Bankruptcy Overview
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.
About The Author: Tony Merlino is webmaster and legal marketing
consultant at http://www.JerseyJustice.com ,a legal information
and marketing portal for clients and their lawyers in New
Jersey.
