With the current US economic situation, about 1.5 million individuals will file for bankruptcy this year in 2010. Of these filings the majority of them will be chapter 7 bankruptcy. Chapter 7, is also referred to as a straight bankruptcy which allows the debtor to discharge unsecured debts. An unsecured debt is one that has no property guaranteeing the loan. There are many types of unsecured debts, the common ones are credit cards, medical bills and personal loans. In a Chapter 7 bankruptcy, student loans and most taxes are usually not dischargeable. The person qualifies for Chapter 7 bankruptcy if their income is below the median income for their state. The US bankruptcy trustee is the one that sets the limits state to state. The CMI is usually adjusted every six months to a year. Because of all the changes to the bankruptcy code in 2005, if you are considering filing it's important to get a consultation from a bankruptcy attorney in your area to discuss your situation.
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Many individuals filing try to hang on to secured property in the bankruptcy. The way to do this is to reaffirm the debt. Reaffirmation is a process that allows an individual who is filing for bankruptcy to keep their secured property as long as they agree to pay for it. A mortgage is probably the number one kind of debt that is reaffirmed and can be a complicated process. It's important to learn the laws that pertain to you in your state.
Most lenders require reaffirmation on their note to protect themselves. In many cases, if there is equity in the property, there is no reason for the lender to reaffirm the loan. In the case of a home loan, debtor's can stay in the home as long as they can keep current on the mortgage payments. Some lenders don't require a reaffirmation agreement because the security is in the property. The basic rule is, if you don't make your payments the lender will foreclose on the property. There is an advantage for the debtor to not reaffirm their debts. As long as the debtor continues to make their payments they get to keep the house. However, if the debtor's situation goes south after the bankruptcy filing was discharged, the individual can walk from the property without the liability of a deficiency to come back on them.
Even after filing for bankruptcy it's possible to have more property repossessed. A repossession can create a very uncomfortable situation and can sometimes happen at a inopportune time. In a nutshell, when an individual defaults on their car loan or home loan, the creditor has the right to repossess it is a case of real estate, and foreclose on it. When it comes to repossessing a vehicle, if the debtor is behind on their payments, the creditor doesn't need to get permission from the bankruptcy court to take their property back. This is because an automobile is a movable asset and if the debtor is given notice, there is a chance that they might hide it or damage the property. If you're behind on your automobile loan and are filing bankruptcy it would be best to include the auto loan in the bankruptcy to eliminate any deficiency balances. On the other hand, if you're trying to hang onto your property and can afford it, you might consider filing Chapter 13 bankruptcy, which allows you to catch up on your back payments in a Chapter 13 payment plan. To figure out which Chapter works best for you, consult with a local bankruptcy attorney to go over all possible scenarios.
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