As unemployment stays in the range of 10% nationwide, many Americans are losing hope of recovering from this recession. Filing bankruptcy used to be considered a last resort, but it is looking more and more promising for many individuals today. Having financial difficulties can have severe health repercussions, and it's a good idea to educate yourself on the subject of filing bankruptcy. There is a vast amount of information about bankruptcy on the Internet. Legal websites online can give you enough knowledge about the bankruptcy system just in case it's ever needed. For some individuals the process of filing bankruptcy is difficult to understand and varies drastically depending on individual's situations. That's why individuals should understand the value of both chapters used in personal bankruptcy. Chapter 7 is the most popular form of bankruptcy because it wipes out all unsecured debt and lets the debtors start over debt free as long as they don't decide to keep payments from secured property. Chapter 13 on the other hand, is a repayment plan that lasts for 3 to 5 years and allows the debtor's to keep their property.
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When filing for bankruptcy, most people believe they are going to have to give up all of their property, including their automobile. This is far from the truth. If you stay current on your payments and your vehicle is considered a reasonable expense, there is no reason for the court to have the debtor surrender it. A basic rule applies in Chapter 7 and Chapter 13, the debtor has the choice to keep paying for the secured debts or surrender the property to the creditor. This is why the court requires an individual to list their expenses and income to show that they have no money left at the end of the month to pay their debts. If a debtor doesn't qualify to file Chapter 7 they can be forced into Chapter 13 instead.
Remember the day you went and bought a new car? That day you drove it off the lot and the value dropped 20% immediately. If you're in the process of filing Chapter 13 bankruptcy, you may be able to cram down a loan and reduce the loan amount to the car's value. When filing chapter 7 that is not available to you. In a chapter 7 bankruptcy you will have to redeem the car. This is the process when you surrender the car to the creditor in the Chapter 7 and buy it back from the creditor. The downside to redeeming is the creditor will require you to pay cash to buy it. There are some loan sharks out there that are willing to lend you the money at a premium. They know you don't have many options and in many cases be willing to pay whatever they want to charge. Many times this can be a trade-off, you might be paying 26% but on a much lower balance.
Recently, due to the large number of bankruptcies and the value of used cars dropping substantially, many lenders have not been picking up vehicles that were surrendered in a bankruptcy filing. Depending on the vehicle, it might cost the lender more to pick the vehicle up and sell it than it would to just abandon it. When it comes to newer vehicles, most lenders require the debtor to sign a reaffirmation agreement in the bankruptcy or they will come pick the vehicle up. Making these decisions can be very complicated and should be decided with the help of a local bankruptcy attorney that can hear your entire situation.
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