When you file bankruptcy under any Chapter of Bankruptcy Code, any action taken by a creditor, collection agency or any government entity can be stopped with the help of automatic stay. It is an injunction against any action taken by the aforesaid entities. It helps debtor and also protects their property under certain circumstances. In case of Chapter 13 bankruptcy, even co debtors are protected.

The automatic stay prevents the following actions

• Collection calls
• Repossessions
• Foreclosure sales
• Filing lawsuit against you
• Wage garnishment etc.

How long does automatic stay remain?

Automatic stay remains till the time the judge doesn’t lift the stay at the creditor’s request. It is valid till the time a debtor doesn’t get a discharge.

In Chapter 7 bankruptcy, the automatic stay may prevent foreclosure from taking place on a debt that is secured by real estate. However, the stay gets lifted and the creditor is allowed to proceed when debts are discharged. In this case, it is also assumed that there is no “non exempt equity” left in the property.

In case of Chapter 13, the automatic stay remains valid through the entire period of the Chapter 13 plan.

What happens if the automatic stay is violated?

The court takes several weeks to send notices to the creditors. During this period if the creditors file lawsuit against you, it is treated as null and void.

How does automatic stay help you in the following?

• Foreclosure

If you are on the verge of facing foreclosure, automatic stay can delay the foreclosure proceedings temporarily. However, sooner or later, the creditor can proceed with the foreclosure process. In case you intend to retain the house, filing Chapter 13 bankruptcy is a better option as compared to Chapter 7 bankruptcy.

• Eviction

In the event, you are being evicted from your home; automatic stay can help you to some extent. However as per the new federal bankruptcy laws, the landlord can proceed with eviction. In case an eviction order was already pending against you and you file bankruptcy, the automatic stay cannot prevent the eviction from taking place.

• Utility disconnection

If you have fallen behind on payments and the service provider is threatening to disconnect gas, electric and water connections, automatic stay can stop this for a period of 20 days.

• Wage garnishment

Automatic stay can prevent wage garnishment. As per norms, not more than 25% of your salary can be used for satisfying court judgments.

File bankruptcy protection

The Mortgage bankruptcy bill also referred to as “Conyers Bill” was enacted in the year 2007 by legislation. The Conyers Bill is controversial because it has brought about modification in the new federal bankruptcy laws that were introduced on 17th October 2005. The mortgage bankruptcy bill aims at helping homeowners retain their home ownership in the event they file bankruptcy.

The bill is applicable for homeowners who availed mortgage loans after January 1st 2000 and thereafter filed Chapter 13 bankruptcy. You have to provide evidence that your finances don’t permit you to make mortgage payments. As such, you are not in a position to pay your arrears. The main reason why homeowners file Chapter 13 bankruptcy is to save their homes from foreclosure. Chapter 13 bankruptcy allows you to enjoy debt relief by restructuring your debts. As such the bankruptcy courts can change terms of your existing mortgage.

The Conyers bill permits bankruptcy courts to lower the rate of interest, do away with excess fees. It also allows courts to modify the principal mortgage balance. By modifying the mortgage loan terms, you get an opportunity to get your finances back on track. And if you adhere to the new repayment plan, the lenders get back their cash in due course and do not initiate foreclosure proceedings.

The mortgage bankruptcy bill extends protection to the financially stranded homeowners. However, if you fail to abide by the payment plan worked out in Chapter 13 bankruptcy, the lender can take help of the bankruptcy courts. Under such circumstances, you can request the court to switch over to Chapter 7 bankruptcy. Once you revert to Chapter 7 bankruptcy, the foreclosure proceedings may begin. The mortgage bankruptcy bill protects homeowners but not all can avail the benefit. If you are not being able to decide what is best for you if you “fail out of bankruptcy”, consult a bankruptcy attorney who can suggest options that suits your needs best.

Filing bankruptcy is associated with a social stigma. This makes bankruptcy filings even more difficult. The probable reasons for filing bankruptcy include unemployment, increasing insurance costs, medical emergencies, mortgage debt and credit card debts etc. However, as per the prevailing market conditions, liquidity crunch is a prominent cause of filing bankruptcy. The number of people filing bankruptcy is on the rise and is expected to escalate in 2009.

Due to the liquidity crunch, people don’t have cash at their disposal. As such they are using credit card for meeting their basic needs too. Since the credit card companies have changed payment policies and reduced credit limits, the credit cardholders were not notified about the same. This created a lot of confusion among the credit cardholders. Majority of the credit cardholders were taken by surprise when they received their credit card statements.

When enquired, the credit card issuers stated that the change in the payment policies as well as lowering of the credit limits had to be implemented as a safety net to save them from further financial loss. As consumers found themselves getting deeper into debt, they find no other alternative but to file bankruptcy.

Due to increase in the number of bankruptcy filings, new federal bankruptcy laws were introduced in October 2005 to put a check on the number of people filing bankruptcy. However, the subprime mortgage crisis and the subsequent recession left consumers with no other option but to file bankruptcy.

Although the new federal laws were introduced, it failed to minimize the incidence of bankruptcy filings. The economic shortfall has left consumers in financial distress.

Statistical data showing projected bankruptcy filings for 2009

• Financial experts are of the opinion that the lower limit of bankruptcy filings will be 5,075 for every business day. As there are 250 business days in 2009, the number of bankruptcy filings may be 1,260,000. This figure is computed assuming that there will be no further growth in the rate of filing bankruptcy.
• However, it has been observed that rate of bankruptcy filings have escalated by 54% over the last 18 months. So, if we set an upper limit for bankruptcy filings in 2009, it shouldn’t exceed 7,600 bankruptcy filings per day. This comes to around 1,610,000 filings in 2009.

It is a fact that even of the bankruptcy filings in 2009 doesn’t exceed the upper limit; it won’t be before early 2011 or end 2010, when the economy will finally turn around to be referred to as a stable one.

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Bankruptcy can be a good option for getting out of debt. Nevertheless, there are many aspects that need to be considered and that is best done with the help of a lawyer. If you are planning to file bankruptcy, before you embark upon this journey you need to have a sound understanding of the process. It is not necessary that you should have knowledge similar to a bankruptcy attorney but the concept should be clear. And you should know what you are heading for and what you are attempting at.

Bankruptcy is a federal court proceeding and by filing bankruptcy you get an opportunity to revamp your finances and attain financial stability. The most common types of bankruptcy filed include Chapter 7 and Chapter 13 bankruptcy.

In Chapter 7 bankruptcy also known as “liquidation bankruptcy”, your assets are liquidated so that your creditors get their money back. You should be aware of the exempt and non-exempt assets.

Previously, filing for bankruptcy was easy and you could declare yourself bankrupt at any point of time. The fed introduced the new federal bankruptcy laws in 2005. Since then bankruptcy filings have become tougher.

If you are planning to file Chapter 7 bankruptcy, you have to undergo a Means Test. In Means test, your monthly income is calculated and compared to the median income of a household in the state you are living. In case your monthly income is less than the median income, you are eligible for Chapter 7 bankruptcy or else your lawyer asks you to file Chapter 13 bankruptcy.

In Chapter 13 bankruptcy, you are not required to give away your assets for liquidation. Instead you are required to pay as per a new repayment plan. Your income should be good enough for you to make payments every month. You manage to get out of debt within 3 to 5 years.

These are the some of the basics of bankruptcy that it is important to develop awareness on. There are many websites offering vital information related to bankruptcy. It is your hard earned money and you should know how to reorganize your finances in a balanced and appropriate manner.

The debt help industry is doing brisk business and helping innumerable debtors in the process. Not that there are no debt help organizations offering debt help free of cost. These are usually referred to as the non- profit making organizations that operate with the help of donations. There are other debt help options you can opt
for if you don

The Federal Bankruptcy Laws determine how companies filing bankruptcy restore their financial stability and continue their operations. A company declaring bankruptcy can make use of Chapter 11 bankruptcy to “reorganize” its business operations and start earning profits again.

What happens when a company files bankruptcy?

The management of the bankrupt company continues its operation on a day to day basis. However, any major decision related to the company is taken by the bankruptcy court. Unless the bankruptcy court approves of a decision, the same cannot be implemented. On the other hand, if a company plans to file Chapter 7 bankruptcy, it will not be allowed to carry out its daily business operations. And a court appointed trustee will sell off the company’s assets to pay off creditors.

Why does a company select Chapter 11 bankruptcy?

Majority of the companies filing bankruptcy select Chapter 11 bankruptcy as it enables them to continue operations. This is true for most of the companies that are publicly-held. Chapter 11 provides opportunity for financial rehabilitation and a company filing Chapter 11 bankruptcy may either work out a plan so that it can start earning profits again or in some cases, get the assets liquidated.

What happens to stocks and bonds in corporate bankruptcy?

Although the company files bankruptcy, the stocks and bonds of the company continue trading. However, companies filing Chapter 11 bankruptcy don’t fulfill listing standards of NASDAQ and New York Stock Exchange. As such, the stocks don’t trade on these 2 stocks exchanges although stocks may continue trading on Pink Sheets or OTCBB or Over-The-Counter Bulletin Board. No federal law can prevent securities of a company from trading even if a company files bankruptcy.

What are the precautions you should take before investing in stocks of a company filing bankruptcy?

Investing in stocks of a company filing Chapter 11 bankruptcy involves a lot of risk. The probability of losing cash is manifold. Even if a company emerges financially strong after filing bankruptcy, the “reorganization” it undergoes usually makes the existing status of the equity shares null and void. This happens because the company usually pays the secured as well as unsecured creditors first before paying off the common stock holders.

How are ticker symbols of stocks named in Chapter 11 bankruptcy?

In case the company emerges financially strong after filing bankruptcy, it may have 2 different types of stocks. One set of stocks will be the ones that stockholders bought at the time of filing bankruptcy and the other type will be one that the company issues after emerging out of bankruptcy when it underwent “reorganization”.

In the former case, the 5 letter ticker symbol would end in “Q” indicating that the stocks were involved in bankruptcy proceedings and in the latter case, the 5 letter ticker symbol will end in “V” indicating that these are the stocks the company issued/authorized as a result of the “reorganization” plan.

If debts are allowed to pile up and they assume a proportion that is beyond repair, bankruptcy or foreclosure is inevitable for debtors. You will have to face foreclosure in case you have fallen behind on payments and you have several missed payments to your credit. Under such circumstances foreclosure is inevitable.

Bankruptcy can only delay the foreclosure process

When you file bankruptcy, you declare your inability to make payments for your debts. However, there is one advantage if you file bankruptcy and that is automatic stay. Automatic stay will delay the foreclosure process. However, in case the lender files for relief from the automatic stay, the foreclosure process can proceed. So, you can stop a foreclosure only if you are able to pay back your dues to the lender. If you are unable to make the mortgage payments, you have to be prepared to lose your home through foreclosure.

If you file bankruptcy and you are on the verge of facing foreclosure, your lender will have to suspend all legal actions against you. However, as mentioned above, if your lender files for relief from automatic stay, he can proceed with the same. So, filing for bankruptcy will not allow you to retain your home unless you make your mortgage payments.

Bankruptcy gives you more time to make mortgage payments

Since filing bankruptcy gives more time to make mortgage payments, you can catch up with your payments if the dues are not astronomical. And if you happen to file Chapter 13 bankruptcy, you get a repayment plan that allows you to make payments in a systematic and organized manner. So, you get another opportunity to pay off your mortgage. When you file bankruptcy, it can discharge some of the unsecured debts. So, if you have some cash at your disposal, you can make payment for your mortgage.

You can delay foreclosure only if you are eligible for filing bankruptcy. However, as per the new federal bankruptcy laws that were implemented in October 2005, you will be allowed to file bankruptcy only if you qualify. Earlier, it was easier for a debtor to file bankruptcy. Under such circumstances you will have to fore go your home.

How is your credit score related to foreclosure and bankruptcy?

Whether you file bankruptcy or face foreclosure, either way your credit score gets affected. If you file bankruptcy, it will remain in your credit report for a period of 7 to 10 years. Similarly, if you face foreclosure, the same gets recorded for a period of 7 years.

Once you have filed bankruptcy, whether it is Chapter 7 or Chapter 13 bankruptcy, you are required to attend the 341 meeting where you gather along with all your creditors at the bankruptcy court. The 341 meeting derives its name from 11 U.S.C. 341, a section in the bankruptcy code. The meeting takes place around 20 to 40 days after bankruptcy is filed.

Although the meeting is where you get to meet all your creditors simultaneously, in majority of the cases, your creditors fail to turn up. However, even if the creditors are not present at the meeting, it doesn

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.