When Dealing With Personal Bankruptcy

There are two options when an individual has decided to file for a Personal Bankruptcy. These are Chapter 7 and Chapter 13 bankruptcies. Chapter 7 is a liquidation of assets and Chapter 13 is a three to five year repayment plan.

Sometimes things happen in life that we have no control over and they end up putting individuals in circumstances where they have no choice but to file for Personal Bankruptcy in order to get a fresh start. Losing a job, the financial repercussions of divorce, high medical expenses and unsecured credit card debt are some of the most common reasons that may cause a person to have to file bankruptcy.

Chapter 7 bankruptcy releases the debtor from any further personal liability for certain debts. As soon as the Personal Bankruptcy is filed with the United State Bankruptcy court; all communications from the creditors must cease. In this type of case, any assets that can be converted to cash are sold by the court appointed trustee and sold via personal sale or through public auction and distributed among all of the creditors equally. Sometimes an individual does not have any assets that can be turned into cash to settle their debts. This is called "no-asset" cases. If this is the case, the debtor is released from all of their debt although there may be liens placed on any property that the debtor owns for certain types of secured debts.

Chapter 13 bankruptcies are different from Chapter 7 in the respect that it is not a release of debt, rather it is a reorganization of debts where a repayment plan of three to five years is put in place. This is the preferred way to file Personal Bankruptcy for those who have valuable assets that they want to keep. Once the repayment plan requirements are met, the debtor is then discharged from all debt and they are free from any further action from the creditors as long as the payments are made as agreed.

There are alternatives other than filing for Personal Bankruptcy that one should consider before filing. It may be possible to settle out of court with some of your debtors. There are debt counseling services that can help you consolidate your monthly payments and obtain a lower overall payment amount. Debt consolidation loans are another option as well. This is where the individual borrows against the equity in their home to pay off all of their other bills. Using an alternative to bankruptcy may actually hurt in the long run if you do ultimately have to file bankruptcy, so weigh all of your options before making a decision.

Numbers of Americans Filing Bankruptcy Continue To Rise Since 2005 Changes

Back in 2005, Congress believed that too many people were taking advantage of the bankruptcy system and they needed to make changes. They felt that the number of abusive bankruptcy filings was way too high so they introduced the Bankruptcy Abuse Prevention And Consumer Protection Act. The BAPCPA was enacted on October 17, 2005. During the next year real estate values nationwide reached a record high and then began a freefall that hasn't stopped to this day. This phenomenon is pushing many Americans into filing bankruptcy to get away from an upside down property. All these problems didn't happen overnight and have been coming on by regulations imposed by Congress over the last 10 years. The first trigger point that they got mainstream America's attention was the financial crisis in 2008. This perfect storm that has been created threatens the retirement of every American and even the way we live.
The mainstream media refuses to use the term depression and instead keeps saying that the economy might slide back into another recession. Most experts have said that our economy never left that recession. Ever since Congress changed the bankruptcy code back in 2005 the number of Americans filing bankruptcy continues to be on the rise. The only trade that has been benefiting from these changes is that of a bankruptcy attorney.
As the news refuses to accept the economic downturn there are many factors that show a different story. First of all, because of the real estate crisis, home ownership is getting close to historic lows in many regions in the US. Next, the rate of foreclosures in the US continues to rise and has increased 14% in the last quarter alone. It was recently reported that there were 20 million homes in America that were in default or in danger of being in default currently. Another economic factor that should open peoples eyes is the unemployment rate. Unemployment has not dropped below 9% since back in late 2008. Many people believe that this number is not a true number because many Americans have given up on looking for work. One big fact that should wake up many is the rate of Americans filing for bankruptcy. In 2010, there were close to 1.6 million bankruptcies filed in the US. Although, the number of people filing bankruptcy in 2011 is relatively flat, many people are predicting this is the calm before the storm.
Any bankruptcy attorney could point to the changes to the bankruptcy code that began the slide down the slope for the US. Historically, filing for bankruptcy was a safety net for Americans that got caught being overwhelmed with a mountain of debt. They idea behind bankruptcy was to allow small businesses to take risks and have a way out in case they failed. Bankruptcy is the backbone of capitalism because if individuals with ideas were obligated to pay debts back for life or debtor's prison, no one would take the risk. Only time will tell how this mess washes out. The government needs to get out of the way and allow our economy to take the path of least resistance and fix itself.
After all the changes to bankruptcy filing, it still has a lot to offer the American consumer. Now, it is just become a little more complicated and is best served with the help of a bankruptcy attorney to navigate the new bankruptcy code. It's still true that filing bankruptcy was created to give good hard working Americans a second chance by putting them on the road to becoming debt-free.

The author is a professional that formed FilingBankruptcyNow.Com which provides information for debtors considering filing bankruptcy under Chapter 7 and Chapter 13 bankruptcy and helps individuals stop foreclosure and eliminate their debt by putting them in touch with a local bankruptcy attorney.

Be Credit Wise After Filing Bankruptcy

After the changes to the bankruptcy code back in 2005 debtors are now required to complete pre-bankruptcy credit counseling and post-bankruptcy financial management courses when filing a Chapter 7 or a Chapter 13 bankruptcy. These counseling courses were designed to educate individuals on making better financial decisions in the future as well as to improve their credit worthiness.

Post-bankruptcy an individual can put their new found information to use and live on a budget while working to rebuild their credit. A good way to monitor their credit progress is to closely watch their credit scores. Federal law allows one credit report free of charge from each of the three major reporting agencies on an annual basis. The debtor will want to be sure that there are no mistakes on the reports, and if so, they should be reported and corrected as quickly as possible. It is not uncommon these days for a creditor to sell the debt to a collection company and for that company to in turn try to collect on the debt even though it was technically discharged in the bankruptcy. This practice is not legal but many aggressive collectors will harass the debtor and report this discharged debt to the credit agencies and ruin the debtor's credit scores that they are working so hard to rebuild. The individual does have recourse against these collectors and should report them immediately to the Fair Credit Reporting Agency for prosecution. Everyone that has gone through a personal bankruptcy has two priorities: to budget wisely and save money, and to rebuild their credit history. This may seem daunting, however, by keeping careful track of expenses and paying bills on time this can be accomplished.

After an individual's bankruptcy has been discharged they should wait at least six months before applying for home refinancing. Sure the debtor will receive offers for credit in the mail within a few months of their bankruptcy discharge, which can be a great way to establish and build a solid credit history. But when it comes to home refinancing, credit experts suggest waiting a minimum of six months or better yet, two years if at all possible. This will allow the debtor ample time to rebuild credit and show a record of making payments as obligated. When the individual decides the time is right to refinance, they may want to contact their current mortgage lender first. The lender may be able to provide the best overall loan package, especially if the debtor has made all of their scheduled payments on time. The individual should consider shopping around to compare interest rates, lender fees, and closing costs to find a mortgage that will improve their financial situation. The debtor should beware not to get tempted to tap into any equity they may have unless it is absolutely necessary.

The goal of rebuilding credit is to improve one's financial stability and not to increase their debt to unmanageable levels. By learning and implementing budget management, going through the process of rebuilding credit, and patient comparison shopping, a motivated person can obtain financial stability and become debt free after filing bankruptcy.

Allowing Bankruptcy Filing Won't Stop The Student Loan Conundrum

For a couple of months now, the Occupy Wall Street movement has gotten a lot of media attention. While no one really knows what they want as there is a mixed bag of groups that are protesting, one common complaint heard is the cost of a college education. Most people who go to college get student loans to pay for their education that many times doesn't pan out. There are those kids who get a liberal arts degree and have no job skills whatsoever and can't figure out why they can't get a good paying job. Hearing these stories, it's hard to have sympathy for these individuals. Over the last couple years with the increased numbers of people filing for bankruptcy, there are many people that are saddled with huge student loans. In today's economy, there just aren't any jobs, especially for kids getting out of college. Currently, there is more than $1 trillion in student loans debt that is guaranteed by the government. This is quite a big chunk of change. It's no surprise with $1 trillion outstanding that they would allow a student loan debtor to file for bankruptcy and wipe these debts out.

You can ask any bankruptcy attorney and the common answer to discharging student loans is it's next to impossible. With the student loan debt tripping the $1 trillion mark many are wondering if a student loan bubble is being created. What's interesting is, Americans now owe more money on student loans than on credit cards according to the Federal Reserve Bank of New York and the US Department of Education. If young adults getting out of school have no way to get a job and pay these loans back, where is the money going to come from? If Congress changed the bankruptcy code to allow the discharge of student loans in a Chapter 7 bankruptcy, there would be a stampede to the door to file for bankruptcy.

What's interesting is, many of these people with all of this debt, really don't believe they owe it. Especially the ones that have not benefited from the education they owe money on. There is the other side of the coin of the individuals that became doctors and lawyers. Many of these have become very successful and the last place they want to spend their money is paying back those pesky school loans. There have been many government agencies created to track down these deadbeat students.

Over the past 20 years, kids have been sold a bill of goods. They have been told all the way through school that if they want to get a job and not deliver pizzas their whole life, they will have to have a good education. Today, many of these graduates head out into the job market to only find out that there are only entry-level positions available to them. With this kind of income and being saddled with student loans, they will never get out of hotel mom and dad. Education is important, but these days society has put too much of an emphasis on going to top-drawer schools. Many entrepreneurs and wealthy businessmen don't even have a college degree. Their success is attributed to the school of hard knocks with a lot of hard work.

Even if Congress made filing bankruptcy on student loans a possibility, nothing would change and the debt will still never be paid. The amount of debt with the student loan industry will continue to rise as lenders have very little risk because the powers that are given to them to collect from Congress with the main one being that debt can't be discharged in a bankruptcy filing.

The author is a professional that formed FilingBankruptcyNow.Com which provides information for debtors considering filing bankruptcy under Chapter 7 and Chapter 13 bankruptcy and helps individuals stop foreclosure and eliminate their debt by putting them in touch with a local bankruptcy attorney.