Bankruptcy

What is Bankruptcy?

A federal court process that can eliminate your legal responsibility for many debts or let you replay them over time

Common Reasons People File

Medical expensesLack of adequate insuranceOver-extended creditDivorce

Chapter 7 Bankruptcy?

“Liquidation” Bankruptcy: removes debts that are not secured by collateral or property/gets rid of most debt

The means test: compares your income to the state median

RequirementsPre-bankruptcy counseling and educationCopies of tax returnsCertification of credit counseling win in last 6 monthsEvidence of earning within the past 60 daysNet income/photo ID

What debts cannot be discharged?

Child supportAlimonyStudent loansLegal fines and penaltiesIncome tax from last 3 yearsLuxury items purchased 60 days before filingCash advances made 70 days before filing

Types of Bankruptcy

Chapters 13 (11 similar businesses)

“Reorganization”Debt payments over 3 to 5 yearsKeep property if making payments on timeSome creditors will be paid back in full with interest, others in full and the remainder will be repaid a percentage of the debt.

*Bankruptcy panel decides on debts, not person filing

*Missing a payments can result in liquidation

Consequences of Declaring Bankruptcy

Difficulty getting credit, finding a job, getting insurance and rentingRate 6.25% to 6.50 above prevailing rateAnnual fee credit cards…

Chapter 7 Bankruptcy remains on credit report for 10 years; Chapter 13 remains for 7 years

Bankruptcy Facts

Average age: 38Education Level: slightly better than the population

at largeFiling status: 44% files as a married couple