Bankruptcy


Disclaimer: The following information is provided on a general informative basis and is not intended whatsoever to be considered legal advice and Secure Credit Solutions is not responsible for any loss which may come from any reliance upon the information provided within. All states bankruptcy laws may differ from state to state check with the state you reside in for information dealing with bankruptcy.

What is bankruptcy


According to the Webster Dictionary, bankruptcy is defined as "In the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. This action is conducted as prescribed by the National Bankruptcy Act, and may be voluntary or involuntary." This translates into that the federal government has established a process in which to help consumers and/or businesses that do not have the means or ability to resolve their debt, to erase them or repay them by a court ordered plan.

Bankruptcy is categorized into "chapters" and there is chapter 7, 11, 12, & 13. The more popular of the chapters being 7 and 13, which will be discussed below.

Chapter 7


Typically referred to as liquidation; in which case it cancels your debts in turn for non-exempt property (listed below) in which it is liquidated into cash and is disbursed to the creditors. The person filing this chapter is discharged of all of the dischargeable debts.

Who is eligible for Chapter 7
In order to be eligible for filing this chapter you must not have filed & discharged in the last 6-8 years. Some other things to take into consideration is your income; if you have enough disposable income to repay your debts you may not be eligible for chapter 7. According to the new law that had passed in 2005, your current income will be measure against that of the "median income" of a family, or individuals in your state. If you fall equal or less than the median income, you can be eligible to file this chapter. If you fall above the median income you must then pass the "means test", which is a series of questions to see if you qualify for this chapter filing.

The point of the means test is to see if you have enough disposable income to repay your debts and therefore make you not eligible for the chapter 7 filing.

Dischargeable Debts
There are many debts that you can have discharged in your chapter 7 filing; such as any secured debts. These consist of the following; your mortgage, auto loan, any unsecured debts such as credit cards, personal loans, judgments, etc.

However you should also be aware of the debts that are NOT eligible to be discharged under ANY bankruptcy filings. These are your federal or state taxes, child support; student loans (read our entire section on Student Loans here), any court ordered debt such as DWI charges, any nondischargeable debts acquired before filing, criminal penalties, or any forfeitures.

If you believe that you qualify to file chapter 7 bankruptcy please contact a bankruptcy lawyer in your area.

Chapter 7 Bankruptcy FAQ's


If I am a co-signer on a loan which was filed under bankruptcy can I be held responsible?
Yes. You may legally be held responsible for the debt even if it was filed under chapter 7 or 13. If you are gainfully employed and show capability of repayment of the debt it can be collected upon.

If I co-signed for a loan and it filed bankruptcy can it damage my credit?
The debt you co-signed for has been listed on your credit report and will now display that it was discharged under a federal filing of chapter 7 or 13, it may have a negative impact on your credit report if it was not repaid under the guidelines set by the original lender.

If I file chapter 7, what is exempt and non-exempt from this filing?
Varying from state to state, there is a list of items or personal belongings which will NOT be taken. Of these items are any automobiles up to a certain value, personal effects, clothes, home appliances which are deemed necessary, life insurance, pensions, retirement funds, home equity(to an extent, some might have to go), any professional trade equipment, and any public benefits you may be receiving.

What is non-exempt are things like your checking and savings accounts, stocks, bonds, or any other investments, heirlooms, a 2nd anything i.e. cars, houses, etc. valuable collections such as sports cards and of the like that hold value.

How long does it generally take to file and what is the cost to me?
Usually it takes up to 3-6 months. The cost is generally $299 USD along with any administrative fees (attorney fees) acquired along the way. Talk to your lawyer about the cost of the court appearance, and don't worry you about the court appearance, its only once. Never underestimate the fees an attorney might charge you, some charge based upon the amount of debt you have, others just have a flat rate. The average cost of filing is just under $2,000.00. When doing your research in finding the right attorney here are things to consider in your attempts:
  • Will I have direct correspondence with my attorney or will I be assigned a paralegal to handle my questions and discussion of my filing? Make sure that you are meeting with and only with a lawyer who can answer any and all of your questions you will have along the way.
  • Hardship. Are you in such a hardship that you wouldn't even be able to file because you can't afford to? Well consider that some places will allow you to file for free, so base your research off of your financial restraints and expect the heavy fees along with it.

You also will have to go through consumer credit counseling before filing to see if you are actually able to resolve your debt on your own behalf, and it must be a government approved agency which can be found here: http://www.usdoj.gov/ust/ along with a financial education course.

Chapter 13


This is a filing in which you have the means or ability to repay your lenders and therefore go under a court ordered repayment plan. You are able to keep your property, but must repay something to your original lenders. This is the major reason and biggest benefit of chapter 13; it will allow you to keep certain assets that would have been liquidated in a chapter 7 filing.

Eligibility for Chapter 13
If you are gainfully employed and have less than $330,000 in unsecured debt and less than $1,010,650 in secured debt at the time of filing. These debts must be non-contingent which means that they have to be of a certain and fixed rate rather than subject to any changes.

Your repayment plan issued in court is based upon your disposable income, which is determined after all of your necessary living expenses are accounted for against your income. Usually, a plan can be for up to 60 months and no less than 36 months. This acts very much like a consumer credit counseling company, in which they determine what you are able to spend each month and your trustee disburses it accordingly over to your creditors.

NOTE: If you happen to miss just ONE payment, you fall out of the repayment program and your bankruptcy filing is dismissed!

Top considerations before filing bankruptcy
Before you make the hard decision whether or not to file bankruptcy there are many things to consider. Secure Credit Solutions wants everyone to know that there is another method to dealing with your debt and those that have been in the same situation have found solutions to their troubles through self-guiding methods. Filing chapter 7 or 13 should be your last option and if so you should reevaluate your situation to see if there still isn't one more alternative method out there that can get you out of your current situation.

Before you're ready to file ask yourself the following:
How many of my debts can actually be discharged? Remember, as stated above, not everything can be wiped away by bankruptcy. Start to evaluate what debts you have and of those which can be discharged, then evaluate your situation again to see if it's the right move.

Are you able to repay your debts off at least within the next 5 years? It may not seem capable now, but if you were put on a repayment plan that was within your financial ability, you maybe able to repay on your own in the next 5 years at MOST! Strongly consider this option as bankruptcy stays on your credit report for 10 years.

Do you have enough debt to file? If you have several credit cards that are maxed to the limit and they total in the area of about 10,000-12,000 dollars and if you file you may not be approved. Consider that you can be dismissed just as easily as you can be discharged and more importantly it will remain on your credit report if you are discharged or not! If you don't have at least 20,000 in dischargeable debt, strongly consider another alternative.

Do you have the right attorney? Don't believe that you can just open up the phone book under lawyers and find a good bankruptcy attorney. As much thought and consideration you give your current financial situation you should devote to finding the right attorney. A good attorney will: file the appropriate paper work, find alternative ways of repaying; find good counseling, help you complete the "means test", and show you what you may have overlooked in trying to reestablish your situation that you might not have known. A good lawyer knows the negative impacts bankruptcy can have on anyone and will do what they can to prevent you from filing. Try contacting the American Bar Association http://www.abanet.org when researching a good bankruptcy lawyer in your area.

Think about the future! When you file bankruptcy, as said before, it stays on your credit report for 10 years and thus any future creditors aren't going to be so generous when trying to obtain unsecured credit. Even credit cards might have to be secured through a deposit (read Secured Credit cards here). Obtaining a mortgage or auto loan may take a few years before that is granted. So, strongly consider your future and put the best foot forward when trying to resolve the matter on your own.

How to file


If you must file bankruptcy as your last resort, Secure Credit Solutions wants to ensure that you do it the proper way, that it is as painless as possible and what to expect along the way.

First and we know we are repeating ourselves, but make sure just one more time that there are no other alternatives out there before you go through with filing bankruptcy.

Next, never file on your own! So when you go through your research in finding the right attorney, make sure that you're going to have direct contact with him and not a paralegal. The larger firms, although reputable will more than likely assign a paralegal to go over all the paper work with you. This will pose a problem when you try and ask a few questions, if you want to make sure that you're getting the right answers and the right considerations, find out if you're dealing with the attorney first hand before anything is signed.

Once you have retained your lawyer, paid all your fees, then you can start to refer all of your creditors and collection agencies over to your attorney. According to the FDCPA you have rights as a consumer and no creditor or collection agency can contact you after you provide them with your attorney's information, this is referred to the "Automatic Stay". As always document all of your creditors contact efforts and they should be in the form of certified letter.

After that stage, there will be a 341 meeting, or a meeting of all the creditors in which case you are notified by mail of the date. What is discussed is that you have given all the honest information on your bankruptcy forms and that you agree and have a full understanding of the filing. This is why it is important to have retained the right attorney; a good attorney will prep you for this meeting. They will make sure that all of your financial information is in order and correct, and they will go over some of the questions that they might be asked of you in this meeting. From this day forward, your creditors have 60 days to file any lawsuits against you and challenge the discharging of any particular debt, or perhaps the entire discharge of the bankruptcy. If none of your creditors file suit, then you will receive a notification of the discharge of the debt you filed in chapter 7.

NOTE: Make sure you keep this notification; its states that you are under no further obligation to repay your creditors and that all collection attempts cease. If you happen to get a call regarding the debt which was discharged you will provide this letter to the agency calling along with a cease and desist.

For a chapter 7 filing the trustee, at this point will determine which assets of yours can be liquidated and sold off to repay your creditors. If there aren't any assets that are non-exempt, the trustee will report a no distribution with the courts.

In a chapter 13, you are then required to enter into a 3-5 year repayment plan based upon all of the financial information you had reported to both your attorney and the meeting with the creditors and the means test. 60 days following your final payment you will receive your notification of discharge stating from your trustee that your repayment plan has been followed as ordered and you are under no further obligations to your creditors.