Troubled financial times may cause people to make rash decisions, which will throw them further into an abyss. For people who are considering bankruptcy as a mean to get out of a bad financial situation, there are two options available. You can either file “pro se” or use a lawyer to file bankruptcy papers. Many people think, that by avoiding hiring a lawyer, they are actually saving money in legal fees. However, if you are not fully aware of the procedure, you might end up sabotaging your case which might worsen your already bad condition. (more…)
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What to Expect from Life after Personal Bankruptcy?
Filing for bankruptcy is a decision that is not made easily. Not only are you struggling to make financial ends meet but you also have to provide bankruptcy courts and lawyers with details of your finances for a duration of 6-9 months or more. You are also expected to meet all the obligations of the court. Not only are your finances under supervision but you are also constantly worrying about the status of your personal bankruptcy case. All of this causes excessive mental stress on people and they are often looking forward to this dreaded chapter of life to end so that they can start afresh. However, it will be wrong to assume that life will change drastically after bankruptcy. (more…)
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Debt Repayment in Chapter 13 Bankruptcy – How Much Amount is to be Repaid?
Individuals who have hit on bad times can file for bankruptcy under Chapter 7 or Chapter 13 (also known as the wage earner plan). The type of bankruptcy which is most appropriate for an individual is decided via bankruptcy means test. Chapter 13 allows debtors to retain some property and make payments over a span of 3-5 years towards their debts as part of a repayment plan. This type of bankruptcy can only be chosen when an individual has some amount of disposable income and can make regular payments as per the decided repayment plan. (more…)
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Considering Bankruptcy? Should You Liquidate Your Assets?
For people who are undergoing severe financial issues, one of the best legal recourse available is filing for bankruptcy. This helps to get huge amounts of debts discharged while offering individuals a chance to have fresh financial beginnings. According to the U.S. Bankruptcy Code, a number of chapters are available to choose while filing for bankruptcy; one must choose the chapter depending on their financial conditions. Chapter 7, also known as “Liquidation Bankruptcy” is one of the most preferred for consumer bankruptcy.
In Chapter 7 bankruptcy, the assets of the individual filing for bankruptcy are sold off and the money so generated is used to make payments to the creditors to clear off the debts. A bankruptcy trustee, appointed by the court, oversees the liquidation of your non-exempted assets and also takes care to distribute the money to any creditor you owe money to.
Though also known as liquidation bankruptcy, not much liquidation of assets takes place in Chapter 7 bankruptcy. As lawyers of Los Angeles based law firm Recovery Law Group explain, most of the limited property that a debtor owns is considered to be exempted and only that which is non-exempt can be liquidated. Since the entire purpose of bankruptcy is to provide an individual with fresh financial start to individuals going through a bad economic phase, stripping them off their possessions will not serve the purpose. Thus exemptions are allowed in bankruptcy proceedings which include filers’ primary residence, automobile, personal property and certain other benefits including retirement account.
It is easier to determine the exemptions when it comes to personal bankruptcy, however, the demarcation is slightly more complex when it comes to business bankruptcy. It is important to take legal assistance to help determine which of your property comes under exempted assets and which one is a non-exempt property. It is also important to avoid making mistakes like intentionally liquidating assets before filing for bankruptcy. In case you are considering bankruptcy, it will be helpful to keep certain things in mind –
- Avoid using your retirement funds: Though being bankrupt is not exactly a nice position to be in, it will not exactly help your cause, if you break into your retirement corpus to pay off your creditors. Emptying your retirement account will not only result in early withdrawal penalty fees but you will also have to pay tax on the money, whereas filing for bankruptcy will protect your retirement funds (they come under exempted property) and thereby your future.
- Don’t make credit card payments using rent money or mortgage payments: The thought of creditors knocking on your door with the threat of lawsuits and wage trimmings can often cause people to panic. However, it is important to keep in mind not to use a mortgage or rent money to pay off creditors. The bankruptcy trustee in charge of your case will make sure that you do not lose your home in the process of paying off your creditors; but if you forgo mortgage payments or rent on time, you may end up on the street due to your miscalculations.
- In case you are planning on filing for bankruptcy, do not sell off your assets to pay cash to your creditors: Many people think that selling off assets like jewelry, cars and other electronic goods to pay off creditors is a good option. However, if you are considering to file for bankruptcy, these actions might be mistaken for disposing of assets or payments made with them equal to favoritism, which may become the cause of the dismissal of your case.
The process of bankruptcy can be quite a complex one for most people. It is therefore essential that you take proper legal assistance from an experienced bankruptcy attorney to determine the best course of action as per your situation.
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Can You Afford to Ignore Credit Card Debt?
Anyone can fall into a bad financial situation anytime. During the time of financial uncertainty, it is at times difficult to make even essential payments, due to which many people come to rely on their credit cards, unaware of the fact that the dues they are accumulating so will be harder to shake off. Increasing credit card debt can cause debt collectors and creditors to come knocking on your doors and take steps to recover their dues including wage garnishment. (more…)
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Can Anyone File for Bankruptcy?
Despite being one of the best legal recourse available for people who are struggling with heavy financial problems, there are a lot of misconceptions associated with bankruptcy. Believing in these myths can cause extensive harm to people who could face problems like wage garnishments, utility shutoffs, foreclosure, etc. According to lawyers belonging to Sacramento based law firm, Recovery Law Group one of the most common misconceptions surrounding bankruptcy is that people believe that bankruptcy is only for individuals with limited source of income and that people earning too much money cannot file for bankruptcy. Well, nothing could be farther than truth. (more…)
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Benefits of Bankruptcy Consultation
More often than not, people prefer dealing with severe financial problems than opting for bankruptcy as the word has been often been misconstrued. A bankruptcy filing is a legal and one of the best methods to come out of financial problems and start life afresh. However, before you make a decision to file for bankruptcy, it is important to get a consultation with skilled bankruptcy lawyers such as those of Los Angeles based law firm Recovery Law Group.
What to Expect in Bankruptcy Consultation?
Taking legal assistance for your financial problems is important as sometimes you might not be aware of the best legal recourse to deal with the issues at hand. However, before you meet a bankruptcy lawyer, it is important that you are well prepared so that you are able to save both time and money. Having your financial information on hand is important, therefore collect all information about your finances including:
- Bank statements
- Loan agreements
- Creditor’s information
- Contract information
- Receipts for any payments made
- Foreclosure documents in case proceedings are pending
- Correspondence with creditors (sue notice etc.)
All these and related documents will help the attorney with all background information about your financial problems. With this information at hand, work for the bankruptcy proceedings can be initiated sooner.
It is important to keep in mind that lying about your finances to the bankruptcy attorney is not going to help your cause. You need to be open to the lawyer and should not withhold any information pertaining to your dues or assets as this may get your case dismissed without any discharge of debts.
In case you have any questions pertaining to the impending bankruptcy, it is important that you discuss them with the lawyer during the bankruptcy consultation. This will help alleviate your concerns and also make you aware of the eligibility factors and any other potential issues which could obstruct the chances of your case going ahead.
Taking a bankruptcy consultation with specialized lawyers provides you with a better idea of the concept as well the recourse to be taken to get rid of the financial mess you are currently in.
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Benefits of Automatic Stay during Bankruptcy
Many people do not realize when they have incurred heavy debts thereby leaving bankruptcy as the last resort. However, not many people are aware that bankruptcy offers a lot of protection to debtors. One of the most important tools of bankruptcy is the automatic stay, which helps stop all actions taken by collection agencies to collect dues from you. In case you are facing eviction issues, foreclosure or repossession problems, due to losing utility or benefits, or are unable to make child support problems; automatic stay comes to the aid of you and your family, in this time of financial mess. (more…)
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Bankruptcy Exemptions in Texas
In case you find your financial future in doldrums and are considering filing for bankruptcy under Chapter 7 or Chapter 13, it is important that you are aware of how the process works. Most of the times, people assume the worst when it comes to bankruptcy. Unlike popular misconception that you will end up losing everything you own, bankruptcy allows a number of protections which allows bankruptcy filers to protect more of their property or pay less amount to unsecured creditors. The Texas exemption laws contain many such protections for the benefit of filers. (more…)
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All You Needed to Know About Personal Bankruptcy and Business Ownership
For people who are the sole proprietor of their business, filing for personal bankruptcy can have ramifications on the business ownership too. This depends on how the business was legally organized and the type of bankruptcy you have filed in the court. As per U.S. bankruptcy code, individuals can file for bankruptcy under two chapters, depending on their circumstances – Chapter 7 or Chapter 13.
As lawyers of Los Angeles based law firm Recovery Law Group explain, Chapter 7, also known as liquidation bankruptcy is one of the most common types of filing done in personal bankruptcy cases. During this process, a trustee (an individual or an entity) is appointed by the court who oversees the liquidation of all the non-exempt property of the filer so as to settle the debt claims. The non-exempt property is that property which the court permits the filer to keep after the declaration. The amount of assets that any debtor can keep varies from state to state. According to Chapter 7 filing, the debtor’s business ownership can be considered an asset which can be liquidated. However, the methods for assessing the value of the asset can vary widely with debates arising over the proportion of ownership in case of closely held corporations.
Unlike chapter 13, a business going through bad financial times can file for bankruptcy under Chapter 7. However, the business does not get a discharge but its assets are liquidated and the business reorganized so as to distribute the money to the creditors on the basis and priority of their claim. If any remaining amount of due remains, it is wiped off. In case the owners do not want to close the business and liquidate all the assets, they can choose to file for bankruptcy under Chapter 11 to reorganize and pay back the creditors.
Another type of bankruptcy filing for individuals is Chapter 13 which offers to reorganize the finances by taking into account the debtor’s assets, the debt due to him/her, and the expected future source of income or revenue. The court appoints a bankruptcy trustee for this task and the creditors agree to the repayment plan calculated by the trustee after taking into account the various previously mentioned factors. Since only individuals can file for bankruptcy under this chapter, if you are a sole proprietor or own shares in a corporation, only then you can file an individual Chapter 13. You need to list your property interest on Schedule B to get exemption on the equity you have in the business. It is important to remember that in Chapter 13 bankruptcy, debts limits of nearly 1 million in secured debts and about 380,000 in unsecured debts is available.
When you opt for a reorganization filing (Chapter 13), the court mandates a repayment plan and personal living budget, which needs to be adhered strictly. The entire reorganization plan needs to be followed for a long duration, typically 3-5 years. Since some portion of the money will flow from business to the individual during this time frame, the business ownership assets might be affected.
Bankruptcy Outcome May Depend on the Legal Formation of Your Company
A small business is generally organized in one of the three forms –
• Sole proprietorship,
• Limited liability corporation (LLC) and
• CorporationCorporations can be of 2 types: S-Corp or C-Corp, wherein, in the former case, profits or losses flow through to the shareholders, and in the latter case, corporations are taxed separately from their owners. With LLC, the organization structure has a blend of both individual and corporate structure. Just like C-Corporations, LLC to has a separate legal existence from its owners. The U.S. business code provides the owners in LLC to have limited liabilities for corporate debts. However, not all closely-held corporations can be treated similarly as the unique circumstances might differ. It is therefore important to have a consultation with a bankruptcy attorney regarding your current financial situation.
Sole Proprietorship
In case a business is a sole proprietorship, the law doesn’t distinguish between the individual and the corporation, however, the specifics of the portion varies from state to state. Generally, however, due to the close association between the individual and the business, personal bankruptcy may also be considered a business bankruptcy. Under Chapter 7, the court will regard the business as a personal asset which may be liquidated to pay off creditors.
Personal Bankruptcy in Case of LLC or Corporation Ownership
These types of companies are regarded as separate legal entities, unlike sole proprietorship. Thus when individuals with corporate interests file for bankruptcy, only the portion of business ownership which is held by the bankruptcy filer gets affected. The business can run in the usual manner with debtor’s equity in it becoming an asset in the personal filing.
Homestead Exemptions in Personal Bankruptcy
The court, in many states, allows legal provision which exempts the primary residence of the bankruptcy filer from various legal claims including bankruptcy. This is known as the Homestead Exemption. It is one of the major reasons why many entrepreneurs and celebrities choose one of the exempt states as their primary legal domicile. Some states have no limit on the value of exempt residence!
Business Ownership Interests and Chapter 7 Filing
In liquidation bankruptcy cases, the net value of ownership interest (assets minus liabilities) is assessed by the court, to come up with a plan to make money available for paying the creditors. If, for example, an individual who has filed for Chapter 7 bankruptcy has a small business valued by the court or trustee at $500,000 and the filer also possess other assets worth another $500,000 which can be liquidated (cash, property, vehicle, etc.), then the total amount available to pay the creditor’s claim is a million dollars.
This is to be considered theoretically as just evaluating a business interest won’t generate the money, a buyer willing to make the purchase is required to actually have the cash in hand to repay the creditors. Most of the time, many small businesses have no value due to the debts in books from the building and operating of the business.
However, it may be noted, that some jurisdictions offer a bankruptcy code which allows individuals or small businesses to make a fresh start. The “fresh start exception” law may permit a business to continue operating without the burden of debt which was previously attached to the business, prior to a bankruptcy filing.