Ask The Money Coach

Posts Tagged ‘Bankruptcy’

Q: I have a question from a reader who wanted to know whether or not she should file for bankruptcy protection. And her situation is a little bit complicated, so let me first lay out pretty much exactly what she wrote to me saying.

She said, “Lynnette, four years ago I had really good employment, my husband had employment and I also had good credits. My husband and I decided to purchase our first home, and lost our jobs shortly thereafter. We lived on credit cards for almost a year, now we have fallen behind on our mortgage, we have fallen behind on our car payments and my credit is ruined. I have two credit card companies that have entered judgments against me and I have had liens placed on our home.”

Since this time, since four years ago or since right after she lost her job she is saying, “She has not obtained steady employment and only her husband is working.” She said, “Her husband’s income, however, has dropped severely from what he was previously making.” Then she gets to the heart of her question.

She says, “I am thinking about filing for bankruptcy protection and wondering if this is a way to make a fresh start? I have tried to speak to debt companies, but the payments are way too far out of reach for us with only one income. We also have four little children and my debts are now around $30, 000.”

A: In this particular scenario, given all the particulars that she outlined, I would think that bankruptcy is a viable option for this person. Most of you who have heard me speak about managing your personal financial affairs properly, know that I always recommend that you consider bankruptcy as a last ditch effort.

But clearly, this is a person who has been unemployed for well over three years, whose husband’s income has declined severely, who has four young children to think about, who is grappling with $30, 000 plus in debts, not to mention, having her home at risk.

Given all of these scenario or these situations, not to mention the fact that she has in fact tried to reach out to either debt consolidators or debt management companies and still found the payments to be “out of reach, ” I do think bankruptcy is a viable option worth considering.

If you are trying to save your home because you want to stay there and you think that your husband’s income alone can support it, can help you to be able to pay for the house month after month, a Chapter 13 bankruptcy filing would be the one that is most appropriate for you. That will prevent your home from being foreclosed upon and taken away from you.

A Chapter 7 bankruptcy filing, on the other hand, would wipe out your credit card debts in full. You should know that the primary difference between a Chapter 7 and a Chapter 13 bankruptcy filing are that with a Chapter 13, which is also known as a “Wage Earner’s Plan,” you do have to repay some of your debts over a period of either three years up until five years.

With a Chapter seven bankruptcy filing, again you don’t get the same kind of protections to keep your home, but you will get rid of that $30, 000 in credit card debt. And if you pass an income test and a means test, meaning that you don’t have at least $100 a month that you can devote towards your payments and that your income is not far in excess of what the median income is in your region, then the courts would allow you to have your credit card debt wiped out in bankruptcy court.

But again, given all the scenario, the entire scenario that you disclosed, particularly the lack of a job, the decrease in income, the liens on your home and all those bills being well past due, I would say, yes, in your case bankruptcy is a viable option worth considering.

Related Questions:

• does bankruptcy give you a fresh start
• get rid of cc debt 30 000
• can declaring bankrupcy give me a tax credit
• will bankruptcy give me a fresh start?
• will bankruptcy give me a fresh start
• will a bankruptcy give me a fesh start
• we lost our jobs should we file for bankruptcy
• i have a 30 000 00 credit card debt
• Does bankruptcy really give u a fresh start
• does bankruptcy give u a fresh start
• can filing bankruptcy give you a fresh start
• will filing bankruptcy let me start over

Here is an article that appeared in the Atlanta Journal Constitution about the increasing number of homeowners that are facing foreclosure who have decided to file for bankruptcy. Filing bankruptcy in Georgia and in many states will effectively delay foreclosure and allow the homeowner time to review their options.  Georgia has one of the speediest foreclosure processes in the country. Often, a homeowner will learn that his/her house is up for sale just weeks before the auction is set to proceed.

“Bankruptcy courts have become the forum of choice to stop foreclosures, not only in Georgia but throughout the country, because the injunction to stop foreclosures in bankruptcy court is automatic,” said Howard Rothbloom, an Atlanta bankruptcy attorney told the AJC.  Read the full article.

Related Questions:

• filing bankruptcy in georgia 2011
• filing chapter 13 to stop foreclosure
• can chapter 13 stop foreclosure
• does chapter 13 stop foreclosure
• how to stop foreclosure in georgia
• chapter 13 stop foreclosure
• chapter 13 to stop foreclosure
• how to delay foreclosure in georgia
• bankruptcy and foreclosure in georgia
• can bankruptcy stop foreclosure in georgia
• stopping foreclosure in georgia
• georgia bankruptcy and time shares

Canada’s bankruptcy watchdog added his voice Friday to warnings that Canadians should watch their personal debt loads.

James Callon, the superintendent of bankruptcy, said it’s important for Canadians to be aware of the risks and possible consequences of taking on a large amount of debt.

“Significant events, such as a change in employment or income, a change in family status or a serious illness, can cause a huge drain on finances,” he said in a commentary on the agency’s website.  Read the rest of this article here.

Related articles

• Swelling bankruptcy ‘a concern’ (bbc.co.uk)
• Elderly Americans Increasingly Declaring Bankruptcy in Retirement (askthemoneycoach.com)
• Elizabeth Warren: The watchdog consumers will thank (askamoneyexpert.com)
• 5 Tips if You’re Facing Court Action from a Debt Collector (askamoneyexpert.com)

Elderly Americans struggling under the weight of credit card debt and medical bills are increasingly resorting to bankruptcy in retirement.

A slew of recent data highlights the problem:

• A 2010 study from the University of Michigan Law School, called The Rise in Elder Bankruptcy Filings, found that those 65 and older are the fastest-growing segment of the U.S. population seeking bankruptcy protection
• The Washington D.C.-based public policy group Demos reports that Americans 65 and above who carry a balance on their credit cards owe an average of $10,235 — up 26% from 2005.
• Older debtors who filed for bankruptcy owed a median $22,562 to credit card companies, the Michigan study showed

“The findings are both striking and ominous,” says John Pottow, author of the University of Michigan study. “While multiple factors, such as health problems and medical debts, contribute to elders’ financial distress, the dominant force appears to be overwhelming burdens related to credit cards.”

Read the rest of this article on WalletPop

Related articles

• The Road Out of Debt (askthemoneycoach.com)
• One more time: The best paths to help you wipe out credit card debt (askamoneyexpert.com)

In the wake of bankruptcy reform legislation passed in 2005, to qualify for a Chapter 7 filing, you must now show that you can’t repay your creditors, and you must pass an “income test” and a “means test.”

The rules governing each are complicated. But in its simplest form, the “income test” compares your income to the median income in your state, based on the number of people in your household. If your income exceeds your state median income, the bankruptcy trustee or any creditor can bring a motion to dismiss your bankruptcy filing on the grounds that is an “abuse” of the bankruptcy system.

The “means test” in a Chapter 7 filing examines whether or not you can afford to pay at least $100 a month to your creditors over the course of five years (a total of $6,000).

If you are deemed capable of repaying this amount, you will be shifted from Chapter 7 into Chapter 13 bankruptcy for a five-year repayment plan.

Related Questions:

• chapter 7 means test student loans
• how can i lower my income for the means test
• chapter 7 means test explained
• where to put student loans on chapter 7 means test
• where do you put student loans on the means test chapter 13
• where do you put student loans in the chapter 7 means test?
• where do you put student loans in chapter 7
• tax credit on bankruptcy mean test
• student loans means testing rules
• student loans income means test
• student loans chapter 7 means test
• student loans and means test