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Bankruptcy filings - Why and how to file bankruptcy

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 15th Oct, 2006 09:39am
When you consider bankruptcy as a way out of debt problems, make sure you're quite clear about why you're filing it. To know whether filing bankruptcy is the right decision and how to file for bankruptcy, take a look at the following topics:

Should I file bankruptcy?

Here are the 11 reasons why you should consider filing bankruptcy.
  1. Creditors not willing to negotiate: Bankruptcy filings make sense when your creditors are not willing to negotiate and offer an alternative payment plan. The creditors may ask for full payment without extending the payoff period. In such a situation, there's no way but to file bankruptcy.

  2. Your liabilities exceed your assets: This is a big reason why debtors file bankruptcy. It is sometimes seen that the monthly payment amount exceeds your monthly income. In such a scenario, bankruptcy filing is a good choice.

  3. Your wages are garnished: If your creditors/lenders have received judgment against you for garnishing wages, filing for bankruptcy can stop the garnishment. Through this, you can partially recover your garnished wages.

  4. Unsecured debts: If most of your debts are unsecured debts such as credit cards, medical bills and the like, you can get rid of them by filing chapter 7 bankruptcy.

  5. High debt amount: Bankruptcy filings make sense if your total debt amount excluding mortgage and car loan is much higher than what you can pay in the next 5 years or so.

  6. Your accounts are in collection: If you're receiving harassing calls from collection agencies who're charging more than you owe, the only way to stop them quickly is to file Chapter 7 bankruptcy.

  7. Late payments: You may have more than 30 day late payments on more than one account. Bankruptcy filings can help you wipe out the dues or pay them off.

  8. No insurance for medical bills: When you have unpaid medical bills with no insurance cover to pay them off, filing bankruptcy can be the right choice for you.

  9. No savings at all: If you don't have any savings left, and cannot pay down debts with your income, the only option left is to file bankruptcy.

  10. Creditors have filed a lawsuit: In case your creditors have filed a lawsuit, you shouldn't ignore the summons. Otherwise, creditors can obtain a default judgment from the court along with the permission to seize your assets or garnish your wages. Bankruptcy filings prevent such judgments from being issued against you.

  11. Foreclosure or repossession: If you cannot afford to pay for the mortgage anymore, chances are that the lender may foreclose. Again, in case you have taken out a car loan and you're unable to pay it off, the lender can repossess your car. Bankruptcy filings put an automatic stay on foreclosure or repossession. However, you may have to reaffirm the debt once you receive discharge.

How to file bankruptcy Chapter 7

Instead of filing bankruptcy on your own, it's better to take help of an attorney who'll guide you throughout the process. Check out the 4 steps on how to file chapter 7 bankruptcy.
  1. Determine if you should file Chapter7: If your financial situation is worse and there's no way you can pay down any debt, Chapter 7 may be the right option. However, if you have some income, but cannot afford payments as agreed, you may consider filing bankruptcy Chapter 13.

  2. Credit Counseling: As per the Bankruptcy Law, prior to bankruptcy declaration, a debtor has to enroll himself/herself into a credit counseling program. The credit counselor must be approved by the US Trustee's office. The purpose is to help you understand if at all you need to declare bankruptcy.

  3. Means Test: Prior to filing bankruptcy, you'll have to pass through the Means Test, which helps to determine if you are eligible to file bankruptcy Chapter 7. If you fail to pass through the Test, you may file Chapter 13.

  4. File your documents: You'll have to prepare a list of your past and present debts, assets, liabilities along with the statement of your financial situation. These documents are then filed with the bankruptcy court for which you'll have to pay a fee.

How to file for bankruptcy Chapter 13

Chapter 13 bankruptcy filings are almost similar to that of Chapter 7 except that the debtor should submit a payment plan which will help him repay all or part of his debts within the next 3-5 years. This plan can be submitted either on the date of bankruptcy filings or within the next 15 days.

The Chapter 13 plan should clearly explain how the debts will be repaid along with the exact repayment period. Thereafter the trustee and the lender review the plan and give the approval. The plan may also be rejected.

How often can you file for bankruptcy?

You can file Chapter 7 every 8 years after a previous Chapter 7 filing and 6 years after filing bankruptcy Chapter 13. However, Chapter 13 can be filed every 2 years from a previous Chapter 13 filing and 4 years from filing bankruptcy Chapter 7.

Bankruptcy filings help you to wipe out debts or restructure payments. However, it affects your ability to obtain future credit (though Chapter 13 has a positive impact), buy a home or even acquire a suitable job. Therefore, you need to consider all aspects of your financial situation prior to filing bankruptcy.
Posted on: 15th Oct, 2006 09:39 am
my mom quit deeded her house to me a year ago, but she has a life estate at the house. i want to know if i try out chapter 7 or 13 bankruptcy filings, will i risk losing her house? also, bankruptcy filings are possible while owning this quit deed? there is no mortgage on the property. property is valued at $90,000 and i want to file a chapter 7 on $20,000 in debt.
I lost my job,have a pt job in my home. Has slow down because my clients, have lost their job etc.My spouse draws ss,we have been able to keep our bills current,but with everything going up we use our c cards. We are losing the battle we can't keepthis up.can we file we have 35,000
in cc, personal loans. well we lose our home we still owe on it,
Posted on: 02nd Nov, 2009 06:06 am
Hi annabella,

You can definitely file a bankruptcy. Whether you would lose your home or not would depend upon the type of bankruptcy you file. If you file Chapter 13, then the lender would give a payment plan to pay off the dues. This will help you save the property. If you file Chapter 7 and reaffirm the mortgage, then you would have to pay the dues regularly. Once you pay off the dues, your property would be free and clear.
Posted on: 02nd Nov, 2009 10:23 pm
Can you be married if your potential spouse is going through a Chapter 13. Especially if you live in a common law state, could the creditors go after you?
Posted on: 15th Nov, 2009 11:49 pm
i have two houses and two cars in my name along with medical bills and credit cards, oh and there was also a truck that i let go back that they were filing a suit on i am paying the two cars off and one of the houses there is no way i can pay for the other house do i risk loosing all of it and will filling bankruptcy completely mess my credit up and will it mess up my new husbands
Posted on: 16th Nov, 2009 03:57 pm

To anonymous,

I don't think there would be any problem if you marry and if your potential spouse is going through Chapter 13. The bankruptcy have been filed before marriage. So, I don't think your property would get included in the process. However, you can contact a bankruptcy attorney and get his suggestions in this regard.

To yellowrose,

If you file bankruptcy, it is your credit that would get affected. Your husband's credit or his properties would not be included in the filing. However, if there are joint properties, then it would get included in the filing. Bankruptcy will affect your credit score and reduce it by 200 or more points but you can take steps to rebuild your credit.
Posted on: 16th Nov, 2009 10:44 pm
I can not afford to pay for a bankruptcy lawyer. They want to charge me $1800 and I cant afford that. Does anyone know the procedure?
Posted on: 22nd Jan, 2010 11:29 am
As filing bankruptcy is a legal process, you should contact an attorney and get it done. You may contact your friends or relatives who may help you in appointing a lawyer for yourself.
Posted on: 25th Jan, 2010 01:41 am
x-spouce & I own home as partners in common - he wants to file 7 - how will this affect the property and me?
Posted on: 25th Jan, 2010 02:41 pm
Welcome Guest,

Your husband will have to list the property as his asset when he files bankruptcy. The trustee may sell it off to pay his creditors. However, as you are one of the owners of the property, you will receive your share of the property. As he is filing bankruptcy, it won't affect your credit report.
Posted on: 25th Jan, 2010 10:08 pm
i have filed bankruptcy in the past how can i find out when i filed, if i may need to file again.
Posted on: 02nd Feb, 2010 07:30 am
Hi danette,

You must be having the documents related to bankruptcy that you had filed earlier. You will be able to know the filing date from those documents. This will help you in deciding when you can file bankruptcy again.

Take care.
Posted on: 03rd Feb, 2010 02:38 am
My attorney asked to receive an appraised value of my home prior to filing chapter 13, why? :?
Posted on: 06th Mar, 2010 11:00 am
My attorney asked to receive an appraised value of my home prior to filing chapter 13 why?
Posted on: 06th Mar, 2010 11:05 am
I am filing bankruptcy chap 13 because of my 2nd mortgage. I had a hearing in dec and missed the hearing. I was know sent a motion to proceed with sale and was granted by the judge. On this it looks like the judge wrote sale may not be canceled. My atty said we can request a motion to extend and refile the chap 13.... Is this something that can be done or is the lawyer trying to get more money out of me??? deperate!!!! BTW i am in Florida.
Posted on: 06th Mar, 2010 02:19 pm
Your query has been replied to in the given page:

Take a look at it. Hope it helps you.
Posted on: 08th Mar, 2010 03:28 am
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