Bankruptcy Mistakes To Be Avoided

Bankruptcy Mistakes To Be Avoided

To many financially distressed individuals, taking the bankruptcy option is the most viable solution to debt problems. Bankruptcy is the ideal tool to wipe all debts and start yopur life over . 

Statistics disclosed that every second man in United States is troubled with unpaid debts. It is not an uncommon occurrence to see people, debtors and creditors’ alike filing for bankruptcy proceedings. Although many solutions are available, solving debt problems is still a daunting task.

To many financially distressed individuals, taking the bankruptcy option is the most viable solution to debt problems. Bankruptcy is the ideal tool to wipe all debts, to afford the debtor a new lease in life and a chance to start anew. If these are your convictions too, beware! You may be taking the worst decision in life.

Don’t be too hasty in taking the bankruptcy option. This debt management tool will not solve all your money/debt problems. It can even have negative repercussions that can eventually hurt you. If you think bankruptcy is a surefire solution that will assist you to run away from obligations and from paying your debts, think again. Bankruptcy is only a temporary solution for individuals, who have the misfortune of running into unplanned, unforeseen or unexpected financial troubles and have no way of meeting or paying them.

A bankruptcy is in a way advantageous to the debtor because this will stop the harassment of creditors. A debtor will be given a chance to start anew. However, the negative impact should not be taken for granted. A credit record tainted with bankruptcy will be detrimental to future employments as well as business dealings. You will be labeled a bad credit risk by banks and other lending institutions and an unreliable financial proposition by future employers. Also you must be aware that even if you got a court discharge from your debts, other debts such as child support, educational loan, penalties and fines will still have to be borne by you.

Never lie about your financial circumstances when filing for bankruptcy. Never see it as official pardons from paying your accumulated debts rather see it as a way to repair your financial footing or a way to regain financial health. Hiding assets will have a grave impact on the proceedings.

Filing bankruptcy is not an excuse to have new debts to finance or to pay old debts. Borrowing money when you don’t have the capacity to pay would further damage your credit worthiness. Using pension and retirement funds as security for debts is a NO, NO, not when you know that they are exempt from bankruptcy proceedings.

Never attempt to do the bankruptcy proceedings without the help of insolvency practitioners or bankruptcy lawyers who are experts and more knowledgeable in the field of financial and debt management. Being a newbie to the process, you will not have the pertinent knowledge with regards to negotiating deals and legal documentation. The paperwork may be simple but filing up entries may be beyond your ability. The debt management counselors would be a big help in this aspect as well as in negotiating deals that would be favorable to you.

With these pointers, it is hoped that a healthy financial footing will be achieved with or without choosing the bankruptcy option.

Bankrupcy Tips – Work On Rebuilding Your Credit – Part #2

Bankrupcy Tips – Work On Rebuilding Your Credit – Part #2
 
Ah yes, the 800-pound gorilla that you would have to take on – rebuilding your credit. Fortunately for you, filing for bankruptcy does not have quite the same social and financial stigma it once did ten, maybe twenty years ago. ‘The purpose of filing is a safety valve,” says Roger M. Whelan, resident scholar of the American Bankruptcy Institute, a nonprofit professional organization. ‘Thank God, the day in which it was like wearing a blazing star on your forehead is over.’

But rebuilding your credit is the double-edged sword of post-bankrupcy life. You have gotten to where you are now because you mismanaged your credit. However, this does not mean that you would have to steer clear from credit from now on. At first, you may have to, because you are given little choice on the matter. But sooner or later, you find that you have to get credit to rebuild your financial life.

So what are the rules? There are no rules; that’s the best part about it. It does not matter how you do it or how fast. The factors can vary widely from the kind of resources you have and the type of bankruptcy you filed for. For instance, if you filed under a Chapter 13 bankruptcy, the bankruptcy will stay in your credit for five to seven years. Whereas, if you filed under Chapter 7, the bankruptcy could stay longer in your credit report – say, up to ten years. During that period, it is going to be very, very difficult for you to get credit, let alone work on rebuilding yours from bad to good. And yet, rebuild you must, if you want to get back in the financial game.

Now, if you have a high dollar income, then obviously you are going to have a slightly better edge over the rest. But just slightly. If you managed to hang onto your house, paying your mortgage on time will improve your credit report. But remember that ‘many apartments don’t report to credit bureaus, so those payments will keep a roof over your head but won’t help you rebuild your credit,’ warns John Ulzheimer, business development manager for MyFico.com, a division of Fair Isaac Corp., the company that developed credit scoring.

Ironically enough, while Chapter 7 filers usually have a hard time getting approved for new credit, they are also usually the ones that have a better chance at rebuilding their credit. Henry Sommer, an attorney and author of ‘Consumer Bankruptcy: The Complete Guide to Chapter 7 and Chapter 13 Personal Bankrupcy’ says that ‘while you’re in a Chapter 13 (reorganization), your options are somewhat limited in terms of credit.’ That’s because you cannot really apply for new credit without getting the court’s permission first.

On the other hand, under a Chapter 7, you are given more freedom in that area since all your debts are discharged. The sooner your debts are discharged, the sooner you can get to working on repairing your credit.

Bankruptcy Tips #2: Adopt a Positive Attitude and Show What You have Learned

Experts on bankruptcy insist that attitude and persistence can make a difference on your life after filing for a Chapter 7 or Chapter 13. ‘The consumer who’s going to recover faster is the consumer who jumps back in,’ says Ulzheimer. ‘Financial capacity is one thing,’ says Tahira K. Hira, a professor at Iowa State University who specializes in consumer economics and family finance. ‘Mental or attitudinal capacity is the other thing.’

So being positive can make a whole world of difference. ‘…If you build a savings account, carry no debts and have an emergency fund, you’re saying, ‘Look, I can control my behavior,’ Hira adds. ‘It depends on how good a salesperson you are and how good your behavior has been.’  And, of course, by behavior, she means your financial behavior or how you carry yourself around expenses and financial obligations. ‘Pay your bills on time’ is the name of the game. It is also incidentally the easiest way to show to your lenders that you have learned from your past financial mistake and are making every effort never to fall into that trap again. In short, you’ve got to be a model citizen in terms of financial management. Can you handle it? Of course, you can! And the only rule to follow is this: Shop for lenders.

‘There will be a price attached,’ warns Hira, ‘which is higher interest.’ This gives you all the more reason to be discriminating when choosing lenders. Don’t just jump at the first credit opportunity thrown your way only to find that the interests are punishing. Don’t get hard-balled into paying for high interest rates when you can get virtually the same loan for lower interest. Compare lenders. You are the consumer and you still have the advantage of choice.

Get Over Your Bankruptcy

The odds you have suffered much more than any bank or lender . Many of us have suffered severe finacial stress over the last 3 years . Unemployment has been hovering around 9% for 3 years . 14 million people are unemployed , did you get a bail out ? The answer to that question is NO ! The same banks that helped you get in over your head , got bailed out with our Tax Dollars .

Most of us wanted to do the right thing and pay our bills . You probably called your bank and lenders asking for help . Did they help you ? No, infact only 1% of all pepole who applied for a loan modification got one . The banks were given Billions to help people save their homes . Instead the banks bought government bonds and made Billions of dollars .

More and more Americans are filing bankruptcy . When , you are pushed into the corner you must fight back . Do not feel guilty about filing bankruptcy , you will survive .

So, the housing bubble was not your fault .When , you lost your job and the company that you worked for went out of business , not your fault . There were many factors that were out of your contol . So , you had to file bankruptcy and guess what the banks are still in business.

My purpose of creating this blog is to help everyone that is down on themselves. Get over your bankruptcy . In fact , for the rest of your life keep the banks out of your life . I thought that could not live without a credit card in my pocket . Guess what I am alive and my freedom from the banks in much more important now. We all must change our lives and stop using credit . Maybe one day the banks will be in your shoes . We all must learn from our mistakes and become a better person . Take control of your life and beleive in yourself once again . There is live after bankruptcy !

Bankruptcy May Not Be Your Best Option

Bankruptcy May Not Be Your Best Option

The following is not legal advice. For legal counsel regarding your situation, please consult an attorney licensed in your state).

The most widely held misconception about bankruptcy is that it’s the debtor’s version of the “get out of jail free” card in Monopoly.  While most people know that bankruptcy affects your credit for 7 to 10 years, very few people know that it’s possible that you’ll have to pay back the debt anyway, even if you file a Chapter 7 “straight” bankru…
 
(The following is not legal advice. For legal counsel regarding your situation, please consult an attorney licensed in your state).

The most widely held misconception about bankruptcy is that it’s the debtor’s version of the “get out of jail free” card in Monopoly.  While most people know that bankruptcy affects your credit for 7 to 10 years, very few people know that it’s possible that you’ll have to pay back the debt anyway, even if you file a Chapter 7 “straight” bankruptcy. The formal definition of bankruptcy is “a proceeding in federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability.” On the other hand, the commonplace definition of bankruptcy is probably “the process of completely wiping out your debts for free.” In the majority of cases, the latter definition may be appropriate, but in some scenarios, it’s likely that even with bankruptcy, you’ll still have to pay back at least a portion of the debt.

So when is it likely that you’ll have to pay back your debts? Here are the most common scenarios when you’ll get all the negatives of filing bankruptcy (severe credit impact for 7 to 10 years), but none of the benefits (you’ll still have to pay back at least part of the debt:

1) You make more than the average person in your state. If this is the case, then it’s likely that you’ll be forced into a Chapter 13 bankruptcy plan. In a Chapter 13 bankruptcy, the court orders that you pay all your disposable income to a court appointed trustee, who in turn disburses payments to your creditors. Keep in mind that the court determines your disposable income by national and county statistics on average necessary expenses, not what you’re paying. So just because you’re paying a lot for a car doesn’t mean the court will approve it. There are numerous cases when a judge ordered families to stop sending their children to private schools so they can have more money to pay back their creditors. In Illinois, here are the latest statistics on the Illinois median income by size of household:

1 – person families41,650
2 – person families52,891
3 – person families62,176
4 – person families72,368

2) You have assets. If you own a home or car, then it’s possible that the bankruptcy court will force you to sell them to generate sufficient cash to pay back your creditors. Chances are if have a good chunk of change invested (unless it’s in an exempt account like an IRA) then you’ll also be forced to liquidate it. If you have a second home or another vehicle (assuming you own both completely), then you’re really out of luck. Fortunately, there are some safeguards to protect consumers from bankruptcy hell. In Illinois, every resident is entitled to at least $7,500 of the value of their home, $1200 of the value of their vehicle, and $2,000 for anything that they want (known as the wild card exemption). Also, these values double if you’re married (assuming the property is in both of your names).

What does this actually mean? Consider the following example.

Let’s say you have a house that’s worth $250,000, and it’s in both yours and your wife’s name. You still owe about $200,000 on your mortgage, and you decided to file Chapter 7 bankruptcy. In this example, you would be forced to sell your home, and with the proceeds you would pay back the mortgage company what you owe on the outstanding balance of the loan ($200,000), you’d pay yourself the Illinois real estate exemption ($15,000), and then you’d pay back your other creditors whatever was left ($250K-200K-15K=$35,000).

Let say your house was only worth $215,000, but everything else in the above example remained the same. In this case, you wouldn’t be forced to sell your home because the proceeds from the sale wouldn’t amount to anything after you paid back the mortgage company and then paid back yourself the Illinois real estate exemption.

3) The creditors can prove that you were fraudulent and never had any intention of paying them back.

For those of us that fall in the aforementioned 3 categories, it usually means that unless a) you don’t have a lot of equity in any of your property, b) you don’t have any investments like stocks, real estate, ect., c) you don’t care about having to sell anything mentioned in points a and b, or d) you don’t care about having to give up your disposable for 5 years in a Chapter 13, then bankruptcy may not be your best option.

 

5 Things You Can Do After Bankruptcy

- 5 Things You Can Do After Bankrupcy

One of the issues that people considering bankruptcy often worry about is that they will never get credit after filing a Chapter 7 or Chapter 13. That, or the fact that the bankruptcy will stay in their credit report for 10 years from the filing, which fact would serve as warning to future creditors that you might turn out to be a bad risk. But neither is true, however. While a bankruptcy will indeed stay in your credit report for ten years, it does not necessarily mean that …

One of the issues that people considering bankruptcy often worry about is that they will never get credit after filing a Chapter 7 or Chapter 13. That, or the fact that the bankruptcy will stay in their credit report for 10 years from the filing, which fact would serve as warning to future creditors that you might turn out to be a bad risk. But neither is true, however. While a bankruptcy will indeed stay in your credit report for ten years, it does not necessarily mean that you can no longer get new credit.

Furthermore, only a Chapter 7 bankrupcy will stay in your credit report within 10 years. If you filed under Chapter 13, the period is shorter – about five to seven years. Worst case scenario: You can get a new loan but with high interest rates or fees. Now, that’s not so bad, is it? Especially after considering that even people with good credit can get bad loan deals. The fact remains that no matter how bad or good your credit line, it is not a guarantee that you are going to get approved for a loan or get low interest rates. In other words, a bankruptcy may damage your credit but only to an extent. It does not necessarily mean that you will never qualify for a new credit. What damage there is, you can always rebuild. And that is what you should be focusing on, instead of wallowing in the pits of Credit Doom.

#1 CAN DO: Keep a Credit Card out of the Bankruptcy

When filing for bankruptcy, the rule is that you have to make a schedule. A schedule is a list of all assets and liabilities that you are required under the law to disclose before a bankruptcy case could commence. If you owe money on a credit card at the time you file for bankruptcy, you have to include that in the schedule. Otherwise, you may be sued for perjury and penalized under federal law. What’s worse, if you fail to disclose unpaid credits like this, you may be denied discharge of all your debts.

The rule, however, only applies to unpaid credits. So if you do not owe any money on your credit card, then you can go ahead and keep that one out of the bankruptcy. You are not obliged to inform the credit card company of the bankrupcy case. Note, however, that your credit card company may still find out about it through other means and cancel your card as a precaution. If your credit card company gives you notice of cancellation of your credit card, don’t give up yet. Many credit card companies allow their credit card holders who are filing for bankruptcy to keep their credit card on condition that they agree to reaffirm the balance on the card and enter into a new agreement. Try to re-negotiate the terms with your credit card company and see if you can settle for a situation that is beneficial for both you and the company. While the decision is up to the creditors, keep in mind that what they want is to avoid the loss incurred when the debt is discharged and to have your future business.

#2 Get New Credit after Bankruptcy

If there is one thing you can count on in today’s competitive lending environment, it is that credit is always available, even to the recently bankrupt. The catch? Credit may be more expensive than before and available with lower limits. But all that is secondary only to the fact that credit does exist and you can get it. One of the easiest credits available to the recently bankrupt is a secured credit card. As opposed to an unsecured credit card, in a secured card, you must make a deposit of a certain amount of money in exchange for a card that you can use just like a regular credit card. Your credit limit is equivalent to the cash deposit you made. Now, the good thing about a secured credit card is that it is usually available post bankruptcy at lower rates than unsecured cards.

What’s more, the fact that these credit cards are secured are not often indicated in your credit report so creditors have no way of knowing whether your credit card is secured or not. All they will see is that you have been approved for a credit card, which ups your credit score a bit and puts you back in the game fairly quickly. Note, however, that credit experts are not quite in agreement concerning the impact of secured credit cards on your credit rating. So if you do decide to open a secured credit card post bankruptcy, be sure to do it slow.? While your rush at rebuilding your credit is understandable, making mistakes that could significantly affect your credit score like this is not worth it.

Rebuilding your credit worthiness after bankruptcy is a matter of getting a toe-hold in the world of credit. The balance is often precarious and needs delicate treatment. Use credit cautiously and pay on time.

#3 Buy a House after Bankruptcy

Absolutely. In fact, there are many studies that show bankruptcy debtors can qualify for a home loan on the same terms as if they had not filed bankruptcy within 18 to 24 months after a bankruptcy discharge. You see, what the creditors are concerned here is not your past financial troubles but your current financial status – e.g., your down payment, the stability of your income and the relationship between the loan payments and your monthly income. That said, take note of the following things that you might want to do in preparation for your first house purchase post bankrupcy:

• When purchasing a home after bankruptcy, the key is the discharge date, since there is usually a waiting period. If your loan was an FHA loan, you usually have a 2-year waiting period for that. For other conventional loans, the waiting period is four years. Now, during the waiting period, you need to do two things: re-establish at least 4 lines of credit (auto loans or credit cards, for example) and maintain an excellent payment history.

• Make sure that there aren’t any delinquencies on your credit report that should have been cleared off with the bankruptcy. If you find any, contact your creditors immediately. Include a copy of your “Schedule of Creditors” in your letter so that your creditors can indicate the debt was included in the bankruptcy and update your credit report.

• The more money you have in your savings or checking account, the better and stronger your file is going to look to a lender when you apply for a home loan. Remember that your ability to make a down payment bears great significance in your approval rating. If you have money in your savings account, your creditors will naturally conclude that you have the money to make a down payment.

#4 Get New Wheels after Bankruptcy

A common misconception people have after a bankruptcy is that getting new credit like a car loan is virtually impossible. Well, note that the word used is “virtually.” That is not the same as saying that you are certainly never going to qualify for a new car loan. Because the truth is you can and you should, if you need to. If you can get a house after bankruptcy, then there is all the more reason for you to be able to get a car. In fact, you can even start going through some dealerships as soon as your discharge papers are in. Just remember that the interest rates are not going to be cheap. Here are some tips to help you deal with that one tiny tangle:

• Check with the Special Financing Department
Most car dealerships have this special financing department that handles would-be car purchasers who are going through some financial trouble. Since these buyers would not be able to qualify for a conventional auto loan, some dealerships are willing to offer you a different deal to help you get that car you want and at the same time overcome the hurdle of credit after bankruptcy.

• Credit Unions
If you are a member of the credit union at your workplace, contact them and see if you can get a car loan through them. Often, credit unions offer lower interest rates than banks, which in addition to charging you higher interest rates, may also require you to deposit your paycheck directly with them. If your workplace does not have a credit union, your neighborhood may have one. Some are available to people based on organization or church affiliation, or even residence in a certain community.

• Charities
Not many people are aware of this but charities are actually a good place to look for inexpensive cars. You may have heard of charities that ask you to donate your working or non-working cars to them. In order to raise money, they repair these cars and sell them for a price that is significantly lower. Try those charities found in your neighborhood and see if they sell cars that are more along your price range.

#5 Have a 700+ Credit Score Two Years after Discharge

You might find this statement suspect, which is understandable really when you consider the many stories of how one bankruptcy can thoroughly damage the credit rating you’ve been building up for years. Expert after expert has said that new credit is near impossible to get after filing for a bankruptcy. However, in almost the same breath, the experts likewise say that it is not impossible to rebuild your credit worthiness after bankruptcy. And this is bolstered by the fact that you had good reason for the bankruptcy, such as unemployment, medical, business failure, etc, and that you immediately took steps re-establishing credit after receiving the discharge.

So why then, despite complying with these two requirements, your credit score remains way below average? The answer lies in your credit report. Your credit report contains everything about your finances. All of the information contained in your credit report, when added up, result in your three-digit credit score. Hence, any errors in your credit report, such as a fraudulent credit line or a debt that remains even though it was supposed to be discharged after bankruptcy, can aversely affect your credit score.

Common sense tells you that if you correct these errors and mistakes, you can improve your credit score. Also, some creditors make various inquiries into your credit report. This act could lower your credit score. What’s more, after a discharge, they are allowed to make only one inquiry into your credit report. After that, you are entitled to ask for $1,000 every time they look into your credit report. Make certain that your creditors are not making any more inquiries into your credit report. Write them a letter explaining that the debt has already been discharged. Include a copy of the discharge order as well as a copy of the ‘Schedule of Creditors’ from your bankruptcy papers as proof that the debts have already been discharged.

Bankruptcy Debt Relief – The Last Resort

Bankruptcy Debt Relief – The Last Resort

Are you buried neck-deep in debt? Do you owe a total of more than a hundred thousand dollars? Have you been repeatedly turned down by debt relief services? If so, don’t lose hope because there is still one last resort for you and that is to file for bankruptcy.

Bankruptcy debt relief has been the way out for thousands of people who have no idea of how to escape the financial hole they have inadvertently trapped themselves in. There are even individuals who have filed for b…
Are you buried neck-deep in debt? Do you owe a total of more than a hundred thousand dollars? Have you been repeatedly turned down by debt relief services? If so, don’t lose hope because there is still one last resort for you and that is to file for bankruptcy.

Bankruptcy debt relief has been the way out for thousands of people who have no idea of how to escape the financial hole they have inadvertently trapped themselves in. There are even individuals who have filed for bankruptcy more than once in their life.

However, before you join their ranks and go for bankruptcy debt relief yourself, you have to make sure first that there is really no other option for you.

The moment you file for bankruptcy, you will immediately be free of all existing debts. This idea might sound very appealing especially for someone who is already up against the wall in terms of financial obligations. However, you will have to completely understand the workings of the bankruptcy debt relief system before you affix your signature on the bankruptcy documents.

Probably the biggest drawback of bankruptcy debt relief is that once you are officially declared bankrupt, your Credit Bureau report will be stamped with the word ‘Bankruptcy’ in big, bold letters. When the lending companies see this on your record, you can be sure that they will not be sending any credit card offers your way.

Usually, your credit report will be cleared only after a period of seven years. This means that during this time, you will have to live on whatever cash you have because no creditor will be crazy enough to lend money to someone who obviously doesn’t have the means to pay for it. Of course, you can always borrow from generous relatives and friends but that would probably push down your rank in their list of favorite people in town.

Seven years can be a pretty long time and it may not be worth the initial freedom that you can get from bankruptcy debt relief. It is therefore critical that you try all alternatives first before filing for bankruptcy. There are thousands of institutions in the country that offer debt counseling services.

Before opting for bankruptcy debt relief, it would be a good idea to consult with some of these financial experts and bankruptcy attorneys so that you can determine if bankruptcy debt relief is in fact the best option to take.

When you are at a financial website that claims to offer debt relief programs, the first thing you have to look for is whether the address and phone number of their company is listed on the site. If there is no contact information and only a P.O. Box number is supplied, that is a sure sign of a scam and you shouldn’t waste your time on that site.

If a telephone number is listed, you must try calling the debt relief program company. Communicating on the phone with an actual person is always better than just corresponding with them via email.

Bankruptcy And Home Loan Refinance Options

Bankruptcy And Home Loan Refinance Options

After a bankruptcy, home loan refinance options can be tricky.  Your lender may or may not work with you in your quest for a better financial security.  You will need to investigate your options for a suitable program.  It may serve your best interest not to use the particular program that your lender provides.

A bankruptcy home loan refinance program can be a wonderful option if the lender is willing to work with you.  It can be a nightmare if the program has hidden surpr…
After a bankruptcy, home loan refinance options can be tricky.  Your lender may or may not work with you in your quest for a better financial security.  You will need to investigate your options for a suitable program.  It may serve your best interest not to use the particular program that your lender provides.

A bankruptcy home loan refinance program can be a wonderful option if the lender is willing to work with you.  It can be a nightmare if the program has hidden surprises along the way.  In some cases, it would be best not to pursue a loan at all.  In some instances, you may feel as if your lender is trying to push you into a program that you do not want.  This should send up some red flags to you and you may want to find another lender who specializes in refinancing options.  It may be that your lender just does not want to work with you anymore.  It is better to find a new one than try to salvage a relationship that will make you miserable for years to come.

If your lender is making the option of a bankruptcy home loan refinance painful, you will want to search for another lender.  There are always other options for refinancing.  There are many finance companies just waiting to serve you and they will offer you a package that is more attractive.  They will come with both good and bad.  Your interest rate will be higher in a package from a finance company. 

It is always important to do a little research when looking for a bankruptcy home loan refinance program that will work for you.  The differences in programs can be like night and day.  Some programs may seem like a good idea in the short term.  These will often lower your payments and that may be the option you choose.  However, some refinancing can make it seem as if you are starting over and your loan will take another thirty to forty years to pay off.  This is not a good option to have if you have already been paying on your home for several years.  It would be a good option if you have only been paying on your home for less than five years.  You will have to make that determination for yourself.

As you can see, a bankruptcy home loan refinance program can have both good and bad outcomes. You as the consumer are ultimately responsible for the program that you choose or do not choose to take. Remember, a troubled financial past should not prevent you from affordably owning your own home. However, many lenders will make it as difficult and as costly as possible for you.  Perform an internet search and look for specialists that know how to seek out premium deals and that will present them to you without any pressure. Make sure that you ask them plenty of questions and have a lawyer look over any documents before you sign anything.

Bankruptcy Alternatives

Bankruptcy Alternatives

Bankruptcy is an option an individual in dire financial difficulty would be forced to take. This is considered as the last debt management tool or resort a debtor could ever take because of the stigma that comes with its implementation. Being published in the London Gazette, made available on line and registered, bankruptcy orders have a far reaching effect. Everybody would be aware of your misfortunes. Bankruptcy will stay in your credit record for a period of 10 years. Its …
Bankruptcy is an option an individual in dire financial difficulty would be forced to take. This is considered as the last debt management tool or resort a debtor could ever take because of the stigma that comes with its implementation. Being published in the London Gazette, made available on line and registered, bankruptcy orders have a far reaching effect. Everybody would be aware of your misfortunes. Bankruptcy will stay in your credit record for a period of 10 years. Its lasting effect could be detrimental to future employment and future financial dealings.

Bankruptcy, however, do have some alternatives. A debtor who is aware of his incapacity to pay debts as they become due should consider entering into a compromise with the creditor and have an informal arrangement to schedule payments. But as it is informal and not legally binding, the creditor on a whim, could renege on the arrangement and demand the full payment of the debt.

Another alternative is the administration order. Instead of paying directly to the creditors, this court-based procedure would require the debtor to make regular payment to the court. However, this is only applicable to debts not more than £5,000 and a regular income is necessary to make the monthly repayments. Irregular payments would result to the cancellation of the court order. In such case, the debtor will be subjected to the restrictions imposed on a bankrupt individual.

IVA is another bankruptcy alternative. In an individual voluntary arrangement, the debtor, with the help of an insolvency practitioner will apply to the court and make a proposal to the creditors to pay all or part of the debt.

What are the workings of an IVA and how is it done? First off is to enlist the help of an authorized insolvency practitioner. The court and the local Receiver’s Office can provide you with a list of names of said practitioners. The court, upon your application will issue an ‘interim order”. This order will prevent creditors from proceeding with any bankruptcy petitions against the debtor.

The insolvency practitioner, acting in your behalf will present to the court the debtor’s proposal. The insolvency practitioner may deem it necessary for the debtor and the creditors to have a meeting to discuss the proposal. The creditors will then vote on the acceptance of the proposal. It is important therefore that all creditors be informed because the arrangement will not be binding to the creditors who were not able to vote.

An IVA gives a debtor the chance to decide on what to do with his assets and on how to pay the creditors. He may even persuade the creditors to let him retain assets such as the house or the car. This is not so in a bankruptcy order. Unlike in bankruptcy, the debtor will not be asked to pay certain fees so that the overall cost of an IVA is lesser.

An individual voluntary arrangement is an opportunity for the debtor to avoid bankruptcy. But if the IVA is disapproved and rejected by the creditors, the debtor will still be faced with bankruptcy. It is therefore necessary to know if the creditors are likely to approve the proposal.

Bankrupcy Tips – Some Rebounding Tips After Bankruptcy – Part #

Bankrupcy Tips – Some Rebounding Tips After Bankruptcy – Part #1

Wow you have done it Now !

So you have filed for bankruptcy. What’s the next step? At first blush, you are full of ideas on how you are getting a fresh start. You have freed yourself from almost all of your debts and you are, for all intents and purposes (financially, at least), a new person. But note that by filing for bankrupcy, you had to pay a dear price. In exchange for a discharge of your debts and stopping your creditors from pursuing any collection actions against you, your credit rating took the brunt of the blow. Considering how your credit rating was probably not all that great to begin with, this recent hit is not going to be an easy one to recover from.

Let’s start with the bad news:

• The bankruptcy will stay on your credit report for up to 10 years.

• To lenders, you would seem a bad risk because you have legally written off at least some of your past debts.

• As a consequence, you may not be able to get a loan or a credit card for some time after the bankruptcy.

• And if you do get lucky and get approved for credit, the interest rates and fees attached will be rather punishing.

The silver lining? Think positive. It is good that you are restricted from getting new credit. Credits were what you got bankrupt in the first place. They will have no difficulty getting you in that place…again. Now, for the rebounding tips to help you climb back up from the pits of bankruptcy:

Lead a Frugal Lifestyle: Common sense dictates that you lead a simpler lifestyle properly slimmed-down, no frills attached. In other words, be frugal. If you filed under Chapter 13, it means that you have signed up for a repayment plan to pay off some of your debts. The purpose of Chapter 13 is to allow debt reorganization so that you can continue holding on to your properties and other assets in exchange for obliging yourself to pay your debts for a certain number of years. The bottom line, therefore, is that you are still in debt, albeit, you may only pay a portion of the total debt to your creditors.

The usual period given by bankruptcy courts with which you can pay off your debts is within three to five years. During this time, the court allows you only a set amount to live on while the court-appointed trustee divides the rest among your creditors each month. What does this mean to you?

As we earlier said, it means a no-frills lifestyle. No luxuries whatsoever, except those exempted under the law. And sometimes, just sometimes, it may also mean changing your basic expenses, such as how much you pay for shelter and groceries every month. You may even have to move to a cheaper apartment or a more low-end neighborhood just so you can get by with the amount the court allows you. Suffice to say that getting new credit will be a difficult feat, if not downright impossible. So you can forget about getting a new credit card or a car loan. Or at least, getting it the easy way. Besides, you can’t take on a new debt without the court’s permission anyway, and getting that means adding an awful lot of complexity in your life.

So how do you go about with barely anything to tide you over through the hard times ahead? It’s simple really – make a budget. Better yet, keep a close watch on your expenses for three months and make a budget based on any observations you have made on your spending habits. This is exactly what Greg McBride, CFA, senior financial analyst for Bankrate.com advises:

Track your expenses for three months to get an idea of how much you’re spending and where that money is going. Then create a realistic budget that fits within your monthly income, he says. ‘The first step to saving is to set boundaries on your spending. And after making a budget, stick to it. That’s the most important part.

Bankrupcy Tips – Notice To The Creditors And Meeting – Part #3

Bankrupcy Tips – Notice To The Creditors And Meeting – Part #3
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But note that there are…
After filing your petition for bankruptcy under Chapter 7, paying the necessary fees, and complying with the legal requirements, an “automatic stay” is granted to you by operation of law. This stay will effectively stop most collection actions against you and your properties (11 U.S.C. 362). This means that as long as the stay is in effect, creditors cannot initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments.

But note that there are certain types of actions listed under 11 U.S.C. 362(b) that’are not stayed when you file the petition. In some situations even, the stay is only’for a short period of time. So this should serve as warning.

After the bankruptcy case has been filed, the bankrupcy clerk will give notice to all creditors whose names and addresses you provided. Then, the case trustee willhold a meeting of creditors between 20 and 40 days after you filed your petition.This meeting is otherwise known as the 343 meeting, after the codal provision 11 U.S.C. 343 that provides for such.

In a 343, the debtor will be put under oath and both the trustee and the creditors will ask questions regarding your financial affairs and property. Your attendance is a must. Within 10 days of the creditors’ meeting, the trustee will then report to the court whether the case should be presumed to be an abuse under the means test described in 11 U.S.C. 704(b).

=== Cooperate with the trustee ===

The case trustee has a very important role in a bankruptcy case. His primary responsibility is to liquidate your nonexempt assets in a manner that maximizes the return to your unsecured creditors. He does this by selling your property, if it is free and clear of liens and as long as it is not exempt, or if it worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property.

In addition to having the authority to sell your nonexempt property, he also has the power to recovery money or property. This is called the trustee’s “avoiding powers,” which necessarily includes the power to:

• Set aside preferential transfers made to creditors made within 90 days before the petition

• Undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition

• Pursue nonbankuptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law

In view of the broadness of a trustee’s power, it is important therefore that you cooperate with the trustee. Provide any financial records or documents that the trustee requests and answer questions, which the trustee is required to ask at the meeting of creditors under the bankrupcy Code.

This is to ensure that you are aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on your credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt.

=== After the discharge ===

If all goes well with your bankruptcy case under Chapter 7 – that is, no one files a complaint objecting to the discharge or a motion to extend the time to object – the bankruptcy court will issue a discharge order relatively early in the case, about 60 to 90 days after the date first set for the meeting of creditors (Fed. R. Bankr. P. 4004(c)).

A discharge order is an order issued by the bankruptcy court, releasing you from personal liability for most debts and preventing your creditors from taking any collection actions against you. As previously mentioned, there are certain types of debts that will never be discharged (see Step #1). As a rule, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of Chapter 7 cases.

For someone filing under Chapter 7, a discharge of almost all of your debts is the ultimate goal. With the release of all your debts and creditors stopped from pursuing any further collection actions against you, the opportunity for a fresh start is apparent.