If you need to file for protection under the bankruptcy laws of chapter 7 or chapter 13 in order to attain debt relief, there are a number of aspects you should know about bankruptcy laws. These laws are designed to permit debtors who can’t pay their debts, to discharge or restructure these debts while still allowing creditors to regain as much of the monies owed as possible. Because the situation of the individual or legal entity, such as a company, seeking protection under the bankruptcy laws can vary widely, there are different kinds that cover specific situations. These laws are written in the different chapters of the United States Bankruptcy Code. In general, the chapter 7 apply rules to personal or corporate liquidations, while those of chapter 13 apply to personal reorganization bankruptcies. For large corporations that need to restructure huge amounts of debts and assets, the bankruptcy laws of chapter 11 generally apply.
Before you file for protection under the bankruptcy laws, you will have to know which chapter you must file. The choice is not yours; instead, you must take a means test that determines which bankruptcy laws apply to your situation. The means test measures your income against that of the state median and if it is below it, you must file chapter 7, or liquidation bankruptcy. However, if your income is above the state median, you must file for protection under the bankruptcy laws of chapter 13. It is important to realize that the state you file bankruptcy in can have a huge impact on which bankruptcy laws apply to your situation. There is another aspect of bankruptcy law that is defined by your location: exemptions.
A number of U.S. states currently struggling with large budget deficits refused the offer of federal help by means of legislation that would allow them to declare bankruptcy, Reuters reported this week.
The bill would eliminate current laws requiring states (except Vermont), which are considered sovereign entities, to finish every fiscal year with balanced sheets. They would therefore be able to file for bankruptcy and get help and protection from the government.
The legislation may be introduced in Congress in about a month, according to former House speaker Newt Gingrich, an active supporter and representative of the Republican party.
Among the states are California, Illinois, and New York, who issued a large portion of the municipal bonds currently valued at $2.8 trillion. According to California State Treasurer Bill Lockyer, bankruptcy would hinder the states from recovering from the recession through infrastructure investments.
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The use of case management software by law firms comes across as no surprise these days. A basic case management system should be equipped enough to provide the following features. These include:
- A calendar system to make a note of the important dates
- A reporting tool and this can be in the form of a template
- A case notes storage or attendance tool
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Bankruptcy filing isn’t the most comfortable of situations, but often, it’s really the best recourse. That being said, it’s still important to know the pros and cons of bankruptcy filing, and make sure you’re ready to deal with the consequences afterwards. To help you decide whether filing for bankruptcy is right for you, here’s a rundown of its good and bad sides—and how you can control them.
Advantages
1) Protection from creditors. The automatic stay goes into effect immediately after the bankruptcy filing. This means that creditors cannot contact you except through your lawyer, or harass you for payments while the process is under way.
2) Relief from debt. Much of your unsecured debt will be discharged in a bankruptcy filing. Student loans and child support payments will not be written off, but at least you’ll no longer have commercial creditors on your back all the time.
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In a Chapter 7 bankruptcy, you have some of your assets sold off and use the proceeds to pay creditors in order of priority. Unsecured debts that cannot be covered by the proceeds are written off. These are usually credit card debts, which make up most of the debt in a typical consumer bankruptcy. Most debtors only end up paying a small portion of their debt under Chapter 7, making it technically cheaper than other types of bankruptcy.
Court Protection
Perhaps the best reason to file for bankruptcy, under Chapter 7 or Chapter 13, is to get protection from your creditors through the court’s automatic stay. As soon as your case is filed, creditors can no longer collect payments, garnish wages, or proceed with any form of solicitation—including foreclosure. Filing for Chapter 7 bankruptcy will keep creditors at bay while you work out an arrangement and try to get back on track.
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Bankruptcy is seldom as simple and straightforward as it seems. Cases that seem smooth enough at the outset can later reveal details that complicate the filing, and even get them dismissed. This is especially true in Chapter 13 bankruptcy, where a repayment plan has to be worked out with creditors and approved by a bankruptcy trustee. From forgotten debts to creditors unwilling to settle, there’s a lot that a debtor has to prepare for. Here are some of the most common Chapter 13 bankruptcy complications and how they can be dealt with.
Delinquent Mortgages
A large share of Chapter 13 debtors today are behind on their mortgages and seeking a way out of foreclosure. But few of them are aware that mortgage debt cannot be added to a Chapter 13 plan. Only past-due payments and associated penalties can be repaid under Chapter 13 bankruptcy; current and future debts have to be paid alongside the repayment plan. This means that monthly mortgage payments have to be taken into account during the means test—one has to have enough disposable income (after mortgage and other expenses) to make Chapter 13 payments over three to five years.
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The choice to file for bankruptcy is usually a matter of cost—it’s the cheapest way out of excessive debt. But there’s more than one way to file for bankruptcy, and each one carries different costs. Most people opt for Chapter 7 bankruptcy because it’s faster and lets them off a greater amount of debt, making it appear cheaper. But there’s more than just the discharge of debt to think about. Here’s a look at the costs of Chapter 7 and Chapter 13 bankruptcy, and how to tell which one works best for you.
Bankruptcy Fees
Bankruptcy fees are actually cheaper for Chapter 13 bankruptcy than for Chapter 7. To file Chapter 13 bankruptcy, one has to pay a statutory fee of $235 and an administrative fee of $39, for a total of $274. Chapter 7 bankruptcy carries a $245 statutory fee and a $39 administrative fee, plus a trustee surcharge of $15. This brings the total to $299, slightly higher than Chapter 13. The fees can be waived or paid in up to four installments for debtors with limited financial capacity.
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Bankruptcy must be your last resort when you want your debts to be paid off completely. There are other ways you can get rid of your debts without having to file for bankruptcy. There are other options such as debt consolidation, debts settlement and debt management that can help you pay off your debts as well as make a decent saving. You can also try to consolidate debt on your own to get rid of those debts.
Ways you can pay off your debt without filing for bankruptcy
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Bankruptcy planning isn’t always the first thing a debtor thinks of—getting rid of debt and starting off anew is often more urgent. But few people realize the importance not just of planning, but planning smartly. Good planning can mean a successful Bankruptcy filing and a more secure financial future. Bad planning, on the other hand, can lead to anything from simple processing delays to fraud accusations that can land you in jail. If you’re not sure how to start planning your bankruptcy, read on for a simple guide.
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First, is bankruptcy really your only way out? Surprisingly, for many people, it’s not. Go over your debts and income, preferably with an accountant or bankruptcy lawyer, and see if there are other solutions available. Bankruptcy can have far-reaching consequences and should only be taken as a last resort. Some of the most common bankruptcy alternatives are debt settlement, debt consolidation, and simple self-reorganization of your finances.
Most people would prefer to avoid bankruptcy, the most drastic debt relief option, at all cost. Sometimes, bankruptcy is unavoidable, due to serious unexpected financial hits that you don’t have the resources to deal with yourself. But often, smart financial management can help you address financial problems before they become so great that bankruptcy is the only way out of the situation. This article will give you some tips on how to avoid bankruptcy.
Tips to Avoid Bankruptcy
• Cut back on unnecessary luxury expenses. If a lifestyle you cannot realistically afford is causing you to get deeper and deeper into debt, cutting back on items or subscriptions you don’t really need can help you avoid bankruptcy.
• Make a monthly budget and stick to it. Balance your expenses against your income, and if at all possible, put some money aside every month for unforeseen expenses.
• Pay your bills on time. Many people who file bankruptcy, do so after a long debt cycle during which unpaid debts gather interest and late fees, thereby increasing the amount of debt. This means that even if you’re not actively spending money, you’re passively increasing your debt.
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