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Major Changes in the Bankruptcy Law in 2005
Congress passed major reformation to the Bankruptcy Laws, which is called the Bankruptcy Abuse Prevention & Consumer Protection Act 2005, which went into effect on October 17, 2005. It is important to understand how the major changes to the process of filing for Chapter 7 and Chapter 13 Bankruptcy will effect you. Despite media reports to the contrary, you may still receive relief under Chapter 7. The requirements for being granted relief has become a little more involved. The topics in the following summary are organized in order they are likely to come up in your bankruptcy case.
Mandatory Pre-petition Credit Counseling
Before an individual can file a petition for bankruptcy, he or she must undergo credit counseling from an approved nonprofit budget and credit counseling agency. Congress included this provision in an effort to make sure that debtors are viewing bankruptcy as their last option. The Bankruptcy Court has a list of approved agencies on its website, http://www.alnb.uscourts.gov/. The counseling does not have to be done in person, the Court has approved telephone and internet counseling. The Law firm of Mitchell Howie has the capability of setting up internet counseling through Hummingbird Credit Counseling and Education (which charges a fee of $35.00) during your initial free consultation with the attorney. Credit counseling must be completed no earlier than 180 days before filing a bankruptcy petition.
The Means Test for Chapter 7 Eligibility
By far the most publicized change to the Bankruptcy Law has been the addition of a means test. After determining that you will benefit from filing for bankruptcy, your attorney must then decide whether you would benefit under Chapter 7 or Chapter 13. The means test is a formula used to determine if a debtor has the ability to pay the unsecured debtors after allowing for monthly living expenses. If the debtor's monthly income is over the allowed expenses, then the Court assumes you are abusing the Bankruptcy Laws. This does not mean you cannot file under Chapter 7, however. The Law firm of Mitchell Howie can perform the Means Test as part of the Free Initial Consultation. The means test applies only to Chapter 7 filings and is calculated as follows:
1.Determine the debtor's current monthly income. This is done by averaging monthly income that the debtor has received from all sources for the six months preceding filing which includes nontaxable income but excludes Social Security benefits and payments to war crime victims. So if you are on Social Security Disability or SSI, and have no other income, you have no monthly income for purposes of the means test.
2.Subtract allowable expenses from the debtor's income. This includes the following:
a. Monthly expenses allowed by the IRS under their National Standards and Local Standards. Please consult an attorney to determine the amount allowable for your County and State. You may allow up to 5% more for food, clothing expenses.
b. Expenses classified as "other necessary expenses" for the debtor, his/her dependents, and the debtor's spouse if a joint case. This includes most types of health and disability insurance maintained for the debtor or his/her dependents.
c. If the debtor has been a victim of family violence as defined by the Family Violence Prevention and Services Act, the debtor may deduct expenses incurred to maintain the safety of the debtor and the debtor's family.
d. If you care for an elderly, chronically ill, or disabled household member of the family (which includes parents, grandparents, siblings, children, and grandchildren of the debtor) you may also deduct the cost of taking care of this person.
e. Up to $1,500.00 per year of the cost to send a dependent child to a private or public elementary or secondary school if the child is under 18.
f. Average monthly payments on secured debts, such as your house or car. This is determined by adding up all payments that would be made in the next 60 months, adding in any other payments that the creditor would have received if you filed a Chapter 13 repayment plan and dividing the total by 60.
After completing the above calculation, you have a surplus income of
$166.67 or more per month, filing for Chapter 7 relief is considered "presumptively abusive." You may still be able to file under Chapter 7 in this case if you can show special circumstances to the Court as to why you cannot pay the $166.67 or more to the creditors in a Chapter 13 bankruptcy. If you were called to active military duty, or had an unexpected increase in your monthly expenses, or a reduced income, the Court may allow for a filing under Chapter 7 despite being over the allowed net monthly income. You must however, provide documentation to the Court to establish and explain your situation.
Please consult with a licensed attorney to determine your net monthly income and
to determine if you have special circumstances which would allow you to receive a discharge under Chapter 7 if your income is above the allowed amount. The Law firm of Mitchell Howie can perform the Means Test as part of the Free Initial Consultation.
Median Income Requirement
In addition to the Means Test mentioned above, the Bankruptcy Abuse Prevention & Consumer Protection Act 2005 has created a "median family income" which is based on the State in which the debtor resides for a family of equal or lesser size than the debtor. This median income is different for each state and only applies to those seeking relief under Chapter 7 of the Bankruptcy Code. If the debtor's actual annual income exceeds the median income, the presumption of abuse arises, and any party, the Trustee, a creditor, or a person with interest in the estate may file a motion to dismiss the Bankruptcy. The debtor must then show the Court why they should be granted a discharge under Chapter 7, and not be required to pay back their creditors under a Chapter 13 repayment plan. Please consult with an attorney prior to filing for a Chapter 7 Bankruptcy to determine your eligibility. The Law firm of Mitchell Howie will advise you as to the proper Chapter under which to file for Bankruptcy during your initial free consultation.
The median income is based on the number of potential wage earners in the home of the debtor, which may include teenagers who are able to work. Even if not filing jointly, the spouse will usually be counted as a potential wage earner under this section. The Alabama median income effective February 1 2008, which is currently being applied by the Court, is as follows:
One family member $36,192.00
(single debtor)
Two family members $44,918.00
Three family members $51,103.00
Four family members $62,015.00
For each additional family member over four, the calculation increases by $6,900.00.
Please consult with an attorney to understand the median income requirement for your individual situation. The Law Firm of Mitchell Howie will advise you as to your allowable median income during your initial free consultation.
Tax Returns
The Bankruptcy Court now requires that debtors provide a copy of their income tax return for the most recent tax year. This must be provided to the trustee at least five days prior to your meeting of creditors. In addition, you may be required to provide the income tax return for the preceding two years before filing for bankruptcy. The IRS can assist you in obtaining your income tax returns if you are unable to locate them.
What is bankruptcy?
Bankruptcy allows one to either
obtain a fresh start free from debt or re-organize and pay off certain debts
and discharge other debts.
Chapter 7 bankruptcy allows a person to claim certain property as exempt property and discharge
debts that exceed his ability to pay.In Alabama your exemptions are limited
and you should consult a Bankruptcy attorney.
Chapter 13 bankruptcy is known as a wage earners plan and allows a worker to make payments for up to 60 months through the
Bankruptcy Trustee.The Trustee, and Bankruptcy law determine the fair distribution of property to creditors. There are several types of personal bankruptcy, with two main types. There is Chapter 7 liquidation and Chapter 13 reorganization. The Chapter 7 bankruptcy liquidation is designed primarily for the individual whose assets and property are exempt from execution.Chapter 7 bankruptcy is used
often to eliminate credit card debt, medical bills and other unsecured debt.In those cases the debtor will not be required to repay any of their unsecured debts. This process takes all physical property that is not exempt and converts it to cash and then pays the proceeds to the creditors. Once all notice to creditors and the bankruptcy law is complied with the debtor may be discharged from his debts. A Chapter 13 reorganization attempts to repay the creditors through a Chapter 13 plan over 60 months or less. A Chapter 11 may be used when a business goes into bankruptcy proceedings.You should consult with an Alabama Bankruptcy attorney or your family lawyer to determine if bankruptcy is a viable option.
The information contained in this message is general in nature and should not substitute for the advice and counsel of a licensed bankruptcy attorney.
The Law Firm of MITCHELL HOWIE provides free bankruptcy consultations in Huntsville, Alabama.
Call (256) 533-2400 for your free bankruptcy consultation
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Costs and Benefits of Bankruptcy
A Chapter 7 bankruptcy filing will remain on your credit report for 10 years and therefore it may effect your ability to get
credit in the future.However, judgments, foreclosures and repossessions may also remain on your credit record until they are paid in full.In other words, if you cannot or do not pay a judgment it will be of record for at least
10 years.Credit card accounts past due over 90 days may show up on your credit report for up to 7 years.
The first benefit of a bankruptcy is that as soon as one is properly filed an automatic stay is issued by the federal
bankruptcy court that prohibits anyone from trying to collect from you without going through the bankruptcy court and your attorney. You will not get any more harassing telephone calls or letters.
The second benefit is that your unsecured debts will be discharged------ you will not be required to pay credit cards and
medical bills that you had when you filed the Chapter 7 bankruptcy.
The information contained in this message is general and should not substitute for the advice and counsel of a
licensed attorney.
The Law Firm of MITCHELL HOWIE provides free bankruptcy consultations with an Alabama attorney in Huntsville,
Alabama. Call (256) 533-2400 for your free bankruptcy consultation
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Bankruptcy Filing Fees
The Bankruptcy Court charges a
filing fee and an attorney also charges a fee for his work in representing you. It is not for free. Therefore, the courts will charge a filing fee. This will be ($299)two hundred and ninety-nine dollars for a Chapter 7 bankruptcy in North Alabama which encompasses Madison,
Limestone,Jackson, Dekalb and Tuscumbia and Morgan County or the Middle District of Alabama which includes Marshal and Cullman
County. The Chapter 13 bankruptcy filing fee is $274.00, but ultimately it is more expensive because payments
must be made to and through the Trustee. There may be other court costs if the case requires additional pleading or the addition of creditors after the original filing.Attorney fees for a Chapter 7 are usually between $600 and $1500 depending on the amount of debt,
number of Creditors and complexity of the case. The money you pay your attorney for preparing your bankruptcy and representing you in Bankruptcy Court will assure that things are taken care of legally. If the filing is simple, with little property and is aChapter 7
Bankruptcy, The Law Firm of Mitchell Howie charges a flat one time fee of $1500.00 for a Chapter 7 personal bankruptcy with less than $100,000 in unsecureddebt. Chapter 7 bankruptcy is the most common form in Alabama. A more complicated or one with over $200,000 in total debt or $100,000 in unsecured debt such as credit card debt may be more expensive.
For contested bankruptcies or special and extra hearings most attorneys charge by the hour for their time and may add office expenses such as copying.
The information contained in this message is general and should not substitute for the advice and counsel of a
licensed attorney.
The Law Firm of MITCHELL HOWIE provides free bankruptcy consultations with a licensed Alabama bankruptcy attorney in Huntsville, Alabama. Call (256) 533-2400 for your free bankruptcy consultation
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How to File Bankruptcy
Bankruptcy was designed to help a person in debt to get a fresh start. If it were not for bankruptcy most people
would spend their lives working to pay off the banks and other creditors without any hope of realizing the American dream of home ownership and retirement. The process is governed by federal and state law and decisions are made in federal bankruptcy court. There are five types of bankruptcy, but for most people filing for personal bankruptcy, there is Chapter 7 and Chapter 13. With a Chapter 7 bankruptcy or liquidation, your non-exempt assets are taken and sold with the proceeds given to your creditors. If you fit within the Alabama homestead and personal property exemptions you may not be required to give up any assets.The bankruptcy exemptions in
Alabama are provided for in the Alabama Constitution and in Alabama Code Section 6 Chapter 10. You should consult with an Alabama
bankruptcy attorney to determine what you exemptions are.
If you file for Chapter 13 bankruptcy, a trustee is named to oversee your case. You present a payment plan and if it is acceptable to your creditors and the trustee it is confirmed by the bankruptcy court and all debt collections against you stop. The major difference is that with Chapter 13 you get to keepassets that may not be exempt, but you are required to pay your creditors at least the same as you would if you filedunder Chapter 7. So if your debts are too large to fit into a reasonable budget, then you may
need to file a Chapter 7 bankruptcy. But if you think you could repay part or all that you owe, then you may be advised to file a
Chapter 13 bankruptcy, which may look better on your credit report because it shows you attempted to pay off what you owed.
Once the determination is made what type of bankruptcy you need you or your attorney will file a petition with the U.S. Bankruptcy court, which will want a list of your creditors. An Alabama attorney can help you decide if bankruptcy is right for you.
This is for information purposes only and is not intended to substitute for the advise and counsel of a licensed attorney. It is recommended that you consult with an attorney.
The Law Firm of MITCHELL HOWIE provides free initial bankruptcy consultations in Huntsville, Alabama
with a licensed bankruptcy attorney. Call (256) 533-2400 for your free bankruptcy consultation
No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.
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How to Retain an Alabama Bankruptcy Attorney
Finding a lawyer to handle a bankruptcy is not difficult, if you are filing a simple Chapter 7 liquidation bankruptcy. Most attorneys listed in your local directory will be able to handle that with little problem. If you do not know what type of
bankruptcy you wish to file, then you need to seek the advice of an attorney who has handled the different types of bankruptcy cases. But beware of an attorney who recommends a more expensive Chapter 13 without fully explaining your options and what a
Chapter 13 bankruptcy entails. To find a bankruptcy attorney, you may consult with friends and family. Ask them if they can make a recommendation. You can also go to the Alabama Lawyer Referral and ask for a recommendation. You should find an attorney with whom you feel comfortable and who meets with you personally An attorney who has you meet with an assistant or paralegal may be difficult to
get in touch with if you need him. If you are paying an attorney you should be entitled to meet with him first. Good
communication is important in an attorney-client relationship and aids in the successful completion of a bankruptcy filing. The attorney should be able to answer your questions and give you enough information to help you understand the bankruptcy laws and how they will effect you. If you feel that it is difficult to get in touch with your attorney, then seek another attorney. You are the client and an attorney is responsible for looking after your best interest. Remember that.
This is for information purposes only and is not intended to substitute for the advice and counsel of a licensed attorney.
It is recommended that you consult with an attorney.
The Law Firm of MITCHELL HOWIE provides free initial bankruptcy consultations with an Alabama Attorney licensed to practice Bankruptcy in the Northern District of Alabama. The office is located in Downtown Huntsville, Alabama. Call (256) 533-2400 for your free bankruptcy consultation
No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.
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Bankruptcy and Marital Property
Should both spouses file for bankruptcy if one is in financial trouble? It depends upon who incurred the debt and the amount of the debt. If only one spouse has incurred the debt and the other is not liable on it it may be possible to
file only for the husband or the wife. In determining the family income to see if you qualify for Chpter 7 or 13 you are required to use both husband and wife's paycheck for the last 6 months. Usually both spouses file and get a fresh start because the costs and
fees are the same for a married couple as for a single person and the debts are often in both their names. However,
just because you are married to someone it does not make you responsible for their debts----you would have had to sign an agreement , saying you would pay your spouse�s debt.
Any non-exempt property bought jointly, will be available to creditors no matter which spouse files. Bankruptcy of
a married individual can have unforeseen consequences and should be carefully considered and reviewed by a lawyer.
This is for information purposes only and is not intended to substitute for the advice and counsel of a licensed attorney.
It is recommended that you consult with an attorney.
The Law Firm of MITCHELL HOWIE provides free initial bankruptcy consultations with a licensed bankruptcy attorney in Huntsville,
Alabama. Call (256) 533-2400 for your free bankruptcy consultation
No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.
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Liquidation vs. Debt Reorganization
There are two basic types of bankruptcy, the liquidation and the reorganization. The liquidation is called Chapter 7. A Chapter 7 liquidation is used by individuals whose home and property are exempt from execution or whose debts are so high that a
repayment plan cannot be worked out. If
there is real estate involved and the payments are current it may be reaffirmed
and it may be kept.The same would go
for other assets that are being paid for such as a car or truck. The Chapter 11 bankruptcy is used by
businesses for reorganization of their debts. They make a plan or budget
showing how much they will pay on their debt and to whom. Chapter 12 bankruptcy
is a reorganization designed to help the family farmer keep the farm. The
farmer must file a plan or budget with a trustee showing how he will repay his
creditors and make the payments. The Chapter 13 bankruptcy is a reorganization
designed for the individual or wage earner.
The person is required to have a job or other regular income. The
bankruptcy court stays all attempts to foreclose and collect on debts while the
debtor makes
payment according to a plan approved by
the court for up to 60 months. This is used when people who have over $10,000
equity in their homes are trying to avoid losing their homes.
This is for information purposes only and is not intended to substitute for
the advice and counsel of a licensed bankruptcy attorney. It is recommended that you consult with an Alabama
attorney.
The Law Firm of MITCHELL HOWIE provides free initial bankruptcy
consultations with an Alabama
bankruptcy lawyer in Huntsville, Alabama.
Call (256) 533-2400 for your free bankruptcy consultation with a licensed
bankruptcy attorney.
No representation is made that the quality of legal services to be performed
is greater than the quality of legal services performed by other Alabama
lawyers.
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Chapter 7 and
13 Trustees
The bankruptcy trustee is who you will be handling the "Bankruptcy Estate" in bankruptcy. This
court appointed representative makes sure that all assets and property have
been declared and that their exemptions of property are proper and legal. You attorney if you hire one will make sure
that all the information necessary to the completion of a bankruptcy is properly prepared
and in order. The trustee will also look after the interests of the creditors.
In Chapter 7 Bankruptcy, the trustee may oversee the sale of non-exempt assets
and the distribution of the proceeds to the creditors. In Chapter 13
Bankruptcy, the trustee looks over your repayment plan and makes sure that the
plan is workable and fair to you and your creditors. The trustee will look at
the plan to make sure it has enough budgeted to support yourself and your family as
well as make the required payments to your creditors. Each trustee may ask different questions
and have different requirements.
This is for information purposes only and is not intended to substitute for
the advice and counsel of a licensed attorney.
It is recommended that you consult with a bankruptcy attorney in your
state.
The Attorneys at the law firm of MITCHELL HOWIE provide free initial bankruptcy consultations
with a bankruptcy attorney in Huntsville, Alabama.
Call (256) 533-2400 for your free bankruptcy consultation
No representation is made that the quality of legal services to be performed
is greater than the quality of legal services performed by other Alabama
attorneys and lawyers that are licensed to practice bankruptcy law.
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Chapter 7
Bankruptcy
Chapter 7 bankruptcy is known as Liquidation. In a Chapter 7 bankruptcy all non-exempt
property is liquidated.Chapter 7 bankrutcy allows unsecured debt to be discharged, however,
you can choose to repay or reaffirm a debt. This type of bankruptcy is used
mostly by people who have no way of repaying their debt and have little
property. The process can be simple if you hire a bankruptcy attorney. You file for
bankruptcy protection. The court issues a stay which stops all attempts at
collection, including seizure of property. A trustee is appointed, you submit a
complete list of your creditors and they are notified of your intent. At this
point the trustee will liquidate all of your non-exempt assets and distribute
the money to your creditor. After the distribution, you will not be required to attend a hearing
again, but your debts will be discharged by a federal bankruptcy court. You are
no longer under any obligation to your creditors. However, if you then manage
somehow to buy something on credit within seven years of filing for bankruptcy,
you will be required to pay that creditor. You cannot file for bankruptcy again
for some time. The information contained in this message is general and should
not substitute for the advice and counsel of a licensed bankruptcy attorney.
The law firm of Mitchell Howie provides for a free consultation with
a licensed Alabama bankruptcy attorney.The lawyers can be reached at 256-533-2400.Call for your appointment
with a bankruptcy lawyer in Huntsville, Alabama.
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Should you
file Chapter 7?
Should you file for Chapter 7 bankruptcy? Chapter 7 bankruptcy is
liquidation of all of your assets in an attempt to repay your creditors. For
people who have substantial property and an income, this type of liquidation
may not be in their best interests. If you are considering bankruptcy for a
business, you will not be allowed to file for Chapter 7,
it can only be used by the individual. If you have no real estate or other
tangible assets which you would wish to keep, Chapter 7 Bankruptcy may be the
way to go. Though in some states, you may be able to keep your home if you file
Chapter 7. The more complex your holdings, the more likely
that Chapter 7 Bankruptcy is the wrong type of bankruptcy for you. The
information contained in this message is general and should not substitute for
the advice and counsel of a licensed bankruptcy attorney
The Law Firm of Mitchell Howie
offers free initial consultations for bankruptcy and personal injury. Call now for an appointment with a licensed Alabama
bankruptcy attorney.Phone 256-533-2400 for an appointment in Huntsville,
Alabama.
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Chapter 7
Procedures
The first step in a Chapter 7 bankruptcy is meeting with a credit counselor. This can be done in person or via the internet through an agency approved by the Bankruptcy Court. For a list of approved agencies, please contact the Bankruptcy Court, or look at their website for a listing. We have provided a link to their site for your convenience under the "Links" section at the top of this page. After completing the credit counseling, the next step is filing the
petition. When you file with the United
States bankruptcy court, in North Alabama you are petitioning
the court for protection under the bankruptcy law. The court will issue a stay
which will prevent any continued or future seizures or lawsuits. Your assets are
now under the court's protection. A trustee will be appointed to inventory and
liquidate your assets. You then submit a list of all of your creditors,
even those who you have managed to keep paying. The court then notifies your
creditors that you have filed a petition with the court. Your non-exzmpt assets will be
liquidated, and the proceeds will be distributed according to a formula
determined by the trustee. Your attorney can tell you which assetts are exempt. After the assets have been distributed, the court
will hold a hearing where tour bankruptcy will be discharged. From that point on,
those creditors will not be able to contact you further. Remember, that a
discharge will not protect you from having to pay most taxes, child support,
alimony and debts incurred based on fraud. The information contained in this
message is general and should not substitute for the advice and counsel of a
licensed bankruptcy attorney.
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Non-Dischargable Debts
In limited circumstances the Chapter 7 bankruptcy may not be a total discharge of your obligations.
You must pay any debt which the government has deemed to be outside of the
protection afforded under Chapter 7 Bankruptcy. This includes child support,
alimony and certain taxes. If you file bankruptcy within three months of going
on a spending spree, then any luxury items purchased on credit,
may have to be paid for in full. This can include furs, boats, motor vehicles
and art. You will have to repay most student loan debt that is guaranteed by
the Federal student loan program. Any debts incurred by fraudulent means, must
be repaid as well. If you are sued and found to have been willfully negligent
or driving while intoxicated, you will have to pay the damages. If you have
been ordered by another court to pay punitive damages, you may have to continue
paying. In short, the Chapter 7 bankruptcy may not discharge everything you may
owe.A person should consult with a
bankruptcy attorney to advise him in these matters. The information contained
in this message is general and should not substitute for the advice and counsel
of a licensed bankruptcy attorney.
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Chapter 11
Bankruptcy
Chapter 11 bankruptcy is often called a
business reorganization and is used by corporations and small business owners
in order to reorganize their debt. For those people who have assets which
exceed the limits of Chapter 7, a Chapter 11 bankruptcy is usually the best
path. The business reorganization is often used by cash strapped businesses which
feel that by keeping the creditors at bay, they can recover and become a viable
business once again. The court appointed trustee must approve your business
plan. Once it is approved you may return to normal operations. This may prove
difficult as vendors may be reluctant to sell you the goods you need to operate
on anything other than a cash basis. If you do successfully fulfill your
reorganization plan, your debts will be discharged. If you fail to follow your
plan, the business will be liquidated. The information contained in this
message is general and should not substitute for the advice and counsel of a licensedbankruptcy
attorney.
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Should you
file Chapter 11?
The advantages and disadvantages of Chapter 11 Bankruptcy
are much like those you would experience filing as an individual. The big
advantage to filing chapter 11 is being able to hold off your creditors from
further attempts to collect debts. This means that all lawsuits against you are
put on hold. You can then create a plan to reorganize the business and attempt
to stay afloat. After your business plan has been approved by the bankruptcy
trustee and the creditors, then you may continue business. The disadvantages
are those you would expect anytime you declare bankruptcy. Your credit is
ruined. Vendors who had let you run up debt, will most
likely ask for payment in cash. Some vendors may not deal with you at all. It
is very difficult to restore a business if your cash flow was such that you had
to file and can no longer pay your vendors. It is important to evaluate
thoroughly the consequences of filing for bankruptcy. The information contained
in this message is general and should not substitute for the advice and counsel
of a licensed attorney.
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Chapter 11
Procedures
The first step in filing Chapter 11 is petitioning the court for protection
from your creditors. The court then issues a stay to prevent further collection
attempts. The court will then appoint a trustee to administer and referee. The
business will be required to provide a complete accounting of all the
businesses' assets and liabilities. This will include any cash flow. A reorganization
plan must be created that indicates how the company will be run in the future.
The plan must indicate how much is to be repaid to each of the creditors and
the schedule of payments. If the trustee finds the plan to be fair, the
creditors will meet to discuss the plan. If there are no objections, the plan
is implemented. The company continues to operate and strives to meet its
obligations under the plan. If the plan is fulfilled, the debts are discharged,
usually after three to five years. If the plan fails, the business may be
liquidated. The information contained in this message is general and should not
substitute for the advice and counsel of a licensed attorney.
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Chapter 12
Bankruptcy
Chapter 12 bankruptcy was designed to help out the
American family farmer. Because of the unique needs of the farmer, a Chapter 11
or Chapter 13 bankruptcy, just didn't fit the special
circumstances. The Chapter 12 allows the farmer to attempt to regain control of
the farm and, hopefully, continue the tradition. Most farm debt is related to
real estate debt. In order to keep this real estate, which would ordinarily be
under lien, the farmer must pledge a part of the profits from future crops
towards the payment of debt. The farmer must also pay creditors an amount
equivalent to the fair market rent. The farmer must be acting in good faith in
order to be allowed this form of bankruptcy. Like other reorganizations, the
farmer must submit a complete list of assets and liabilities and a statement of
financial affairs. If the farmer successfully repays their debt, they may keep
the farm. The information contained in this message is general and should not
substitute for the advice and counsel of a licensed attorney.
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Should you
file Chapter 12?
The advantages and disadvantages are all clear when it comes to the Chapter
12 bankruptcy. The farmer must retain the land. In other forms of bankruptcy,
any land which is mortgaged in order to buy seed or fertilizer,
is subject to seizure. The chapter 12 bankruptcy protects the farmer from this
type of seizure. The land remains in the farmer's hands and is farmed as usual
as long as part of the profits go towards paying debts. For farmers caught in a
bad year, this type of reorganization often works just fine. The disadvantages
are actually few for the farmer. The only disadvantage would be the requirement
that part of the profit goes towards paying the debts. Because the farmer must
often borrow to pay for the next crop, the cycle may be downward. Be sure to
examine your financial situation carefully before going into bankruptcy. The
information contained in this message is general and should not substitute for
the advice and counsel of a licensed attorney.
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Chapter 12
Procedures
The first step in filing a chapter 12 bankruptcy is the filing of a petition
with the United States Bankruptcy Court asking for protection. The court will
then issue a stay that prevents creditors from continuing collection
procedures, including lawsuits. The court will appoint the farmer as trustee to
oversee the process and to insure that everyone, creditors included, get a fair
deal. The court will require a complete list of creditors, an accounting of
assets and liabilities and a Statement of Financial Affairs. The farmer must
then develop a plan within ninety days to repay debts. Once a suitable plan has
been developed, the farmer may continue to operate the farm. If the crops are
successful and payments are made to alleviate the debt, the farmer gets to keep
the land and continue farming. If unable to complete the plan, the farm will
then go into liquidation. The information contained in this message is general
and should not substitute for the advice and counsel of a licensed attorney.
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Chapter 13 Bankruptcy
The wage earner repayment plan or the adjustment of debts of an individual
with regular income, as it is now known, is also called a Chapter 13. This type
of bankruptcy is useful for those people who either do not want the stigma of a Chapter 7 liquidation or who have property to protect and
a steady income from which they can make payments. This individual
reorganization requires the petitioner to create a repayment plan that attempts
to repay the creditors some percentage of what they are owed. If the trustee
approves the plan, it is submitted to the creditors who may object or approve.
Eventually a plan will be worked out and payments will commence. Upon the
successful completion of the plan, the bankruptcy is discharged. The debtor
need not worry about ever being contacted by the creditors again. The
information contained in this message is general and should not substitute for
the advice and counsel of a licensed attorney.
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Chapter 13
Procedures
The first step in a Chapter 13 bankruptcy is filing the petition. When you
file with the United States
bankruptcy court, you are petitioning the court for protection under the
bankruptcy law. The court will issue a stay which will prevent any continued or
future seizures or lawsuits. Your assets are now under the court�s
protection. A trustee will be appointed to inventory your assets. You then
submit a list of all of your creditors, even those who
you have managed to keep paying. The court then notifies your creditors that
you have filed a petition with the court. You will now create a payment
schedule which the trustee and the creditors must approve. Once approved, you
will be given three to five years to pay. After successfully completing the
plan, the court will hold a hearing where your bankruptcy will be discharged.
From that point on, those creditors will not be able to contact you further.
Remember, that a discharge will not protect you from having to pay most taxes,
child support, alimony and debts incurred based on fraud. The information
contained in this message is general and should not substitute for the advice
and counsel of a licensed attorney.
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Protecting
Your Home From Creditors
Can you keep your home, is one of the most frequently asked questions when
faced with a bankruptcy. While the home loan is technically a secured loan with
the house itself serving as collateral, many states have passed laws that
protect the house in a bankruptcy. This protection ranges from absolute, which
is pretty much the case in Florida,
to very little to no protection in other less progressive states. There is also
a federal personal property exemption of $7,500. Some states require that you you use their exemption, others give you a choice between
theirs and the federal government's. Before you file for bankruptcy, you need
to understand your state's laws. Your decision as to which type of bankruptcy,
or even whether you wish to file at all, may change after reviewing the rules
of your state. The information contained in this message is general and should
not substitute for the advice and counsel of a licensed attorney.
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Protecting
Your Vehicles from Creditors
There are certain assets which state and federal law have determined to be
exempt from the reach of creditors, and this may include your car or truck. If
you own your vehicle outright, then, according to federal law, if it is valued
at less than twelve hundred dollars, it is exempt. Your state may have
different laws governing the exemption for cars and trucks. Some states exempt
any vehicle that is necessary for transportation to and from work or which is
used as part of that person's livelihood. Other states have higher exempt
values than the federal government, others less. If your vehicle is still being
paid for, the lien holder can repossess the vehicle. You can retain possession
of the vehicle if you make good on the past due payments and reaffirm the debt.
This means you promise to continue paying for the vehicle. The lien holder, does not have to accept this solution. The
information contained in this message is general and should not substitute for
the advice and counsel of a licensed attorney.
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Secured vs.
Unsecured Debts
When you file for bankruptcy you may have two types of debt, secured and
unsecured. Secured debt is debt which you obtained by pledging some tangible
property of value as collateral. This could be a cash loan with your home
serving as collateral. You could be purchasing a home from a bank, which then
holds the lien on your home until you repay your loan. A car, on which you are
making payments, is another example of a secured loan. If you file for
bankruptcy, the lien holders will be able to repossess the collateral. How
much, if any, of your home's equity is subject to foreclosure depends upon the
laws of your state. Unsecured debt is any debt that has no collateral backing
the loan. Credit card debt is a prime example. Signature loans are another.
Unsecured creditors can usually expect to get little if anything in a
bankruptcy. The information contained in this message is general and should not
substitute for the advice and counsel of a licensed attorney.
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Exempt
Property in Bankruptcy
Exempt property is any property which the law, either state or federal,
determines to be out of the reach of creditors. The federal law has a list of
exempt property which includes. $7,500 for a homestead, a motor vehicle valued
at less than $1,200, a $200 limit on each personal item up to a total of $4,000
dollars for the entire family and a $750 limit on tools and professional books.
Alabama's laws are less favorable exemptions and you are not
able to choose between the state's and the Federal Government's exemptions.
Some states will require that you use their list of exemptions. Alabama requires that you use its list of exemptions. Personal property is limited to $3,000 and homestead exemptions are limited to $5,000 per spouse. Certain
government benefits are also exempt, including future benefits like social
security, unemployment benefits and veteran's benefits. Child support payments
and alimony are also exempt from the reach of the creditor. The information
contained in this message is general and should not substitute for the advice
and counsel of a licensed attorney.
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Fair Debt Collection
Practices Act (FDCPA)
The Fair Debt Collection Practices Act outlines exactly what a collector can
and cannot do to attempt to collect a debt. They can call you at work. But,
they cannot let anyone know the purpose of the call. They cannot tell the boss
or secretary or anyone, that they are a collection agency trying to collect a debt. If you tell
them to quit calling you at work, they must stop. They can call you at home
between the hours of 8 A.M. and 9 P.M.
your time, not their time. If they call at any other time, they have broken
federal law. They may send you letters asking you to repay them. They cannot
send a letter which can be construed as being from a collection agency. There
can be no markings to indicate such information. And they may file a lawsuit to
attempt to get a judgment against you. The information contained in this
message is general and should not substitute for the advice and counsel of a
licensed attorney.
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Protection Under the FDCPA
Because unsecured creditors have only one way to get their money back short
of filing a suit, that is to harass you and they use it to the hilt. They will call you relentlessly, send
you mail and generally try to make you wish you had never defaulted. But there
are rules according to the Fair Debt Collection Practices Act. They cannot tell
anyone that they are collecting a debt. They cannot even mark the outside of
mail notices with any indication that they are attempting to collect a debt. If
they call you at work, tell them to stop. After that, any call they make to
your business, is illegal. They must call you between the hours of 8 a.m. and 9 p.m.
local time. They may not threaten you or curse at you. If you notify the
collection agency in writing that you wish them to cease and desist bugging
you, they can only contact you once more to confirm they will not be contacting
you. If any collection agency ever violates any of these rules, you may sue
them and sue them well. Just be sure to document the incidents thoroughly. The
information contained in this message is general and should not substitute for
the advice and counsel of a licensed attorney.
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Can Student
Loans be Discharged
In most cases, the student loan is not a dischargeable debt. You will have
to pay these back no matter what. If you do not pay them back, they may be able
to garnishee your wages. This means that a portion of your wages will be
deducted before you see your check and will then be applied towards your
outstanding student loans. Most student loan organizations will wait until
after your bankruptcy is discharged before resuming collection attempts. There
are two exceptions to this general rule. If failure to discharge a loan would cause hardship for the debtor or their family, then the loan may be dischargeable. The information contained in this message is general and should not substitute for the advice and counsel of a licensed attorney.
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What Happens
to Guarantors/Co-Signers
Cosigners are people who have lent their good name and credit to someone
else so that they may get credit. This is a risk. For the small business owner
who owns majority stock in a small company, the bank may ask that the owner
cosign any loans made for the benefit of the corporation. There are two kinds
of cosigning. Cosigning as a surety and cosigning as a guarantor. The surety is
a promise directly to the creditor, that they will
pay, if the primary debtor fails to pay. A guarantor, on the other hand, agrees
to pay only after all avenues to get money from the principal debtor have
failed. The cosigner of a note has no protection if the debtor files Chapter 7
bankruptcy. If the debtor files a Chapter 13, the cosigner need not worry. If
you are unsure as to your liability as a cosigner before or after the fact, get
legal advice. The information contained in this message is general and should
not substitute for the advice and counsel of a licensed attorney.
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Bankruptcy and
Your Credit Rating
Bankruptcy is a last ditch effort which, if filed, will affect your credit
rating for as long as ten years. Each time you fail to make a payment on a
credit card, an electronic mark against your good credit was stamped in your
record. These records are called credit reports and are kept by several large
companies who do nothing except rate the credit
worthiness of consumers. If you file for bankruptcy, another mark will find its
way onto your credit rating. This will indicate that you filed for bankruptcy.
The immediate result will mean being cut off from regular sources of consumer
credit. This may include credit cards, home loans and car loans. You may be
denied employment if good credit is considered necessary for the position. And,
you may find it difficult to rent a home or get standard utility service. A
ruined credit rating can mean a difficult life for a number of years. The
information contained in this message is general and should not substitute for
the advice and counsel of a licensed attorney.
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Bankruptcy and
Pending Lawsuits
If you are currently involved in a lawsuit in which you stand to gain you
may have to use part or even all of the cash award
from your lawsuit to satisfy your creditors. How a lawsuit is affected depends
entirely upon the respective reasons for the lawsuit and bankruptcy. A lawsuit
undertaken to help pay for current and future medical expenses in a case of
negligence, will be affected by bankruptcy only such that any monies gained in
the lawsuit will go towards paying for the medical costs. The bankruptcy will
not allow you to skip out on your obligation to pay for your medical
procedures. But you may be allowed to discharge other debts not related to your
medical needs and your settlement may be exempt from many of the creditors.
This is a complex area of the law which requires the attention of an expert.
The information contained in this message is general and should not substitute
for the advice and counsel of a licensed attorney.
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Bankruptcy Tax
Issues
If you are a debtor, you may actually stand to gain from a bankruptcy, at
least under regular IRS rules. When you have a debt of fifty thousand dollars
dismissed, then you have effectively gained fifty thousand dollars. You may
still be insolvent, but the rules would seem to indicate that you are wealthier
than when you started. In recognition of this paradox, the IRS developed a
policy stating that anyone who discharges debt and remains insolvent after the
debt is not recognized as having received income. If you
become solvent in any amount due to filing, then that amount is considered taxable.
In the case of a business reorganization, a net
operating loss is created. This has tax value and will affect the taxes of the
filing company. Because the tax ramifications are complex, it is advisable to
seek professional advice before filing. The information contained in this
message is general and should not substitute for the advice and counsel of a
licensed attorney.
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Credit Counseling Online
The Federal Bankruptcy Rules state that a person filing for bankruptcy must take a course in Credit Counseling
and Financial Mangement. If you would like to take the required credit counseling course before your appointment,
please go to the Hummingbird Credit Counseling website
or call the Consumer Credit Counseling Service of Tennessee River Valley at 256-881-1000.
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