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    Chapter 7 Bankruptcy

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    Bankruptcy FAQ

    WHAT IS CHAPTER 7 BANKRUPTCY?

    Chapter 7 bankruptcy is a filing in which the individual filing for bankruptcy has very few assets and is primarily delinquent in unsecured debt. Unsecured debt is debt in which the borrower did not put up any initial collateral in exchange for the credit.

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    WHAT IS CHAPTER 13 BANKRUPTCY?

    Chapter 13 bankruptcy is often referred to as the Wage Earner’s Bankruptcy. Unlike Chapter 7, Chapter 13 bankruptcy gives the debtor the opportunity to pay off all, or parts, of their debt over time rather than liquidating their property or facing steep penalties. This chapter of bankruptcy is for individuals that have a consistent income, however, they need a little more time to pay off their debts than the creditors are allowing. In this chapter of bankruptcy, you can pay the debt off over a course of 3 to 5 years.  

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    WHAT IS CHAPTER 11 BANKRUPTCY?

    Chapter 11 bankruptcy cases are typically filed by corporations, limited liability companies, and business partnerships. Individuals that are in substantial debt and have too much income to qualify for Chapter 7 or Chapter 13 bankruptcy may also apply for Chapter 11 as well.

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    WHAT TO KNOW ABOUT STUDENT LOAN DEBT AND BANKRUPTCY

    There probably isn’t a law student alive who has not, at least for a brief moment, wondered whether they could file for bankruptcy to get out of their student loan debt. Most law school graduates leave school with an albatross of debt — common figures tossed around at the bar exceed six figures. And while everyone’s mental image of a lawyer is a rich guy in a pinstripe suit with a Porsche, most lawyers don’t make anywhere near that money, especially at the beginning of their careers. And yet, despite being very well educated and likely able to file a bankruptcy petition on their own, almost none of them do.

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    DOES BANKRUPTCY CLEAR TAX DEBT?

    It is no surprise then that discharging tax debt is not exactly simple or easy. And while it is far from impossible (especially if it is older federal income tax debt), it is not as simple as discharging a past due credit card bill or debt from a business that went belly up. There are a number of rules that determine whether your income tax debt can be discharged, as well as strict timing that must be followed.

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    WHAT ARE FINANCIAL RELIEF AND REPAIR OPTIONS AVAILABLE TO ME?

    Many Americans face steep challenges paying off their debt. Fortunately, there are many financial relief and repair options available to help do this. These include debt settlement, credit repair, loan consolidation, and bankruptcy. 

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    WHAT IS THE BANKRUPTCY LIQUIDATION PROCESS LIKE?

    If you are contemplating whether to file for bankruptcy, you may be concerned about having all of your personal possessions "liquidated" during the proceedings. Do not fret. There are specific rules and regulations governing which assets are eligible for bankruptcy liquidation and which assets are exempt. You may be surprised to learn that there are numerous assets and personal possessions that are protected during a bankruptcy proceeding.

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    CAN STUDENT LOAN DEBT BE DISCHARGED WITH A BANKRUPTCY?

    If you are struggling with the burden of paying down your student loan debt, you are not alone. Millions of people are carrying tens of thousands of dollars in outstanding loan debt from their educational pursuits. If you are struggling financially, you may wind up asking yourself, “Can student loan debt be discharged in bankruptcy?” Here is the answer – student loan debt is extremely difficult, but not impossible, to have discharged in a bankruptcy proceeding. The reason discharge of student loan debt is so difficult is the governing standard used by courts across the country – you need to provide evidence that making payments towards your student loan debt “will impose an undue hardship on you and your dependents.”

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    SHOULD I PAY OFF MY CHAPTER 13 BANKRUPTCY EARLY?

    It is understandable why someone in Chapter 13 bankruptcy would want to speed through the repayment plan–if they can–and move past this experience. However, it is important to consider that once you are in a repayment plan, if your financial situation improves and you show that you can pay more faster, then your creditors might rescind their debt forgiveness and increase the debt owed to them, thus increasing your monthly payments.

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    HOW LONG DOES IT TAKE TO FILE FOR CHAPTER 7 BANKRUPTCY?

    If you are struggling financially and unable to make progress in paying down your debts, you may want to consider filing for Chapter 7 bankruptcy. It is a legal option that has helped many people clear their debt and get back on their feet financially. If you are curious about this option, you may be asking yourself, “how long does it take to file for Chapter 7 bankruptcy?”

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    WHAT DOCUMENTS DO YOU NEED WHEN YOU FILE FOR BANKRUPTCY?

    Once you have made the decision to file for bankruptcy, getting the required documentation in order can be overwhelming. There are several questions you will be asked when filling out your bankruptcy paperwork, and you will be asked to disclose ample amounts of information related to your financial positioning. Whether you are filing a Chapter 7 bankruptcy or have a Chapter 13 matter, the documentation is the same. When going through bankruptcy, you have to provide the following documents to the trustee and reveal additional information when completing the bankruptcy paperwork. This article will give you an overview of the documents that you will need when filing for bankruptcy.

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    DOES A BANKRUPTCY AUTOMATIC STAY PROTECT ME FROM CREDITORS?

    When a person files for bankruptcy, the court has a motive to provide an equal distribution among creditors that are similarly situated. For this reason, there is a procedure to protect the debtor from the pillaging of creditors upon the initial filing for bankruptcy—the protection granted is an automatic stay and takes effect immediately.

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    NEW BANKRUPTCY FORMS REQUIRED UNDER THE 2020 CARES ACT

    Over the past few months, you may have heard in the news about the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), which has resulted in items like the national stimulus checks, expanded unemployment insurance and the founding of the Coronavirus Relief Fund, amongst many other things. One major change that has come with the 2020 CARES Act, is a change to the official forms that are required to be filled out when filing for bankruptcy. While not every bankruptcy form has been changed, there are 5 that have been affected under the new 2020 CARES Act.

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    CAN MY STIMULUS CHECK BE GARNISHED?

    If you were hoping to get a $1,400 stimulus check from the recently enacted American Rescue Plan Act of 2021, but have unpaid debts, you need to temper your expectations. Why?  Because it has come to light that creditors can garnish stimulus checks to recover on unpaid debts.

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    WHAT HAPPENS TO YOUR TAX REFUND IN A BANKRUPTCY?

    When someone decides to file for Chapter 7 bankruptcy, they may be curious to know whether they can retain the tax refund or if the expected refund will be diverted during bankruptcy to pay your creditors. Unfortunately, there is no single correct answer. In reality, the answer will depend on your unique circumstances.

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    CAN I GET A MORTGAGE AFTER CHAPTER 7 BANKRUPTCY?

    If you go through Chapter 7 bankruptcy proceedings, a common question that arises is whether you are still eligible to apply for, and obtain, a mortgage. Here is the answer - yes, you can still qualify for a mortgage after a Chapter 7 bankruptcy. Though, it is important to understand that each mortgage lender has its own unique requirements and waiting periods for mortgage applicants with a bankruptcy filing on their record.

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    WHAT SHOULD I CONSIDER WHEN FILING FOR BANKRUPTCY DURING A DIVORCE?

    Bankruptcy and divorce can go hand in hand. Stress-related to mounting debt creates tension among the married couple, which in turn can put a strain on the relationship. Next thing you know, divorce is a real possibility.

    So it’s not uncommon to consider filing for bankruptcy during a divorce. However, entering into a bankruptcy proceeding while at the same time divorcing can create additional issues you need to be aware of.

    The specifics depend upon whether you’re considering a Chapter 7 or Chapter 13 bankruptcy.

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    WILL MY EMPLOYER FIND OUT ABOUT MY BANKRUPTCY?

    Usually, your employer will not find out about your bankruptcy. However, there are a few cases where they may discover or be informed of it. These include being in the public record, managing wage garnishments, creditor listings, and Chapter 13 payroll deduction orders.

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    HOW SOON CAN I APPLY FOR CREDIT AFTER A BANKRUPTCY DISCHARGE?

    After your debt is discharged, there’s generally no waiting period to apply for a credit card. However, that does not mean your application will be accepted, because bankruptcy has a lasting effect on your credit score.

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    HOW LONG DOES A BANKRUPTCY STAY ON CREDIT REPORTS?

    One of the drawbacks is that bankruptcy is included in credit reports. The exact length a bankruptcy stays on credit reports depends on whether the individual filed a Chapter 7 or Chapter 13 bankruptcy.

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    WHAT ARE THE ADVANTAGES OF FILING BANKRUPTCY?

    There are a lot of benefits that come from filing bankruptcy, and these benefits could mean the difference between struggling financially while dodging debt collectors for the next decade or more of your life and building a firm financial future with better credit, better opportunities, and an easier time providing for your family.

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    WHAT IS THE DOWNSIDE OF FILING FOR BANKRUPTCY?

    While bankruptcy certainly has its benefits, there are some significant downsides to this drastic measure that should be considered before filing. A Chapter 13 filing, which makes up about a third of all filings, means you’ll still pay much of the debt back. And for the majority of filers – the Chapter 7s who walk away from much of the debt – there are still major downsides. 

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    CHAPTER 7 VS 13 BANKRUPTCY

    Nothing can be further from the truth. Bankruptcy in the United States generally takes one of two forms for individuals (not businesses): a Chapter 7 debt elimination filing or a Chapter 13 reorganization filing that allows the consumer to pay back much of what she owes.

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    WHAT IS THE BANKRUPTCY MEANS TEST?

    Bankruptcy is certainly one solution out of this common situation. You may have even had friends or colleagues who have whispered to you about their own bankruptcy filings over a cup of coffee, giving you hope for a debt-free path forward. But before you rush to file, you need to know about the most intimidating part of the process: the Means Test.

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    WHAT SHOULD I KNOW ABOUT DEBT COLLECTORS?

    Most small businesses do not want to get into debt collection because of the incredible array of laws and regulations that govern collections. They will typically sell your debt to a third-party collector. The same goes for government agencies, such as parking ticket collections. Larger businesses, like credit card companies, may have a debt collection unit, but when they strike out on collecting, they will typically sell it off to a third party as well.

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    DOES FILING BANKRUPTCY STOP FORECLOSURE?

    To keep it short and sweet: yes, bankruptcy can stop a foreclosure, at least temporarily. Immediately upon the filing of bankruptcy, an automatic foreclosure stay is instituted, along with the stay on the collection of all other debts. This means all calls, letters, and debt collection efforts with regards to the foreclosure must halt.

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    WHEN SHOULD YOU FILE BANKRUPTCY?

    A wise man once said that there is never a right time to say goodbye. That’s true for someone that you love, but absolutely not true for your unsecured debt. In fact, it may seem like the time is perfect — right now —  to stop debt collectors in their tracks and clear out all of the debt. The time is now to give you a fresh start.

    But wait: before you rush to file, are there any considerations that may make this the wrong time to file for bankruptcy and clear your debt?

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    DOES BANKRUPTCY STOP FORECLOSURE?

    Home is your rock - your security. It's no wonder that for many people, one of the biggest concerns with filing bankruptcy is about foreclosure and saving their home. Many have received threatening letters and phone calls from their mortgage lender and are terrified of the prospect of losing home

    If you are facing foreclosure, you may have wondered (or others may have suggested) using bankruptcy as a means to stop foreclosure in its tracks. Does it work? Does filing bankruptcy stop a foreclosure?

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    WHAT YOU NEED TO KNOW ABOUT BANKRUPTCY & FORECLOSURE SCAMS

    Are you in danger of losing your house? “Our consultants can save your home for a low fee!”

    Struggling to keep up with your monthly bills? Is your credit score lower than my self-esteem? “Our credit counseling can teach you the tricks and hacks that help you take control of your finances and resurrect your credit, allowing you to get the same opportunities as all of those rich upper class people you have been envious of your whole life. Go from gas card to platinum card!”

    Does it sound too good to be true? That’s because it is. Where there is debt, there will be piranhas trying to feast on the flesh of poor victims who are already struggling to keep their heads above water. Not only are shameless debt collectors trying to squeeze every penny out of you that they can, but there are predators pretending to be saviors promising you the world, only to deliver heartache in the end.

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    BANKRUPTCY STUDENT LOAN FORGIVENESS

    Is anybody actually paying their student loan debt right now? Anybody?

    While the pandemic raged on, two presidents pressed pause on student loan payments and interest accrual. When that happened, pretty much everyone completely stopped paying their student loans. After all, why would you make voluntary payments on a debt that incurs no interest and demands no minimum payments?

    And every few months, our current president extends the forbearance. Every other day, there are conversations about partial loan forgiveness, mass loan forgiveness, and tuition reform to get us out of this mess in the future. Will it be $10,000 in forgiveness? Will there be income caps? Are they playing out the anticipation until right before the midterm elections?

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    WHAT ARE UNSECURED DEBTS?

    I’m hungry. But I have no cash. And the Halal cart on the corner only takes cash. So, I went to my coworker and I asked her to borrow $10 to pay for a falafel platter. She handed me $10, I bought my food, and then I never paid her back. What is her recourse? Nothing. Nothing except for telling everybody else in the office that I am a deadbeat. That $10 is unsecured debt. It is that simple.

    Compare that to this: I ask her to borrow the $10, and tell her that I am going to leave my autographed Kansas City Royals baseball card with her until I pay her back. If I do not pay her back, she keeps the card. That is secured debt – debt secured by some piece of property (otherwise known as collateral on the loan).

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    WHAT DOES FILING FOR BANKRUPTCY MEAN?

    Most of us have played Monopoly at some point. If you have, you know the stinging feeling of bankruptcy — at least in the game, bankruptcy is death. Once you become insolvent and cannot cover your rent after landing on some gentrified hotel on Connecticut Avenue, you lose — the game is over.

    Life is not Monopoly. In real life, bankruptcy is an opportunity to reset your financial life. For consumers, bankruptcy might mean selling off excess assets and discharging any debt not covered by the proceeds of those sales or it could mean keeping everything but working out a repayment plan. For businesses, bankruptcy could mean closing the doors, selling off your assets, and paying off as much of your debt as possible or it could mean a reorganization of your company with a plan to restructure assets and debts and continuing to earn income. 

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    BANKRUPTCY STATISTICS SHOW A SURPRISING TREND IN EARLY 2022

    All of those are signs that the economy is finally headed for a reckoning. The last few years, the US government has printed money and handed out relief programs at the expense of the value of the dollar, which is currently facing inflationary forces it hasn’t seen since the late 1970s. By the time they got the dollar stabilized in the 1980s,, interest rates were in the twentysomething percents — which indicates we have a lot more fat to trim and a lot more damage to the economy to come before we are out of this mess today. Either that, or they let inflation run amok and everyone’s salary simply buys less.

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    WILL MY CREDIT SCORE RISE WHEN BANKRUPTCY COMES OFF?

    A credit score is a measurement of how much of a risk it is to extend credit to an individual. If you have fallen behind on your bills or have never been extended credit and demonstrated the ability to use it responsibly (such as a credit card that you have paid on time), you will usually have a low credit score.

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    HOW LONG DOES THE BANKRUPTCY PROCESS TAKE?

    They say waiting is the hardest part, but if you have been struggling to deal with debt collectors and to try to keep your head above water while your budget is stretched thin every month with minimum payments and the like, you may be relieved to know that — at least once you file your bankruptcy petition — the worst, though not the wait, is over. Once you file your initial papers, all debt collection attempts must stop while the bankruptcy is pending, which means fewer debt collection calls and letters and at least a few steps towards normalcy and sanity. But just how long does the bankruptcy process take?

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    WHAT YOU NEED TO KNOW ABOUT BANKRUPTCY AND FORECLOSURE SCAMS

    Are you in danger of losing your house? “Our consultants can save your home for a low fee!”

     

    Struggling to keep up with your monthly bills? Is your credit score lower than my self-esteem? “Our credit counseling can teach you the tricks and hacks that help you take control of your finances and resurrect your credit, allowing you to get the same opportunities as all of those rich upper-class people you have been envious of your whole life. Go from gas card to platinum card!”

     

    Does it sound too good to be true? That’s because it is. Where there is debt, there will be piranhas trying to feast on the flesh of poor victims who are already struggling to keep their heads above water. Not only are shameless debt collectors trying to squeeze every penny out of you that they can, but there are predators pretending to be saviors promising you the world, only to deliver heartache in the end.

    READ MORE>>

    DOES FILING BANKRUPTCY STOP FORECLOSURE?

    Home. What does your home mean to you? Maybe it is where your son took his first steps on the day you moved into that huge house, after three years living in a tiny, cramped Brooklyn apartment. Maybe it is where you wake up and look out your back window to see a scene resembling a Bob Ross painting every single day. Home is where your family congregates, where holidays are celebrated, and where the land beneath your feet belongs to you, and you alone.

    Home is your rock – your security. It’s no wonder that for many people, one of the biggest concerns with filing bankruptcy is about foreclosure and saving their home. Many have received threatening letters and phone calls from their mortgage lender and are terrified of the prospect of losing … home

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