Chapter 13

Top 10 Bankruptcy Mistakes

By Richard Waple

Bankruptcy mistakes can be very costly and all too often an individual filing bankruptcy will make inadvertent mistakes that jeopardize their chance of discharging their debts and retaining exempted property. Avoid these Top 10 mistakes and you will be well on your way to a successful bankruptcy filing.

1. Transferring Real Estate or Other Assets: Some people try and protect their assets by transferring them out of their name, but this strategy will not work in a bankruptcy proceeding. Recent property transfers must be disclosed to the bankruptcy trustee and the bankruptcy court may “avoid the transfer” and put the parties in the same position they were in before the transfer. Even if you don’t feel that the property or asset that your name is rightfully yours, the bankruptcy court may still “avoid the transfer”. It is often unnecessary to transfer any property or assets before filing bankruptcy as each state has bankruptcy exemptions designed to protect all or a portion of your assets.

2. Transferring Credit Card Balances: Transferring a large amount of debt to one credit card can result in debt on the new credit card not being eliminated due to the large amount of debt incurred to one creditor right before filing bankruptcy. The new creditor may have a strong argument that the balance transfer should be presumed fraudulent, especially if the transfer was within 60 days prior to filing and over $1500.

3. Repaying Loans to Family Members: The bankruptcy code requires that you treat all of your creditors equally and does not want you choosing which creditors to repay right before filing bankruptcy. You can’t repay Uncle Bob the $2000 from when the furnace went at the expense of your other creditors. The bankruptcy trustee may pursue the relative for a portion of any funds recently transferred to them. You are required to list debts that are owed to family members, but assuming there is no discharge objection brought, the debt will be legally eliminated and you can repay the loan if you choose to.

4. Not Including All Your Debts on your Bankruptcy Petition: You are required by law to include all of your debts on your bankruptcy petition, even if you want to keep the debt. If you want to keep your house and automobile when you file a Chapter 7 bankruptcy, you usually will sign a reaffirmation agreement with the bankruptcy court excluding the discharge of those specific debts.

5. Ignoring Lawsuits: Many people fear lawsuits and don’t know what to do when they get a summons in the mail. In most cases, if you have already filed bankruptcy and receive a summons from a debt listed on your bankruptcy petition, your bankruptcy attorney should be able to fax your case information to the creditor’s attorney and get the case dismissed. However, if you are in the process of filing bankruptcy, but the case is not officially filed yet, it can be helpful to attend the designated court hearing and request a continuance to give you an opportunity to file for bankruptcy relief.

6. Withholding Information from Your Bankruptcy Lawyer: Bankruptcy Lawyers are often frustrated at 341 hearings when their clients are placed under oath and disclose new information that was previously withheld from their attorney. Bankruptcy lawyers need all the requested information to properly advise you and protect your income and assets. The horror stories about bankruptcy that we’ve all heard are frequently due to an individual failing to disclose vital information to a qualified bankruptcy attorney for proper advice and planning.

7. Cashing in 401(k)’s, IRA’s, and other Retirement Funds: Generally, 401(k)’s, IRA’s, and other retirement funds are protected from the reach of your creditors and are allowed to be kept during and after a bankruptcy. However, a common mistake is people cashing in their retirement accounts or obtaining a loan. The money that is taken out of your retirement account is no longer protected from your creditors, and you’ll likely owe penalties and taxes on any accounts that were cashed in.

8. Filing Bankruptcy when you are expecting a Large Tax Return: In many states, a tax refund is considered to be an asset that can be liquidated if the bankruptcy exemptions aren’t enough to protect it. Depending on the amount of the refund and the relevant state laws, it is often advisable for you to receive your tax refund and spend the proceeds on living necessities before the bankruptcy is filed. Many states offer a “wildcard” exemption that can be used to protect tax refunds among other things.

9. Waiting Until the Last Minute Before Filing Bankruptcy: The moment you file a bankruptcy an “automatic stay” goes into place which prohibits your creditors from any further collection activity against you, but it is unlikely that you will be able to recover any wages garnished or property taken before the filing of the case. Too many people wait until their creditors have already taken action against them before consulting with a bankruptcy attorney. It can take considerable time to prepare the bankruptcy petition, review the relevant documentation, and be certified by a trustee approved credit counseling agency. Once you have made the decision that bankruptcy is your best alternative, you should file as soon as possible to avoid anymore creditor harassment and allow yourself to put future earnings towards long-term goals and savings instead of chipping away at an insurmountable amount of debt.

10. Not Hiring a Bankruptcy Attorney: Fortunately, experienced bankruptcy attorneys are aware of all of these common mistakes and many more. Bankruptcy is a complex area of the law and the process has being further complicated with the new bankruptcy laws. Mistakes can be costly and a thorough case evaluation from a local bankruptcy attorney is the best way to identify any possible issues and develop a strategy to relieve your debt problems.

Richard Waple is the creator of http://www.bankruptcyhq.com, a bankruptcy information website containing insight and information primarily based on Richard’s experiences as a bankruptcy attorney with one of the largest consumer bankruptcy law firms in the nation.

Article Source: http://EzineArticles.com/?expert=Richard_Waple
http://EzineArticles.com/?Top-10-Bankruptcy-Mistakes&id=549194

Powered By WP Footer

Chapter 13

Bankruptcy: What You Need to Know

By Alan Barnes

Personal bankruptcy is a legal way to give people with overwhelming debt a fresh financial start. Many people do not realize that there are five types of bankruptcy options available under the U.S. Bankruptcy Code; however, for most consumers there are really only two viable options; Chapter 7 and Chapter 13 bankruptcy.

Chapter 7, bankruptcy is entitled Liquidation: In a Chapter 7 bankruptcy, a court-supervised procedure occurs during which a court-appointed trustee collects the assets of the debtor’s estate, converts them to cash for repayment, and makes all necessary distributions to the debtor’s creditors; however this is all done within the debtor’s right to retain certain exempt property. Traditionally, there is little or no nonexempt property in a chapter 7 bankruptcy. Due to this fact, there may not be an actual liquidation of the debtor’s assets. In this case, it is called a “no-asset bankruptcy.” It is important to realize that a creditor that is trying to collect on an unsecured claim will only get a distribution from the bankruptcy estate if the case is an “asset bankruptcy” and the creditor can provide proof of their claim with the bankruptcy court. In almost all chapter 7 bankruptcies, the debtor will be grated a discharge that releases them of personal liability for most dischargeable debts. The entire process normally takes just a few months from the time the bankruptcy petition is filed.

Chapter 13, bankruptcy is entitled Adjustment of Debts of an Individual with Regular Income: A chapter 13 bankruptcy is traditionally used for people who have a regular source of income or a full-time job. For many people, chapter 13 is preferable to chapter 7 because it allows the debtor to keep some assets. A chapter 13 bankruptcy allows the debtor to repay creditors over time. This time traditionally varies from three to five years. This type of repayment proposal takes place at a confirmation hearing. During this confirmation hearing, the court will either approve or disapprove the debtor’s repayment plan. This decision largely depends on whether the repayment plan meets the Bankruptcy Code’s requirements for confirmation. In a Chapter 13 bankruptcy the debtor is usually able to remain in control of their possession and property while making payments to creditors; however, payments are made via a court trustee. Unlike chapter 7 bankruptcy, the debtor does not receive an immediate discharge of their debts. Under chapter 13 bankruptcy, the debtor must complete the repayment plan before the discharge is granted; however, the debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect.

It is important to remain cognizant of the fact that not all debts are discharged under bankruptcy. The debts that are able to be discharged will vary under each chapter of the Bankruptcy Code. However, the most common types of non-dischargeable debts are tax claims, debts that are not presented by the debtor to the court while filing for bankruptcy, debts for spousal or child support or alimony, debts to governmental units for fines and penalties owed to government entities, debts for personal injury caused by the debtor’s operation of a motor vehicle while driving intoxicated, debts for willful and malicious injuries to person or property, debts for government funded or guaranteed educational loans, and debts for certain condominium or cooperative housing fees.

In order to file for bankruptcy, you must file a petition in federal bankruptcy court. You must file a statement of assets and liabilities as well as schedules listing of your creditors. Once you have finished filing bankruptcy, your creditors can no longer take action against you to collect discharged debts.

Negative Aspects of Bankruptcy

In chapter 13 bankruptcies, you may end up paying back 50% or more of your current debts. Additionally, if you miss a regularly scheduled payment at anytime during your chapter 13 bankruptcy repayment plan, you could end up in violation of the court and forced to repay all the debt!

One of the most difficult parts of bankruptcy is learning to live with the fact that filing bankruptcy limits your personal spending to items that the court considers absolutely necessary. In most cases, debtors do not complete their chapter 13 bankruptcy repayment plans. Most people filing chapter 13 bankruptcies think they will be able to complete their repayment plan; however, only about a third of them actually do. Additionally, chapter 7 bankruptcy may stay on your credit longer than a chapter 13 bankruptcy. This time ranges from 7-10 years for most people. Many people do not realize that if you own a home with a sizable amount of equity, have a fair amount of assets to protect, or have co-signers on a loan, you most likely will not be able to file chapter 7 bankruptcy under current law. Now that the new bankruptcy legislation has passed, it will be even more difficult to file for bankruptcy.

Many people think that filing bankruptcy is the silver bullet that will fix all of their debt and credit related problems; however, filing bankruptcy is the worst thing you can do to your credit. Most lending institutions will consider your bankruptcy when evaluating you for a personal loan even after the bankruptcy has expired. Qualifying for a loan after filing for bankruptcy can be very difficult and could cost you considerably more than a person that has not filed for bankruptcy.

It is understood that some situations will require you to file for bankruptcy. However, you should avoid bankruptcy if at all possible. A good debt settlement company can help eliminate most, if not all, of your unsecured debt so that you do not have to file for bankruptcy. If you require additional information on the subject of bankruptcy you may want to contact a bankruptcy attorney in your area.

Alan Barnes IAPDA Certified Debt Arbitrator President and CEO of Debt Regret http://www.debtregret.com

Article Source: http://EzineArticles.com/?expert=Alan_Barnes
http://EzineArticles.com/?Bankruptcy:-What-You-Need-to-Know&id=34443

Powered By WP Footer