Bankruptcy Law: New Laws for Chapter 7,11, 13

You have had a stretch of bad luck either personally or professionally. Maybe you had to find a new job, had a drop in consumer spending, had a major illness or injury in the family, or simple made a series of bad financial decisions. You have tried desperately to keep up with your obligations to creditors, but it is becoming too much to handle. You need some time, a chance to take a deep breath without creditors calling or threatening legal action. You do not want to file chapter 7 bankruptcy, because you need to keep your home, your vehicle, or maybe save your business, if possible. Then, you need to consider filing personal or business bankruptcy under chapter 13.

Why Chapter 13?

Chapter 13 bankruptcy is essentially the ability to reorganize your debts and get them down to a level whereby you might have a chance of paying them off.

You just need a little help to get your feet back on the ground. You want to keep your possessions, satisfy your creditors, and save your family or place of business. Basically, it does not matter whether you are doing it for personal or business reasons. A chapter 13 bankruptcy works in the same manner. Known as the wage earners plan, a chapter 13 bankruptcy may protect your business, your loved ones, and your possessions.

Although you might have to eventually change it to a chapter 7 bankruptcy, people have been known to bring their businesses back from the brink of closure and save their families from having to be destitute. If you have any debt loans that have a cosigner, it will also protect them from legal action.

Credit Counseling after Bankruptcy

In addition to finding a good lawyer, you will need to find some credit counseling, whether you are filing for your business or your personal finances. Your case will not even be accepted by federal bankruptcy court if you have not sought money advice. Also, if the counselor can talk to your creditors and maybe get the payments down to a reasonable amount, including a payment plan, you will also have to come to court with that paperwork in hand. In essence, chapter 13 bankruptcy has the goal of doing the same thing. So, they will want to include the results of your counseling in their decision.

Chapter 13 Bankruptcy Paperwork

Anyone who files for chapter 13 bankruptcy will be required to fill out a lot of forms that will tell the court about your true financial status. If you are still working, it will have to be clarified as to your income and debt ratio. Are you truly unable to pay all of your bills, or have you exercised poor spending habits in the past?

Also, the court will want to know what debts you have that are exempt from bankruptcy. For example, you cannot get out of paying child support, even if you are legally bankrupt. You will also be required to pay any legal judgments against you. In other words, if you are legally responsible, you must pay.

You will have to get all of your financial information together; including income tax returns you may be delinquent in filing. Do not mail them in, but make sure your lawyer has all of the necessary documents ready to go. If you accidently or purposefully neglect to include information, you could have more legal troubles than you care to handle and your case will be thrown out of court.

In preparation for your day in court, you are going to need to go through ALL of your financial documents and prepare

1. Schedules of Assets and Liabilities
2. Schedule of Current Income and Expenditures
3. Schedule of Executory Contracts and Unexpired Leases
4. A Statement of your Financial Affairs

If you have tax returns, the court will need to see the most recent one, in addition to any you have to file during the course of the bankruptcy proceeding. (If you have neglected to file taxes altogether, you will not be able to file bankruptcy, until you get that paperwork together.) Your paperwork will not only include what you have written down.

The court will want to see proof of everything you are claiming. According to www.uscourts.gov, you will need to include this information :

1. A list of all creditors and the amounts and nature of their claims;
2. The source, amount, and frequency of the debtor's income;
3. A list of all of the debtor's property; and
4. A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc

In the end, it will seem like an entire tree was used just for your information alone. But, in the end, it will be worth it, if you want to save your assets and/or your business.

Bankruptcy Payments

As part of chapter 13 bankruptcy, you will be asked to make a plan to pay back your debts through the trustee. If you have back taxes or court fees, these are considered a priority debt and must be paid in full. Secured debts are the ones in which you still have the property that the creditor could take back. Usually this part of the debt is reduced to the current value. Finally, the unsecured debt would be like your credit cards.

But, you will have to have a meeting to discuss the debt with your creditors. If they do not think that your plan is fair under the circumstances, they can file a petition with the court. But, the debtor is required to pay as much as possible over a designated period of time.

The court has put the chapter 13 bankruptcy plan in place. According to the terms of the plan, you will have to pay the trustee bi-monthly or monthly. In turn, the trustee will take that money and distribute it among your creditors.

Finally, while you are in chapter 13 bankruptcy, you cannot incur any new debt, without the approval of the court. Right now, you obligation is to get this financial mess cleared up. The court does not want you overextending yourself again, and defeating the purpose of chapter 13.

Completion of the Chapter 13 Plan

Usually a chapter 13 plan last anywhere from 3-5 years. At the end of the time, as long as you have complied with the repayment schedule and done everything required by law, the court will discharge your debt. Now, you are free and clear to get that fresh start, hopefully make better financial choices, and have better opportunities so the court will not have to repeat this procedure in 8 years.

Of course, sometimes life throws a real curve ball, and you simply cannot repay the debts according to schedule. Maybe you have suffered a major illness and have astronomical medical costs. But, if you are really doing your best and then something else comes up, you can apply for a hardship discharge. If you qualify, your debts may be forgiven, before the repayment plan is finished. But, it will not work for just any reason. The court must feel it is an emergency situation.

In the end, chapter 13 bankruptcy is supposed to help you get back on your feet, without losing your property. Whether it is personal or business, it gives you a chance to restructure your debt to a livable amount.

Chapter 13 Bankruptcy Lawyer

Even if you are only thinking about chapter 13 bankruptcy, you need a bankruptcy lawyer. Whether you are filing personal or business bankruptcy, there are so many details to consider. Trying to represent you or your business, in order to save money, could cost you the case in the end.

Some businesses have come out of chapter 13 a stronger and more profitable enterprise. Some homeowners have been able to keep their houses and family intact. Even if you eventually have to convert it to a chapter 7 bankruptcy later, it buys you a little time and the opportunity to get that fresh start without having to forego your assets.