Which Are The Benefits Of A Bankruptcy?-00-6409

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Bankruptcy assists to get rid of a share or whole of your debts and/or offers a payment plan with which you may remunerate back debts below the supervision of the court. When you declare bankruptcy, it puts an auto remain on any legal action (collections, garnishment, foreclosure etc) taken by creditors/lenders because of non-payment of debt.

There are personal and business bankruptcies. The most mutual types of personal bankruptcies are Chapter 7 and Chapter 13.

When should you file bankruptcy?

If you're unable to manage your debts and must eliminate or reorganize them, you may consider declaring bankruptcy. Given below are conditions when you may declare bankruptcy.

You're paying the minimum on your bills
More than one account are in collection
The lender is when it comes to to declare foreclosure
You've lost your job not long back
Cannot budget and get out of debt in next 5 years

What's discharge in bankruptcy?

The discharge is a court order freeing the debtor from the personal liability of paying off debts. The discharge order is published after 4 months ...
... of filing Chapter 7 bankruptcies and 3-5 years of filing Chapter 13 bankruptcies (30-60 days after your final payment).

Once the discharge order is published, it stops creditors from any collection activenesses or personal communication through phone calls, letters or mails. In case of secured debts (mortgage or car loan) included in bankruptcies, the discharge order does not remove liens on your property. So, the lender may execute a foreclosure the auto remain is lifted. To avoid a foreclosure, you may sign on a reafirmation agreement (for immune equity) and start paying your mortgage again.

How to file bankruptcy

Instead of filing bankruptcy on your own, it's better to take help of an attorney who'll guide you all around the procedure. There are 4 steps to filing or declaring bankruptcy. These are:

Deciding which Chapter to file
Enrolling for Credit Counseling
Means Test
Filing docs with financial statement

For more details on how to declare bankruptcy, check out the selective information on bankruptcy filings.

What happens after you declare bankruptcy?

Take a consider the bankruptcy selective information given below and get an idea of what happens after you declare bankruptcy.

1. Creditors are notified: Within 14 days of declaring bankruptcy, the court notifies your creditors when it comes to the filing. The court sends a mail with details on the case number, auto remain, name of your trustee and the date for meeting with creditors.

2. Meeting with creditors: Within the next 20-40 days, the court holds the 341 Meeting with your creditors and trustee. Here, you'll have to answer the trustee's questions on assets, debts etc. The creditors will then question you below oath. Your attorney will negotiate with them if required.

3. Trustee's role: Within 30-40 days of the filing, the trustee determines if your assets may be liquidated to remunerate the creditors. If it's Chapter7 and all your assets are immune (protected below bankruptcy law), a no distribution report are going to be filed at the court. But if there are non-immune assets, the trustee sells them off in order to remunerate your creditors. In case of Chapter 13, the trustee reviews the payment plan you've proposed for approval.

4. Creditors may challenge discharge: By the 60th day of the filing, your creditors may file a lawsuit or challenge the discharge of your debts.

5. Creditors file claims: By day 90 (after the 341 meeting), creditors will have to file their claims against you (the debtor).

6. Financial Management course: You must go through a personal financial management course as arranged by your attorney. This will make you entitled for the discharge.

May you keep home after filing bankruptcy?

You'll be competent to keep your home if you've filed Chapter 13. But if you've filed Chapter 7, you may or may not be competent to defend the home equity (reasonable market value minus liens) from your creditors/lenders. There are Federal and State Homestead exemptions; if your equity is fewer than the exemption, then you'll be competent to keep your home.

Federal and State Exemptions

You can pick out Federal exemption regardless of how long you're living in the state. The Federal exemption is limited to equity worth $125,000 if the property has been acquired within 1215 days prior to declaring bankruptcy.

In states where Federal exemptions are not available, filers may use the current state's exemption if they lived in the state for at least 2 years. Those who haven't lived in the state for at least 2 years may use the exemption of the state where they have stayed for the most of the time for 180 days before the 2 year period.

If your home equity is higher than the state exemption, then the trustee will sell your home. He'll offer you the exempted amount and remunerate off the rest to your lender after deducting his fee. If you still owe money on the house, then you can reaffirm the debt and continue to pay under the existing terms and conditions. Another option is to redeem the house by buying it from the lender through a single payment for its current value.

However, if you have sold off non-exempt assets in 10 years prior to the filing in order to protect them from your creditors, then your exemption will be reduced by the value of those assets.

What debts are not discharged?

There are certain debts which cannot be discharged by filing a bankruptcy. These include: student loans, back taxes, fraudulent debts, alimony, child support, large purchases ,government penalty

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