Top 5 Surprising Bankruptcies

It’s easy to get bogged down and discouraged when you think that you are the only one dealing with the decision to declare bankruptcy. It may be encouraging to know that some of history’s most successful names dealt with the same struggle you may be dealing with today. Bankruptcies can happen to anyone, and if you don’t believe me just take a look at some of these names.

  1. Abraham Lincoln: Our revered 16th president fell into overwhelming debt because of a failed general store he opened in 1823. He owed about $1,000 after the store closed and he didn’t have the money so his creditors took him to court and won the right to his last valuable assets: a horse and some surveying gear.
  2. H.J. Heinz: If it wasn’t for the ideas dreamed up by H.J. Heinz all of our hot dogs, hamburgers, and french fries would be lacking to say the least. The condiment king was only 25 years old when his struggling business failed to sell enough of a horseradish sauce to pay the bills. The company declared bankruptcy in 1875.
  3. Milton Hershey: America’s favorite chocolatier knew that his candy was great, but unfortunately didn’t quite know how to run a business. In 1882 his first candy shop attempt in Philadelphia fell because he couldn’t cover the expenses any longer. He decided to declare bankruptcy and head back home to Lancaster, PA to try again.
  4. Henry Ford: Although Henry Ford was a mechanical innovator, even he couldn’t stay away from the financial struggles that come with a failed business. He started his first motor company in 1899 and because of his need for perfection the company had only produced 20 vehicles in a years time. The business owed much more than it made that year and went bankrupt in 1901.
  5. Walt Disney: Many of us owe countless family vacations and memories to Walt Disney, but at the start of his career he owed his creditors more than he had. Walt Disney opened his first film studio in Kansas City in 1922 and barely kept it alive for a year. After a failed deal with a New York company that promised to distribute his films, Walt didn’t even have enough money to cover his small overhead. The studio ended up going bankruptin 1923.

There are startling similarities between all five of these men: each one struggled financially, each one filed bankruptcy, and each one of them went on to be wildly successful. Although this isn’t a guaranteed recipe for success, it does show that going bankrupt can put you back on track financially. So find the best bankruptcy lawyer for your situation (keeping in mind that there are cheap bankruptcy lawyers available) and ask “how does bankruptcy work?” If you discover that it may be in your best interest to declare bankruptcy, remember that you aren’t the only one to struggle, and you will come out of the process with a fresh financial future.

Chapter 7 Case Studies

Hypothetical #1: Jane Filer

Jane is a 64 year-old retired grandmother. Jane worked for 30 years and has a small pension and collects social security totaling $1,500 per month. Jane rents her home, and is financing her car. Jane is having difficulties making her car payments because she has a lot of credit card debt — almost $18,000 total. Jane wouldn’t mind giving her car back to the creditor as long as she could eliminate the debt she owes on it. Jane doesn’t have any money in the bank or any significant assets. She realizes she’ll never be able to afford to repay all her debt and wants to put a stop to all the collection letters and harassing phone calls before it progresses to lawsuits and other aggressive collection activities.

Analysis

In this hypothetical, Jane would qualify for Chapter 7 bankruptcy. Her income is under the average median income of any state, and she has no assets that could be sold to pay off her debts. Jane would be able to eliminate her credit card debt and give the car back without owing the finance company any money. Jane may also decide to keep the car if she thinks that she can now afford it after eliminating all of her credit card debts.

In this example, Jane would be able to eliminate her credit card debt and give the car back without owing the finance company any money.Hypothetical #2: Joe and Mary Filer

Joe and Mary Filer are a married couple with three dependent children. Dennis makes $45,000 annually and Pamela makes $30,000 annually. They are homeowners and have a first mortgage and a home equity loan that was used to pay off some prior credit card debts. Their house is located in Chicago, IL and has a fair market value of $150,000, with mortgages totaling $140,000. They are also financing 2 cars, which have payments that are up-to-date. They are finding it difficult to pay their mortgage, home equity loan, car payments, credit card bills, medical bills, and all their living expenses. Joe and Mary would like an opportunity to eliminate some of their debt, but they want to keep their house and cars. With all their monthly debt obligations, they don’t have the ability to put money aside for their children’s college fund or other long-term goals.

Analysis

Joe and Mary can file a Chapter 7 bankruptcy. The Illinois bankruptcy exemptions protect the equity that is left in their house, and that their total annual income is under the median income for a family of 5 in Illinois. Joe and Mary would be able to keep their house and 2 cars if they continue to make their mortgage, home equity, and auto payments. They could eliminate their credit card debts, medical bills, and any other unsecured loans.

Reasons Your Bankruptcy Could be Denied

Many people who file bankruptcy are unaware of the fact that their case could be denied. Most debtors just assume that the court will grant them the bankruptcy they desire as long as they meet all of the eligibility requirements. This, however, is not the case. There are several reasons that your bankruptcy could be denied, and if you or someone you know is considering bankruptcy then these are reasons that you will want to know. Here are just three of the main reasons why people’s bankruptcies get denied.

  1. Documents – Bankruptcy revolves around the debtors financial situation, and because of this the debtor will be required to present certain documentation to their attorney’s and ultimately to the bankruptcy court. Some of the most commonly requested documents are: paycheck stubs, bank statements, mortgage info, vehicle leases, and prior year’s tax returns. The majority of the paperwork will be requested by your attorney in order to create your bankruptcy petition, but in some cases the bankruptcy court will request documents form you directly. If, for some reason, you provide incorrect or insufficient documents to the bankruptcy court they have the right to deny your case.
  2. Timing – One thing is for sure if you do decide to file Chapter 7 or Chapter 13 bankruptcy; you will not be the only one filing. The courts are jammed full of petitions to consider, and allowing every debtor the ability to extend deadlines would push decisions back months, if not years. In multiple instances, federal and local courts have ruled that they do not possess the authority to cure an untimely bankruptcy filing. If you fail to meet a deadline that the bankruptcy court has set for your case, then that is grounds for dismissal.
  3. Fraud – When you stand before the bankruptcy trustee at your required bankruptcy court appearance they will ask you simple questions regarding your case and financial situation. These questions are to ensure that no fraud has taken place. Fraud in a bankruptcy could mean neglecting to list a creditor or debt, not telling your attorney about money you have in other accounts, or not admitting to being eligible for money like an inheritance once your bankruptcy is complete. Bankruptcy fraud is taken seriously and most bankruptcy judges have no problem denying the case on those grounds. In some severe cases where fraud is proven the bankruptcy trustee has the right to make sure the debtor can never file bankruptcy on those certain debts again.

Bankruptcy dismissals and denials are not an hourly occurrence, but they are something to be mindful of nonetheless. If you are serious about using bankruptcy to become debt free then you should do everything you can to make sure it does not get denied. Stay organized, aware, and in contact with your attorney every step of the way to make sure that your bankruptcy is completed smoothly so you can finally be on your way to financial freedom.

How to Handle Creditors During Bankruptcy

With all the preparation that comes with going bankrupt, it can be easy to forget a step or two. That’s a great reason to hire a bankruptcy lawyer to help you along they way if you happen to get frazzled and forget what to do. When you find the best bankruptcy lawyer for you be sure to keep their office number handy throughout the entire process. In most cases even if they cannot speak with you directly, a legal assistant or paralegal can answer questions about your case. While I was working as a bankruptcy paralegal one of the most common questions that clients called in to ask was “what do I tell my creditors that keep calling me?”

The answer is ultimately two-fold, depending on the type of creditor that is contacting you. Typically creditors fall into two categories: original and third party. An original creditor is one that your debt originally started with such as the credit card company or a hospital. Unfortunately, original creditors have a right to contact you by until the day your personal bankruptcy is officially filed with the court, and even the best bankruptcy lawyer can’t stop that. When and if they do contact you, it is typically beneficial to inform them that you have hired a bankruptcy lawyer and are in the process of going bankrupt. Don’t be surprised if they ask for the name and phone/fax number of your attorney to verify the information.

Sometimes original creditors feel that your account has gone too far without any payment and will choose to sell your account to another company to continue the collection process. These companies are known as third party creditors or collection agencies, and are a cause of stress before and during the personal bankruptcy process. In fact, some have said that the incessant calls from collection agencies are what finally made them decide to go bankrupt. The good news is that you, as a debtor, have certain rights that protect you from third party creditor harassment. The “Fair Debt Collection Practices Act” or FDCPA is a United States statute that was created to prevent abusive collection attempts. The FDCPA states that as soon as your hire an attorney in the pursuit of filing personal bankruptcy, collection agencies lose the right to contact you. If they continue to do so contact your bankruptcy attorney immediately to see if possible sanctions can be filed against them for violating your rights.

If you are currently experiencing multiple creditor phone calls a day, be sure to note who is calling and whether they are an original creditor or a collection agency; No matter which type of creditor it is, going bankrupt can help. Once you have found the best bankruptcy lawyer for your case be sure to tell them about the calls you are receiving so they can evaluate whether or not your FDCPA rights are being violated. Remember, you have rights as a debtor and you should never feel bullied by your creditors.

Idaho State Bankruptcy Laws

What are the Idaho Bankruptcy Exemptions?

IdahoIdaho 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 Idaho bankruptcy attorney to find which of your assets will be protected in a bankruptcy filed in Idaho. In general, the major Idaho bankruptcy exemptions include:

GENERAL IDAHO EXEMPTIONS
Real Estate (the Homestead Exemption)
A dwelling house or mobile home, and the lands on which said structures are situated, with a total exemption not to exceed the lesser of: (i) the total net value of the lands, mobile home, and improvements thereon, or (ii) the sum of $50,000.
Automobiles
Up to $3,000 of equity in one motor vehicle can be protected.
Other Property
$1,000 for jewelry; $1,500 for implements, professional books, and tools of the trade; and $500 per item (not to exceed $5,000 in the aggregate) for the following items: household furnishings, goods, and appliances held primarily for the personal, family, or household use of the individual or a dependent of the individual; wearing apparel, animals, books, and musical instruments; and family portraits and heirlooms of particular sentimental value to the individual.
Go to the complete list of Idaho 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?

IdahoGenerally, 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 Idaho a community property state?

Yes, Idaho is a community property state. Because it is a community property state, you are responsible for any debts that your spouse incurred while you were married. You are therefore equally liable for your spouse’s debts even if you did not voluntarily assume liability for them by, for example, cosigning for a loan given to your 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?

Craig (R-ID) — YEA
Crapo (R-ID) — YEA

Idaho Bankruptcy Court Locations:

US Courts – District of Idaho
550 W. Fort St., Rm 400
Boise, ID 83724
(208) 334-1074

Pocatello Office
801 E Sherman St, Rm 119
Pocatello, ID 83201
(208)478-4123

Moscow Office
220 E 5th St, Rm 304
Moscow, ID 83843
(208) 882-7612

Coeur d’Alene Office
205 N 4th, Rm 202
Coeur d’Alene, ID 83814
(208) 664-4925

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.

Idaho Bankruptcy Attorney Locations:

Looking for an Idaho bankruptcy attorney?
Looking for an Idaho Falls, Idaho bankruptcy attorney?
Looking for a Meridian, Idaho bankruptcy attorney?
Looking for an Orofino, Idaho bankruptcy attorney?

Gambling and Bankruptcy

Everyone’s finances are different, and for that reason everyone’s financial struggles are different. Thousands of people each year choose bankruptcy help to assist them with whatever type of financial difficulty they are having. There are different rules within the bankruptcy code for specific types of debt whether it be a secured debt like a mortgage or a vehicle, or unsecured debt like credit cards and medical bills. One type of debt that has more recently come onto the bankruptcy scene is gambling debt, and it must be handled with care.

According to the current Bankruptcy Code, dischargeable debt is debt that is eligible to be eliminated by filing bankruptcy, while non-dischargeable debt cannot. Some types of non-dischargeable debt are: student loans, child support, alimony, back taxes, and for many years gambling debt. Times changed, of course, and suddenly fewer gamblers were using cash, and instead they were able to gamble with their credit cards. This lead to quite a change for how gambling debt was handed within Chapter 7 and Chapter 13 bankruptcy cases.

Because credit cards fall under the category of unsecured debt they are typically dischargeable whether you are filing chapter 7 or filing chapter 13 bankruptcy. The “judge” that presides over bankruptcy cases is known as the trustee and they ultimately can choose which debts, if any, to object to. That is where the subject of gambling debt within bankruptcy becomes very messy. Whether you find a cheap bankruptcy lawyer or file bankruptcy yourself you will be required to disclose all of your financial information including gambling debt for the past couple of years.

Section 523(a)(2)(A) of the Bankruptcy Code provides an exception to discharge for debts obtained by “false pretenses, a false representation, or actual fraud. In plain English this means that Creditors owed gambling debts may file what are known as “adversary proceedings” to challenge the dischargeability of their debts. These cases are rare and extremely hard to win, but they do occur. In most cases they take place after the mandatory “Meeting of Creditors” and may require the debtor to pay additional attorney’s fees since the adversary proceeding is technically an extra civil suit.

In most cases if a trustee finds out about debt that was purposefully left off the bankruptcy paperwork or purposefully not mentioned in the bankruptcy hearing it he/she may suspect fraud in your case and it could affect the dischargeability of other debts you have. If gambling debt is the bulk of your financial struggles then you should be upfront with your bankruptcy attorney so that they can work to ensure that the trustee agrees that the debt should be dischargeable. Remember that filing bankruptcy is a way to get your finances on track and give you a fresh start so every little bit helps. In most cases even if the bankruptcy trustee decides to not erase your gambling debt they will still allow all other types of unsecured debt to be erased.

Nevada State Bankruptcy Laws

What Are The Nevada Bankruptcy Exemptions?

NevadaNevada 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 Nevada bankruptcy attorney to find which of your assets will be protected in a bankruptcy filed in Nevada. In general, the major Nevada bankruptcy exemptions include:

GENERAL NEBRASKA EXEMPTIONS
Real Estate (the Homestead Exemption)
Up to $350,000 of equity in your homestead can be protected. A provision in the new bankruptcy law caps the homestead exemption at $125,000 if you have not lived in the state for at least 40 months prior to the time you file a bankruptcy petition. In some situations, the cap may be permanent. You should consult with a Nevada bankruptcy attorney for specific information.
Automobiles
Up to $15,000 in equity in one motor vehicle can be protected.
Other Property
Private libraries not to exceed $ 5,000 in value; all family pictures and keepsakes; necessary household goods not to exceed $12,000 in value; farm trucks, stock, tools, and supplies not to exceed $ 4,500 in value; professional libraries, office equipment, office supplies and the tools, instruments and materials used to carry on the trade of the judgment debtor not to exceed $ 10,000 in value; and the cabin or dwelling of a miner and his cars, implements and appliances not exceeding $ 4,500 in total value.
View the complete list of Nevada 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?

NevadaGenerally, 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 Nevada a community property state?

Yes, Nevada is a community property state. Because it is a community property state, you are responsible for any debts that your spouse incurred while you were married. You are therefore equally liable for your spouses debts even if you did not voluntarily assume liability for them by, for example, cosigning for a loan given to your 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?

Ensign (R-NV) – YEA
Reid (D-NV) – NAY

Nevada Bankruptcy Court Locations:

Foley Federal Building
300 Las Vegas Boulevard South
Las Vegas, NV 89101
(702) 388-6709

U.S. Federal Building
300 Booth Street
Room 1109
Reno, NV 89509
(775) 784-5559

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.

Nevada Bankruptcy Attorney Locations:

Looking for a Nevada bankruptcy attorney?
Looking for a Las Vegas, Nevada bankruptcy attorney?
Looking for a Reno, Nevada bankruptcy attorney?

Alaska State Bankruptcy Laws

What are the Alaska Bankruptcy Exemptions?

AlaskaAlaska 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 an Alaska bankruptcy attorney to find which of your assets will be protected in a bankruptcy filed in Alaska. In general, the major Alaska bankruptcy exemptions include:

GENERAL EXEMPTIONS IN ALASKA
Real Estate (Homestead)
Up to $67,500 in the equity of your home can be protected.
Automobiles
Up to $3,750 in equity for one motor vehicle not exceeding $25,000 in value can be protected.
Other Property
Household goods, clothing, books, musical instruments, and family heirlooms valuing up to $3,750 can be protected.
View the complete list of Alaska 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?

Alaska FlagGenerally, 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 Alaska a community property state?

No, Alaska 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.

Did your senator vote in favor of 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?

Murkowski (R-AK) — YEA
Stevens (R-AK) — YEA

Alaska Bankruptcy Court Locations:

Historical Courthouse
605 West Fourth Ave, Suite 138
Anchorage, AK 99501
(907) 271-2655
(800) 859-8059 (Alaska Only)

U. S. Courthouse
101 12th Avenue, Room 332
Fairbanks, AK 99701
(907) 456-0349

U. S. District Court
709 W. 9th Avenue, Room 979
Juneau, AK 99802
(907)586-7458
(866) 243-3812

US Bankruptcy Court
648 Mission Street, Room 507
Ketchikan, AK 99901
(907) 247-7576

US District Court
Front Street

P O Box 130
Nome, AK 99762
(907) 443-5216

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

Alaska Bankruptcy Attorney Locations:

Alaska bankruptcy attorney?
Anchorage, Alaska bankruptcy attorney?

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.

Predatory Credit Card Companies

I recently read an article in Time Magazine written by Daniel Kadlec about how Credit Card companies were becoming even more predatory in regards to milking their customers.  It’s not as if they weren’t doing well-enough already, right?

Here are some of the ways credit cards companies are trying to maximize their potential and all the while sticking it to the people who use their credit cards:

  1. Late Fees have been increased to an average penalty of $30, going as high as $39.  In the mid-90’s the average late fee penalty was closer to $15.
  2. Balance Transfer Fees of typically 3%. So if you transfer $5000 in credit card debt to another card, it’ll cost you $150.
  3. Minimum payments have increased across the board, doubled in some cases.
  4. Foreign Currency Conversion Fees of also typically 3% every time you use your card abroad.  (Take it from my personal experience that they also charge this for purchases in Canada!)
  5. Closing down an open account with a zero balance due to inactivity.  This hurts because every time a line of credit is closed your credit score negatively takes a hit.

So while we can complain all we want, we have no one to blame but ourselves.  The Credit Card companies disclose all these money-making schemes to us in the 20 page, microscopic font “CardHolder Agreements” that they send us with their credit cards.

The only real solution if you don’t want to be taken advantage of by these predatory tactics is simply not to use the Credit Card companies’ products.

Easier said than done, I know.

Here’s the link for that Time Magazine article if you’d like to check it out:

http://www.time.com/time/magazine/article/0,9171,1546352,00.html

— Attorney Andrew Partridge
BankruptcyHQ.com

Who Files for Bankruptcy?

There is a common misconception that only low-income individuals and families file for bankruptcy. However, this is far from the truth. Financial hardship affects people from all walks of life.

People from All Walks of Life File Bankruptcies

BankruptcyPeople in all professions seek relief from their creditors by filing bankruptcy – even business owners, doctors, lawyers, and CEOs of Fortune 500 companies. People of all different ages, ethnicities, religions, and backgrounds find financial relief by filing bankruptcy.

Bankruptcy is Your Economic Right

Filing for personal bankruptcy is every American’s economic right. In 2005, Americans filed over 2 million personal bankruptcies. Creditors are aware that you have the legal right to file bankruptcy and take this risk into consideration when determining what interest rates they will charge you. If the interest rates on your debts are very high, it is possible that you might have already paid the creditor more than you initially charged or borrowed.

Bankruptcy Has a Long History

Bankruptcy’s history is long and extensive. Scholars state evidence of bankruptcies in Biblical times exists. In the United States, some form of bankruptcy law has been available since the year 1800. Congress has since shaped and molded our Bankruptcy Code over the last 200 years. Bankruptcy laws have a purpose: to offer you protection from your creditors by granting you an opportunity to either reorganize or eliminate your debts.

Bankruptcy Today: The Recession and Bankruptcy

As the recession churns on, we’re finding ourselves increasingly depending on credit and subsequently sinking further into debt. Some of us are asking ourselves a question we never thought we’d have to consider: Should I file bankruptcy? If you find yourself contemplating bankruptcy, you’re certainly not alone. Bankruptcy filings have increased all around the country.

Bankruptcy and Recession Statistics

In March, nationwide personal bankruptcy filings were up an astounding 41 percent from the same time last year, according to the National Bankruptcy Research Center. And it appears that the bankruptcy filings won’t slow down anytime soon; the March 2009 total of 121,413 filings was up 24 percent from February 2009’s total of 98,344 filings.

Foreclosures are on the rise too. The Center for Responsible Lending reports that a new home enters foreclosure every 13 seconds in this country. That means that as of this writing, 763,621 homes have entered foreclosure since the first of the year. These foreclosure statistics may only fuel bankruptcy filings, because in many cases Chapter 13 bankruptcy can stop foreclosure proceedings. With all this talk about bankruptcy statistics, let’s examine what exactly it means to file personal bankruptcy.

What Does Bankruptcy Offer?

The U.S. Bankruptcy Code offers two main forms of personal bankruptcy: Chapter 7 and Chapter 13. Under both types, the filer typically receives the protection of the bankruptcy automatic stay. The automatic stay is a court order that prohibits creditors from pursuing further collection efforts, such as:

  • foreclosure
  • repossession
  • some lawsuits
  • most wage garnishment
  • utility shutoff, and more

Although both types of bankruptcy offer this automatic stay, that’s where the similarities end. Chapter 7 and Chapter 13 offer distinctly different benefits for filers.

What’s the Difference Between Chapter 7 and Chapter 13?

To put it simply, Chapter 7 bankruptcy deals with discharging (eliminating) unsecured debts and Chapter 13 bankruptcy helps people repay their secured debts over time while allowing them to keep their property.

Chapter 7 Bankruptcy

A successful Chapter 7 bankruptcy filing results in the discharge of a filer’s unsecured debts (debts not tied with property), which may include:

  • medical bills
  • credit card debt
  • utility bills
  • payday loans
  • parking tickets, etc.

Under Chapter 7, if a person has significant property, the bankruptcy court has the option to sell it in order to repay creditors. (This is why people who own homes with significant equity typically don’t file Chapter 7.) Since the new bankruptcy law went into effect on October 17, 2005, people must qualify to file Chapter 7 by submitting to the means test.

The means test analyzes a person’s income to determine whether they really need to eliminate their bills or if they can afford to repay their debts through Chapter 13. Interested in filing Chapter 7? Talk to a bankruptcy lawyerabout whether you may qualify.

Chapter 13 Bankruptcy

Under Chapter 13, a filer is placed on a repayment plan that is agreed upon by the filer (or his or her bankruptcy lawyer), the bankruptcy court and creditors. The plan usually lasts between three and five years, during which the filer makes one lower monthly payment directly to the bankruptcy court.

If all payments are made according to the schedule, the filer typically can keep his or her property (like a home or car) and at the end of the repayment period, the court has the option of discharging the rest of the filer’s unsecured debts.

Considering Bankruptcy?

If you’re considering filing bankruptcy as a way to potentially resolve debt and/or protect your property, it may be a good idea to talk to a bankruptcy lawyer about your options.

A bankruptcy lawyer can examine your personal case and help you determine whether you qualify to file.

Contact us now or use the form to apply now

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