Can a College Student File Bankruptcy?

Many people think that if you’re currently enrolled in college or a school program, you’re not allowed to file for bankruptcy. Nothing could be further from the truth! Bankruptcy laws only require that you be 18 years old, a resident of the state where you are filing from for the last two years, and be capable of making the choice to file bankruptcy voluntarily. So don’t let the fact that you’re still a student stop you from filing for bankruptcy if that’s the relief you need.

In fact, college can be the best time to file a bankruptcy. Your student loans are still in deferment, so you won’t even have to worry about them in the filing itself. Also, you won’t have that high paying salary that might actually keep you from being able to file an easy Chapter 7 liquidation until after you graduate. Why hold on to those debts until you have to pay them back for at least a three year time period? File now and save yourself the trouble.

Also, don’t worry that by filing for bankruptcy you’ll never be able to get another credit card. Most people who file for Chapter 7 bankruptcy see a flood of credit card offers after they file. The credit card companies know that you wont be eligible to file another Chapter 7 for eight more years, so to them, you are a safe bet. The trick is to read the fine print on those offers. Of ten times, they’ll start off with a twenty to thirty percent interest rate. Be selective and choose one with a ten to fifteen percent rate. Use it like a debit card and pay the balance back to zero at the end of each month. In no time at all, you’ll find your credit score steadily improving.

Once your credit has improved, you can think about financing a car, or maybe even purchasing a home, and you’ll be in good shape to do so. It’s all because you filed for bankruptcy while you were in college and then practiced responsible credit behavior after you graduated. When all’s said and done, people wont need to see your diploma to know how good you are at making the right decision.

Just remember, always consult an attorney who specializes in bankruptcy law. They know all the ins and outs to get you back on your feet and on your way to a great future. Until then, keep your eyes on the prize. And if you are looking for some additional information, check out the helpful directory Ldmstudio Directory to kill some time, too.

Chapter 7 Trustee Buyouts

Last week I had a discussion with one of my Chapter 7 clients about a potential wrinkle to her upcoming bankruptcy filing, commonly referred to in bankruptcy practice as a “trustee buyout”.

When this client had retained our firm back in September, 2006, she had indicated to me that her home was worth $240,000 and that she owed $209,000 on a single mortgage. She had based this $240k valuation from a refinance appraisal she’d received in March, 2006. She was current on her monthly mortgage payments and wished to keep her house through the Chapter 7 bankruptcy via reaffirmation. Unfortunately, due to an illness from which she suffers, things went delayed and we are just now getting to the point where we’re ready to file her Chapter 7 bankruptcy for her.

Last week’s new issue came to light when my client told me that a condo identical to hers in her building had sold in the last month for $250k. Concerned about the possible change in circumstances and how it may affect her future Chapter 7 filing, I did some due diligence on her behalf and checked several websites that produce “CMA’s” (comparative market analysis). The property indeed was being valued on these websites at closer to $250k than the $240k valuation she had initially told me.

When filing a Chapter 7 or Chapter 13 bankruptcy, a filer is entitled to protect a certain amount of equity in their homestead property. The homestead exemption only protects equity in a property that someone lives in. Equity is the difference between what the property is worth after cost of sale and what is owed in total on the property. While it varies from state-to-state, the homestead exemption in Illinois where I practice is $15,000 per person. (Note: The exemption doubles to $30,000 in Illinois for a married couple’s joint filing.)

My client owns her property in fee simple, which means no one else is on the deed to her house. As a general rule, a trustee will typically allow a 7-9% cost of sale deduction off of a house’s valuation to account for broker fees, taxes due at sale, etc. So in this case, with my client property being worth $250k, deducting an 8% cost of sale would leave the value at an even $230k. Remembering that my client owes roughly $209k on her condo, the equity difference between $230k and the $209k owed would be $21k. Because we can only protect $15k of equity at filing in Illinois, this means that the equity in her house is $6k above the exemption amount and could thus be perceived as an asset for liquidation by a bankruptcy trustee.

At this point, I suggested to my client that we needed to get a current appraisal on her property to determine the actual value. She did this immediately and the condo’s value was indeed appraised at $250k. I then gave my client several options on how we could proceed from here:

  1. We could file a Chapter 13 for her instead of a Chapter 7 to protect the exposed equity in her condo. She would be required to pay back at least $6k of the $50k in credit card debt she owed to match the amount that could be liquidated in a Chapter 7.
  2. She could sell her house prior to filing the bankruptcy, protect up to $15k of the equity, and spend down the remaining $6k or so on necessities, like rent, food clothing, etc.
  3. We could file a Chapter 7 for her and if necessary negotiate a “trustee buyout”.

My client had no interest in selling her house and much preferred filing a Chapter 7 bankruptcy to a Chapter 13 bankruptcy, so we decided together that a “trustee buyout” was her best course of action.

In a Chapter 7 where a filer has an asset worth above the allowable exemption, it is usually possible to negotiate an arrangement with the Chapter 7 trustee to pay him the cash amount equivalent to the valuation of the exposed asset and protect the asset itself. In my experience, the payment arrangement can vary in time from 3 months to a year, or even possibly a one-time lump sum payment. It is also often the case that a trustee in a Chapter 7 proceeding will choose to ignore an asset that he could potentially liquidate. If a trustee believes that he could not make a meaningful distribution to the creditors listed in the Chapter 7 proceeding, he can choose to acknowledge the asset but pass on liquidation or further action because the value of the asset is too small to make any kind of repayment dent to the creditors as a whole. Hopefully in my client’s situation above, this will be the case.

Bankruptcy Filings Up 60% in Arizona:

The Arizona Republic reports that Arizona bankruptcy filings for the first half of 2007 have increased 60 percent from the number of Arizona bankruptcy filings for the first half of 2006, with 895 bankrutpcy petitions filed in June, the highest monthly total of 2007.

The article cites credit card debt, higher mortgage payments, and medical bills as factors driving the trend.

Many bankruptcy attorneys I have talked with would agree with this and have commented that the current market conditions have lead to the “perfect storm”, with adjustable rate mortgages dramatically increasing, credit card minimums increasing, and home equity loans becoming harder to qualify for due to the soft housing market and tighter lending requirements.

The dramatic increase in filings may surprise some people, but the Arizona bankruptcy statistics are misleading. I attribute the increase to primarily be a result of the bankruptcy law change (BACPA), which created a huge rush to file at the end of 2005, artificially depressing the number of bankruptcy filings for the first half of 2006. The bankruptcy law changes have being widely criticized, but most individuals still qualify for either a Chapter 7 or a Chapter 13bankruptcy.

Arizona Bankruptcy Increase Linked to Increase in Foreclosures

A recent article in The Arizona Republic reports that August bankruptcy filings in Arizona increased 65 percent from 2006 filings. Arizonans filed 1021 bankruptcy applications in August, 2007 up from 617 in August 2006. Bankruptcy filings are also increasing nationwide, up 31 percent from August 2006.

Although the article doesn’t get into the specifics of why such a large increase in Arizona bankruptcy filings was seen, I believe it can be largely attributed to the rapid increase in foreclosures seen in Arizona.

According to data compiled by RealtyTrac , foreclosures in Arizona nearly tripled in July from 2006 – the eight largest increase nationwide, putting Arizona into the top 10 states for foreclosures.

I expect that a large number of the Chapter 13 bankruptcies filed where individuals attempting to save their homes from foreclosure by getting the protection of the automatic stay. Filing a Chapter 13 bankruptcy is a viable option that can order a mortgage company to stop the sale of your property and give you up to 3 years to repay any arrearage.

As foreclosures continue to rise in Arizona and many states, I expect it will cause a similar increase in Chapter 13 bankruptcy filings.

Money Saving Tips for the Holiday Season

The end of the year is always eventful from Halloween to New Years, but with the bustle of the season comes lots and lots of spending. The last thing anyone wants to start a new year with is thousands of dollars in credit card debt and consulting with a personal bankruptcy attorney. Here are 5 tips on how to get through the holiday season without tons of credit card debt and a looming bankruptcy:

1. Keep it Simple – Remember that being around friends and family during the holidays is more important than thousands of dollars worth of “stuff” so don’t go overboard when shopping for gifts or planning a menu. Try to give yourself a price limit when shopping for specific people in your life and stick to your plan.

2. Plan Ahead – If you are hosting a holiday at your home don’t wait until the last minute to create a menu and buy the groceries. Make your menu early so that you can delegate to your guests what they can bring. Asking guests to bring an item isn’t rude, it’s smart and allows everyone to feel like they pitched in for the event.

3. Look for Sales – Black Friday and Cyber Monday aren’t the only holiday sales worth looking forward to. Most retail shops have sporadic sales from October until December to keep customers in the doors. Check for online deals with free shipping or ads in the Sunday paper to keep up with the best value for the price.

4. Homemade gifts – Handmade gifts not only have a personal touch, but they can be great if you are trying to find a way to give lots of different people a gift. Bake cookies, make ornaments, make candies, or stock up on bulk candles for a nice gift that won’t break the bank.

5. Buy throughout the year – The good thing about the holiday season is that it’s consistent; it comes at the same time every year without fail. Because of this make sure and keep your eyes peeled for sales throughout the year on bulk items or even special items that you want to get for certain people in your life. Spreading out your spending will keep the holiday season from feeling like nothing but a spending spree.

The best way to not fall into a debt trap during the holidays is to simply not spend what you don’t have. Start an account and the beginning of the year for holiday gifts and groceries so that you don’t automatically rush to use credit cards when October comes around. By using this tips you can avoid thinking about filing for bankruptcy after having a wonderful holiday season. Remember you can only file Chapter 7 bankruptcy once every 8 years so an overboard Christmas spending spree is not what you want to cause one.

Maryland State Bankruptcy Laws

What Are The Maryland Bankruptcy Exemptions?

MarylandMaryland law protects all or a portion of your property from being seized by creditors or the bankruptcy trustee in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you are generally allowed to keep all of your assets and property. Certain exceptions may apply, so it’s wise to consult with a Maryland bankruptcy attorney to find which of your assets will be protected in a bankruptcy filed in Maryland. In general, the major Maryland bankruptcy exemptions include:

GENERAL MARYLAND EXEMPTIONS
Real Estate (the Homestead Exemption)
Up to $5,000 in real or personal property can be protected.
Automobiles
There is no specific automobile exemption in Maryland.
Other Property
Up The debtor’s interest, not to exceed $1,000 in value, in household furnishings, household goods, wearing apparel, appliances, books, animals kept as pets, and other items that are held primarily for the personal, family, or household use; cash or property of any kind equivalent in value to $6,000; and 100 percent of the value of professionally described health aids.
Go to the complete list of Maryland bankruptcy exemptions

Please remember that this page provides general information only, and is not intended to provide legal advice. The information is not a substitute for the advice of a qualified bankruptcy attorney. If you need legal assistance, consult an attorney.

Which state’s exemption laws apply in your bankruptcy?

MarylandGenerally, the laws of the state in which you lived for the 730 days (2 years) prior to filing a bankruptcy petition will apply in your bankruptcy.

If you have not lived in the same state for the 2 years immediately prior to filing your bankruptcy petition, the laws of the state in which you lived for the majority of the 180-day period preceding the 2-year period will likely apply.

If application of the preceding general rules renders you ineligible for exemptions under any state’s laws, you may be allowed to choose the federal exemptions applicable in your bankruptcy.

Is Maryland a Community Property State?

No, Maryland is not a community property state. Because it is not a community property state, you will be responsible for your spouse’s debts only if you voluntarily assumed those debts by, for example, co-signing on a loan given to your spouse. In a non-community property state, one spouse can file for bankruptcy and be eligible to eliminate all of their unsecured debts without the involvement of the other spouse.

How did your senator vote on the new bankruptcy laws?

Following years of intense lobbying by creditors, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). How did your Senators vote on these largely pro-creditor provisions?

Mikulski (D-MD) — YEA 
Sarbanes (D-MD) — YEA

Maryland Bankruptcy Court Locations:

Baltimore Division
Garmatz Federal Courthouse

101 West Lombard Street
Suite 8308
Baltimore, MD 21201
(410) 962-2688

Federal Courthouse
6500 Cherrywood Lane
Suite 300
Greenbelt, MD 20770
(301) 344-8018

Salisbury Courthouse
U.S. Post Office Building
129 East Main Street, Room 104
Salisbury, Md 21801

Note: You may not have to actually go to one of the above bankruptcy courts. Trustees often conduct your meeting at a local venue.

Although bankruptcy is federal law, the bankruptcy courts in each jurisdiction have local rules that must be followed. A local bankruptcy attorney will be familiar with the specific rules in your area.

Maryland Bankruptcy Attorney Locations:

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How Long Does Bankruptcy Affect My Credit?

This question was probably asked to me over 1,000 times during my time as a bankruptcy paralegal. I attribute the frequency to the negative rumors that continue to surround filing bankruptcy. People constantly hear totally irrational phrases like “bankruptcy takes your credit score to zero” and “if you file bankruptcy you will never get another loan” and they are simply not true. Here are a few of the true facts regarding how long bankruptcy affects your credit:

Bankruptcy remains on a Credit Report for 7-10 years

Once you have credit taken out in your name and under you social security number 3 companies begin tracking what is called a “credit report” for you. These three companies are Equifax, Experian, and Trans Union. Your credit report reflects all credit accounts in your name and their balances, delinquencies, and overall status. When someone files a Chapter 7 bankruptcy in order to wipe away their unsecured debt and their case is completed these three companies are notified by each creditor listed in the bankruptcy paperwork. They are notified to report the balance of the debt as $0.00 and place the word “bankruptcy” as the status for the debt. Depending on the type of bankruptcy you file this will remain on your credit report for 7-10 years.

Bankruptcy doesn’t set your Credit Score to zero

Along with the creation and tracking of your credit report the three companies above are also responsible for compiling your credit score: a number between 450 and 900 that defines the creditworthiness of a person. Ultimately this number tells creditors how likely you are to pay off your debt according to the 3 credit bureaus. When a person files bankruptcy their credit score goes down because they are wiping away debts that they technically did not “pay off”. However, bankruptcy doesn’t drop the credit score down to the lowest possible number of 450.

Bankruptcy doesn’t disqualify you from obtaining new credit

With the reflection of bankruptcy on your credit report and credit score many people think that their chances of obtaining new credit are close to impossible. Fortunately for us that isn’t the case. The good news is that many people say that in just one year after filing for bankruptcy their credit is better than ever before. This is due to positive financial decisions once the bankruptcy is completed. In most cases it takes about 2 years after going bankrupt for a person to obtain a mortgage, and about 6 months for a new car loan.

There are companies that specialize in rebuilding your credit after completing a bankruptcy and they can help you achieve your new financial goals. Think about it this way: if you are considering the option of filing bankruptcy then your credit score and credit report are probably not too great anyway, so the only direction you can go is up! Don’t believe the myth’s, in the long run filing bankruptcy can really help your credit.

Mississippi Bankruptcy Laws

What Are The Mississippi Bankruptcy Exemptions?

MississippiMississippi law protects all or a portion of your property from being seized by creditors or the bankruptcy trustee in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you are generally allowed to keep all of your assets and property. Certain exceptions may apply, so its wise to consult with a Mississippi bankruptcy attorney to find which of your assets will be protected in a bankruptcy filed in Mississippi. In general, the major Mississippi bankruptcy exemptions include:

GENERAL MISSISSIPPI EXEMPTIONS
Real Estate (the Homestead Exemption)
Up to $75,000 of equity in land and buildings can be protected; Up to $20,000 of equity in a mobile or manufactured home used as a primary residence can be protected.
Automobiles
There is no specific automobile exemption in Mississippi.
Other Property
Tangible personal property of the following kinds not exceeding $10,000.00 in cumulative value: household goods, wearing apparel, books, animals or crops, motor vehicles, implements, professional books or tools of the trade, cash on hand, and professionally prescribed health aids; and any item of tangible personal property worth less than $200.
Go to the complete list of Mississippi bankruptcy exemptions

Please remember that this page provides general information only, and is not intended to provide legal advice. The information is not a substitute for the advice of a qualified bankruptcy attorney. If you need legal assistance, consult an attorney.

Which state’s exemption laws apply in your bankruptcy?

MississippiGenerally, the laws of the state in which you lived for the 730 days (2 years) prior to filing a bankruptcy petition will apply in your bankruptcy.

If you have not lived in the same state for the 2 years immediately prior to filing your bankruptcy petition, the laws of the state in which you lived for the majority of the 180-day period preceding the 2-year period will likely apply.

If application of the preceding general rules renders you ineligible for exemptions under any states laws, you may be allowed to choose the federal exemptions applicable in your bankruptcy.

Is Mississippi a Community Property State?

No, Mississippi is not a community property state. Because it is not a community property state, you will be responsible for your spouses debts only if you voluntarily assumed those debts by, for example, co-signing on a loan given to your spouse. In a non-community property state, one spouse can file for bankruptcy and be eligible to eliminate all of their unsecured debts without the involvement of the other spouse.

How did your senator vote on the new bankruptcy laws?

Following years of intense lobbying by creditors, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). How did your Senators vote on these largely pro-creditor provisions?

Cochran (R-MS) – YEA
Lott (R-MS) – YEA

Mississippi Bankruptcy Court Locations:

United States Bankruptcy Court
Northern District of Mississippi
Thad Cochran U. S. Courthouse

703 Hwy 145 North
Aberdeen, MS 39730
(662) 369-2596

Jackson Office
100 East Capitol Street
Jackson, MS 39201
(601) 965-5301

Gulfport Office
Dan M. Russell, Jr. U. S. Courthouse

2012 15th Street, Suite 244
Gulfport, MS 39501
(228) 563-1790

Note: You may not have to actually go to one of the above bankruptcy courts. Trustees often conduct your meeting at a local venue.

Although bankruptcy is federal law, the bankruptcy courts in each jurisdiction have local rules that must be followed. A local bankruptcy attorney will be familiar with the specific rules in your area.

Mississippi Bankruptcy Attorney Locations:

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Why Filing Bankruptcy Shouldn’t Scare You

You may have heard some negative things about filing bankruptcy over the years, but we all know that not everything you hear is always true. If you are facing an overwhelming amount of unsecured debt like credit cards or medical bills then going bankrupt may be in the best interest of your financial future. Don’t let the negative rumors surrounding bankruptcy scare you away from doing something that could really help you in the long run. Here are just a few reminders of why filing Chapter 7 bankruptcy or Chapter 13 bankruptcy shouldn’t scare you:

1. You aren’t alone – Don’t fall into the trap of thinking that no one else is having debt problems like you are. In this economy that’s just not true. For years people have been struggling with credit card debt, large amounts of medical bills and more recently foreclosure and repossession. Last year alone more than 1 million Americans filed for Chapter 7 bankruptcy to get a financial fresh start by eliminating their unsecured debt. Due to the recession our country has and is still facing it would be surprising if you didn’t know of someone that has had to file bankruptcy to keep afloat.

2. Help is readily available – The great news about looking into bankruptcy now is that at any given time you are not too far away from tons of information regarding bankruptcy. One simple search on the internet will provide you with more information than you ever wanted on how to file bankruptcy and if it is right for you. Not only is the internet a wealth of knowledge, but in some cases bankruptcy attorneys will allow you to meet with them for free initial consultations before you make your decision. If neither of these options appeal to you then maybe you should just start by asking friends or family who you know have filed in the past.

3. The system is on your side – The bankruptcy laws are written for one purpose: to help individuals and married couples get out of debt and find a way to have a financial fresh start in life. The laws are not meant to be abused, which is why there are limits to how many times a person can file in a given number of years, but for the most part the bankruptcy code is on the side of the debtor. The bankruptcy court as a reputation of being fair and open minded to every situation they hear. Don’t think that your situation is too far gone for bankruptcy to help.

If you truly think that going bankrupt could help you and/or your family then don’t hesitate to find out more information. Just remember that you aren’t alone, help is always readily available, and the system is on your side. The bankruptcy process will be over before you know it and in less than 2 years you could be debt free and planning for the future.

What to Expect at Your 341 Meeting of the Creditors

At the filing of either your Chapter 7 or Chapter 13 Bankruptcy , a mandatory proceeding called a “341 Meeting of the Creditors ” is scheduled by the bankruptcy court.  Depending on your jurisdiction and the volume of bankruptcies filed, your 341 Meeting will happen anywhere from 30 to 60 days after the filing of your case.  In populated states like California , New York , Texas and Florida , 341 Meetings occur typically 45 to 60 days after filing since these courts often get backlogged.  In less populated states such as Idaho , Iowa , Wyoming and North Dakota , 341 Meetings usually take place closer to 30 days after the filing of a bankruptcy because there are less total bankruptcies being filed.  You will receive official notice from the Bankruptcy Court of your 341 Meeting’s date, place and time.

341 Meetings are supervised by a government-appointed Bankruptcy Trustee.  Your Trustee’s duties are to handle the administration of your case and represent the creditors at your 341 Meeting in their absence. (NOTE***Your creditors in a Chapter 7 bankruptcy will rarely ever show for your 341 meeting. There are also no judges present at 341 Meetings in either Chapter 7 or Chapter 13 Bankruptcies.) 

The Bankruptcy Trustee’s job at your Chapter 7 341 Meeting is determine whether or not you have the ability to repay your debt based on your income or have any assets that he/she can liquidate to repay your creditors. The Trustee’s job at your Chapter 13 341 Meeting is to make sure that you have filed a feasible plan and are repaying the correct amount to your creditors based on your economic situation at the time of filing.  At either 341 Meeting, you’ll be required to testify under oath regarding your filed bankruptcy petition schedules, finances and income.  Answer all the Trustee’s questions truthfully.  While the Trustee is an adversary in your bankruptcy proceeding, their intention is not to try to verbally trip you up or corner you, they simply want to make sure that your bankruptcy schedules are accurate and that you qualify to file bankruptcy. If you have any additional concerns, make sure your bankruptcy attorneydiscusses all details of your case with you prior to the filing of either Chapter 7 or Chapter 13 bankruptcy so there are no surprises at your Creditor’s Meeting.

341 Meetings are rather informal and you can dress casually, but try to look presentable.  Where you live will dictate what you need to bring to your Meeting of the Creditors, and your attorney will advise you prior to the Meeting.  As a general rule, you’ll need to bring:

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