IVA and Finance Blog

Congress decided to make major changes to the United States bankruptcy code in recent years because of the problem the current code was creating. With more people filing for bankruptcy protection and discharging their debts, companies that extended credit to the debtors were forced to cease trying to collect on the money that was owed to them. Under the new guidelines, it is much more difficult for debtors to simply discharge their debts and they are forced to enter into repayment options if they choose to file. The most recent reformations were a result of many years of abusing the bankruptcy system.

The new bankruptcy code resulted in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, but changes in bankruptcy code are not new for citizens of the United States. Congress was authorized to make changes to the rules and regulations that govern the relationship between debtors and creditors since 1801. Since then, the legislators have amended the bankruptcy code many times. The 2005 changes, however, created the most significant changes in the code in nearly two decades.

In April of 2005, President George Bush signed into law some new regulations to be added to the existing bankruptcy code. Under the new bankruptcy regulations, debtors who file for any form of bankruptcy protection must meet several requirements. Firstly, debtors who file for new bankruptcies are required to complete a financial counseling course. Since a large number of bankruptcy filings are due to irresponsible personal finance management, the counseling course is designed to help people recognize and change their spending behaviors. This also helps to deter future bankruptcy filings because statistics show that many people who file bankruptcy will do it again in the future.

One way that the new code discourages abuse of the bankruptcy system is that it requires the signature of a lawyer for those who are considering bankruptcy. With the new guidelines, a bankruptcy petition cannot officially be filed unless a debtor has consulted with an attorney about other options that are available. This encourages a second look at the person’s finances and the circumstances regarding the debt rather than just rushing to have them discharged. A comparison of the debtor’s finances against the average income of the state’s population plays a major role in the investigation.

Other restrictions of the new bankruptcy code make it more difficult for debtors to file Chapter 7 bankruptcy to simply have their debts discharged. With the new regulations, the majority of cases are forced into a Chapter 13 bankruptcy that requires debtors to repay their debts with a scheduled payment plan. This process involves a court-appointed trustee to handle the finances of the debtor and a certain percentage of their regular income is delegated to the creditors. Repayment schedules are typically arranged so that the debts are paid within five years. Under the old bankruptcy code, however, it was much easier for debtors to file Chapter 7, which simply erases their debts without any form of repayment.

As of October 17, 2005, these and other changes were added to the United States bankruptcy code for several reasons. Because of the toll that unpaid debts have on the economic status of society, major changes were needed to lessen these detrimental effects. Since the focus of these amendments was placed on behavior change and reducing the abuse of the bankruptcy system, the new code should be able to force debtors to think about their financial decisions more carefully.

How does it feel to pay the fees your bank charges? Ridiculous. You work hard for your money and shouldn’t have to throw it away to a bank you are helping in the first place. Bank charges can be refunded but this is not widely known and the banks don’t want to share the information with you, but you can learn how to file a claim to get back the money you’ve been paying.

Bank Complaints

PPI compensation is one of the most popular claims to file because of its seemingly useless place in financial accounts. A PPI refund can be just the thing you need to encourage you to take control of the other areas you are being charged in your financial standing. PPI (Payment Protection Insurance) plans are tacked on to every loan, line of credit, credit card and many other financial accounts sold as a way to protect your credit in the event you fall behind or are unable to make your payment. Unfortunately, they are not that simple and often go unused or fail to protect in a time of need. In all reality, they are not what they seem and often don’t hold up their end of the deal or go completely unused.

Reclaim Bank Charges

Before you can start filing a claim for your bank charges refund you need to understand a few things, like the charges and fees you’ve been paying over the past six months and which agency to work with in order to get the most back in a timely manner. While, you can file the claims and work through the process yourself, results are often better and higher with an agency who knows what they are doing by your side. Banks don’t want to refund the money and some will put up a big fight to keep your claim in the works and at bay while using distraction and other techniques to avoid paying, but with the right person by your side you can ignore all these attempts and get the results you are looking for in a shorter period of time than you otherwise may be able to do.

If you take the time to understand the bank charges you pay and demand an explanation of the charges you don’t understand, you can file an informed claim. Then with the right help and a littler tenacity you can get the money back you are entitled to.

Repossessed House

It is obvious that most people would like to be debt free. Debt has a huge impact on both your life and your state of mind. Then avoiding personal bankruptcy advice is probably the best kind of advice that anyone can give.

Knowing how to avoid bankruptcy is a good way to go about your life. Being young, you often times take your financial responsibilities for granted. If you are not given the right advice from and early onset, then you will find that in later years you finally settling down to the realities of debt. It might not seem that easy to actually avoid personal bankruptcy but it takes a small step, to do this you must avoid debt no matter what. This will means that you might sometimes sacrifice that holiday that you were so looking forward to because you need to save the money for a rainy day.

It is difficult to accept that saving small in the beginning and avoiding spending all your money will help you avoid personal bankruptcy in the future. It must be the thought of sacrificing what seems like the present time good time.

Relieve The Emotional Strain And Avoid Personal Bankruptcy

Being sensible is the best way to avoid personal bankruptcy. What this means for you is that you should try your best to consciously stay away from debt. Keeping a monthly statement of your income and outgoings is likely the best thing to do. You might be amazed at just where your money is going and where it should not be going.

It is also a very sensible way to be in this day and age as the world economy is never stable and this will have an effect on your life in some way or the other. The reason why people are advised to avoid personal bankruptcy is because it can really have an impact on your life.

Debt will have already hurt your self-esteem and filing for personal bankruptcy will simply be even more painful. It is difficult to keep from spending lavishly on the things we enjoy in life that we feel we deserve from working so hard. Spending much more than you are saving will easily lead you to debt and eventually personal bankruptcy so think carefully about just where your money is going and what you are spending it on and save for the future when things may be tough.

Most people hear the word bankruptcy and get a lump in their throat. Bankruptcy is basically something that a person claims when they have no other way out financially, and obviously this is very depressing.

There are actually three different ways a person can go into bankruptcy, and these are: voluntary assignment where insolvent persons make an assignment of all their assets for the general benefit of all creditors, involuntary assignment which is when a creditor files a petition in a provincial court for a receiving order against the debtor’s assets, and deemed bankruptcy which is when a proposal in bankruptcy under the Bankruptcy Insolvency Act has failed.

What Is Bankruptcy Debt Relief

Bankruptcy is definitely a serious thing and can cause an array of problems, but bankruptcy debt relief is possible. The first step to bankruptcy debt relief is to try and understand a bit more about life after bankruptcy. Specifically in terms to how long bankruptcy lasts, if a person has been declared bankrupt before, within the past fifteen years, then they will not be automatically discharged.

If it is the first time for being declared bankrupt however, then discharge may be automatic, and this means that there will be a release of the bankrupt from most of the debts owed at the date of the bankruptcy order. There are a few exceptions to this as with most anything however, including debts arising from fraud and fines.

Also on the topic of bankruptcy debt relief is the issue of the assets that were obtained before discharge. This is important because this will largely determine how much money is going to be available after bankruptcy. When discharged there may still be assets that were owned either when the bankruptcy began or which were acquired before discharge. This may include property of insurance for example.

Think About the Future

Bankruptcy debt relief is a very important topic to discuss, but more than anything it is important that people are aware of how to stay out of debt in the future. After all, many people go to incredibly hard work to get out of debt but then just fall back into the same hole again in the future. This is not only going to be frustrating and devastating to a credit report, but also it is much harder to get out of debt the second time around.

Debt does not bring anything positive, and can really be repressing on a person’s life, because it means that they may not be able to do many of the things that they would like to.

For more information please visit my Debt Relief - Debt Relief Service Management Website.

A Chapter 13 bankruptcy is the specific type of legal proceeding that is granted under Federal statues to provide a repayment program for debts that are owed. Under Chapter 13 bankruptcy, a three-year or a five-year repayment plan is created for specific creditors according to the rules governing bankruptcy and through agreement by all parties involved. The arrangements are all overseen by a trustee who is appointed by the Federal bankruptcy court.

When someone files a Chapter 13, it means that they are not able to repay their debt obligations as they originally agreed to do when the debt was taken on. Chapter 13 bankruptcy law allows for these debts to be reorganized for the purpose of repayment. This is different than a Chapter 7 bankruptcy, in which the debts are discharged immediately instead of being set up with a repayment schedule.

In most cases, a Chapter 13 type of bankruptcy has a repayment plan in which the debtor makes monthly, bimonthly or weekly payments to the trustee. The trustee then provides bankruptcy help by taking care of properly dispersing the payments to the creditors. In most instances, the amount of the debt has been restructured and is less than the full amount that is owed to all the creditors.

The trustee in a Chapter 13 bankruptcy is responsible for learning about the financial situation of the person who is filing for bankruptcy, to determine how much they are able to make in payments to the bankruptcy court on a regular basis. The trustee also takes into account the income level of the person, or family, and the obligations which are exempt from the bankruptcy proceedings.

Because a Chapter 13 requires that regularly scheduled payments be made to the court, it is generally recommended only for debtors who have a regular and stable income. For those who are seasonal workers or freelancers, filing Chapter 13 bankruptcy is not the best solution for their financial troubles, in most instances.

When a debtor has agreed to the terms and payment plan of a Chapter 13, it is crucial that they always make their payment to the bankruptcy court on time. If they fail to make their payments as agreed, the entire bankruptcy court record and case can be thrown out. Should this happen, the creditors once again have the right to come after the debtor for the full amount of the debt and the protections under the bankruptcy relief process would not be available to them until they are eligible to file bankruptcy again.

If it occurs that a debtor, who is under a repayment plan through a Chapter 13, is not able to keep up with the payment schedule, then there is the possibility to find bankruptcy relief from the reorganization provisions agreed upon. In the case of a situation that arises, in which the debtor is unable to make the payments to the court as agreed, such as in the case of losing a job or other source of income or if they have an extended illness, they might be able to file a bankruptcy claim form known as a “hardship discharge.”

The first thing that must be looked at before seeking a “hardship discharge” of a Chapter 13 bankruptcy plan, is to evaluate the bankruptcy to see if it can be modified to a Chapter 7. If it can be modified from Chapter 13 to Chapter 7, then the “hardship discharge” would not be allowed. The case and complete situation should be reviewed by an experienced bankruptcy lawyer in order to know what options are available to the debtor. In all cases, because of the additional stress and expense of returning to the court, to once again fill out the Chapter 13 bankruptcy forms and get approval, every attempt should be made to make all payments as agreed to under the repayment plan.

Chapter 13 bankruptcy law is at times referred to as reorganization bankruptcy.  It’s uniquely different than Chapter 7 bankruptcy. In a Chapter 7 bankruptcy most all of your debts are cancelled out. But, you must forfeit any belongings that aren’t exempt from seizure by your creditors. Under Chapter 13 bankruptcy law, you aren’t required to give up any personal property. But, you’re required to use your income to pay off most or all of what you owe your creditors. Your payments to creditors are made over time, usually from three to five years. The time parameter depends on the amount of your debts and income.

Eligibility for Chapter 13 Bankruptcy

Chapter 13 bankruptcy isn’t for everyone. Chapter 13 bankruptcy law involves using your income to pay some or all of your debt. So, you’ll have to demonstrate to the court that you’re able to fulfill your payment responsibilities. If your income is unpredictable or excessively low, the court might not permit you to file under Chapter 13 bankruptcy law.

If your total debt load is excessively high, you’re also ineligible to file under Chapter 13 bankruptcy law. Your secured debts can’t be more than $1,010,650. A “secured debt” is one that gives a creditor the ability to take away a particular piece of property (like your house or automobile) if you don’t pay off the debt. Your unsecured debts can’t be more than $336,900. An “unsecured debt” doesn’t allow your creditor the right to take your property.  An example of an “unsecured debt” is a credit card or a medical bill.

The eligibility requirements of a Chapter 13 bankruptcy are covered in detail in Chapter 13 Bankruptcy: Keep Your Property & Repay Your Debts Over Time.

Initiating a Chapter 13 Bankruptcy

Before filing a Chapter 13 bankruptcy, you must attend credit counseling from an agency licensed by the United States Trustee’s office. These agencies are allowed to charge a fee for their services.  But, if you can’t afford to pay the fee, they have to offer cut rate counseling and, in a few situations, free counseling.

Chapter 13 Repayment Plans

The most consequential component part of your Chapter 13 bankruptcy paperwork is your repayment plan. It traces in detail how much money you’ll give to each one of your debts. There’s no authoritative form for the plan.  But, almost all courts supply their own forms.  To learn more about Chapter 13 Bankruptcy repayment plans, read Chapter 13 Bankruptcy: Keep Your Property & Repay Your Debts Over Time.

How Much Will You Have to Pay

Your Chapter 13 plan must pay back particular debts fully. These debts are called “priority debts” because they’re believed significant enough to rise to the forefront of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax duties.  Additionally, your plan must include your standard payments on secured debts.

The plan must show that any income you have left over after getting to these compulsory payments will go toward paying off your unsecured debts.  You don’t have to pay off these unsecured debts in full.  You only have to indicate that you’re applying any left over income towards their repayment.

How Long Will Your Repayment Plan Last

The length of your repayment plan hinges upon how much you bring in and how much you owe. If your average monthly income during the six months before the date you filed for bankruptcy is bigger than the typical income for your state, you’ll have to volunteer a five-year plan. If your income is less than the median, you may offer a three-year plan.

Regardless of how much you make, your plan discontinues when you pay back all of your debts fully, even if you’ve not arrived at the three- or five-year mark.

What Goes On If You Can’t Produce Plan Payments

If you encounter a job loss after beginning a payment plan or ascertain that you can’t maintain the payments on your Chapter 13 bankruptcy plan, the bankruptcy trustee may modify your plan.  It’s even possible that the court could grant the discharge of your debts on the basis of hardship.  Hardship may include the abrupt loss of a job due to a company shutting down or a severe debilitating illness.  If the bankruptcy court won’t allow you to change your plan or give you a hardship discharge, you may be able to change to a Chapter 7 bankruptcy. 

How Does a Chapter 13 Case End

Once you complete your repayment plan, each continuing debt that’s eligible for a discharge is canceled out. But, before you’ll be able to get a discharge, you must prove to the court that you’re up-to-date on your child support duties and that you’ve completed a budget counseling course with an agency authorized by the United States Trustee. This budget counseling course is in addition to the compulsory credit counseling you go through prior to filing for bankruptcy

Life after bankruptcy can have a great impact on your financial life. For some, bankruptcy provides a fresh start and debtors receive numerous loan and credit offers before their debts are even fully discharged. For others, bankruptcy prevents them from getting a decent interest rate on a house or other major purchase. It is always important to consider all of the ramifications and other options before making the final decision to file bankruptcy.

One of the biggest complaints that people have about bankruptcy for the sake of a new start is that it does not change a person’s habits. Oftentimes, people get deep in debt because of bad spending habits or because of letting their credit cards and consumer debts get out of control. The actions you take after bankruptcy are vital to keeping the management of your finances under control. This is one reason that bankruptcy does not actually help people. Without behavior change, the majority of filers fall back into the same destructive spending habits that they had before their debts were discharged. Therefore, recognizing that you have a spending problem is vital before considering bankruptcy.

If you file bankruptcy without going through some type of financial management training, you have a greater chance of repeating the same mistakes. New laws require filers to complete a money management course before their debts are discharged. This is a step in the right direction to help people realize how to use credit as a responsible aspect of their finances rather than abusing it until it is too late to climb out of the debt that they have accumulated.

The final step following a bankruptcy is to deal with the negative ramifications it has on your credit. For purposes of getting a home mortgage, bankruptcy will stay on your credit record for the rest of your life. This could be bad news for the interest rate or the repayment terms of your mortgage even several years after bankruptcy. If you file bankruptcy due to one single major setback in your life, such as an illness that resulted in huge medical bills or a job loss, some mortgage companies will work with you. While it still shows up on your credit, mortgage companies that do manual underwriting can customize your home loan and they will consider your specific situation. Be sure to save any papers related to the event so you can present them to the mortgage company when it is time to buy a home.

The choices you make after bankruptcy can affect your financial future. Realizing what put you into debt in the first place is your first step to moving on from the bankruptcy and making sure it does not happen again. Although it can have a negative impact on your pride or self-image, dwelling on the bankruptcy is neither helpful nor productive, so moving on with your life is the best thing to do. This is especially true if your financial troubles were a result a single life event. Recognize the mistakes you made and take measures to ensure that it does not happen again.

The New Bankruptcy Laws Make it More Challenging to File Chapter 7 Bankruptcy

The most recent modifications to bankruptcy laws might cause it to be more difficult for you to file bankruptcy. If you’re in a higher income bracket you’ll no longer be permitted to use Chapter 7 bankruptcy.  Instead, you’ll have to file under Chapter 13 bankruptcy and pay off at least a few of your creditors. If you want to file bankruptcy, you must participate in credit counseling prior to filing.  You’re also required to go to additional counseling in the field of budgeting and debt management.  The extra counseling is a necessity to get a release of your debts. And, since the law imposes new demands on lawyers, you might have a trickier time getting a attorney to take on your bankruptcy case.

Limited Eligibility for Chapter 7 Bankruptcy

Under the previous bankruptcy laws, you were allowed to choose the type of bankruptcy that seemed best for you.  In almost all cases that would be a Chapter 7 bankruptcy liquidation instead of a Chapter 13 bankruptcy repayment. But, if you’re in a high income bracket, the new bankruptcy laws won’t allow you to utilize Chapter 7 bankruptcy.

To see out whether you’re able to file Chapter 7 bankruptcy under the new bankruptcy laws, you must first evaluate your “current monthly income” against the average income for a family unit of your size in your state. If your income is lower than or equivalent to the average, you’ll be able to file for Chapter 7 bankruptcy. If it’s greater than the average, however, you must pass another test to file for Chapter 7 bankruptcy.  The other test is known as “the means test.”

The purpose of the means test is to verify whether you have enough free income, after subtracting certain allowed expenses and mandatory debt payments, to make payments on a Chapter 13 program. To determine whether you pass the means test, you subtract particular allowed expenses and debt payments from your current monthly income. If the money that’s left over after these computations is less than a certain amount, you’ll be able to file for Chapter 7.

Counseling Requirements

Prior to filing for bankruptcy under either Chapter 7 or Chapter 13, you must complete credit counseling with an agency approved by the United States Trustee’s office. The reason for this counseling requirement is that it assists you in discovering whether you actually want to file for bankruptcy or whether an informal repayment plan will help you regain your financial stability.

Counseling is essential even if it’s obvious that a repayment program isn’t doable for you.  You’re required only to take part in the counseling.  You don’t have to consent to any repayment plan the agency proposes. Even so, before you’ll be able to file bankruptcy, you’ll have to show any repayment plan the agency provides along with a certificate demonstrating that you completed the counseling.

Near the end of your bankruptcy lawsuit, you’ll have to attend a new counseling session.  This counseling session is designed to teach you personal financial management skills. You can’t get the discharge that cancels out your debts until you show proof to the court that you completed this requirement.

Lawyers Might Be Harder to Retain — and Lots More Costly

The new bankruptcy laws do add numerous complex demands to bankruptcy filings. Many of these brand-new demands impose more responsibilities on attorneys leading to bankruptcy cases being more time intensive. Among the major new requirements on attorneys is that they must now personally ensure the accuracy of all the information their clients give them.  That additional demand means that attorneys must spend a lot of time on every bankruptcy suit.  Therefore, they’ll charge more to take each bankruptcy case.   The new bankruptcy law requirements have in reality squeezed a few bankruptcy lawyers out of the field totally.

Many Chapter 13 Filers Will Have to Live on Less

When you filed Chapter 13 bankruptcy under the old bankruptcy laws,  you had to dedicate all of your available income to your repayment plan.  The previous bankruptcy laws defined spendable income as that which you had leftover after paying your real living expenses. The new bankruptcy laws have altered this computation.  While you still must deliver all of your usable income, if your income is greater than the median in your state, you don’t get to calculate your usable income based on your true expenses.  Rather, you have to work out your available income applying allowed expense totals specified by the IRS. And these permitted expense amounts must be deducted from your median income during the six months before filing bankruptcy, not from your actual pay every month.

Additional Changes

There are additional changes that can impact you negatively if you’re filing or looking at filing bankruptcy.  For plain-English guidance in the new bankruptcy laws, get a copy of The New Bankruptcy: Will It Work for You?