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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 pray your are right James. That is the part I have been sweating....family humiliation
Posted on: 04th Apr, 2011 06:14 am
Bankruptcy is a public record.
Posted on: 04th Apr, 2011 09:57 am
they dismissed my husband chapter 13 and his stay since my name on the deed can i i convere u.s. bank into my chapter 13 my husband fighting cancer and i will do any thing.
Posted on: 24th Oct, 2011 01:57 pm
Hi babygirltiffaney!

Welcome to forums!

You will have to contact a bankruptcy attorney and discuss your case with him. He will let you know what steps you can take in this matter and whether or not you can file bankruptcy Chapter 13.

Feel free to ask if you've further queries.

Sussane
Posted on: 24th Oct, 2011 10:30 pm
I have filed bankruptcy but now have listed my Moms property as I am on the warranty deed and will own an interest when she passes. How do I list this property and do I put a dollar amt. as market value at today's prices? I submitted an amended Schedule "A" but it came back from court as not entered correctly.
Posted on: 11th Jun, 2012 05:20 pm
Hi Dianejean!

Welcome to forums!

It is your bankruptcy attorney who will help you in knowing how you would list the property while filing bankruptcy.

Feel free to ask if you've further queries.

Sussane
Posted on: 12th Jun, 2012 12:21 am
Two years ago, I was foreclosed on by my lender while I was awaiting discharge from a Chapter 7 BK. Recently, in preparing a foreclosure review, I discovered that the loan had several flaws, including the fact I would end up defaulting because of my low, fixed income. If I had known more about mortgages, I would have run a simple analysis and projected that this would happen. My question is, would this be a fact a foreclosure review would consider? Or are they only interested in "accidental errors" which led to the foreclosure?
Posted on: 31st Jul, 2012 08:51 pm
Hi Carlton,

You can contact a real estate attorney and take his opinion in this regard. The attorney will look into the documents and let you know whether or not there is any chance to stop the foreclosure.
Posted on: 01st Aug, 2012 12:12 am
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