Monday, February 24, 2014

Decide If Bankruptcy Is Right for You

1. Learn about the types of bankruptcy.For individuals, there are two main kinds of bankruptcy:
  • Chapter 7 -- a bankruptcy where many, if not all, of your debts are cancelled outright in a short three- to six-month process.
  • Chapter 13 -- a bankruptcy where you use your income to make payments on your debts over the next three to five years.
2. Consider alternatives to bankruptcy.
Things may not be as bad as you think. You may be "judgment proof" or you may have options you aren't aware of.

3. Make sure you are you eligible for bankruptcy.You may be prevented from filing for Chapter 7 bankruptcy if you have enough income to repay your debts in a Chapter 13 plan. Or you may not qualify for Chapter 13 bankruptcy if your debts are too high or your income too low.

4. Learn which debts won't be cancelled.Some debts, like child support obligations, cannot be wiped out in bankruptcy.

5. Consider what will happen to your home.Bankruptcy won't relieve you of your obligation to pay your mortgage, but it might make your mortgage easier to pay by getting rid of other debts. If you have substantial equity in your home, you might lose it if you file for Chapter 7, depending on how generous the exemptions laws are that are available to you. If you file for Chapter 13, you can keep your home and pay off any mortgage arrears through your repayment plan. (To learn more, see Your Home and Mortgage in Chapter 13 Bankruptcy and Your Home in Chapter 7 Bankruptcy.

6. Will you lose your car or other property?How much property you get to keep depends whether you've pledged the property as collateral for a debt, and on the "exemption" laws that are available in your state. If you file for Chapter 7, you might lose your car if you have substantial equity that isn't protected by your state's exemption laws.

7. Will your credit cards be paid off?Bankruptcy is good at wiping out most credit card debt and unsecured loans, unless you spent extravagantly or lied on your credit application.

8. Is your pension, IRA, or 401(k) safe?In most states, you will not lose pensions,retirement accounts, or life insurance in bankruptcy. If you have a pension, a 401(k), an IRA, or life insurance, find out what's protected in your state.

9. Will cosigners be stuck with your debt?If a friend or relative helped you get financing by cosigning a loan agreement, Chapter 13 bankruptcy will protect your cosigner, but Chapter 7 will stick them with any debt you don't pay.

10. Consider how bankruptcy may affect your personal life.Bankruptcy canbe intrusive -- you have to disclose every last detail of your finances to the court, and other people may find out about your bankruptcy. In a Chapter 7 bankruptcy, you can have property taken away, or, under a Chapter 13 plan, you might spend three to five years having to ask permission to spend your own money.

Bankruptcy will also have a detrimental effect on your credit score.

by: Albin Renauer

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Wednesday, February 19, 2014

Medical Bankruptcy: A Growing Phenomenon

The problem of medical expenses in the U.S. economy has been gradually (and sometimes not so gradually) increasing over the past 50 years.
In recent years, that growth has accelerated to the point that in 2003, medical costs made up more than 15% of the U.S. Gross Domestic Product (GDP). If we continue as expected, that percentage could grow to approximately 33% by 2040.

Medical Bills Are Often a Key Cause of Bankruptcy

People who've experienced an illness or injury and found themselves buried in bills (even if they have health insurance) may consider >filing bankruptcy as a way to get out of debt.
Although people tend to have a lot of questions about filing bankruptcy, bankruptcy was created to help people resolve overwhelming bills so they can move forward.

There are two main types of personal bankruptcy: Chapter 7 bankruptcy (debt discharge) and Chapter 13 bankruptcy (debt repayment plan).

Chapter 7 bankruptcy involves the debt discharge, which eliminates unsecured debts, which are debts not tied to property, such as medical bills, credit cards, utility bills and some personal loans.
A Chapter 13 bankruptcy filing is a little different, because it involves setting up the filer on an interest-free debt repayment plan. This is generally best for people who have unsecured debt and secured debt, which is debt tied to property, such as a mortgage, that they want to keep. Chapter 13 bankruptcy has helped millions stop foreclosure, repay their debts and stay in their homes.
When you or a loved one is injured or ill, what's important is focusing on getting better--not worrying about excessive medical bills.

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Tuesday, February 4, 2014

Can I File Bankruptcy Just on Medical Bills?

Bankruptcy is all about treating all your creditors in various classes fairly. For example, the Court doesn’t want to see you pay Aunt Marge the $1,000 she lent you last year and not pay MBNA for the $1,000 you owe them. While you think Aunt Marge deserves the money more than MBNA (actually, I do too), it isn’t fair to let you pick and choose who receives payment, or give them what the Code calls a “preference.”

Since medical bills, credit cards, most personal loans, and some taxes are all considered “general unsecured debts,” they all have to be treated the same way. This means that all of your debt, not just medical bills, has to be included. It also means that you can’t just file on one or two credit cards, or on one judgment.

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