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Filing For Bankruptcy? Here Are Three Of The All-Time Biggest Mistakes To Avoid

Posted by on May 28, 2015 in Uncategorized | Comments Off on Filing For Bankruptcy? Here Are Three Of The All-Time Biggest Mistakes To Avoid

After days or weeks of soul searching, financial restructuring and harsh realizations about your spending, you’ve decided to file for chapter 7 bankruptcy. You’re nothing close to a money wizard or bankruptcy attorney, so you’re not sure what to do, or more importantly not do, next. Before you begin the process of filing for bankruptcy, here are three of the worst mistakes and decisions to avoid: Lying About Your Finances Once you decide to file for bankruptcy, all the lawyers, court officers and just above everyone you come into contact with will be going through your past and finances with a fine toothed comb. This is why it’s vital that you are completely transparent about your finances. Lying or omitting any debts, assets or sources of income isn’t only suspicious, it’s also illegal. For example, if you have a bank account you only use for holidays or to pay your child’s school fees, don’t leave it out of the information you file, even if you think the amount is too small and insignificant to matter. While filling out all that paperwork, don’t hesitate to ask your attorney about any sections or lines that do and do not apply to your situation. If you aren’t sure and you go ahead and skip a section about your finances, you might wind up with a hefty fee, or worse, being denied the bankruptcy all together. Representing Yourself After doing the research and learning just how expensive it can be to file for bankruptcy, you’ve decided that the most logical way to save money is to represent yourself. After all, filing for bankruptcy is just about filling out a bunch of paperwork, right? Not seeking representation and counsel during this long and sometimes confusing process is one of the biggest pre-bankruptcy mistakes you can make. If you’re still not convinced, it’s important to note that depending on the complexity of your financial past, in addition to dealing with your state’s laws and the national bankruptcy laws, you could have to get into contact with the Internal Revenue Service, as well. Even if you’re struggling financially and don’t think you can afford good representation, realize there are several lawyers out there who are willing to work with you to ensure you get through this messy process, and on with your life. Piling On Additional Debt Finally, people who are already in dire financial trouble and are considering bankruptcy sometimes decide to make their situation just a little worse by taking on more unnecessary debt. This could be anything from running up a credit card on a lavish vacation, or taking out a new loan to pay back friends and family members. If you take on any type of debt that you have no means or plan on repaying, not only will it put your ability to successfully file for bankruptcy into doubt, it is actually very illegal, and could end up with you paying a huge fine or worse, in jail. Instead, if you are filing for bankruptcy in the near future, the best way to ensure your actions are not put into question is to live your life as you have, and skip that yearly vacation! According to the website, the number of Americans filing for bankruptcy each year has been going...

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How Lien Stripping In Chapter 13 Can Benefit Your Financial Situation

Posted by on May 15, 2015 in Uncategorized | Comments Off on How Lien Stripping In Chapter 13 Can Benefit Your Financial Situation

Chapter 13 bankruptcy is not always the preferred option to use, but it does have its advantages over Chapter 7. One advantage you might be interested in learning about is called lien stripping. This is something that is commonly used in Chapter 13 bankruptcy cases, and its purpose is to remove second and third liens from homes. What is Chapter 13? Chapter 13 bankruptcy is one of the options available to people that are struggling with debt. Through this branch of bankruptcy, you will be placed on a repayment plan with your creditors, which will last up to five years. While you will have to repay a lot of your debts, there is a chance that you may be able to get by with only paying a certain percentage of them. There is also a chance that you will qualify to get your second and third loans from your house discharged in full. This is called lien stripping, and if you can do this, it could help you avoid losing your home, and it could help you get out of debt faster. This is not something that you can usually do in a Chapter 7 bankruptcy case. How Does Lien Stripping Work? In Chapter 13 cases, all of the debts you have are included in one plan. You will make payments to the trustee for the debts, and the trustee will use your payments to pay your creditors. This will last for a certain number of years, and one of two things will happen to these debts at the end of this period: All secured debts (such as a house loan or car loan) will convert to debts that you must begin paying. This means that at the end of your bankruptcy, you will begin making your mortgage payments directly to the lender instead of to the trustee. The same is true for your car payments. All unsecured debts (such as credit cards or medical bills) that still have balances at the end of the bankruptcy will be forgiven. This means that you will no longer owe any money for any unsecured debts you have. When lien stripping takes place, your second and third mortgages are converted from secured debts to unsecured debts at the start of the bankruptcy. This means that you will be making payments on these debts during the bankruptcy plan, but the remaining balances at the end of the plan will be discharged. Does Lien Stripping Automatically Happen? The downside to lien stripping is that there are rules that require you to qualify for this before it happens. When you file for Chapter 13, the court will compare the value of your house to the loans you have on it. If the value of your house is more than your first mortgage, you will not qualify for lien stripping. If the value of your house is less than the amount you owe for your first mortgage, you will qualify for lien stripping on your second mortgage. If you have a third mortgage on the house, you can have the lien stripped from it if the value of your house is more than the amount you owe on your first loan, but less than the amount you owe on your first and second mortgages combined. In...

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Deductible Expenses That Can Help You Pass The Chapter 7 Means Test

Posted by on May 11, 2015 in Uncategorized | 0 comments

Filing for chapter 7 bankruptcy can help you deal with an overwhelming debt problem, but you must pass a means test to qualify for this type of case. The means test is designed to determine if you have enough disposable income to pay your debts. If you do, you won’t be able to file for chapter 7 and will have to settle for chapter 13. However, the bankruptcy court does allow debtors to deduct a number of expenses from their incomes, which may make it easier to qualify for chapter 7 bankruptcy. How the Means Test is Conducted There are two ways the means test is done. The first way is to take the person’s income over the prior six months, annualize it, and then compare that figure to the median income for the same-sized households in the state where the person lives. For example, the median income in Michigan is currently $43,677 for a one-person household. Someone who made $3,000 per month in the previous six months would be eligible for a chapter 7 bankruptcy because the person’s annual income would be calculated at $36,000 per year, which is less than the median for that state. If the person’s income lands above the median, then the court enacts the second option of deducting expenses from the amount and seeing what’s left over. If there isn’t any disposable income after the deductions, then the person will be allowed to file for chapter 7. Deductible Expenses Some of the expenses the courts use are standardized ones based on local and national standards, which is calculated by the IRS. However, you can still deduct certain expenses from leftover income that may reduce it enough so you pass the means test. These expenses include: Payments made to an Achieving a Better Life Experience (ABLE) account. This is a tax-free savings account people can use to put money aside to care for people with disabilities. Involuntary expenses such as union dues and required payments made to a retirement plan. Tax obligations, both current and arrearages related to non-dischargeable tax debt. Payments made to secured debts such as auto and house loans. Court ordered payments such as child support, alimony, and personal injury judgments. Health, disability, and life insurance premiums. Healthcare expenses. If the amount you pay is higher than the national standard, then you can typically deduct your actual expenses. Child care expenses including day care, preschool, and babysitting. Education expenses related to your employment or for a child who is mentally or physically disabled. Money spent caring for an elderly, disabled, or chronically ill person who lives in your household. Contributions to a charity. These contributions must have been made prior to filing for bankruptcy and are ones you expect to continue to make during the process. For example, a weekly donation to your church. Special expenses incurred related to your family’s health and welfare. The court must approve these expenses, though, so be prepared to explain the situation. Exceptions to the Means Test Not everyone is required to pass the means test to qualify for a chapter 7 bankruptcy. There are three exceptions to the rule: Disabled veterans with a rating of at least 30 percent who accumulated their debts while they were on active duty. People whose debts consist of...

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