Recently on our legal forum a user asked, “I am one of the thousands of students who has accumulated student loan debt. I should have listened to my parents and gotten a degree that was marketable but instead my liberal arts degree has left me with nothing but debt and a job as a barista in a local coffee shop unable to repay my student loan. I am wondering if filing bankruptcy and discharging my student loan debt is possible and what I need to know?”
Recently on our legal forum a user asked, “Everyone around me seems to be doing great: new houses, new cars, new pools. I am struggling to pay my bills. Creditors call me every day and hound me for money I don’t have. I am wondering what bills I should pay first if there is no way I can pay all my bills every month.”
Recently on our bankruptcy forum a user asked, “I am considering joining the army. I am in a desperate financial situation. Not only do I have $20,000 in credit card debts I have a car I cannot afford and $50,000 in medical bills. I have wanted to be in the military my whole life. Will filing bankruptcy hurt my chances?”
For many Americans the idea of living debt free is simply a dream, something they only hoped to experience. Whether it’s personal loans, car payments, mortgage payments, school loans, or credit card balances, most Americans owe thousands of dollars in unsecured and secured debt obligations. Recently on our bankruptcy forum a user asked, “I am sick and tired of living paycheck to paycheck. Will filing bankruptcy help me live debt free?”
There is an ironical freeway exit sign making its way through the internet that says Bankruptcy Next Exit. The sign warns us of the financial difficulties which may be happening down the highway of life.
Bankruptcy can happen to any one of us regardless of our station in life. Although bankruptcies are declining in the United States, down 20 percent from a year earlier according to information released by the National Bankruptcy Research Center, there will still be an estimated 1.2 million file for bankruptcy by the end of 2011.
For those people whom have found bankruptcy, life has led them to the next exit, but the exit does not have to necessarily mean it is the end of the road. Bankruptcy is a legal process concerned with your finances and once completed, you can ride up the on ramp to start down the highway of life once more. So, filing for bankruptcy can be all about getting a complete fresh start, and it can be about an honest person or business working their way of a bad financial situation too.
There are different types of bankruptcies to accommodate different financial situations for individuals, corporations, and partnerships. Bankruptcies can range from having your assets liquidated, building a plan to pay back your creditors, to completely reorganizing your business to survive an economic downturn.
If you make that next stop for bankruptcy, what are some of the things you can expect to accomplish? You can expect to eliminate the legal obligation of your unsecured debts through a bankruptcy discharge; you might expect to pay a part or all your debts; you can potentially stop foreclosures, repossessions, wage garnishments, and debt collection harassment; you can restore or prevent termination of utility services; and unless you were driving under the influence of alcohol, you can get your driver’s license back if it has been suspended because you did not pay court ordered damages for a driving accident.
Those are just some of the things bankruptcy can do for you if you have to make that stop in life, but what are some of the road bumps in bankruptcy? What is it that bankruptcy cannot do for you if you make that exit?
Filing for bankruptcy protection cannot eliminate certain rights of secured creditors, like car loans or home mortgages. You can force secured creditors to take payments over time, but generally, you cannot keep the collateral unless you continue to pay the debt.
Also, filing for bankruptcy protection cannot discharge certain debts like those that arise after the bankruptcy has been discharged, child and spousal support, some debts associated with divorce, most student loans, court restitution orders, criminal fines, and most taxes. Filing for bankruptcy cannot eliminate the obligation of a co-signer on your loan in most cases.
Whether or not you make bankruptcy as your next exit is a decision only you can make while you are traveling the bumpy highways of life. Just like getting directions on finding your way down the highway, you might want to consider consulting with a bankruptcy lawyer to help you understand what direction you need to take in filing bankruptcy.
Many of you facing bankruptcy for the first time will have a lot of questions about the process. One such common question is, “What happens to your savings and checking accounts in bankruptcy?”
The answer to this legitimate question will vary from state to state, and it will also depend on the type of bankruptcy you file.
There are basically two types of bankruptcies most individuals can file: Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.
In a Chapter 7 bankruptcy, you will be asked to make a list of all the assets you own and the debts you have incurred. From this list of assets, the bankruptcy court trustee will collect the non-exempt assets and liquidate them to pay the creditor claims on the unsecured debts.
Exempt assets are either state or federal exemptions that involve assets exempt from liquidation, or sale of the asset. Secured assets are automatically exempt because they have a lien associated with the debt. Liens are not discharged in bankruptcies.
State bankruptcy laws mandate which exemptions you can use in a bankruptcy case- federal or state. Some states allow you to choose, others make it mandatory to use one or the other. Checking and savings accounts fall under exemption status for any bankruptcy filed.
State exemptions can widely vary. In either case, where the money originated may be important. The origination may bring other exemption status into play. A bankruptcy lawyer can help you determine what is and what is not exempt.
In a Chapter 13 bankruptcy, commonly called a wage earner’s plan, you will create a three or five year plan to pay back a portion or all debt owed to your creditors. The plan is based on your disposable monthly income. Exemptions play a role in the process by determining how creditors are going to be paid. A bankruptcy court trustee will distribute the money monthly to all your creditors as prescribed in your plan.
What you are not paying as a part of the Chapter 13 plan to pay your creditors, you can keep to run your household and living expenses. Money you can keep includes any exempt money plus the money in your checking and savings accounts you may have remaining after payments. All assets and income must be accounted for during the plan, and you are responsible for meeting your payment responsibilities to the trustee.
Like in a Chapter 7 bankruptcy, a Chapter 13 bankruptcy payment plan may adversely affect your checking and savings accounts. Where monies originate from in a checking or savings account may determine how a plan is administered or whether those funds can be used in the plan.
Therefore, how much you can keep before the bankruptcy court asks you for the funds will depend on which state you live, which exemptions you are allowed to use, and what type of bankruptcy you file. A bankruptcy lawyer might help you understand how these complex laws may apply in your particular situation.