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Should I File for Bankruptcy?
In today's society, many people are finding
themselves in debt that they are unable to swim out of. They
have been raised in a society that is materialistic and everyone
has to keep up with everyone else. This often leads to credit
card debt, home equity loan problems and numerous other problems
such as facing foreclosure and unable to pay a multitude of
bills.
Yet, from our experience this is not why most
homeowners are in foreclosure. We have found from helping
hundreds of homeowners avoid foreclosure that the main causes
of financial distress are:
1. Divorce
2. Medical illness or injury
3. Loss of job
Bankruptcy is not something that you should
be ashamed of. Rather, it is a fresh start on your life with
no bills or making affordable monthly payments to help you
get out of debt. Bankruptcy allows you to take control of
your finances and begin to live an affordable life style.
Credit card companies are the main cause for
individuals that are in debt. They offer you a low interest
rate for six months, but the regular APR is 24%. They offer
you to transfer balances and extend your credit. As you handle
your credit properly, they continually increase the amount
of money that you can spend. Many individuals find themselves
in the "minimum payment trap" because of this. If
they continued to pay the credit card companies, they would
be paying the minimum payment for 35 years or more depending
on the amount of debt.
There are two types of bankruptcies. Chapter
7 is the liquidating of all unsecured debts. This applies
when the monthly payment on all of your personal overhead
bills exceed your income.
Chapter 13 requires creditors to negotiate with
you and it is subject to the approval of the bankruptcy trustee.
This requires that creditors settle so that you are able to
take control of your finances. A plan to repay your debt is
worked out and applies when your income exceeds your monthly
personal overhead requirements.
If you want to file bankruptcy to save your
house, Chapter 13 is the type you need to file. In Chapter
7 all your secured assets (car, house, etc.) will be taken
back by the lenders.
The type of bankruptcy that is applied to your
situation depends on several individual factors.
The chapter that is best for you will depend
on your debt and the value of your assets.
Chapter 7 is frequently selected for individuals.
The debtor is discharged of their unsecured debt after filing.
If the income is high enough to permit repayment of some of
the debt, the court may dismiss the case for "substantial
abuse."
Chapter 13 is used if you have debts that are
not dischargeable. If you are in default on your home or car,
if you have more property than can be exempted under Chapter
7 and if owe taxes or other debts that are not dischargeable.
You must have a regular income and debts below a certain level
to file Chapter 13.
The repayment plan is a good choice when you
owed debts such as taxes and child support, if you have liens
that have a value larger than your assets secured by the debt,
if you have unfilled taxes, if you are in default on your
car and house and if your assets are worth more than the exemptions.
The problem with bankruptcy and foreclosure
From our experience, we have found that when
you declare bankruptcy to save your house, you must start
making your mortgage payment. And now, the payment will be
higher than it was originally. This is because all the payments
you missed, plus interest and late charges are added to your
mortgage balance. So if you are having trouble paying what
it is now, you will have no chance if the payment goes up.
This is why many homeowners in bankruptcy eventually
lose their house anyway. The Bankruptcy only gives them about
6 months time before they have to move.
And in many of these cases, the homeowner then
has to file a Chapter 7 Bankruptcy because he cannot pay his
debts. So he has to pay all the fees for filing Bankruptcy
twice and stills loses the house and cars, ruins his credit,
and is forced to move.
New Bankruptcy Laws Make It Even Harder
To File
Thanks to George Bush, the new bankruptcy laws
of 2005 make it much harder to file bankruptcy on short notice.
Anyone wishing to file bankruptcy has to go through a long
counseling process before they can file. This process
is several weeks long. In Texas you do not have several weeks.
You only have a few days. So if you are already in foreclosure,
bankruptcy will not help save your house.
Click here
for more information on the new laws
There's a lot more to consider
If you are thinking
about Bankruptcy click here for a lot more information.
The quickest way to
determine if Bankruptcy is for you is to call us to arrange
a FREE Situation Analysis. If it turns out Bankruptcy is your
best option we can recommend a few good attorneys if you need
us to.
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