Gathering appropriate bankruptcy information is vital for making informed decisions about declaring personal or business bankruptcy. Substantial alterations were instituted within the United States Bankruptcy Code via the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. To assure compliance with BAPCPA guidelines debtors would be wise to consult with a qualified bankruptcy attorney.
A key piece of bankruptcy information is that BAPCPA demands that every debtor must pass through the ‘means’ test to determine which bankruptcy chapter they qualify for. The means test analyzes debtor’s income in contrast with their state’s average income level. Individuals earning more than median levels are normally required to file Chapter 13, while those earning less may qualify for Chapter 7.
The majority of debtors must restructure outstanding debt under Chapter 13 and develop a payment plan that can extend for up to 5 years. Prior to BAPCPA, a lot of people filed for Chapter 7 so they could liquidate assets and have remaining debts written off.
Under Chapter 13 bankruptcy, petitioners are allowed to retain valuable assets by repaying creditors over a prolonged time period. While Chapter 13 payments can help debtors get back on track, they can also create additional financial hardships.
Chapter 13 payments are in addition to normal monthly expenses. Debtors are not allowed to incur new debt throughout the repayment phase. This can be very detrimental to individuals that experience job loss, health issues, or encounter unexpected emergencies that require them to take out a bank loan.
Bankruptcy payments are remitted to the bankruptcy Trustee on a monthly or bi-monthly basis. If debtors do not comply with payment terms the Trustee, along with creditors, are allowed to file petition seeking dismissal of the bankruptcy petition.
Debtors that experience temporary financial setbacks should contact their bankruptcy attorney or Trustee immediately and attempt to work out a plan. In most cases, the Trustee will work with debtors who are proactive in rectifying money problems. With that being said, debtors that make a habit of not paying or remitting late payments face the very real possibility of having the petition dismissed.
If petitioners fail out of bankruptcy they no longer have protection from the court. Once a bankruptcy petition is discharged creditors can commence with collection procedures including repossession of property, foreclosure, and garnishing wages. Creditors can also obtain court ordered judgments that are reported to credit bureaus and cause further damage to FICO scores.
Failing out of bankruptcy is particularly harmful to individuals that filed as a way to stop foreclosure. Mortgage lenders can move forward with repossession of property at the point where they left off prior to the automatic stay enacted through bankruptcy. If the bank was set to repossess the property 7 days prior to the bankruptcy filing, they can foreclose within 7 days once the petition is dismissed.
Debtors must commit to remitting Chapter 13 payments on time and in full each month. Otherwise, they will fail out of bankruptcy and incur additional damage to credit scores as well as lose all the property they were trying to protect.
Debtors should spend time looking into bankruptcy alternatives before making a final decision to file personal bankruptcy. Some of the more popular choices include credit counseling, budgeting, debt consolidation, and debt settlement.
It’s also important to become educated about BAPCPA guidelines and regulations. The new bankruptcy laws are published via the Department of Justice, U.S. Trustee Program website at Justice.gov. Visitors can locate an list of authorized credit counseling agencies and review laws surrounding personal and business bankruptcy.
Simon Volkov is a California real estate investor who specializes in buying and selling foreclosure, bankruptcy, and probate real estate. Simon has published numerous bankruptcy information articles via his website and throughout the online community. If you are facing bankruptcy or foreclosure and need to sell your home quickly, visit today.