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| Are You Thinking About Filing For Bankruptcy Prote |
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Bankruptcy, when you come right down to it, is the process that enables those
who are unable to pay their debts get a fresh start.
It allows for some or
all of these debts to be discharged or reorganized. Individuals or businesses
may file bankruptcy.
This enables you to clean the slate and get a 2nd
chance with your finances. In most instances, bankruptcy provides a fair method
for compensating your creditors as well.
The bankruptcy process need not
be your worst nightmare. However, there are certain requirements that must be
met. You will be required to file a list of all of your outstanding debts and a
complete list of your
assets. This is done with the help of your lawyer thru
the Federal Courts.
To make this process easier to understand, your
"Assets" fall into two categories.
They are: Exempt and
Non-Exempt
Exempt assets are the property or belongings that you do
NOT have to use to pay off the debts you have incurred.
In other words,
exempt assets are off the table, (not in play) and may not be touched by your
creditors.
In most instances this includes a certain amount of equity in
your home, and some of the equity in a vehicle. For the most part, your
clothing, and other personal items are deemed exempt. This does not include the
expensive jewelry, furs and the big boys toys.
Next, you will be
assigned a "trustee" by the Federal Bankruptcy Court to administer the payment
of your debts.
Your debts also fall into two categories.
They are:
Secured debts and Unsecured debts.
A Secured debt is one in which
the creditor retains a "security interest." Most often it is the same property
that was purchased with the credit that creditor extended.
Secured debts
occupy the first position. This means they enjoy priority over non-secured
debts, and must be satisfied first.
If you are unable to pay off secured
debts, the creditor has the option to repossess that property and sell it. If
there is any "short fall", that remaining debt is now considered unsecured. It
doesn't go away, it has only changed from secured to unsecured.
Once you
have filed for protection, the court will issue an "automatic stay". This
stops your creditors in their tracks. They may not take additional action
against you beyond the bankruptcy.
This allows you to avert impending
repossessions and foreclosures.
Chapter 7
In Chapter 7
Bankruptcy you are in fact liquidating your assets. This means that you are only
permitted to keep "exempt" property. The remaining non-exempt property will be
sold to the highest bidder. The proceeds of the sale are applied to the
outstanding debt. The shortfall or amount left unpaid by the sale is then
discharged.
In Chapter 7 Bankruptcy there are a few debts that are not
dischargeable. They include taxes, back child support, DWI fines and student
loans.
Chapter 13
In Chapter 13 Bankruptcy you are trying
to regroup, recoup and get back on track. It is commonly known as the
"reorganization bankruptcy for individuals."
Individuals who want to pay
off their debt over a period of three to five years file Chapter 13 bankruptcy.
Chapter 11
Chapter 11 Bankruptcy is commonly used as the
reorganization tool for businesses. This kind of bankruptcy is attractive if you
own "non-exempt" property that you want to protect.
Chapter 11 will also
help you to catch up on bills that have fallen into arrears. It effectively
blocks an impending repossession or foreclosure.
Not everyone is
eligible for a Chapter 13 bankruptcy. You must have a reliable source of income
that is sufficient to pay your reasonable everyday expenses and still have an
amount of positive cash flow with which you begin paying off past due bills.
If you file a Chapter 13 you are required to submit a plan to repay your
debts that includes a set timeframe and set amounts to be repaid. Upon approval
of the bankruptcy court, both parties (debtors & creditors) are obliged to
accept the terms of the order
What To Do Now
Choosing
your bankruptcy lawyer is an important decision.
This beginning process
allows you to evaluate and determine your best course of action. This discussion
is also your opportunity to satisfy yourself that the Jersey Justice sponsoring
attorney's fees are reasonable for your type of case.
Am I Making The
Right Decision?
In all likelihood you are stressed and feeling the
pressure to seek professional help with your finances.
Your decision to look
for an experienced bankruptcy attorney may be the best financial decision you
have made in a long time.
Even taking the beginning steps to consult
with an attorney takes enormous courage. You may even be thinking about
struggling through all the mess on your own. That could be a very lonely path.
Before you make the decision to go it alone, ask yourself a few
questions. If two or more of these are you, then it could be the perfect time to
seek the services of a bankruptcy professional.
Are You:
receiving harassing or threatening phone calls from people you owe?
paying the minimum payment possible on your credit cards?
taking
out Payday Loans? (which by the way are illegal in NJ)
begging for loans
from friends and family?
about to lose your job?
behind in your
taxes?
receiving foreclosure notices?
behind in child support or
alimony?
gambling to try and make ends meet?
sick and unable to
even go to work?
If your answers indicate that you are in financial
deep water, bankruptcy may be your best solution, but you will never know for
sure until you get the advice of an attorney.
How Will Bankruptcy Effect
My Life? Your Bankruptcy Attorney will be able to explain some other very
important considerations.
What happens after bankruptcy?
What
will my life be like?
Will I ever be able to get credit again?
How do I live within a budget?
How do I start all over?
How do I rebuild my credit?
If these nagging questions are
on your mind, then a bankruptcy attorney is right for you.
It is true. A
bankruptcy can be a persistent source of blemishes on your credit report for up
to 10 years.
The good news is you are able to start re-establishing your
credit the moment your case is closed.
How good is your present report?
It is probably already suffering the consequences of late payments,
delinquencies and every other known credit report disorder.
Think about
this. Your credit score could actually improve due to the elimination of most of
your debt. Lenders actually believe that you are a better credit risk now since
they know that you may not file bankruptcy again for another six years.
At about 18 months to 24 months into your bankruptcy you will even be
able to qualify for a new home loan if you are able to come up with a minimum
down payment backed up with proof of income that supports the debt service.
Auto loans are available to individuals upon discharge of your existing
debt. And believe it or not you will start receiving offers for credit almost
immediately. But "caution" is the watchword at this critical point in time.
The offers of credit could have been what got you into trouble in the
first place.
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