We all know that Chapter 7 is the most common choice when it comes to filing for bankruptcy. But among the many chapters bankruptcy comprises, Chapter 13 is the second favourite. Now with the new law, many more debtors will find themselves filing this claim. And not exactly by choice, but because they will find it impossible to file for Chapter 7 due to the new salary limitations. This and some of the new regulations have caused quite a stir, and already people are choosing side.
But truth be told, no matter what chapter you choose, if you do not qualify for Chapter 7, you will not be able to file for it, and will have to file for the second alternative. Leaving aside the eligibility issue, there are still many who opt for this type of chapter because it offers options no other chapter does.
Here we will discuss those cases in which Chapter 13 is the best alternative for the debtor.
Case #1: You Are A Homeowner
Chapter 13 does carry some major drawbacks individuals are not very inclined to go through: it might take up to five years for this type of claim to be discharged though it usually takes 3, also, the debtor will have to actually pay those debts, they will not be written off instantly like in a Chapter 7 claim. But, on the other hand, this type of bankruptcy tends to have a less harsh effect on personal property as it works more or less like a repayment plan.
If you are a homeowner, I take it that your home is one of the most important things you own, if not the most important. When filing for Chapter 7, the debtor runs the risk of having his home repossessed. In a Chapter 13 bankruptcy, provided that you are successful in repaying the debt, none of your assets will be in danger. Many homeowners will rather pay back their debt and have the knowledge that their home is safe.
Case #2: You Own Non-Dischargeable Debts
Some types of debts cannot be discharged. If you happen to have many of them (government student loan, alimony debt, tax related debt, etc) and are in need of filing for bankruptcy, it might not be worth it to file for Chapter 7. True, the rest of your debts will be discharged, but the other ones will remain, and you will still have to pay the off. It might be wiser to file for Chapter 13 and work out a repayment plan for them.
Case #3: You Have A Co-Signer On One Of Your Loans
Having a co-signer always boosts loan approval chances, that is why many people resort to friends and family for help. Truth be told, the moment that person signs the contract, they become co-debtors. Provided that you are unable to repay any of your debts and you decide to file for Chapter 7, the debts will be discharged for you, but not for your co-signer. Creditors will quit harassing you, but they will go after co-debtor instead. Chapter 13 filing does not pose a threat to your co-signer. In fact, as long as you keep up with the repayment program, the creditor will not contact that person at all.
Showing posts with label Bankruptcy. Show all posts
Showing posts with label Bankruptcy. Show all posts
Tuesday, August 14, 2012
Thursday, June 28, 2012
Avoid Personal Bankruptcy
How To Avoid Personal Bankruptcy
It's an unfortunate truth in our society today, most people live beyond their means. They live off of credit which may work fine for a while, but the simplest thing such as an illness or job loss will completely push them over the edge financially. That has happened to many people during this current economic downturn. Even if it wasn't your fault that you got sick or lost your job, living off of credit will ruin your financial situation if you have to file for bankruptcy. In order to get your feet back under you financially, there are some things you can do to avoid personal bankruptcy.
The time to take control of your finances is right now. The longer you wait, the further out of control things will become. This isn't going to be a quick or easy thing to fix. You will likely have to face some less than pleasant truths about the way you handle your money.
For one thing, stop using credit. Period. You should cut up all of your cards expect one. Now I know that many people will say that that is bad advice since it will hurt your credit score. Yes, cutting up your credit cards will have a negative impact on your credit score, but for the short term, so what? If you're considering bankruptcy you're already in trouble and you really don't need more credit at this point anyway. Cut them up so you don't use them and make a bad situation even worse.
Next, take stock of your overall finances. If you take a long hard look at your spending habits you will probably find that you have one or more weak areas where you spend a lot of money. Once you figure out where your budget is bleeding, you can patch it up.
For example, let's say that once you sit down and take a long look at your spending habits you find that you are spending hundreds, or thousands, of dollars a month on eating out. Once you know that, you can adjust your lifestyle accordingly. No one is saying you shouldn't ever eat out again but you might be able to cut back and eat more dinners at home, or you might choose less expensive restaurants and / or meals.
Once you've found a weak area in your budget and you find a way to plug that hole, you will have a little extra money every month. The next step is to take that money and invest it in paying down a debt. Start with your lowest balance credit card first. Instead of only making minimum payments every month add the amount you saved on your budget to that credit card payment.
once you have that small card paid off, start on the nest larger one. Now you can not only apply the left over money from your budget to your monthly payment you can also add the amount you were paying on the first credit card that you just paid off. Just keep doing this over and over and before you know it you will have all your credit cards paid off.
You can use this same principle for paying off your car loans and mortgages too. This method will take time and a little bit of discipline, but it is something that anyone can do.
If you want to avoid personal bankruptcy you will have to take control of your spending. It's very easy to fall into bad habits, but you can recognize those bad habits and learn to make better choices. Good luck.
It's an unfortunate truth in our society today, most people live beyond their means. They live off of credit which may work fine for a while, but the simplest thing such as an illness or job loss will completely push them over the edge financially. That has happened to many people during this current economic downturn. Even if it wasn't your fault that you got sick or lost your job, living off of credit will ruin your financial situation if you have to file for bankruptcy. In order to get your feet back under you financially, there are some things you can do to avoid personal bankruptcy.
The time to take control of your finances is right now. The longer you wait, the further out of control things will become. This isn't going to be a quick or easy thing to fix. You will likely have to face some less than pleasant truths about the way you handle your money.
For one thing, stop using credit. Period. You should cut up all of your cards expect one. Now I know that many people will say that that is bad advice since it will hurt your credit score. Yes, cutting up your credit cards will have a negative impact on your credit score, but for the short term, so what? If you're considering bankruptcy you're already in trouble and you really don't need more credit at this point anyway. Cut them up so you don't use them and make a bad situation even worse.
Next, take stock of your overall finances. If you take a long hard look at your spending habits you will probably find that you have one or more weak areas where you spend a lot of money. Once you figure out where your budget is bleeding, you can patch it up.
For example, let's say that once you sit down and take a long look at your spending habits you find that you are spending hundreds, or thousands, of dollars a month on eating out. Once you know that, you can adjust your lifestyle accordingly. No one is saying you shouldn't ever eat out again but you might be able to cut back and eat more dinners at home, or you might choose less expensive restaurants and / or meals.
Once you've found a weak area in your budget and you find a way to plug that hole, you will have a little extra money every month. The next step is to take that money and invest it in paying down a debt. Start with your lowest balance credit card first. Instead of only making minimum payments every month add the amount you saved on your budget to that credit card payment.
once you have that small card paid off, start on the nest larger one. Now you can not only apply the left over money from your budget to your monthly payment you can also add the amount you were paying on the first credit card that you just paid off. Just keep doing this over and over and before you know it you will have all your credit cards paid off.
You can use this same principle for paying off your car loans and mortgages too. This method will take time and a little bit of discipline, but it is something that anyone can do.
If you want to avoid personal bankruptcy you will have to take control of your spending. It's very easy to fall into bad habits, but you can recognize those bad habits and learn to make better choices. Good luck.
Saturday, May 5, 2012
Avoiding Bankruptcy With a Scottish Protected Trust Deed
A Scottish protected trust deed is a means in Scots law for you to pay your creditors what you owe them through a trustee. It is basically a means of avoiding bankruptcy by placing all your assets into the hands of a trustee who will realize them when necessaery and pay your creditors according to the value of the assets.
In a regular Trust deed, you agree to tranbsfer your assets to a trustee, who then communicates with your creditors and arranges your payments. These payments can be made from money you agree to pay to the trust and also by selling your assets, though essential household items cannot be sold. It is fundamentally a way to avoid bankruptcy (or sequestration). However, any creditors objecting to the trust deed can take their own steps to recover what you owe them. A Protected Trust Deed differs in that even creditors that object cannot undertake further legal steps to recover what they are owed. They are obligated to adhere to the terms of the protected trust deed.
In order for a trust deed to become 'protected' the following steps are necessary:
1. Your trustee must place a notice in the Edinburgh Gazette, 2. Inform each of your creditors in writing that you are petitioning for a Protected Trust Deed, and 3. Each creditor must be sent a copy of the notice placed in the Edinburgh Gazette.
Each creditor then has five weeks in which to object, commencing on the date of publication of your notice in the Edinburgh Gazette. The trust deed will then become protected if:
a) Fewer than one third of your creditors object, OR b) Fewer than those representing a third of your total debts object.
If either of these groups do object, then you may be able to petition for sequestration yourself, but only if you owe more than £3,000 and you have never been declared bankrupt over the past 5 years.
A protected trust deed should only be used where you have no other means of repaying your debts and do not wish to be declared bankrupt. Credit references agencies will be informed of your insolvency through your notice in the Edinburgh Gazette, and your trustee must be provided with all of your assets (everything you own). You should also pay the trustee as much of your income as you can afford after paying your essential household bills.
Obviously, the more you can afford to pay yourself, the less likely it will be that your house will be sold. You could also think of arranging a loan secured on your home and pay your debts that way. The trustee can sell your property to raise the cash needed to meet the terms of the protected trust deed, and even if your house is co-owned a sale can be forced in court with the trust receiving your part of the proceeds.
It is thefore the last chance saloon, and should be regarded as your last chance to avoid bankruptcy. Your creditors are obligated not to contact you any more, but with the trustee, even if they had objected. The trust normally runs three years after which remaining debts are written off and any remaining funds and property still in the trust are returned to you.
Thease are the main reasons why you should consider a protected trust deed apart from the fact that it will enable you to avoid bankruptcy:
• You no longer have the pressure of continual telephone calls from creditors
• All interest charges and costs are stopped when the protected trust is set up
• It cost less to set up than bankruptcy
• You will normally be able to serve as a company director
• You will normally be able to remain self-employed
• You will normally still be able to hold public office
• All remaining debt after three years will be written off
• Information about the protected trust deed is not published in the press like bankruptcy is
However, you must take no further credit during the period of the trust deed, pay the agreed monthly contribution and cooperate fully with the requirements of the trustee. If your financial situation improves in any way, such as from a legacy or even a lottery win then you must inform the trustee.
The Protected Trust Deed is entirely a Scots law arrangement and is fairly easy to form. You first have to complete a form that will determine whether or not you qualify for this method of arranging debt repayment, and if so you are put in touch with a company that specializes in trust deeds. They will then take over the process for you from the information with which you provide them.
In a regular Trust deed, you agree to tranbsfer your assets to a trustee, who then communicates with your creditors and arranges your payments. These payments can be made from money you agree to pay to the trust and also by selling your assets, though essential household items cannot be sold. It is fundamentally a way to avoid bankruptcy (or sequestration). However, any creditors objecting to the trust deed can take their own steps to recover what you owe them. A Protected Trust Deed differs in that even creditors that object cannot undertake further legal steps to recover what they are owed. They are obligated to adhere to the terms of the protected trust deed.
In order for a trust deed to become 'protected' the following steps are necessary:
1. Your trustee must place a notice in the Edinburgh Gazette, 2. Inform each of your creditors in writing that you are petitioning for a Protected Trust Deed, and 3. Each creditor must be sent a copy of the notice placed in the Edinburgh Gazette.
Each creditor then has five weeks in which to object, commencing on the date of publication of your notice in the Edinburgh Gazette. The trust deed will then become protected if:
a) Fewer than one third of your creditors object, OR b) Fewer than those representing a third of your total debts object.
If either of these groups do object, then you may be able to petition for sequestration yourself, but only if you owe more than £3,000 and you have never been declared bankrupt over the past 5 years.
A protected trust deed should only be used where you have no other means of repaying your debts and do not wish to be declared bankrupt. Credit references agencies will be informed of your insolvency through your notice in the Edinburgh Gazette, and your trustee must be provided with all of your assets (everything you own). You should also pay the trustee as much of your income as you can afford after paying your essential household bills.
Obviously, the more you can afford to pay yourself, the less likely it will be that your house will be sold. You could also think of arranging a loan secured on your home and pay your debts that way. The trustee can sell your property to raise the cash needed to meet the terms of the protected trust deed, and even if your house is co-owned a sale can be forced in court with the trust receiving your part of the proceeds.
It is thefore the last chance saloon, and should be regarded as your last chance to avoid bankruptcy. Your creditors are obligated not to contact you any more, but with the trustee, even if they had objected. The trust normally runs three years after which remaining debts are written off and any remaining funds and property still in the trust are returned to you.
Thease are the main reasons why you should consider a protected trust deed apart from the fact that it will enable you to avoid bankruptcy:
• You no longer have the pressure of continual telephone calls from creditors
• All interest charges and costs are stopped when the protected trust is set up
• It cost less to set up than bankruptcy
• You will normally be able to serve as a company director
• You will normally be able to remain self-employed
• You will normally still be able to hold public office
• All remaining debt after three years will be written off
• Information about the protected trust deed is not published in the press like bankruptcy is
However, you must take no further credit during the period of the trust deed, pay the agreed monthly contribution and cooperate fully with the requirements of the trustee. If your financial situation improves in any way, such as from a legacy or even a lottery win then you must inform the trustee.
The Protected Trust Deed is entirely a Scots law arrangement and is fairly easy to form. You first have to complete a form that will determine whether or not you qualify for this method of arranging debt repayment, and if so you are put in touch with a company that specializes in trust deeds. They will then take over the process for you from the information with which you provide them.
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