People often regard bankruptcy as the last option to get out of debt. Bankruptcy has positive effects too. One of the main benefits of filing for bankruptcy is that your insurance premium gets lowered to a considerable extent. Often, insurance companies regard filing for bankruptcy as an act of financial responsibility. Insurance premium gets lowered if a bankruptcy discharge eliminates debt.

Credit score plays an important role in determining your insurance premium. If you are being charged very high insurance premium due to ruined credit, you can file for bankruptcy. In due course, your credit score improves and you can enjoy lower insurance premium.

Insurance policies are treated differently in bankruptcy

If you file for bankruptcy, your life insurance policies are treated in a different manner as compared to your other assets. The main reason for treating life insurance policy in this manner is that the proceeds from the policy can be used to extend financial support to the family of the bankrupt. There are other benefits too. For instance, you can continue enjoying your health insurance benefits, in addition to unemployment benefits as well as disability benefits.

Bankruptcy following medical emergencies

A recent study states that 68% of the consumers who had declared bankruptcy owned health insurance policies. Not only this, about 50% of the people who filed for bankruptcy had done so due to health and medical emergencies.

The proceeds of your insurance policy will not be exempted though, if you encash it before filing for bankruptcy. Every state has exemptions of its own. Exemptions are made as per state and federal laws. However, you cannot avail both exemptions. It has to be either a state exemption or a federal exemption.

For instance, in Nevada, proceeds of your insurance policy will be exempted if the premium you are paying does not exceed USD$1,000 annually. In Texas, a debtor who is a beneficiary enjoys exemption of dollar amount that is unlimited. It holds true for accident insurance, health insurance and also annuities extended by an employer.

Depending on your prevailing financial condition and the unforeseen circumstances that you may face, filing for bankruptcy may enhance or restrict the usefulness.

Bankruptcy exemptions are applicable depending on the equity you have in the property. In case of an automobile, if it has enough equity, you can retain the car. If the equity in your car is more than the exemption, it can be sold so that you can repay your debts. It is also important that you be current with the payment of your car loans.

Debtors can also elect bankruptcy code exemptions in some of the states. In these states, debtors have the opportunity to choose between state exemptions and federal exemptions. However, the bankruptcy exemption laws differ from one state to another. Another important aspect of auto exemption is whether your car has a clear title or not.

In the event your car has been used as collateral, or you are leasing it or financing it, there are 3 options with regard to secured car loans when Chapter 7 bankruptcy is filed by you.

What happens to your car loan in Chapter 7 bankruptcy?

If you file for Chapter 7 bankruptcy, you can reaffirm, redeem or surrender.

Reaffirm

A reaffirmation agreement is signed between you and your car creditor. In this you continue making payments and the creditor assures you that as long as you are paying, your car will not be taken away.

Surrender

You can surrender your automobile to the lender if you cannot afford to make monthly payments towards car loan.

Redeem

You can redeem or buy the car from the creditor by paying him the fair market value. You are required to pay the replacement retail price of the vehicle as per 2005 bankruptcy code.

Effect of Chapter 7 bankruptcy on Car leases

If you have leased your car, you have 2 options. You can either surrender the car or continue to make lease payments every month. In case you surrender the vehicle, obligations under lease get eliminated.

Effect of Chapter 13 bankruptcy on Car leases

In Chapter 13 bankruptcy you either assume or reject the lease. If you “assume” the lease, you have to make payments every month. If you “reject” the lease, you have to return the vehicle to the lender.

What happens to your car loans in Chapter 13 bankruptcy?

In case you have defaulted in making your car payments, you can declare Chapter 13 bankruptcy to stop repossession of the vehicle. You make payments depending on the time of your purchase. Whether it has been recently bought or bought several years back.

Cram Down

In case you bought your car after 910 days elapsed from the time you filed for bankruptcy, you are required to pay as per the current value of the vehicle.

910 Claims

In case you have bought the car within 910 days from the time you declared bankruptcy, you are required to pay back the entire loan. However, the interest rate it attracts gets reduced to a great extent.

Effect of bankruptcy on Car insurance

Filing for bankruptcy does not prevent you from getting your car insured. The car insurance rates may go up to some extent. If you have been making regular insurance payments, it is less likely that your insurance rate will escalate. If you have a lower credit rating your rate may increase.

Filing for bankruptcy hurts your credit score and remains in the credit report for a period of 10 years. There are many car insurance companies who use credit score as a means of evaluating your creditworthiness. The car insurance company may offer you an insurance policy but may not offer you the best rates.

Your battle against debt is half won if you have an efficient lawyer by your side. The last couple of months have been tough for you financially. You have been trying hard to wrestle out of debt. Your current financial status demands you to file for bankruptcy. Can you handle it alone? It is better not to. There are several legal aspects in bankruptcy that can be addressed only by an experienced bankruptcy lawyer. Your attorney can take the entire bankruptcy process to completion and get you out of the debt trap.

How can the bankruptcy attorney help you?

Once you have contacted the attorney, don’t conceal any information related to your debt accounts. Even if there is any detail which may go against you, speak out. Your bankruptcy attorney may be in a position to help you out.

You have to go for credit counseling at least 6 months prior to filing for bankruptcy. It has been made mandatory as per the new bankruptcy law introduced on October 17th 2005.

You have to hand over all relevant papers to him along with the proof that you have undergone a credit counseling session. Give him all the documents related to your debt accounts, assets, monthly expenditure, income etc. After carefully studying your financial situation, your bankruptcy attorney will decide which chapter will help you the most.

Filing for bankruptcy is always considered the last resort; nevertheless, it indicates that you are ready to take the onus and get out of the financial mess. However, if you file for bankruptcy, the same gets recorded in your credit report for a period of 7 to 10 years. Your credit report is an indicator which shows how you have managed your personal finance down the years. There may be financial upheavals on the way; you should try to take it into your stride. How you manage your personal finance today will have a cumulative effect over the years. If your credit report shows that you have filed for bankruptcy, your chance of getting new credit diminishes. Moreover, a damaged credit report can act as a hindrance in getting employed at a good place or may deprive you of enjoying financial benefits.

A condition in which your income is less than your debts is not an uncommon scenario. There are many people who tend to fall into debts despite the fact that they earn a lot. When you have reached a point when you have spent almost everything and have nothing left to pay the creditors, you are bankrupt.

If you have assets locked in long term plans

If you have locked your assets in retirement plans, CDs or certificates of deposit and any other investment vehicle (long term), you may or may not be able to save your assets when you file for bankruptcy. Consult your bankruptcy lawyer to find out how you can get optimum protection for your assets. You should plan out your personal finance strategically depending on your low credit rating and your capacity to borrow.

In case you have most of your assets locked in retirement benefits, it is better you file for Chapter 13 bankruptcy. You can use the 5 years reorganization plan to pay off creditors.

If you have invested in shares

If you are investing in shares, you may be anticipating a good return on investment. However, with the increase in the number of companies filing for bankruptcy, your personal finance may receive a set back too. If one sector of the economy or a company or for that matter country gets affected, the net asset value of a fund is also affected. The securities market may get a jolt. So, it is best to have a diverse investment portfolio.

Your retirement benefits in bankruptcy

The retirement plans that have anti alienation clause, a provision that does not allow creditors to attach the retirement funds and the proceeds cannot be used to pay off creditors. 401K savings as well as pensions which qualify for Employee Retirement Income Security (ERISA) and even the federal pension savings act have anti alienation clause and the proceeds cannot be used to pay off creditors. There are exceptions though.

Beware of inaccurate reporting

There may be times when your credit report may have information wrongly entered. Your financial position may not be requiring you to file for bankruptcy, but your credit report says the other way round. It may be due to identity theft or wrongly entering your monetary movements in the credit report. If you find any discrepancies, report the same to the credit bureaus.

Filing for bankruptcy makes your credit score nosedive. It is not the end of the road though. You can make use of various benefits home equity offers when you are bankrupt or intending to file for bankruptcy. Majority of the lenders will not be willing to give credit. And it takes a lot of time to build up creditor confidence again. Make use of your home equity under such circumstances.

Make use of the equity in your home

Availing home equity loans are comparatively less complicated as they are secured and the risk involved is also less. You need to have a good credit history and should have the ability to make monthly payments. At least, the last 6 months should show a responsible financial behavior. So, it is better to wait till the credit score improves to a certain extent. There is no point in applying for a home equity loan soon after declaring bankruptcy and just being turned down for the same.

If you have enough equity in your house, it can pay off your debts sooner. Chapter 13 bankruptcy allows you to repay the outstanding balance of your debts within 3 to 5 years. If you have equity in your home, you are still a favorite of the creditors. You may not qualify for a traditional mortgage loan but there are certain banks engaged in subprime lending. Subprime lenders lay more stress on equity rather than the credit. Your repayment capacity is also taken into consideration. The banks offering subprime loans charge comparatively higher fees for offering home equity loans and the rate of interest is also pretty high.

One advantage of availing a home equity loan when you are bankrupt is that it gives you more time to pay off your debts. It makes the repayment time more flexible. As far as the interest rates are concerned, a good mortgage lender will advice you to opt for fixed rate of interest. You need to read between the lines before you can settle a deal with your mortgage lender.

When you file Chapter 13 bankruptcy, you need to hire a Chapter 13 bankruptcy attorney to pay off as many debts as you can. You are not required to lose your assets but you have to make payments from your income. The Fed has designed the bankruptcy laws in such a manner that the lending business is made more streamline. The Congress also aims at helping consumers who plan to file bankruptcy under various circumstances and helping the American citizens for debt relief. Chapter 13 is meant mainly for people who have regular income and are in a position to pay back some or all the debts with the help of a new repayment plan. Here lies the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy. While in Chapter 7 bankruptcy, you need to surrender your non exempt assets so that they can be sold and paid for your debts. Chapter 13 bankruptcy doesn’t require you to surrender your assets. You retain your assets. Instead you are given a repayment plan and according to the new payment plan you are expected to make the payments.

Who qualifies for Chapter 13 bankruptcy?

If you are having regular income you can file for Chapter 13 bankruptcy. Business entities or corporate houses are not allowed to file. If you intend to file Chapter 13 bankruptcy, you have to give sufficient proof that you are in a position to pay back the debts provided you are given a new repayment plan. If it is found that your income is low, you don

Introduction

If you are planning to file Chapter 7 bankruptcy, a lot of things need to be considered. In Chapter 7 bankruptcy, if you have any non-exempt assets with you, these assets will be sold by the trustee. The trustee is usually appointed for carrying out Chapter 7 bankruptcy procedures and pay off debts to your creditors according to the priority arranged in the bankruptcy code. The individual debtors can keep exempt assets with him. One of the most common forms of bankruptcy filed, Chapter 7 bankruptcy can help you get out of debt pretty fast. For similar reasons, debtors prefer Chapter 7, even if they are capable of paying at least some amount to the creditors. Individuals, corporate business entities and married couples can file for Chapter 7 bankruptcy.

Once you file for bankruptcy in the federal court, the proceedings start. You need to name all your assets and debts. You may be required to give an account of all your financial transactions too. Make a list of all your assets and debts you need to repay to your creditors. It is better to disclose details of your property and its market value as defined in the bankruptcy code.

Appoint an Attorney

Once you file Chapter 7 bankruptcy, automatic stay comes into effect. Your creditors are not allowed to make collection calls to collect debts. The trustee that has been appointed informs all the creditors that you have filed for bankruptcy. Meanwhile, you appoint a bankruptcy attorney who will be taking care of the entire proceedings. Previously, you could take decisions related to bankruptcy on your own. The new Federal Bankruptcy Laws have made it compulsory to appoint an attorney who can guide you better in completing the bankruptcy process. An attorney can suggest methods that will hasten the process and make it less complicated and hassle free.

New Regulations regarding Chapter 7 bankruptcy

As per the new rules pertaining to Chapter 7 bankruptcy, the eligibility criteria for debtors has become more rigid. The Fed has introduced certain changes. Check it out.

Means Test

According to the new law implemented by Congress, any one who wants to file for Chapter 7 bankruptcy has to undergo the means test. What happens is your gross income will be compared with the median income of the state in which you reside. If your income is found to be less than the median income of the state, you qualify for Chapter 7 bankruptcy.

Debt Counseling Services

The new Federal Laws have made debt counseling mandatory. You have to take a debt counseling session so that the debt counselor can decide if you need to file for bankruptcy or not. After assessing your financial status, if the counselor thinks you need to file, you go ahead or you drop the idea of filing for bankruptcy and follow the alternative option suggested by the debt counselor.