare, “I got it on my card.”  Problem solved, you’re a hero, end of story, right?  Right, if you understand the responsibilities which accompany carrying debt.  There’s good debt and there’s bad debt.  Good debt gets paid on every month and is very clean.  Credit card debt, when handled responsibly, provides you, the owner of that debt, a convenient line of credit which was managed proactively, affords you some additional freedom.

It’s important to understand the different types of debt one can carry.  There are large debts, like mortgages and car loans, which are often budgeted for.  They are substantial payments which a logical person wanting to keep a roof over their head and wheels under their feet would plan for.  They are fixed costs.  For most people, only by going into debt can one afford to acquire them.  They are risky if you over extend your financial viability on your purchase or make a bad decision in regards to negotiating your loan, but inherently they are good debt.  Prior to the current sub-prime debacle going on in the US mortgage industry, one needed relatively minimal established credit history to get a loan to buy a house.  Those who responsibly planned for such loans were afforded good debt.  Paying your mortgage every month is a great way to carry good debt and establish a firm credit history.  Regardless of the type of good debt you carry, if you continue to be in good standing with that debt, it’s generally considered a positive move.

Bad debt though is constantly lurking around the corner!  Don’t think it’s so easy to be in debt and be OK.  Credit cards are really great, and really bad.  For example, my story above about the late night pizza and the ability to follow through on something like that is a real life example.  Do that a few times a month.  Next thing you know you don’t have any cash at the pub, and you end up buying rounds of drinks for your mates.  You use your credit cards as cash, and figure one of two things.  You say to yourself, “I’ll pay it all off next month.”  Or, “This is great; I get all this stuff for $50 a month!”  If you’re the first person, you pay off all your credit card balances every month, with all the cash you would have spent in lieu of using that credit card.  The card is a tool in making your life convenient.  You only qualify as that person though if the balance on your cards is $0.00 most every month.  If you’re the second person, who is as naïve as to think that anything in this world is free, you’re cruising for some bad debt bruisn’.  Balances carried more than 30 days on average carry an interest rate.  The average consumer credit card interest rate is somewhere around 14.5%.  Add in a late payment, and that rate goes through the roof, oftentimes more than doubling.  The late payment fee is a killer too.  Minimum payments don’t work.  At some point, the interest compounded each month is more than the minimum payment you’ve been making and next thing you know; you’re looking into filing bankruptcy to help deal with the debt.  That’s bad debt.

The moral of the story is this.  Work hard to establish good debt and stay current on it!  Be very wary of the lures of credit card utopia and bliss unless you are sure you can pay it off in full all of the time.  Debt doesn’t have to be a bad four letter word!

-DPearlman

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There’s been a lot of talk lately about how bankruptcy filings are increasing again, after a short period of stagnation due to more stringent bankruptcy filing laws.  I’m sure there are a myriad of reasons for this happening.  I’ve heard some pundits call it the perfect storm!  I can’t help thinking to myself though, that one of the large causes of the current crisis in the US mortgage industry is the mortgage lenders themselves.  I chuckle to myself when I think of the hole large financial institutions find themselves in now, and the explanations they come up with trying to explain what happened.  I don’t have much sympathy for executives who make risky decisions, live high on the hog for a few years, and then suddenly can’t understand why they are being asked to resign their position from the board.  The fact of the matter is that these decisions by predatory lenders to engage eager buyers in risky mortgages, to make a buck and accelerate growth numbers have led to a record number of foreclosures the past few months.  These foreclosures are more than numbers for the CNBC anchor’s and Bloomberg experts to chat about 24/7; these foreclosures are real people’s lives being turned upside down because mortgage lenders went nuts with greed for a few years.  A few years ago when the housing market was booming with low interest rates and other various sub-prime deals du jour, all you could see on T.V. was stories about how it was the best time ever to buy a new house, or flip that condo you just bought.  The onslaught of infomercials hocking videotapes teaching you how to scour the classifieds and buy cheap houses, then go on to sell them for a quick profit was intense.  There were dozens of them.  And I guess these schemes worked for a few years too.  Now they’re not working and people are feeling the pain.  The pain translates into higher bankruptcy filings to deal with the mounting crisis.  Talk to an attorney if foreclosure has pushed you to the brink, they’ll be able to guide you in the right direction, more so than you can say about you lenders.

-DPearlman 

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