Bankruptcy Overview

Bankruptcy Overview

Two Most Popular Forms of BK Explained Bankruptcy is a federal court proceeding that will help eliminate or payback debt. It is a legally declared or recognized condition of insolvency. Bankruptcy can be utilized by individuals, married couples or businesses that are unable to pay their debts. Bankruptcy is for people that have absolutely no other method of paying back monies owed, and to prove this must pass a means test. Bankruptcy is the solution and legal method designed to forgive debt.   Bankruptcy Filing Requirements…   Undergoing a “means” test. Receiving debt counseling from an approved organization. Submitting a repayment plan. Attending a meeting with creditors.   There are 4 forms of bankruptcy but the two most commonly used forms are Chapter 7 and Chapter 13.   Chapter 7 Chapter 7 bankruptcy is designed to payback the creditors with what you currently have and give you a new start. This will stop the harassment of creditor’s calls and put you on the track to a new financial future. To qualify for Chapter 7 a person must make less than the median income for their area of residence. If they make more than this they can still qualify but they will have to take the means test. The means test is to assess if you are able to pay back the creditors in five years or less. Chapter 7 allows the client the ability to keep some possessions called “Exempt Items.” An exempt item is an item that is not accounted for in the bankruptcy proceedings. While exempt items vary from state to state, generally in Chapter 7 exempt items are the same regardless of the residing state. These items typically include: the primary residence, one vehicle, personal items, retirement savings in pension funds, 401Ks and IRAs. Individuals will only be allowed to keep their home and vehicle if they can afford those payments after bankruptcy.   Chapter 13 Chapter 13 is commonly for “high” income earners with “less” debt and is called the wage-earners bankruptcy. For Chapter 13, you will repay what you owe the creditors, although generally not the full amount. The repayment amount will be carefully calculated. You will be responsible for gathering documents and collecting financial information for all your bills and debts. This information will determine how much you can afford to pay to the creditors without going back into debt. The plan payments...

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Debt Settlement in 279 Words

Debt Settlement in 279 Words

The Basics of Debt Settlement Explained If you are faced with massive debt, timely bill payment is difficult and you want to stop annoying and intruding collection calls, debt settlement may be a viable option. Also known as debt negotiation, debt settlement is a process by which your outstanding debt is typically settled for 40%-60% of the amount owed. By agreeing to this settled amount, the creditor or lender is forgiving the remaining debt, thereby helping the borrower or debtor get out of debt faster.   The 4 Basic Steps in Debt Settlement…   Client stops payment to creditors, and starts contributing to trust account. Collection calls are handled by the debt settlement representatives. Negotiation of debt happens a few months after program begins. Debt is lowered by 40%-60% in an overall shorter time period.   Brief History on Debt Settlement: Lenders have been practicing debt settlement concepts for hundreds of years. Creditors are usually willing to settle because it means that they will receive some amount of money owed as opposed to nothing or very little if the client files for bankruptcy. Debt settlement became prominent in America when bank deregulation during the late 80s made lending to consumers easier. This deregulation was followed by a recession which created financial hardships for consumers. As individual consumer debts increased, banks established debt settlement departments to negotiate with defaulted cardholders.   Changes to Bankruptcy Laws: Not only have personal debt loads raised but another under reported change in 2005 has driven the demand for debt settlement. Legislation now has made it more difficult for Americans to claim Chapter 7 bankruptcy. Currently anyone filing for bankruptcy will be required to meet IRS regulations or will be forced into Chapter 13 which is a debt restructuring plan....

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