| Practice Areas |
 |
 |
 |
And Legal DefinitionsThis year, more than a million Americans will file for protection under our federal bankruptcy laws. While some bankruptcy claimants may be considered credit abusers and/or financially irresponsible, many are hardworking individuals and well meaning business owners who have succumbed to financial difficulty and face an irreparable crisis. Bankruptcy is designed to help resolve such a crisis and can act as a financial life preserver when you’re drowning in debt. Bankruptcy may not be your only recourse, but it is important to contact an experienced and professional bankruptcy attorney who will advise you of your legal rights under the bankruptcy law and federal bankruptcy courts.Bankruptcy is designed to help both individuals and businesses either to eliminate their debt or to repay it under the protection of the courts. Typically, a bankruptcy is described as a liquidation of assets or a reorganization. Under a liquidation bankruptcy or chapter 7, the claimant files to eliminate all debt through the courts. Under a reorganization, (chapter 11 for business or chapter 13 for an individual), the claimant files a plan with bankruptcy court proposing a full or partial repayment. New Bankruptcy Laws: The passage of the Bankruptcy Abuse Prevention and Consumer Protection Act on October 17, 2005 has changed the requirements under which a debtor may file a chapter 7 bankruptcy. Financial “testing” is required to determine the debtor’s capacity to pay. The debtors are also ow required to seek budget and credit counseling within 6 months of filing. Chapter 7 cannot be filed if the debtors household income is above the median income as deemed by the state. Also, state exemptions can’t be applied unless the debtor has resided at their residence for over two years. Due to the new imposed bankruptcy requirements for chapter 7, debtors now have to file under chapter 13 protection instead. These individuals must agree to a court-imposed plan to repay the debt over five years. The court will appoint a trustee to monitor the process. Bankruptcy filings will be recorded on the individuals credit report for seven years in a chapter 13 and up to ten years for a chapter 7 filing. Chapter 7: Chapter 7 may be filed by a corporation, individual or partnership and is commonly referred to as a liquidation. Filing a chapter 7 bankruptcy does not involve filing a plan of repayment. Instead, the appointed trustee gathers the debtor’s nonexempt assets and will use the proceeds to pay the creditors in accordance with the provisions of the bankruptcy code. The debtors property may be subject to liens and mortgages that pledge the property to the creditors. The bankruptcy code allows the debtor to keep “exempt” properties, but the court appoints a trustee to liquidate the debtor’s other assets. Potential debtors need to know that filing this petition under chapter 7 may result in the loss of property. Chapter 13: Chapter 13 bankruptcy has also been referred to as a wage-earners plan. This enables individual with a regular income to develop a repayment plan to repay some or all of their debts. Under chapter 13, a repayment plan to make installments for a period of 3-5 years is proposed to creditor. Individuals are permitted to keep their property by agreeing to repay debts out of future income. This is not available to corporations or partnerships. After completion, chapter 13 debtors are discharged of the remaining debt. Foreclosure: This is the legal proceeding where the bank or other secured creditor repossesses a parcel of real property due to the failure to comply with an agreement between a borrower and a lender called either a “mortgage” or “deed of trust”. The violation of the mortgage is a default in the payment of a promissory note secured by a property lien. A “foreclosure by sale” ends in the posting of a sign that advertises the auction of your home and the date of sale. The only way to stop this foreclosure at this point is a full payment of money due or the filing of a chapter 13 bankruptcy. If you are able to pay the full amount in arrears, including any fees and costs, you can stop the foreclosure of the property. Most people lack the funds to make full payment. Filing a chapter 13 will stop the foreclosure and will allow you to repay the arrearage over a 3-5 year period. This is paid through a court-appointed official, while you resume your regular monthly payments in order to keep your home. A bankruptcy case can be filed prior to the sale and is often the only way to save your home at this juncture. Debt Consolidation: Debt consolidation is not a loan. It is a process in which debt is restructured into one monthly payment. It also enables a consumer to reduce the amount owed, thus eliminating interest. Often, a consumer can detect the warning signs of being in too much debt long before receipt of any collection notices. Signs you might have too much debt: • You have begun charging to your credit card essential expenses like food and daily expenditures • You are making only the minimum payments on your credit cards each month • You are near the limit of your credit cards • You have too many credit cards • You are unsure how much money you owe creditors Chapter 11: Chapter 11 is typically used to reorganize a business or restructuring debt. It is not often used by individual consumers as it is far more complex and expensive to pursue. Under certain circumstances, however, it ma appropriate for an individual. Chapter 11 allows a business to reorganize itself and gives them the opportunity to restructure debt and get out from under a lease or contract. A business is typically allowed to continue to operate, though under the supervision of the bankruptcy court. If you or someone you know would benefit from the experience of a dedicated and professional bankruptcy attorney, call the Law Offices of Andrew S. Bisom today at 714-384-6440 or use the simple evaluation form provided on this site. |
The Law Office of Andrew S. Bisom specializes in consumer financial problems and solutions to real estate foreclosures.