Bankruptcy Reader

By Priya Jestin, Staff Writer

It’s been around a year since the new bankruptcy law came into force and yet, there are many people who are still unaware of the intricacies of the new law. Most of them still think that bankruptcy is an open and shut case and will not involve much effort. Stuck in a classic debt trap — just file for bankruptcy! Sorry to disappoint you guys, but the party’s over.

Things have gotten so tough, you’d be better off repaying your loans than trying the bankruptcy route. That’s if you are still in a position to pay off your debts. While a Chapter 7 filing can help you get rid of your debts, you must check if your income is amenable to a Chapter 7. By that I mean, if your income exceeds the limit set for your state you may not be eligible for a Chapter 7 . Even in a Chapter 7, some bills are not discharged, such as taxes, student loans and back child support.

If you cannot file a Chapter 7, you could try a Chapter 13 wherein you would have to pay back some portion of the loans. This could mean living on a strict budget, set by the court, for a period of three to five years. Oh, and before I forget, a bankruptcy can remain on your credit report for up to 10 years. This could exacerbate problems and make it difficult for you to get a job, insurance, or reasonably priced loans.

By Priya Jestin, Staff Writer

One of the best things about filing for bankruptcy is that your creditors will stop harassing you. By law, once you have filed your bankruptcy documents, creditors must desist from any action against you. They cannot initiate or continue any lawsuits, wage garnishees, or even make telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make payments.

Another thing you need to know about bankruptcy is that your spouse will not be affected by your bankruptcy if they are not responsible for any of your debt. And finally, Chapter 7 filings are public records. However, under normal circumstances, no one will know you filed for Chapter 7. The Credit Bureaus will record your filing and it will remain on your credit record for 10 years.

– By Priya Jestin, Staff Writer

Since we’ve completed more than a year of the new bankruptcy law, we can do an honest evaluation of the new law now. According to many bankruptcy attorneys, the new law hasn’t impacted businesses as much as it has individual consumers. Not only are people forced to deal with the painful reality of bankruptcy; they have the increased burden of meeting myriad requirements before filing. Also the amount of paperwork required has also increased considerably.

Could all these problems be the reason for the fall in bankruptcy rates? Well, there may be many who thought it would be better to slug it out somehow rather than go through a complicated bankruptcy filing. Most of the drop was in Chapter 7 filings, which are personal or business liquidations. Often small-business owners will not file for Chapter 7 because of the emotional ties they have to their business.

– By Priya Jestin, Staff Writer

Martha knew her financial situation wasn’t too good, and she had prepared herself for the inevitability of bankruptcy. What she wasn’t prepared for was the lingo! Agreed, our attorneys are well conversant in legal language. But what about simple folks like us. How much do we understand of a term called discharge?

A bankruptcy discharge is supposed to release the debtor from personal liability for certain specified types of debts. This means that you (the debtor) are no longer legally required to pay any debts that are discharged. In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor’s discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee. Creditors receive a notice shortly after the case is filed that sets forth much important information, including the deadline for objecting to the discharge.

Ever daydreamt about letting loose and going on the spending spree of a lifetime? And wouldn’t it be fun if you could spend all you wanted. And then, when it’s time to pay those gargantuan bills you’ve worked up, all you need to do is magically pull a rabbit out of your hat and make everything better. In other words, you declare bankruptcy and get all that debt wiped out. Fool.com reports:

It’s likely too soon to be certain about the effects of bankruptcy reform. What is clear, however, is that many honest people are suffering for the bad actions of a few abusive debtors. The best way to deal with the new law is to do everything you can to avoid getting into financial straits in the first place, but unfortunately, circumstances sometimes make that impossible.

Read more: Did Bankruptcy Reform Work?

Did you know that the filing and subsequent discharge of either a Chapter 7 or a Chapter 13 bankruptcy might eliminate some types of personal income tax liability? Well, so it seems, but there are certain conditions. You must meet these requirements if you want to completely eliminate your personal income tax liability through bankruptcy. In case of a Chapter 7 bankruptcy, to get your tax liability eliminated, you should:

• File your tax return on time
• Not make a fraudulent filing
• Have filed your tax returns over three years ago as of the bankruptcy filing date.

Nearly a year since the enactment of the new bankruptcy law, Chapter 7 bankruptcy filings are slowly on the rise. However, according to recent reports, at 71 percent, filings remain significantly lower than 2004 filings for the same time period. Accounting.smartpros.com reports:

Chapter 7 and 13 bankruptcy filings are slowly rising since enactment of the law, however, at a much lower pace than in previous years likely due to cost to file; complications with paperwork; the surge in filings prior to the law; and a misperception that Chapter 7 is no longer available. Attorneys are trying to issue appropriate messaging that helps set the record straight.

Read more: Chapter 7 Filings on the Rise

Filing for bankruptcy is a pretty painful time and I’m sure not everyone will be in the mood to look at it as a new beginning. It is painful but if you look at the brighter side, you may not feel so distraught. In case of a Chapter 7 filing, you can wipe off your entire debt and begin with a clean slate once again. A Chapter 13 helps you structure your debt payments — this will help you get back on your feet and get a fresh start. And the best part — your creditors can no longer harass you with those annoying calls. In short, you need not fear that phone again since the courts notify your creditors and they are ordered to stop attempts at collections once you file for bankruptcy.

In some ways, filing bankruptcy can also work out to be better for your overall credit. Imagine taking 7 to 8 years to pay off your debts! By filing bankruptcy you can get the financial breather that you need to start building your life again. You can create a savings reserve and, slowly apply for new credit. So you see, the glass of milk can be half full instead of half empty, what says??

This tough new law was supposed to slash the number of bankruptcy filings, and it did show stellar effects — but only for a short period of time. Now, the numbers are rising again because the root causes of unpaid debt were never addressed. Moneycentral.msn.com reports:

Credit counselors are already reporting an increase in the number of debtors seeking help because of high gas prices and adjustable-rate mortgages that have reset at higher rates. Those debtors may well enter the bankruptcy pipeline in the next year or so.

Read more: The bankruptcy boom is back

Bankruptcy attorneys claim that a recent 5th U.S. Circuit Court of Appeals decision that gets tough on debtors who file for Chapter 7 bankruptcy protection may have some unintended consequences. A recent judgment may actually encourage unemployed debtors who file for Chapter 7 to stay unemployed until the bankruptcy is final. Let me be frank guys, I still need some info on this one, so just take this piece of news as the introductory part of a bigger article where I explain the decision and its ramifications. Law.com reports:

The opinion "will tell someone who’s lost a job before a bankruptcy, ‘don’t get a job before bankruptcy is over,’ " says Behrooz Vida, a partner in Bedford’s Venable & Vida who represents the Cortezes. "It’s just so contradictory. That’s the problem."

Read more: 5th Circuit: Employment Status Change Nixes Chapter 7 Bankruptcy