Differences in Bankruptcy Chapters

by Alan Lester van der Reinje

No matter how much we prepare for disasters it never seems to be quite enough. Most people live from paycheck to paycheck and only make the minimum payments on their credit cards or loans. When disaster strikes, such as unforeseen unemployment, many find themselves accumulating debt they cannot pay off. The option of choosing a bankruptcy chapter becomes a pressing decision and one that can change lives.

There is a distinctive difference in bankruptcy chapter 7, 11, and 13. Bankruptcy laws have also changed within recent years so it is especially important to know which changes in law are the most applicable to the given situation. A bankruptcy chapter, regardless of which one, is under the regulation of The United States Bankruptcy Courts and is governed by federal laws determining the rules and guidelines for each bankruptcy chapter.

Chapter 7 bankruptcy is where the individual is unable to pay anything towards his or her creditors. The judge and attorney will compile a list of all debts owed and look at whether or not the individual will be able to pay them back the money that is owed. If the person is not fiscally able to repay the debts then the assets not covered under exemption will be sold or returned and any extra monies paid to the creditors.

Chapter 11 bankruptcy and chapter 13 bankruptcy are where the debtor and his or her attorney makes arrangements through the court system to pay back the debts in monthly installments that will not overburden the individual. There are some assets, such as retirement, that cannot be touched by creditors so this provides some measure of relief for those nearing retirement age who do not want their 401k or retirement saving plans wiped out.

Bankruptcy chapter laws also prohibit certain types of behavior from creditors and collection agencies. These vary slightly from state to state but are generally a list of rules and regulations that prevent collectors from harassing individuals. One provision in bankruptcy chapter laws prevents creditors, after bankruptcy proceedings have been initiated, to contact the individual again directly regarding the debt.

Other bankruptcy chapter laws might cover a debt collector making harassing or threatening statements to an individual, his or her friends and family. There are also laws protecting a person’s place of work from receiving phone calls if it jeopardizes their job.

All of the bankruptcy chapters leave a mark on credit reports. It is one decision that definitely should not be taken lightly. Jobs, cars, bank accounts and even insurance premiums are all affected by bankruptcy. It will not be a permanent mark and there is a chance for a new life if valuable lessons are learned. Overspending must be curtailed and responsibility taken for bills, otherwise the vicious cycle can begin again.

7 Steps to a Fresh Start after Bankruptcy


Bankruptcy is one option to consider in order giving yourself a “fresh start,” when you have more debts than you have assets. There are in fact many types of bankruptcy provided under the law but the most common is Chapter 7 bankruptcy, which is also known as liquidation.

When filing under Chapter 7 bankruptcy, all your assets, excluding those that are exempt under the law of your state, are dissolved and liquidated. Generally, the person tasked to do this is the court-appointed official, called a trustee.

All in all, the vital task of the trustee is selling your properties and using the proceeds to pay your creditors. After doing such, the court will then cancel many of your remaining debts, thus affording you a “fresh start” to life.

Here is a step-by-step guide to filing a bankruptcy under Chapter 7 bankruptcy:

Step 1: [Read more...]

New Bankruptcy Law Makes it Harder to Stop Foreclosure

On October 17, 2005 President Bush’s sweeping bankruptcy reform law goes into effect forever changing the rules of debt collection in this natiion. Consumer advocates and the public appear to be completely unaware of the total and complete victory of the creditors under the new legislation. This article opens the door to the Trogan Horse so that consumers can prepare themselves for the worse.

The most important aspect of the bankruptcy code was the “automatic stay” provision. This allowed consumers to file for bankruptcy at anytime during the creditor’s collection process putting an immediate stop to all contact and collection activities from the creditor. The new law requires that a debtor receive credit counseling from an approved non-profit credit counseling agency for 180 days prior to filing Chapter 7 or Chapter 13 bankruptcy.

While this may sound benevolent, a much closer look at the practical effect of this provision reveals the crafty peeling of the debtor’s rights. The 180 day requirement is to provide the credit counseling agency the opportunity to work out payment plans with creditors. However, during this same period of time the creditor is not restrained from collection efforts. For example, Margaret is a homeowner in Jacksonville, Florida and is six months behind on her mortgage. As a rule, credit counseling agencies only work with credit card companies and have little or no training with dealing with mortgage companies.

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What Homeowners Should Know to Stop Foreclosure- Speaking Your Lender’s Language

Financial literacy is the means of empowering consumers to make informed financial decisions through exposure to accurate and timely information. In no other area is the void of accurate information more evident that in the area of foreclosure.

The national foreclosure rate is at the highest level since the Great Depression. Families fall behind on the mortgage payments because of illness, job layoffs, business failure, divorce and marital problems, and bad money management decisions. Foreclosure and the loss of the home is the usual result. Foreclosure is financially and psychologically devastating to the stability of the household.

This article provides information to expose homeowners to the financial principles of loss mitigation. Loss mitigation is essential to asset protection because it provides the borrower with information necessary to make good decisions. Learning the programs or “tools” available as an alternative to foreclosure is the key to preserving home ownership.

For example, If I told you that the mortgage servicing industry reports average loss of $20,000 to $30,000 per foreclosure, then you may be inclined to believe that foreclosure is not an efficient and cost effective means of collections for the lender. According to Vic Draper, President of Universal Default Services, “33% of all mortgage defaults that go to REO never made contact with the borrower!” The lender does not want your home and will work out a financial alternative if you speak their language.

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Why Bankruptcy May Not Be Your Best Option

You are in a position of needing to consider bankruptcy based on your current financial situation. Hopefully you have learned some lessons along the way in getting to this point, like about how do strike deals, when to get statements in writing from partners or customers, how to plan more carefully for the needs of your company so that you do not grow too fast. Whatever the reason, you got to this point and are now considering filing for bankruptcy.

You need to be fully aware that filing bankruptcy should be your absolute LAST course of action, and only taken after you have thoroughly exhausted all other alternatives. There are probably more excellent reasons to NOT file bankruptcy than there are good ones. While bankruptcy may be your only viable option, you need to ensure that you have exhausted all other viable options first.

Be aware that filing bankruptcy is going to be a huge red flag on your credit report for the next 7 to 10 years. There is nothing you can do about it, and that red flag is going to cause you to be turned down for loans and financing, or if you do get approved, the interest rate that the lender will quote you because he is “taking a chance” on you is going to be astronomically high. That means that it is going to take you longer and will also cost you more to get back on your feet, so consider your options carefully.

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Chapter 13 Bankruptcy – Stop Mortgage Foreclosure

Yes, you can save your home!

Using the chapter 13 can strategically help you cure your mortgage default, protect your equity and eliminate your other debts to help you right the ship.

Several years ago, we saw a boom in mortgage lenders offering low adjustable rate mortgages (ARMS) 100% to 110% mortgage loans, and no money down mortgages.

Today, we have seen these ARMS increase from 5% to 8%, 9% or more depending on the lender. Homeowners are being bombarded with a mortgage payment that is almost double than it had been previously before the interest rates have started to rise.

What is a homeowner to do? With the soft real estate market, homes have not appreciated in value, or not enough to allow homeowners to refinance and use some of their equity to help with the higher rates. [Read more...]

Considerations Before Filing Bankruptcy

Financial difficulties can occur in anyone’s life. When you think financial difficulties are more than you can handle, don’t let bankruptcy become your first thought. Bankruptcy should be considered as a last resort, not just the first thing that pops into your head when the going gets tough. Instead, consider these options.

One of the first steps in avoiding bankruptcy is to make budget. If you have laid out a plan for your incoming money, you will be less likely to spend it on unnecessary items. You will therefore make the money last longer and work harder for you. Setting up a budget is crucial to help regain control over your finances. If you already have a budget setup, review it ruthlessly and start cutting wherever and whatever you can so you can return to profitability.

Another option to bankruptcy is to consider exactly what your debt is. Perhaps you have purchased a home that is more than you can afford or maybe you have too much vehicle debt. If either of these is true, you may need to consider downsizing. If you are paying out more than 40% of your income on a house loan, it is definitely time to consider selling your house and buying a less expensive one. The same applies to vehicles — maybe this is not the time to be making payments on a Lexus when payments or paying off a late-model Toyota or Chevy makes more financial sense to keep more money in your pocket and your creditor’s pockets each month.

Not only do you need to consider what type of debt you have, you also need to consider what items you can sell to increase your savings. Often, selling items you no longer use can help with the month to month struggles you might be experiencing. Maybe you have a lot of old books or CD’s laying around that you no longer use. Selling off a few unwanted items can help free you from some financial burdens.

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Can a Personal Bankruptcy Prevent You From Getting a Job?


Personal bankruptcy? Kiss your dream job good bye…

For quite some time, it’s been standard for financial, gaming and government employees to have their credit reports checked by their employers. After all, we don’t want criminals working in the government (insert your favorite joke here).

But now, the “Credit Police” are infiltrating other industries as well.

And what really irks me is, they don’t have the guts to just come out and say “We don’t want people with bad credit working for us.”

No, instead they’re using September 11th (911) and an increase in workplace violence as an excuse to check our credit reports. That’s pretty low.

Recently, pre-employment screening agencies have noticed a surge in requests for full background checks, which can investigate credit reports as well as criminal records, driving records, and employment and education history.

Alert Staffing reports that about 50 to 70 percent of all companies currently review credit reports, which not only reveal bankruptcies but also liens, judgments, and loan and credit card payment history.

Many companies simply believe that trustworthiness and creditworthiness go hand in hand. Personally, I think that’s a crock! I know lots of rich people with high credit scores, who I wouldn’t trust to watch Sparky, my pet goldfish, not to mention my money. On the other hand, I can list hundreds of people who’ve filed bankruptcy and have poor credit scores, who I’d trust my life with. However, most business owners believe how we handle things in our personal lives is a sign of how we would manage a company’s assets.

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Paying Credit Cards More Important than Tithing

The United States Bankruptcy Court for the Northern District of New York has recently held that those going though Chapter 13 bankruptcy must pay off their credit cards and other creditors before they tithe to their church or make other charitable donations.

This wasn’t the case before the new bankuptcy law went into effect last year. It’s a sad state of affairs for religious americans who are forced to file bankruptcy. Hopefully, congress will act to change this unfortunate aspect of the law. But I wouldn’t count on it happening anytime soon.

To read the original article go to: http://biz.yahoo.com/prnews/060907/dcth042.html?.v=70

Leon Rountree III

Consumer Bankruptcy Attorney


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Health, Health Care Insurance and Bankruptcy

Imagine for a moment that your health has taken a turn for the worse. You need extensive medical attention and expensive treatments. Would you be prepared to account for these medical costs? Or would you or a family member ultimately have to deal with this financial burden?

Surely, you would not want to suffer the consequences of paying big medical bills on your own. This is why health insurance is so important. A Harvard study conducted in 2001 found that medical bills caused half of all bankruptcies. Therefore, you should make sure that you have some form of medical insurance. You should also make sure that your money is well-spent on insurance that meets your needs.

Insurance Provided by Employer

You should feel lucky if you are in the minority of people who receive health insurance through your employer. According to bankrate.com, company health insurance is actually part of a group insurance plan. Your employer pays for most of your insurance and also pays for your insurance with portions of your paychecks. Everyone in your group plan pays the same rate. The premiums paid by healthy members go towards paying the bills of sick members. Bankrate.com recommends that you study up on your employee benefits package to make sure that the insurance plan you choose provides you with the services and options you will need. If you are young and/or relatively healthy, you may want to consider choosing to pay for your company’s cheapest health plan.

Bankrate.com also recommends that you review your insurance plan periodically. You may be paying more money for services you no longer need. For example, if you have children that have graduated from college or are no longer on your insurance plan, you should change your insurance plan accordingly. Additionally, if you have lost weight or quit smoking, you could qualify for a cheaper insurance plan.

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Taxes and Bankruptcy: The Nuts and Bolts

The filing and subsequent discharge of either a Chapter 7 or a Chapter 13 bankruptcy may eliminate some types of personal income tax liability. There are, however, certain restrictions which must be met in order to completely eliminate personal income tax liability through bankruptcy.

Some personal income taxes may be eliminated through the filing and subsequent discharge of a Chapter 7 bankruptcy. The following requirements must be met for the personal income tax liability to be eliminated in a Chapter 7 bankruptcy:

• The tax return must have been filed on time

• The filing should not be fraudulent

• The tax return must have been filed over three years ago as of the bankruptcy filing date (e.g. IRS debts for the last three years generally, would not be dischargeable)

• Alternatively, in some cases, if the tax return was filed late, was not fraudulent and was filed over two years ago as of the date of the bankruptcy filing, the tax debt may be deemed dischargeable. For example, if you filed your 1986 tax returns in 1990, and in 1994 filed a Chapter 7 Bankruptcy, this tax debt would be dischargeable as long as it was not related to a fraudulent filing and the tax debt was assessed by the IRS over 240 days before the bankruptcy filing.
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Your 2006 New Year’s Resolution – Save More Money!

Are you planning on establishing a “New Year’s Resolution” to start
saving more money in 2006? Like any resolution, unless some ACTION
is taken on your part, nothing will ever change.

For example, if your New Year’s resolution is to lose weight, you WILL
have to change a few eating habits and/or exercise regularly. If your
goal is to quit smoking, then you WILL need to make an honest effort
to stop smoking.

Key To Your Success
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The key to making your resolution become a reality is to set a goal. In
other words, what do you want the ‘extra’ money for? Are you saving
for a new car stereo system? What about a family trip to Las Vegas?

Point is, when you have something to strive for, saving money becomes
ten times easier. This goal is something you really want, so you will
do what is necessary to be successful.

Once you have a tangible goal to work toward, establish an amount
you will need to reach. Or, how much is your ‘goal’ going to cost?

For example . . .
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