Constitutional Right to File Bankruptcy

As a society, we have come a long way since the days of debtor prisons and states. The Constitution provided for our protection against those antiquated ways when it gave Congress the power to legislate bankruptcy law making the primary laws governing bankruptcy federal. State laws supplement the federal laws by clarifying the necessary details. The laws have been designed to protect both creditor and debtor making bankruptcy a legal proceeding designed to allow the honest person or business to work their way out of a bad financial situation, or in some cases, to start afresh.

Definition of Being Bankrupt

Basically, being bankrupt is much more a black and white experience than it is a gray one. As a general rule of thumb, you are completely financially bankrupt if your current sustainable income plus any cash reserves will not pay all of your living expenses, pay interest on outstanding loans, and reduce some of your principal on those loans while paying on them for five years.

Depending on which state you live, the formula should not consider the current value of your assets owned outright including any retirement accounts. Paying off debts for five years is chosen because five years is the maximum legal number of years a United States Bankruptcy Court allows an individual to work their way out of bankruptcy protection.

Types of Bankruptcies Individuals Can File

There are basically two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13.

A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. A trustee that is appointed by the court will gather and sell your non-exempt property, and he will use the proceeds from the sale in order to pay your creditors. Most chapter 7 cases are “no-asset” cases, meaning you do not have any non-exempt property for the trustee to sell.

A Chapter 13 bankruptcy, commonly called a wage earner’s plan, enables individuals with regular income to develop a plan to repay all or part of their unsecured debts over three or five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years.

Who to Contact if You Think You Need to File Bankruptcy

Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Oklahoma City, Oklahoma, contact us here today at www.bankruptcy7-13.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

One of the leading causes of bankruptcy is foreclosing on homes. With the economy still sluggish and the housing market down, many homeowners are finding themselves in default on the payments for their homes. The automatic stay of bankruptcy is attractive to homeowners who are in default.

The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment.

The stay allows homeowners to regain control of their finances with the potential of saving their homes. Here are two common questions about foreclosures and bankruptcy.

1. Do you need to pay back a loan after a foreclosure procedure?

   A mortgage company who has legally foreclosed on a secured property is normally legally entitled to recover all of their losses and expenses for the collection of their debt. When the mortgage company sells the asset for less than what was owed on the property, the difference is called a “deficiency.”

   Depending on which state you live and their foreclosure laws, you may be held liable for any deficiency plus the expense of collecting it. You cannot be held responsible for the sale amount of the property. The mortgage lender would have to go to court to get a deficiency judgment against you in order to collect.

   Any forgiven deficiency by a mortgage lender can be considered income by the IRS and you might end up owing income tax on the forgiven part.

2. Can you keep your home if you file bankruptcy on a second mortgage?

   The possibility exists you can keep your home and strip a second mortgage under certain circumstances. In any bankruptcy, a second mortgage can be reduced to unsecured debt if the market value is less than the primary loan value on the home.

   The second mortgage in a Chapter 7 bankruptcy will be discharged but the lien will remain. In a Chapter 13, both the lien and the second mortgage will be stripped.

   The homeowner can keep the house in a Chapter 7 if there is enough exemption to do so and the homeowner reaffirms the debt. The homeowner can keep the house in a Chapter 13 if he or she is up to date on the payments to the primary lender.

Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Jacksonville, Florida, contact us here today at www.bankruptcy7-13.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

Not everyone who is forced into filing for bankruptcy protection is upside down on their homes. Divorce, a catastrophic event, foreclosure on personal or business property, failure to pay bills on time, loss of income, health problems, poor business decisions, bad timing, bad advice, or a poor economy can all force individuals and married couples into bankruptcy.

If you are forced to file, should you put a new mortgage on your home in order to pay off your creditors in a Chapter 7 bankruptcy?

A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A trustee that is appointed by the court will gather and sell your non-exempt property, and he will use the proceeds from the sale in order to pay your creditors.

In the case of an individual or couple who has equity in their home, placing a new mortgage on the home to satisfy creditors may be the only way you can save your home when filing a Chapter 7 bankruptcy. Unless your home equity is exempt from bankruptcy liquidation, the trustee might sell the house in order to satisfy the creditors.

Bankruptcy federal and state laws provide for asset exemption status from the sale of your assets. That means any asset you own, including equity in a home, might be exempt from liquidation in a Chapter 7. Some states allow you to choose either the federal or state exemptions while others will insist you use state exemptions when filing.

Should you put a new mortgage on your home in order to pay off your creditors in a Chapter 7 bankruptcy? Only if there is the possibility a bankruptcy trustee might sell the home and you want to keep it.

Another alternative to placing a new mortgage on your home to satisfy creditors is to file a Chapter 13 bankruptcy in lieu of a Chapter 7. A Chapter 13 bankruptcy, commonly called a wage earner’s plan, enables individuals with regular income to develop a plan to repay all or part of their unsecured debts over three or five years. In a Chapter 13 bankruptcy, you are allowed to keep all your secured assets as long as you continue to make timely payments on them.

Whichever bankruptcy type you choose, bankruptcy laws can be complicated, and common sense dictates you might want a bankruptcy lawyer to help you understand how the complex laws might apply to your particular situation.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of West Palm Beach or Boca Raton, Florida, contact us here today at www.bankruptcy7-13.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “Can a roommate’s bankruptcy have a negative effect on your credit report?”

The answer to the question is, unless you have a specific business or financial relationship with the roommate, most likely not.

Depending on the type of bankruptcy filed, you could potentially be affected by your roommate filing a bankruptcy if you own a joint account of any kind, you have co-signed a loan in default, or you have some type of partnership in a going business concern.

There are basically two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13.

A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A trustee that is appointed by the court will gather and sell your non-exempt property, and he will use the proceeds from the sale in order to pay your creditors.

If you have any one of the numerous financial relationships already mentioned with a roommate that files a Chapter 7, creditors can report your name to the reporting agencies as in default with your roommate. If you are not filing jointly as partners or in a business relationship of some kind, then the bankruptcy itself will not go on your record.

A Chapter 13 bankruptcy, commonly called a wage earner’s plan, enables individuals with regular income to develop a plan to repay all or part of their unsecured debts over three or five years.

Again, just like in a Chapter 7 if you have any of the numerous financial relationships with a roommate that files a Chapter 13, creditors will be allowed to report your name to the reporting agencies when in default with your roommate. Unless you are married, you are not allowed to file a joint Chapter 13, and the bankruptcy filing of a roommate will not go on your credit report.

One of the benefits for a roommate filing a bankruptcy, if you have financial ties with him or her, is the automatic stay of bankruptcy court. The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment.

Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you live in or around the metropolitan area of Memphis, Tennessee, contact us here today at www.bankruptcy7-13.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

A reaffirmation agreement in United States bankruptcy law refers to an agreement made between a creditor and the debtor that waives discharge of a debt that would otherwise be discharged in a pending bankruptcy proceeding. If you waive the discharge on a given asset, you cannot claim the asset in a bankruptcy case up to eight years after the bankruptcy closes. So, if you default on the loan after reaffirmation and before time allows you to file for bankruptcy protection again, you have no further legal recourse against foreclosure.

Most bankruptcy lawyers will tell you it is not a good idea to reaffirm a debt when you file for bankruptcy. There are obvious advantages and disadvantages for reaffirming. This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “If you did not get your mortgage reaffirmed does this mean you will lose your property?”

The immediate answer to the question is “not necessarily.” Technically, the automatic stay of a bankruptcy will stop foreclosures and seizures made by creditors on secured loans, but once the bankruptcy is closed, foreclosures and seizures may continue.

Creditors often put bankruptcy clauses in their loan contracts that state filing bankruptcy is a default of the loan, even though the debtor has made all the payments on time. Others may write into the same contract that as as long as the payments are kept up, they will not take action against the property, but if they do, their only interest lies in the property itself.

The wording in the contracts place the onus of the decision making about default in the hands of the lenders. Many homeowners who want to keep an asset see affirmation as an advantage because the new agreement guarantees the company will not foreclose or seize the property after bankruptcy proceedings are finished. The new agreement remains in effect as long as the debtor continues to make timely payments on the asset.

Many lenders will not foreclose on or seize a property if the debtor has been faithfully making timely payments all along. Others will. That is why the immediate answer to the question, “Will you lose a home not reaffirmed in the bankruptcy process?”, is “not necessarily.”

To decide whether to reaffirm or not is a difficult decision only the debtors can make. Reaffirmation agreements do not guarantee you will repay the loan. Bad things can happen to good people, and if you waive your rights to discharge, any default on the new agreement, and the creditor can sue you for the full amount of the loan.

Most likely if sued, a judgment will be rendered in the favor of the creditor allowing the creditor to go after any of your assets to satisfy the debt. You will no longer have the protection of the automatic stay of bankruptcy, and you will have to wait out the appropriate time frame before you can file for bankruptcy protection again.

Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

Some people have the misinformed opinion that married couples must always file for bankruptcy protection together. There can really be nothing further from the truth. Whereas spouses may choose to file a joint bankruptcy case together, they are not required to file together by bankruptcy laws.

There are two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13, but spouses may file either of these bankruptcies individually or jointly.

When it comes to filing a Chapter 7 bankruptcy and only one of the spouses file for bankruptcy protection, then careful attention will be required to understand which property is property of the bankruptcy estate. All property including property held in common with a spouse is placed into the bankruptcy estate by the US Bankruptcy Court trustee. Any non-exempt property will be liquidated by the trustee to pay claiming creditors and expenses of the bankruptcy.

The bankruptcy estate is a fundamental concept in bankruptcy law. The assets or property within the estate determine which ones are available to pay creditors, and “property” is defined in a broad sense under Bankruptcy Code 11 U.S.C. 541. Under this code, property is defined as all legal and equitable interests of a debtor and any property that is community property of the debtor and spouse.

Exempt property, property not subject to liquidation as defined by state and federal law, is considered property of the estate until the exemption claims are final, normally 30 days after the 341 meeting.

The term “community property” in bankruptcy law can sometimes be confused with the same term in Divorce law. A person that holds a title on an automobile in certain circumstances may possess community property when it comes to divorce, but in bankruptcy, the property may well be considered non-estate property. One spouse using a vehicle in their business is an example.

If either party of a married couple decides they want to file a Chapter 13 bankruptcy, the bankruptcy estate is kept in tact and a plan is devised to pay off the creditors of the filing party based on the filer’s disposable income. The Chapter 13 plan will be made for three or five years, depending on whether or not the household income is less than the state median income. Any property of the estate, including community property, is protected by the filing and subsequent automatic stay of the bankruptcy court.

Bankruptcy laws can be complicated, especially when you are filing as an individual and your spouse is not filing. Common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Austin or San Marcos, Texas, contact us here today at www.bankruptcy7-13.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “Can you get a bankruptcy removed from your credit report if it was never officially filed?”

There is really no such thing as a bankruptcy that was never officially filed. By federal bankruptcy laws, bankruptcy is a process by definition. That means someone has to file a bankruptcy petition with a U.S. Federal Bankruptcy Court placing the information in their records, and when the bankruptcy has been placed in the recording system of a bankruptcy court, it is official. When the petition reaches the court system, the court can report the filing to credit reporting agencies as a bankruptcy officially filed.

By the same bankruptcy laws, credit agencies receiving the official filing information can keep the bankruptcy on a debtor’s report for up to 10 years. If the reporting agencies do not voluntarily remove the information, the only other way a debtor can get the information removed is file a petition in a local court of jurisdiction that will provide a court order for removal.

There can be mistakes made within the filing system, but there is little legal recourse for removing the information from credit reporting agencies even though these mistakes may not be of your doing. The Fair Credit Reporting Act governs how you should handle such errors if they occur.

As an example, this personal bankruptcy story was reported on a bankruptcy forum in 2011, “ I just recently had a Chapter 11 removed from by credit on both Equifax and Trans Union. I am finding Experian to be the indignant one. The bankruptcy was involuntary and dismissed when it was discovered unfounded. I am curious if anyone can help me figure out how to get this mess gone. I NEVER EVEN FILED BANKRUPTCY!”

There are two forms of bankruptcies- voluntary and involuntary. Although rare, an involuntary bankruptcy occurs when a creditor legally forces bankruptcy proceedings onto a debtor. The greatest majority of bankruptcy legal proceedings are of the voluntary variety.

In the case of the illustration, someone wrongfully filed an involuntary bankruptcy onto the debtor, and the case was dismissed once the bankruptcy court found out the mistake. Unfortunately, it can still take legal action to have this type mistake removed from a credit report. A bankruptcy court will not automatically take this action on behalf of the wronged debtor.

Mistakes or no mistakes, bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you have determined a credit reporting agency has wrongfully reported a bankruptcy on your report, and you live in or around the metropolitan areas of Greensboro, Winston-Salem, or High Point, North Carolina, contact us here today at www.bankruptcy7-13.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

One of the questions many first time bankruptcy filers ask is, “Can you just declare bankruptcy on your credit card debt?”

The immediate answer to the question is possibly, but filing for bankruptcy is a little more complicated than the one question.

Someone wanting to file bankruptcy for a single oriented issue is usually wanting to file a Chapter 7 bankruptcy. Commonly called a liquidation of your assets and the simplest type of bankruptcy, a trustee appointed by the court will gather and sell your non-exempt property and will use the proceeds from the sale in order to pay your creditors.

In a Chapter 7, like in all bankruptcies, you have to list all your creditors, and the bankruptcy court will prioritize the creditors according to the types of debts. Secured exempt debts will not be liquidated, and in order for you to keep the secured assets, you must be current on all your payments and reaffirm your contract with the secured lender.

Unsecured and non-exempt debts, like credit cards, will be placed in a priority list made by bankruptcy laws and paid by the order in which they fall on the list. All debts will be paid until there is no money left. At this time, all non-exempt debts unpaid will be discharged from the responsibility of ever having to pay them.

Most chapter 7 cases are non-asset cases meaning the debtor possesses little or no assets to exempt. In these cases, by filing for bankruptcy protection, you can effectively eliminate only the credit card debt.

If there is a secured auto or house you have more equity than what an exemption will allow you to keep, a reaffirmation may not be allowed, and the trustee may sale the asset in order to pay debts.

Can you file a bankruptcy on your credit card debt only? The effect may be, that after you file, credit card debt ends up being the only thing discharged, but bankruptcy laws are a lot more complicated than just one item issues. Common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Salt Lake City or Ogden, Utah, contact us here today at www.bankruptcy7-13.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

These personal bankruptcy questions were posted on the internet in 2011 in a bankruptcy discussion: “The majority of my debt is IRS and California state income taxes, will a bankruptcy stop penalties and interest and reduce or reorganize my debt? My Social Security is currently being garnished and it is frightening to think I may be paying the IRS for the rest of my life. I have several years of taxes not yet filed. The garnishment is for 2004. I have to do something, I just don’t know what.”

Although state laws do play an important part of bankruptcy proceedings, filing for bankruptcy protection is primarily a federal process. When it comes to income taxes and garnishing wages from social security, federal guidelines cannot be overlooked by state law.

The debtor in the illustration above is asking very complicated questions based on a complex situation he or she has found there self. An attempt to give a broad overview of the situation will be given here on this forum, but to understand fully the tax implications and bankruptcy, it is recommended you seek the experience and advice of a bankruptcy lawyer.

The following is a brief summary of the federal guidelines that must be met before a personal income tax may be discharged in a bankruptcy case:

1. The tax must be due and owed for a period of more than three years, and the due date of the taxes is more than three years before the bankruptcy case is filed.

2. The tax return for the tax debt at issue must be filed more than two years before the bankruptcy is filed.

3. The tax debt issue has been assessed by the taxing authority more than 240 days prior to the filing of the bankruptcy case.

4. The debtor filing the return must not have attempted to evade the paying of the tax nor can the debtor filing be willfully fraudulent in submitting a return.

Tax debts arising from tax returns not filed are not discharged. The IRS routinely assesses tax on returns not filed . These tax liabilities cannot be discharged unless the taxpayer files a tax return for the year in question.

Before a Chapter 7 or Chapter 13 bankruptcy can be granted, the bankruptcy petitioner is required to prove the four previous tax returns have been filed with the IRS. The four previous tax returns must be filed no later than the date of the first creditors’ meeting in a bankruptcy case.

The automatic stay of a bankruptcy will temporarily stop the garnishment, penalties and interest levied while the bankruptcy is in process. The penalties and interest can be discharged by a bankruptcy, but only the qualifying taxes as listed above can be discharged in a bankruptcy.

The IRS can garnish up to 15% of your Social Security payments if they have obtained a tax levy and follow the strict federal guidelines for doing so. Social Security is exempt from most types of garnishments other than those listed by federal law.

Can you refinance your home after a dismissed Chapter 13 bankruptcy? In many cases, yes, but before going into how you can refinance, it might be best to understand what it means to be dismissed from bankruptcy first.

A dismissal in bankruptcy can happen for a variety of reasons, but there are only two types of dismissals- voluntary and involuntary.

A voluntary dismissal occurs when an individual decides filing for bankruptcy was a mistake. You may wish to request a voluntary dismissal if the court informs you the primary debt you wish to discharge cannot be discharged, or you find employment permitting you to successfully pay off debts without the aid of a bankruptcy court.

In a Chapter 13 bankruptcy, you can have your case dismissed voluntarily by simply making a formal request for dismissal or stop making payments to the bankruptcy trustee. Except for reports of the bankruptcy to credit agencies, creditors knowing you have filed, and the legal constraints for filing again, a voluntary dismissal is like never having filed at all.

An involuntary bankruptcy dismissal occurs when you fail to meet the requirements of the court. When this happens, a court will dismiss your case.

Neglecting to file paperwork, failing to take an approved credit counseling course, or failing to file any tax returns over the previous four years are examples of reasons to be involuntarily dismissed in a bankruptcy case. More serious offenses like fraud can also be reasons for a bankruptcy court to involuntarily have your case dismissed.

If you are involuntarily dismissed because of fraud, there may be no remedy of refinancing left for you. Barring fraud as the reason for a dismissal of a Chapter 13, you can refinance your mortgage in several ways.

Government backed lenders are required to lend you money if you qualify for refinancing. Although many lenders will charge you more for interest, depending on your credit score, an FHA government backed loan will not penalize you for filing bankruptcy.

Also, you might be able to get a bankruptcy buyout if you have been making your mortgage payments on time. A Chapter 13 Buyout Plan is nothing more than taking your home and refinancing it, except with guidance from a US Bankruptcy Court. If your Chapter 13 is less than 37 months old, you might be required to pay all your unsecured debts in full. That is why it is important you have enough equity in the home to make the refinancing work for you.

Deciding whether or not you should refinance your home and how you refinance after or before a dismissed Chapter 13 case can be very complicated decisions to make. These are certainly decisions that should be made from an informed advantage. Consulting with a bankruptcy lawyer, who can help you understand how bankruptcy laws might apply in your particular situation, may give you the informed advantage you need about refinancing after a dismissed Chapter 13.