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Bankruptcy Law

When a financial lender comes across a mention of bankruptcy on your credit file he or she will generally look no further; they simply see it as a red flag, and stamp it with denial!

If you were to make inquiries, you'll find that many people will tell you that it's practically impossible to remove a bankruptcy that has been written in your credit file. But in truth it is not that clear-cut of a matter. What you should know about disputing a bankruptcy mark on your credit file is pretty much like any other type of dispute about negative information on your personal credit report. It is important to remember that if the need ever does arise (where you will need to discuss a negative bankruptcy remark) the main issue is actually whether or not the account is really yours. By law a credit agency is required to be to produce accurate documentation to verify it is you.

If they are unable to verify the account actually is your account, then they're required by law to remove the negative bankruptcy remark from the report. Remember that the burden of proof falls on the credit agency. Disputing a negative bankruptcy mention on a credit file is possible without any need to fabricate additional information. However, don't be surprised if the credit bureau negotiates and signs a collection agency agreement as a way to assist them in their recovery process. In most cases it is unlikely a credit agency will even bother to look into your public records when responding to a claim regarding a bankruptcy notation. Why not? Because a law court will often only verify your records in person. Credit agencies and bureaus may claim that they have a foolproof system in place to verify it through alternative avenues, but that is not the case at all. Credit agencies know the legal ramifications if a disputer takes them to court seeking a financial payout for maintaining a bankruptcy on-record (and, without actually verifying the account holder) which could bring about a great deal of extra financial expense and trouble for them. History shows that very few Credit bureaus will pursue this type of course due to high legal costs. You may wish to sign and file an application to pay filing fee in instalments which can reduce the financial burden.

What property can I keep?

Bankruptcy - Chapter 7: Under chapter 7 exceptions are made for items of personal clothing, work equipment, tools of trade, retirement bank accounts, household furniture, and an automobile with limited equity.

These bankruptcy allowances are usually made under State law to ensure that debtors can file bankruptcy and maintain an acceptable standard of living. However, under federal law exemptions do exist which guarantees a debtor additional legal protection regarding assets such as a home.

But it is important you fully understand that all non-exempt taxable assets should be surrendered in the course of filing for bankruptcy. This will allow the trustee to sell the assets so that payment is made to the unsecured creditors.

Bankruptcy - Chapter 13: differs somewhat from that of a Chapter 7 because it allows you to keep ownership of any real and personal property you may own. Chapter 13 gives the debtor an opportunity to repay his or her debts over a realistic time period. Of course, the debtor must have the financial means to do so or they may again have their non-exempt taxable assets seized by the trustee. Chapter 7 bankruptcy is usually referred to as "straight forward bankruptcy" as it is simply a liquidation proceeding.

Facts about chapter 7

The debtor hands over his or her non-exempt property to the bankruptcy trustee who sells it, and then distributes the monies received to the creditors. The debtor is then discharged (of all of his or her dischargeable debts) usually within a period of 4 to 6 months. In a majority of cases the debtor generally has NO assets that he or she would lose, so Chapter 7 gives that person a chance at a brand new beginning. The prime reason for Bankruptcy is to allow an individual (who is heavily burdened with debt) a brand-new start by wiping the slate clean of their debts. Reasons for filing chapter 7 are: (1) Unemployment (2) Huge medical expenses (3) Overextended credit (4) Relationship difficulties; and (5) Out of control expenses.

Costs filing chapter 7

Generally speaking, it's $300.00 to $500.00 for you to file a Chapter 7 bankruptcy. A bankruptcy lawyer's costs can oftentimes vary depending on the circumstances or a particular type of legal case. Typically, a lawyer will charge you a fee of $1,000.00 to $2,000.00. There are a few lawyers who may offer you an initial free consultation. Legal costs and attorney fees can be kept relatively low if you are well prepared and well organized. Remember that attorney fees can be kept low if you do not ask your attorney to attend the meeting of creditors with you. However, it is best to check this first with your attorney. In some states (for example: Massachusetts) a bankruptcy lawyer is legally required to attend the (Section 341) independent meeting with your debtors or the law deems the attorney to have NOT legally represented the debtor in proper legal representation.

Facts about chapter 13

Chapter 13 bankruptcy is generally referred to as a "complete reorganization bankruptcy" which is commonly filed by a person who intends to pay off their debts over a specific period of time. This usually takes 3 to 5 five years. Chapter 13 appeals to those who have non-exempt taxable property which they would like to retain ownership. It is also available for anyone who has a set regular income which is more than adequate to pay their living expenses with a sufficient amount remaining to pay off their debts.

(1) You would like to repay your debts but need the protection of bankruptcy in order to do so. Sometimes Chapter 13 bankruptcy is a better alternative than filing for Chapter 7 (2) you have a large home mortgage or car loan and your payments are way behind. But it is your desire is to pay the missed payments and need more time so that you can to reinstate the loan agreement. Chapter 7 bankruptcy does not allow for this. In Chapter 13 bankruptcy you can only make up for the missed payments (3) You are at a crucial stage as your payments are way behind. (4) you have ownership in a farm and manage it, therefore it is your desire to pay off your debts that you are not eligible to do so under a Chapter 12 farming bankruptcy because you have incurred a large debt which is unrelated to farming (5) you own non-exempt taxable property and filing for Chapter 7 will allow you to retain certain property, called exempt. However, if you have a number of non-exempt properties (you would need to relinquish if you filed a Chapter 7) Chapter 13 bankruptcy is a much better alternative (6) you have already filed a Chapter 7 bankruptcy (within the last 8 years) and it is not possible for you to file for Chapter 7 a second time until the 8 years have expired. Almost all unsecured debt is wiped away by bankruptcy with the exception of: (1) Child support and alimony (2) Student Loans (3) Income taxation debt (4) Debts for personal injury or death caused by drunk driving.

Stop creditor harassment

By law, creditors MUST cease harassing a debtor as soon as the appropriate bankruptcy documents are filed. Furthermore, by law creditors, cannot start litigation or continue with an existing lawsuit. This includes wage restraints or garnishees as well as telephone calls where the creditor demands you to make payments. Secured creditors (i.e. a bank holding a lien on an automobile) can oftentimes get a "court stay" removed and/or lifted, in the event that you cannot (or, possibly stop) making payments. Once a person files for bankruptcy it becomes part of public records and can be viewed by anyone. But in most cases no one will be aware of you filing for bankruptcy. Nevertheless, Credit Agencies and Bureaus DO almost always record bankruptcies, and it can remains on records for anywhere up to ten years.

Bankruptcy and your spouse

If your spouse or partner is holding a supplemental credit card the law might consider them also to be responsible for the debt. However, in community property states either of the spouses can contract for a debt without the other spouses' signature. There are some exceptions to that rule like the purchase or sale of real property, but those exceptions will still require both spouse's signatures on the contract. Regarding day-to-day debts (i.e. credit cards) both partners do not have to sign. A list of community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. An experienced bankruptcy attorney will be able to guide you in this matter.

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