Avoiding Bankruptcy

Avoiding Bankruptcy [What Filing Chapter 7 Really Means]

Those that are filing Chapter 7 are looking for a fresh start to their debts. Often times this is the only way to get through the potential mounds of debt that have piled up. Although many people think badly of this filing, it really can be a necessary obstacle.

For most that file bankruptcy, the bottom line is not that they are trying to get out of paying for their debts, but rather that they are looking for a way to live their lives. Chapter 7 is not a bad thing when it provides countless opportunities to those that have simply made a mistake.

What Happens?

Many people know what bankruptcy is, but they don’t realize what it actually means. First off, there are two types of bankruptcy that can be filed by an individual. First, you have Chapter 7 which will work to erase debts and give the individual or couple a fresh start without having to pay back any of the debt they owe.

The second type of bankruptcy is that of Chapter 13. In this type of bankruptcy, the individual or couple will have to pay back the money, but the debt is restructured and so that they actually can pay the money back. In both cases, a black mark is placed on your credit report which will stay with you for the next ten years.

During the next years, you won’t have to pay back all of the debt that you filed Chapter 7 for. Anything that is new after that point or anything that was not included is necessary to pay back. Legally the debtors that you owed money can no longer attempt to collect the debt from you.

This is also a time where it will be much harder to get loans. If you do get them, they are likely to be outrageous in their interest rates.

Filing Chapter 7 is almost a necessity to many. Those that have had to deal with expensive medical bills or those that were careless with credit cards often find themselves caught, under a rock and there is no way out.

It is very hard to pull out of a situation like this, especially when there is no simple solution. For many, Chapter 7 really means a new beginning and the hope of a new future without debt.

Filing Chapter 7: Understanding the Process

When it comes to filing Chapter 7, the process is one that is complex and takes time. You can’t just walk into your attorney’s office and expect to have the bankruptcy discharged. The fact is that your creditors can actually fight you on this. You can have to meet various requirements.

With the new laws that are in place, you may have to really work to earn this privilege. With all of that said, will you make it through filing Chapter 7?

Hire An Attorney

While you can file bankruptcy on your own. It is much more efficient and economic to hire an attorney that specializes in bankruptcy. He or she will work with you to find the best possible solution for your needs. They will also work with you to meet with your creditors. To come to an agreement, and to file all of the legal work that must be filed in order for this to happen, without a problem.

Get Your Debts Together

The next thing that you’ll have to handle is finding out who you owe money to as well as how much you owe them. You’ll need to gather account numbers for those accounts and find out if anyone else’s name is on those debts as well. You’ll need to do this so that you can accurately clean up your debt.

If something is not included in the filing of Chapter 7, you’ll still be responsible for it afterwards. One way to check on what you owe is to pull your own credit report from each of the credit agencies. This will give you a good idea of who you owe money to. Although it may not list everyone.

More To Do

Still, there is much to consider. For example, you’ll need to determine that you are eligible to file Chapter 7. With the new bankruptcy laws in place. This can be somewhat of a challenge. Not everyone is eligible and you may have to work through credit counseling services before you actually can have your discharge happen.

Once you get through the paperwork, you’ll sign on the dotted line. But, that doesn’t mean that all is done. In fact, it can take three to four more months for the proper courts to decide if in fact you are eligible to file as well as if you should be granted this opportunity.

If so, you will receive official word of your filing within that amount of time. The entire process can take a year or more to happen. Filing Chapter 7 is time consuming, but something that must be done nevertheless.

Filing Chapter 7: Understanding the New Laws

As of 2005, new bankruptcy laws went into place to keep those that have been filing Chapter 7 abusively from doing so.

This law, called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is one that is quite comprehensive. It provides for several restrictions that will require those that are considering filing bankruptcy to follow before being able to have their bankruptcy discharged.

Is this a necessary change? Is it a helpful one? No matter what the answers to those questions are, the fact is that it is now harder than ever to file Chapter 7.

What The New Law Says

There are several things that are now taken into effect in regards to filing Chapter 7 under this new law. Here are some points that are important to know about.

  • A variety of new deadlines is included. If these new deadlines are missed, your bankruptcy will not go through. Penalties for refilling will be higher and harder to work through.
  • A test is provided by your attorney that will determine if you even are allowed to file bankruptcy. This will decide if you can file Chapter 7 or Chapter 13 and is called a means test. More people will be required to file under Chapter 13 which will require you to have your debts restructured so that you still have to pay them back, just at a lower rate.
  • Your assets are likely to be valued higher than before and this includes furniture, cars, and other assets you have.
  • There are also laws in place that require residency requirements as some individuals were seeking to use the laws of one area over another if they were more favorable to them.
  • There are penalties and fees for trying to re-file. Although it was easy to do this in prior years, it is now going to be seriously challenging to do so.
  • The judges are allows to provide for up to 20% in reduction to the debt is the creditors will not work with consumer credit counseling companies to help you to relieve your debt.
  • There are also protections in the new law that allows for your college savings plans and your retirement funds to remain untouched by the filing of Chapter 7.

With all of these new laws in place, it is even more important to contact a skilled attorney when it comes to filing Chapter 7.

What To Do Before Filing Chapter 7

Filing Chapter 7 is a huge deal. In fact, it is even harder to do now that new laws are in place making it harder to file and much more likely that you won’t have all of your debts discharged in a few months.

There is no doubt that those that are in need of this service still have it available to them, but it should still be something that you consider avoiding if at all possible. Before you file Chapter 7, find out what things you should be doing.

First of all,

You should know what you owe, who you owe it to and have a budget that cuts out every possible extra expense so that you can work to pay down your debt.

Finding ways to actually cut through your bills can help you to really pay off those credit cards and bills, without having to file Chapter 7. The more drastic you are in doing this; the more successful you can be to avoid this problem.

Another thing that you should do is to consider using only cash for purchases. You may want to consider going to only cash in a set allowance, too. This will help you to really cut into the amount of money that you owe because you won’t be adding to it each month. Give yourself a set amount of money to spend per month and don’t go over.

You can also look for small ways to add dollars into your pocket. Selling off a few assets that you have and don’t really need can help you to actually find benefits in the long term. If you have an extra car sitting in the garage, it may look nice, but it could be something to help you avoid filing Chapter 7.

You should try to sell little things too, such as through garage sales and even by selling them in your local newspaper.

Another step in the right direction is to work with your creditors. You’ll find that there are non profit consumer credit counseling programs available that will work as the middle man. They will help you to find the right balance with your credit about your situation and even try to get your rates lowered.

There are many ways that you can actual benefit from doing these things. The most important benefit is that you can avoid filing Chapter 7 and find yourself in a much better place.

The Basics Of Filing Chapter 7

What do you need to do to file Chapter 7? For most people, there will come a time when they just wish they could wipe out the pile of debt that they are under. They would love to just be able to go back and make the right decisions about how to use their money.

As hard as it can seem, it is often increasing important to insure that you do make the right decisions. Yet, there comes a time when for some it is necessary to consider filing Chapter 7.

Understanding what that actually means and entails is something different, though. Most people know what bankruptcy is but don’t know the difference in Chapter 7 and Chapter 13.

They don’t know how to do it nor do they realize that it is harder than ever to have their debts discharged. Nevertheless, it is something you have to plan for. Here are some things that should be known.

Chapter 7:

In this type of bankruptcy filing, your debts are discharged. All debts that are filed under this and are approved for discharge will be debts you are no longer responsible for. This type of bankruptcy filing is best for those that don’t have assets or have assets. That are not valuable enough for the creditors to file against.

Chapter 13:

This type of filing is much different. Here, your debts are adjusted. This provides a temporary halt to the foreclosures and collections that are happening to you. In order for you to spend the next three to five years trying to pay down the debt that you owe. It will allow you to restructure the debt into easier to manage terms.

In addition, it will change the interest rate on your loans to make them more affordable. Those that are considering either of these types of bankruptcies will need to talk with an educated attorney about the matter. For many, the process of determining if they qualify for Chapter 7 or Chapter 13 will be determined by the attorney who will administer a means test to determine this.

The end result is that it is necessary for you to determine if filing Chapter 7 is the right choice for your financial future. With new laws in place, it may or may not be something that you can do at all.

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