The Federal Bankruptcy Laws have undergone certain changes recently. The new Federal Bankruptcy laws have set stringent norms for debtor who plan to file for bankruptcy. Sometimes understanding these rules are a bit difficult. So any person who wants to file for bankruptcy needs to hire someone who can guide debtors intending to apply for bankruptcy. If not, the debtor may commit mistakes at any point of time and this may lead to increased difficulties in discharging debts. It
also prolongs the repayment process.

There are two types of laws that can give protection to the debtor called Chapter 7 and Chapter 13. Each one has its own eligibility criteria. If a debtor wants to file Chapter 7 bankruptcy, he has to meet certain requirements. For instance, his income has to be equal to or less than the median income of the state. After meeting the minimum financial obligations every month, if a debtor is left with nothing, he can apply for Chapter 7 bankruptcy. If he has unsecured debts like credit card bills or medical bills, filing for Chapter 7 bankruptcy is a good option. The debtor has to take a credit counseling session to find out whether Chapter 7 or Chapter 13 will be suitable for him.

If a person files for bankruptcy, as per the order of the federal court, the creditors are not allowed to make collection calls to the debtors. The court decides which debts are to be discharged and which debts are required to be paid. The new Federal Bankruptcy Laws states that most of the non-exempt assets can be sold by the court or the court appointed trustee for repaying the creditors. This explains why it is so important to select the right type of bankruptcy. Selection
should be according to the situation of the debtor.

If a debtor has lot of assets and wants to keep his home or car with him then he should go for Chapter 13 bankruptcy. In Chapter 7, a debtor has to lose his assets so Chapter 7 will not be appropriate for him. In this context, a good bankruptcy lawyer can guide as he is well acquainted with the legal norms of bankruptcy.

There are many law firms and if you seek assistance, they can guide you. Bankruptcy is a complex aspect of the legal system involving contract laws, real estate laws and tax laws. Once again, the court will decide which creditor needs to get paid and in what order. Other than these, there are 2 common types of bankruptcy. They are called Chapter 11 and Chapter 12 applicable in debt related matter pertaining to businessmen and farmers. They have their own procedures and documents need to be furnished as per requirements.

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Personal bankruptcy can provide great relief to people facing financial problems. Prior to filing for bankruptcy, a debtor should understand the complete procedure of filing for bankruptcy. A debtor should also assess his financial condition before deciding whether Chapter 7 or Chapter 13 bankruptcy will be suitable for him. He should know the cost of filing for bankruptcy. There are several costs like submission costs, attorney costs, court fees and trustee fees. If the court conducts any meeting on behalf of the debtor, the cost is borne by the debtor. So a debtor should seriously consider the costs before filing for bankruptcy.

A debtor should only think about filing bankruptcy when he is left with no other option. The main reason for this is that his future loans and credit depends on his action. When it is feasible to clear off debts without filing for bankruptcy, approach a credit counselor to discuss if there are other options that can make you debt free. Alternatively, you can also qualify for a debt relief program and avoid this complex process. If the debtor has plans to buy a home or car in future after he has filed for bankruptcy, he may get a loan at a very high interest rate. So, a debtor should proceed with bankruptcy after carefully assessing the consequences of filing bankruptcy.

Bankruptcy is a legal process that can be applied in different ways. One way is filing for Chapter 7 bankruptcy, which is the most common type of bankruptcy. The debtor surrenders his assets to a court appointed trustee. Thereafter, the assets are liquidated to pay off creditors. As far as filing for Chapter 7 bankruptcy is concerned there are variations and it differs from one state to another. A debtor is required to file for bankruptcy in the state where
he resides.

There is another way, where the debtor wants to keep the property with him and he has regular income. He is also in a position to pay a minimum amount to the creditors. For that, a debtor should have a payment plan and get approval from the trustee. This is called Chapter 13 bankruptcy.

However, if a person applies for personal bankruptcy, he can avoid harassments from the collection agencies. A debtor should start working towards improving his credit again. And if he maintains good credit he can qualify for FHA (Federal Housing Administration) mortgage or VA(Veteran Administration) mortgage after 2 or 3 years.

If you don’t wish to go for FHA(Federal Housing Administration)mortgage or VA(Veteran Administration)mortgage then bad credit loans could be an good option after filing bankruptcy to assist the consumers to fulfill their current financial need.

For more information

Bankruptcy Ahead – Personal bankruptcy information blog for those who need to learn about chapter 7 and chapter 13 and the bankruptcy process before making the decision to file bankruptcy alone.

Ritz Camera Centers Inc, highly skilled in imaging and photography is the largest camera store chain in United States. Ritz took refuge in Chapter 11 bankruptcy in February, 2009 to reorganize its business operations. Ritz operates under different names like Ritz Camera, Inkley’s, Wolf Camera, Kits Camera, The Camera Shops. In addition to the camera stores, it is also involved in supplying boats and this section operates under the banner Boater’s World. The total number of stores under its banner is around 1000. This figure was recorded before it filed bankruptcy. Ritz is based in Beltsville, Maryland. Last time the company declared bankruptcy was way back in
2001 after which it bought Wolf Camera.

What led Ritz to file Chapter 11 bankruptcy?

Company officials state that there was more than one reason to file bankruptcy. The main reason was credit crisis. Due to reduced consumer spending sale of products dropped noticeably. The rise in gas prices also aggravated the problem.

The main creditors in Ritz Camera bankruptcy

The company declared that its assets as well as liabilities amounted to USD$500 million each. Ritz Camera’s bankruptcy reports reveal that the main creditors in the bankruptcy proceedings are

• Nikon – Ritz owed approximately USD$26.6 million at the time of filing bankruptcy
• Fuji Photo Film – The company owed USD$8.4 million
• Canon – This company is entitled to receive USD$13.7 million in payments from Ritz.

Quoting Marc Weinsweig, the Chief Restructuring Officer “The loss of revenues and profit margins from the diminution in the photo-finishing business proved too much of a burden, coupled with the losses experienced by the Boater’s World business in 2008″.

Ritz sought court permission to get USD$85 million in financing so that it could continue its operations while the reorganization plans were underway.

President Obama recently introduced the Homeowner Affordability and Stability Plan to bail out as many as 4 million to 5 million homeowners facing foreclosure. The mortgage loan modification program allows you to re-negotiate the existing loan terms and facilitate easy repayment of the same. Not all loans can be modified and if you who have availed a mortgage loan from Fannie Mae or Freddie Mac, you are entitled to loan modification.

Loan refinancing is different

Loan modification is different from loan refinancing. Loan refinancing is meant for homeowners who have overdue debts. A mortgage modification is meant for homeowners who are current with their payments. In this context, current payment means you have missed only one payment and you were late by not more than 30 days in the last one year or 12 months.

To qualify for a loan modification program, you have to fulfill the following criteria. They are as follows-

• The loan must be secured by Freddie Mac or Fannie Mae
• You are required to furnish documentary evidence that you are facing financial hardship
• The amount you owed on 1st mortgage should not be more than USD$729,750
• The home should be your primary residence.
• The first mortgage should have been obtained not after January 1st 2009.

If you qualify for the loan modification process, the next step is to initiate the process. To apply for loan modification you have to
provide the following-

• You have to give details of your assets
• Recent tax returns
• Gross monthly income
• Details of 2nd mortgage if applicable
• You have to give details of the minimum monthly payments on your credit cards
• Outstanding balances on your credit cards and the interest rate each of them attract.
• If you are making payments for student loans, car loans etc, you have to give details of the same.

You may have to undergo a credit counseling session if your loan modification request is accepted. Loan modification is initiated with a 3 month probationary period. Execution of documents related to loan modification takes place only if the payments are regular. Mortgage loan modification requests must reach before June 2010.

How do lenders help you?

Lenders will help you in 3 ways. Depending on your requirement, lender may change your rate of interest from ARM or adjustable-rate mortgage to FRM or fixed-rate mortgage. Alternatively, your principal balance and your monthly payments may also be reduced.

For more information

Free mortgage advice – Free mortgage advice from a Senior Mortgage Officer.

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The incidence of medical bankruptcy has increased over the last couple of years and in some places, it is up by 300%. You are referred to as a “medically distressed” debtor in bankruptcy if you have spent 25% or more of your annual income on medical expenses that are not reimbursed. You are also said to be medically bankrupt if you are not able to attend your work for 4 weeks at a stretch due to your own illness or illness of your relative.

Medical Bankruptcy Fairness Act (2008)

The Medical Bankruptcy Fairness Act of 2008 was introduced to extend relief to the debtors who are in medical distress. The Act increases Federal Homestead Exemption in Bankruptcy to USD$250,000 for medically distressed debtors. However, increase in homestead exemption will benefit who have enough equity in their home. It won’t be of much help for people who have taken out home equity line of credit or second mortgages.

Bankruptcy Code treats all debts alike

The Bankruptcy Code treats all debts in a similar manner and doesn’t differentiate medical debts from credit card debts, car loans or mortgage debt. Medical bankruptcy is not formal in United States. Nevertheless, medical bills can be either discharged in case of Chapter 7 bankruptcy or the medical debts can also be restructured in Chapter 13 bankruptcy.

As per reports furnished by “Health Affairs Medical Journal”, majority of bankruptcy filings are due to
medical bills. The higher incidence of medical bankruptcy can be attributed to the fact that medical field believes in aggressive debt collection. This drives debtors to file bankruptcy with the hope of getting some financial relief.

How your medical bills are treated in Chapter 7 bankruptcy?

When you file Chapter 7 bankruptcy, your medical bills are forgiven most of the time. However, it gets recorded in your credit report for a period of 10 years. It reduces your chances of getting fresh credit even if you file bankruptcy for doing away with your medical bills.

How your medical bills are treated in Chapter 13 bankruptcy?

When you file Chapter 13 bankruptcy, you are allowed to pay off your medical bills through a new repayment plan. Chapter 13 safeguards you from lawsuits and helps you to retain your assets. You may be allowed to pay off your medical bills for less than what you owe. The same gets recorded for a period of 7 years in your credit report.

Reasons for upsurge in medical bankruptcy

There are 2 main reasons why medical bankruptcy is on the rise. The main reason is that cost of health care is escalating with every passing day. Cost of prescription drugs is increasing. The second reason is due to the employers passing a major portion of the health insurance cost to the employees.

The Obama Administration announced March 4, 2009 the so called “Making Home Affordable Program”. This is Obama’s USD$75 billion dollar bail out program and many homeowners are pinning their hopes on it. Obama’s federal program for loan modification is being offered for a limited time period. The main aim of the mortgage loan modification program is to help homeowners with a lower monthly payment thus making the payments more affordable for them.

The program has a standardized layout and your loan modification request is either refused or accepted depending on your financial condition. There is no option of negotiation involved in the program.

Find out if you qualify for Obama’s Loan Modification program

You are required to meet certain criteria in order to qualify for the loan modification program. The home you are residing in should be your primary residence. The mortgage loan should have been taken out before January 1st 2009. As far the loan amount is concerned, it should not exceed USD$729,750. The mortgage payments you make every month should be 31% of your gross monthly income. This should however include insurance as well as taxes.

Although Obama’s Homeowners Affordability and Stability Plan is making a lot of hue and cry about helping homeowners but it is not proving to be beneficial for all. Let us see why.

Why isn’t Obama’s Plan helping everyone?

Obama’s Homwowners Affordability and Stability Plan fails to address the problems of “underwater” homeowners. These homeowners are the ones who have negative equity in their homes. And they have no other option but to “voluntarily” walk away from their property as making further
investment in the property makes no sense.

Bankruptcy marketing is the process by which information about consumers who have filed bankruptcy is gathered. Once you file bankruptcy, your chances of getting fresh credit as per favorable terms are greatly diminished. This is because when you file bankruptcy, your credit score is affected badly. However, you may need cash before you can repair your credit. Usually traditional lenders will shy away from giving you fresh credit. Not only lenders, insurance carriers, credit card issuers etc take your credit score into account before extending credit to you.

Non-traditional lenders use bankruptcy marketing to locate individuals who have filed bankruptcy. They can spot the prospective consumers who can be offered credit. The information can be gathered only when the bankruptcy court publishes details of consumers whose debts have been discharged or those who have come out of bankruptcy. These records are made public. The information contains details like total amount of debt that was repaid, income of the consumer, type of bankruptcy filed by the debtor etc.

There are 6 types of bankruptcy that can be filed. As such the information contained in the bankruptcy marketing report will differ from one another. The marketing plan that is worked out for consumers filing different types of bankruptcy also differs. Since there are innumerable consumers filing bankruptcy every year, it is not possible for the non-traditional lenders to gather such a huge database. So, they hire bankruptcy marketing firms to gather information about consumers filing bankruptcy.

The bankruptcy marketing professionals usually gather information from different courthouses in United States. Data containing details of consumers are regularly updated and checked for accuracy on a regular basis. They are authenticated before they are mailed to the lenders.

In a nut shell, bankruptcy marketing is a powerful tool with the help of which non-traditional lenders can improve their chances of selling their products to the individuals who have filed bankruptcy and are in dire need of some cash.

Bankruptcy cannot be far behind if you have not managed your finances well and if you don’t qualify for other debt relief options. When you are in debt, you may be exploring all possible ways to stay away from bankruptcy. And the fact is many options have come up that can serve as an alternative to bankruptcy. However, filing for bankruptcy is no longer a simple process. You have to be eligible to file bankruptcy. Earlier you could do so as per your convenience but according to the New Bankruptcy Law which became effective 17th October 2005, you have to consult a credit counselor before you can file bankruptcy.

Good credit score and bankruptcy cannot be simultaneous

When all other debt relief options have failed to get you out of debt, bankruptcy can be your savior. Undoubtedly, bankruptcy ruins your credit score and it haunts your credit rating for a period of 10 years but you have to compromise at some point. And getting fresh credit with favorable terms may be a far cry once you file bankruptcy. You cannot expect to file bankruptcy and simultaneously keep your credit score unscathed.

Filing for bankruptcy will not only help you to get out of debt but it will also allow you to make a fresh start financially. There are different types of bankruptcy but the most widely availed are Chapter 7and Chapter 13. In both the cases, your debts will be treated in a different manner.

How your debts are treated in Chapter 7 bankruptcy?

In Chapter 7, which is also known as “liquidation”, your assets are sold off by a court appointed trustee so that your creditors can be paid off. Not all assets are sold off; you are allowed to retain some of your assets. They are referred to as “exempt property” or property that is spared from liquidation. It can be your car, home etc. However, property that is not exempt should have enough equity so that by selling it, your creditors can get paid for your outstanding debts. There are state as well as federal exemptions and you can avail either state exemption or federal exemption but not both. Exempt property differs from one state to another. Not all debts are discharged when you file Chapter 7 bankruptcy. Usually your unsecured debts can beeliminated in Chapter 7 bankruptcy.

How your debts are treated in Chapter 13 bankruptcy?

When you file Chapter 13 bankruptcy, you don’t have to give away your assets or property. You will be given a debt repayment plan and you are expected to pay off your debts within a span of maximum 5 years. You are required to have a stable income that will enable you to pay every month. The repayment plan is valid once it is approved by the court. The most common types of debts that are consolidated in Chapter 13 include outstanding balances on auto loans, mortgage arrears, credit card debts, student loans and unsecured debts. As a rule, all outstanding debts should be included when you are consolidating debts in Chapter 13 bankruptcy.

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Filing bankruptcy will give you a fresh financially start. And if you file bankruptcy, you will get ample opportunity to repair your credit score. It depends on how quickly you gather your finances. If you are married and if you file bankruptcy either jointly or individually, your finances may be affected differently. The article highlights the manner in which your finances are affected if you file bankruptcy individually or with your spouse.

There are 5 aspects that need to be considered when you file bankruptcy after marriage

1.Debts and joint debts during marriage

Individual or joint filing will depend on how the debts were accrued. If bankruptcy is being filed by one spouse, the other spouse may also have been responsible for the debts that have accumulated. However, marriage doesn’t imply “shared liability of debt”. The non-filing spouse is responsible for the debts in case he or she has co-signed or signed the agreement to pay them off. In case majority of the debts have been accumulated by one spouse, the other spouse can avoid filing bankruptcy jointly.

2.Individual or joint filing

In case one spouse files bankruptcy, the other spouse may be targeted by the creditors. Filing bankruptcy jointly may render protection to both the spouses but under certain circumstances, it may not be necessary. Whether individual or joint filing is better is decided by several factors. These may include income sources, nature of debts owed, type of property ownership, manner in which ownership is defined, your residing state etc.

3.Income of the household

If you are planning to file Chapter 7 bankruptcy, a means test is conducted. Combined income of both the spouses is taken into consideration irrespective of your intention of filing bankruptcy individually. It would decide whether the debts need to be discharged(Chapter 7 bankruptcy) or repaid in due course (Chapter 13 bankruptcy).

4.Individual bankruptcy filing doesn’t protect your spouse

If one spouse is filing bankruptcy, it doesn’t protect the other spouse from lawsuits being filed against him/her. If there are joint debts, they must be paid off to avoid creditor action against the non-filing spouse in future.

5.Property ownership

The state in which you live has laws that determine the type of “marital property ownership”. There are 2 types of property ownership in marriage and they are “Equitable distribution” and “community property”. While “Equitable distribution” includes the property owned by the bankrupt spouse as well as half of the marital property jointly owned, “community property”, is the property acquired at the time of marriage and that which is owned equally by each spouse. In bankruptcy filing usually the community property is at stake. The separate property of the non-filing spouse acquired prior to getting married remains safe.

Bankruptcy fraud takes several forms and is a white-collar crime. Bankruptcy is a condition when you declare yourself financially insolvent. And you do so legally. Bankruptcy is a federal court proceeding and is designed in such a manner so that you get an opportunity to reorganize your debts or distribute your non-exempt assets equally among your creditors. The bankruptcy system assumes that you will disclose all your assets to the court appointed trustee so that a fair judgment can be reached.

Often it is seen when bankruptcy is filed, there is an attempt either from the debtor or the creditor to retain/get more than what they are entitled to. Such anomalies fall within the purview of bankruptcy fraud if it is done intentionally.

What are the different types of bankruptcy fraud?

Some of the common forms of bankruptcy fraud are as follows-

Petition Mills

Petition mill is a type of bankruptcy fraud that is rapidly increasing in United States. Petition mill claims to help you avoid eviction if you are a tenant and financially stranded. If you are a tenant facing eviction and financially stranded you can be a target of petition mill. If you happen to come across newspaper listings of advertisers suggesting different ways to avoid eviction, don’t respond to these gimmicks. If you respond, the advertisers (perpetrators) file bankruptcy in your name. You think that you are receiving the help they promised. In reality, they are prolonging the process and extracting money from you. Your credit rating also gets damaged in the process.

Concealing assets

Concealment of assets constitutes approximately 70% of all bankruptcy fraudulent activities. This happens when you don’t disclose all your assets to the court appointed trustee. By not disclosing assets, you tend to retain them when you file bankruptcy. Majority of the debtors transfer property rights in someone else’s name to protect assets from liquidation. This is not acceptable as per bankruptcy laws.

Multiple bankruptcy filings

Multiple bankruptcy filings occur when you file bankruptcy in different states. You use your real name and Social Security number or use fake names and provide wrong information about yourself. You don’t declare your assets with the hope of retaining them and preventing them from liquidation.

Perpetrators are booked as per standard criminal procedure

Perpetrators found to be involved in bankruptcy fraud are booked as per standard criminal procedure. As Proof of fraud, you are required to establish that there was an intentional misrepresentation of factual information and material facts.

Culprits can be imprisoned for a period of up to 5 years or fined up to USD$250,000. A perpetrator may also be entitled to both forms of punishment.