Category: Finance

Filing for bankruptcy can wreak havoc on your mind, will and emotions. Bankruptcy is stressful for all involved. It can also lead to a stressful financial future if you fail to educate yourself on what happens from day one when you file bankruptcy. What are the key points to educate yourself on when a person declares bankruptcy?

First Step To Filing Bankruptcy

Did you know that filing a personal bankruptcy means you’re filing in Bankruptcy Court? The idea of heading to bankruptcy court can feel daunting, but finding an experienced attorney is the first step in filing a personal bankruptcy. Finding a good attorney that is experienced with personal bankruptcy is critical for knowing your rights and the next steps you must take to complete your petition.

All personal debts and property must be listed when filing. This will ensure that your petition will be smooth and move quickly. Keep in mind that you should write any questions down that you might have regarding the process of your filing and how to proceed.

Counseling and Filing the Right Bankruptcy

Did you know that financial counseling is now required in many states for those who file bankruptcy? This counseling session is important and it is specific to filing bankruptcy. The purpose is to help individuals identify key challenges in their financial world that may need to be corrected for long-term financial success.

The bankruptcy counseling is generally free and provided by a non-profit organization. It’s certainly wise to obtain wise financial counsel whether or not it’s mandatory in your state or county. The attorney will usually provide a list of options for you that offer face-to-face meetings as well as online learning.

Steps 4 and 5

Once you attend your bankruptcy counseling you’ll be encouraged to complete your forms and submit them to the bankruptcy court. These forms include the listing of all of your personal debts and personal property that will be included in your filing. This is because a personal bankruptcy or Chapter 7 bankruptcy leads to a complete liquidation of your debts.

This means that you’ll start over with a clean slate once the hearing is final. This step is also important because it will share with the court whether or not you have assets of value that can be obtained by the court to fill in the gap of what you owe. Those who have no assets of significant value will be referred to as a “no asset” case.

The fifth step is to make sure that you make your attorney aware of anything you would like to keep. This is referred to as a “reaffirmation”. The only debts that an individual will usually keep include a car loan or mortgage for their home. A loan company may offer you the opportunity to refinance your vehicle for lower payments or lower interest. Paying less interest is always favorable with any loan that you hold long-term. This is because interest is the money the bank is earning rather than principal balance getting paid down.

The Final Step

Once you go to court and the filing is finalized, you’ll only need to wait for your discharge papers. This means that everything has been accounted for with the court system. This means that your debts have been cancelled and all creditors have been notified. The process of contacting your creditors takes time, but everything is completed by your attorney’s office on your behalf.

The attorney’s office will provide your creditors with all of the information they have requested. There are a few occasions when a creditor may show up to contest a debt and try to get a consumer to “stay on board” and keep paying on the debt. Once you have been released of the debts you listed, you should no longer hear from your creditors.

A discharge can bring welcome relief when the papers arrive in the mail. It is important that you take into consideration all that you have learned during this time. Don’t underestimate the wise counsel you receive during this time, and use it as a guideline for your future.

In chapter 7, bankruptcy, an individual’s assets are liquidated for payment to creditors. A few court-appointed trustees oversee the process and liquidate those assets. Those liquidation proceeds can then be divided among the Chapter 7 debtors and other unsecured creditors, such as credit card companies or medical bills. Any remaining funds remaining after all distributions have been made revert back to the Chapter 7 debtor, who would have received them in a Chapter 13 bankruptcy filing if he had filed one instead of chapter 7. Those funds would then be treated as the property of his estate, meaning they could potentially be transferred to heirs upon his death or another collateral event like divorce or remarriage.

What Happens to Your Bank Account When You File Chapter 7?

1. Creditors can freeze Bank Accounts

A Chapter 7 bankruptcy filing usually automatically places a hold on your bank accounts. A creditor or debt collector may not touch any money in your bank account until the bankruptcy case has been completed (or discharged, depending on how you want to look at it). However, there is an exception to this rule: if there is money in your account that came from another creditor (other than the creditors listed in the bankruptcy). That creditor has not been paid; its claim will be allowed to continue even if it means you lose access to those funds.

2. Creditors can get Bankruptcy Trustees to sell a car or home

If you are late in making mortgage payments on your home or car, a creditor (or potentially a debt collection company) may ask the trustee to put up your property as collateral. The bankruptcy court will appoint a trustee to handle this process. Depending on the condition of your property, the trustee and the value of your collateral might get far apart after you file and the trustee has access to it. In that case, he can call in his note and still receive his fee.

3. Creditors can make you sell your house or car

Since a Chapter 7 bankruptcy is considered a liquidation of your assets, you may not be able to keep your house if you wish to preserve it as an asset in the future. The same may happen if you are considering filing for Chapter 7 to get out of a car loan or other debt. The creditor can call in the note against the collateral, and if you have no other options, you can be forced to sell your house or car.

4. Creditors can garnish your wages

After you file for bankruptcy, all of your debts are administered by a trustee who will find a way to pay off or discharge them. In some cases, however, that might not be enough to satisfy the creditors, and they may try to garnish your wages or place a lien on your bank account to collect. These are penalties known as “trustee’s liens” or “trustee’s levies.” In some jurisdictions, these liens or levies will stay on your record for ten years.

5. Creditors can sue you for less than they are owed

The trustee assigned to your bankruptcy case assumes that all of your debts have the same value and therefore liquidates all your assets to pay them off in full. If the trustee finds that the combined weight of your purchases is less than what the creditors are owed, he will return any difference to you as a distribution. This process is known as “piercing the veil.” The claimant (bankruptcy trustee) is not required to prove that the debtor’s assets are worth less than the debts they claim. If it turns out that they are not, the creditors may end up suing you for less than they are owed.

6. Creditors can collect against your retirement benefits

If you have previously filed for bankruptcy, any debts you might have taken on shortly after that (the “fresh start” period) will be discharged and removed from your credit report. However, suppose you file for Chapter 7 after a previous bankruptcy has been terminated or disappears from your credit report. In that case, creditors may still be able to collect against your retirement benefits. Suppose a creditor or debt collector can successfully collect against your retirement benefits. In that case, all the money in those accounts will be seized and treated as income instead of an average retirement benefit. You may be forced to pay income tax on the charged amount.

7. Creditors can force you to pay a debt

Even if a creditor cannot do anything about the original debt through bankruptcy, they still have other ways of ensuring you will pay up on it. The trustee in charge of your case can ask for an “allowance” for certain debts, allowing them to continue operating normally and keep collecting payments from you until it is settled.

Final Verdict

Bankruptcy does not erase your past. Creditors are well aware of this and take advantage of this fact. If you have been struggling with debt for a while, there is no shame in seeking a bankruptcy lawyer’s advice. It is important to remember that filing for bankruptcy is not the end of the world either. Many people file for Chapter 7 and then sand again within ten years to clear away any lingering debts from the previous bankruptcy filing. These people must repay their original debt in total during their 10-year waiting period before filing again. Still, they can file without any worries about owing additional fees or penalties associated with previous filings.

If you’re considering bankruptcy as an option to eliminate your debts, you’ll want to know which debts are included in a bankruptcy filing. Unfortunately, the creditor usually has to agree to write off a debt. In addition, the person filing for bankruptcy doesn’t have to include every single debt in their bankruptcy filing. Here are some debts covered by bankruptcy.

1. Credit Card Charges

Usually, unsecured credit card debts are discharged in a bankruptcy filing. These debts are primarily high-interest loans. Those who have a charge card instead of a credit card (meaning you pay the balance in full each month) may or may not be able to discharge these debts through bankruptcy, depending on the issuing bank’s policies and state laws.

2. Personal Loans and Mortgages

The debt usually isn’t dischargeable if you have taken out a personal loan or a mortgage (a home or car loan). In some cases, depending on state law, you may be able to include personal loans in bankruptcy if the creditor writes them off. If there is a dispute about whether the creditor has written off the loan, you may want to consult with a local consumer advocate or attorney for help.

3. Collection Agency Accounts

Collection agencies have a difficult time collecting debts from people filing for bankruptcy. However, if you owe money to these companies or someone else with a lien on the debt, meaning another creditor wants repayment of the debt before the collection agency does, those debts may or may not be discharged in bankruptcy. If you owe money to an agency, ask them about their policies regarding these debts.

4. Child Support Payments

Child support is normally dischargeable in most states, but it can be hard to prove that you’ve paid these payments and shouldn’t have overpaid them under strict guidelines in some states. Child support isn’t discharged in other states until a court decides on your case.

These payments are in court and intended for the child’s physical, emotional, and educational needs. According to a recent study, more than 30 percent of debtors filing for bankruptcy are unemployed, which is expected to rise. If you don’t have the resources to pay child support, seeking legal advice may be in your best interest before filing a bankruptcy case.

5. Overdrafts and Unsecured Loans

This debt is included in your bankruptcy case. However, you’ll have to prove that the debt is due to financial hardship and you have made a substantial effort to repay the debt. A few states do not allow overdraft debts to be discharged in bankruptcy, so it is wise to check with an attorney before filing your case. Many debtors decide not to include the overdraft debt in their filings, resulting in collection expenses and fees for the account.

6. Catalogue Debt Collection

Catalog debt collection, also known as third-party debt collection (TPDC), is a charge placed on your credit cards and bank or other financial accounts. The original creditor transfers these debts to a company called “a debt buyer,” which takes in about 80 percent of the funds collected from you for these debts.

Due to financial difficulties and bankruptcy, thousands of TPDC companies have gone out of business by filing bankruptcy. You must shop around for a TPDC company and make sure they are collecting on your debts.

7. Repossession Deficiency Balances

A repossession deficiency balance is an amount a creditor demands you pay to sell your vehicle or other property. Usually, this debt is not discharged in bankruptcy. However, some creditors may take a loss in court and agree to write off this debt when you file for bankruptcy.

If this happens, the creditor must file an affidavit with the court stating that you have paid the deficiency amount. Also, be aware that if you are still making payments on a loan for an item you’ve lost and sold to someone else, those payments are still included in a bankruptcy, even if they’re past due.

8. Store Cards

Store cards are usually a form of credit offered by a retailer. They may help you get merchandise without carrying large amounts of cash, and they can help you get discounts on future purchases. However, these debts aren’t normally dischargeable in bankruptcy. These cards, and any loans used to pay for them, are considered “nonpriority” debts. They accrue interest the same as other debts, but the creditor only gets paid once your payment is 10 percent or more past due.

Although you may need to pay back debts in a bankruptcy filing, you will not have to pay them all at once. Certain debts may be discharged depending on the type of debt and your ability to repay it. When it comes to personal bankruptcy, there are many options for you to prepare for the process.

Many people in the stock market become confused by what exactly their dividends are, so they often put off investing in stocks that they think will yield high rewards. Sharp minds tend to invest in dividend-paying stocks because they’re a reliable income stream. The two main theories of dividends are the nature theory, also known as ‘the growth theory,’ and the payout theory, also known as ‘the replacement theory.

Benefits Of Nature Theory

1. It offers protection against inflation.

Inflation is a continuous rise in the overall price of goods and services, including food and fuel, salaries, rents, and taxes. This increase can be slow and steady or very rapid.
It is essential to know how much inflation there is because it may take decades for inflation to erode your purchasing power.

2. It provides a steady stream of income.

To understand the effects of inflation, you have to look back at last few years. Because wages have not kept pace with prices, many people work harder than ever without earning much more money. By choosing dividend-paying, stocks, you will put yourself in a position where you’ll be able to continue reaping the gains of dividends without risking your purchasing power.
When people worry about losing their purchasing power due to inflation, they often resort to cash investments like savings accounts and bonds. Saving money on these vehicles is not bad, but it offers only a slow income stream.

3. It provides stability to your portfolio.

It is especially true of long-term investments like Treasury bills, which are safe and stable assets that provide dividends at variable rates. As we discussed earlier, it is essential to choose stocks with no negative outlook on their prices because they may drop or lose their dividends in the future due to changes in the business environment or declines in the stock price.
In contrast to the inflationary forces pushing prices up, deflation has encouraged people to buy products and services (and supply) more than ever before.

4. It provides liquidity for retirement.

In the first few years after you start investing, you should keep up with your expenses so you don’t deplete all of your income. But once you have enough money in the bank to live comfortably and save the rest of your income, cash investments will not continue to increase in value. That is why it is essential to choose stocks ready to pay dividends while still trading at a reasonable price.

5. It provides tax deferral.

If you have a high income and a lot of capital gains, it is prudent to take advantage of the extensive exemptions from taxation that are available for dividends and long-term capital gains. These exemptions can save you many thousands of dollars in taxes each year.

Benefits Of Payout Theory

1. It is more tax efficient than the growth theory.

In both cases, your dividends will be taxed similarly to ordinary income at marginal rates, but there are more favorable rates depending on income levels. So by choosing dividend stocks that pay dividends at a low rate, you’ll get a lot of money in your pocket that might have been lost to taxes if they paid dividends at the same rate as other stocks.

2. It provides a stable revenue stream.

If you are looking for income, it’s better to choose stocks that pay dividends at an increased rate than to select stocks that will increase the value of your investment over time. If the value of your investment declines, you’ll be able to re-sell the stock and recover some of your investment. However, if the company goes bankrupt, you’ll get nothing back.

3. It allows for tax deferral.

If you have a high income and a lot of capital gains, it is prudent to take advantage of the extensive exemptions from taxation that are available for dividends and long-term capital gains. These exemptions can save you many thousands of dollars in taxes each year.

4. It offers liquidity for retirement.

In the first few years after you start investing, you should keep up with your expenses so you don’t deplete all of your income. But once you have enough money in the bank to live comfortably and save the rest of your income, cash investments will not continue to increase in value. That is why it is essential to choose stocks ready to pay dividends while still trading at a reasonable price.

5. It provides stability to your portfolio.

It is especially true of long-term investments like Treasury bills, which are safe and stable assets that provide dividends at variable rates. As we discussed earlier, it is essential to choose stocks with no negative outlook on their prices because they may drop or lose their dividends in the future due to changes in the business environment or declines in the stock price.

Many types of investments are available, but dividend-paying stocks may be some of the most attractive. There is a lot of money to be made in a world that’s always looking for income, and by learning how to invest correctly, you can ensure you’re on the right side.