Credit card bankruptcy
credit card bankruptcy
If you are thinking about filing for bankruptcy, below are a few questions you might be asking yourself as you find out more about this complicated procedure and if it’s a good idea to file for credit card bankruptcy
What is bankruptcy?
Bankruptcy is a legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of Title 11 of the United States Code (the Bankruptcy Code).
Who can start a bankruptcy? Do I need an attorney to file for credit card bankruptcy
Any person, partnership, corporation or business trust may file a bankruptcy. If the debtor ( person or entity who owes the money) files a petition to start the bankruptcy, it is a voluntary bankruptcy. If the creditors (people or entities to whom the money is owed) file a petition against a debtor to start the bankruptcy, it is an involuntary bankruptcy. If an involuntary case is filed, the debtor has a specific number of days in which to contest the petition and contend it should not be in bankruptcy.
What are the different “chapters” in bankruptcy?. Which one will I need to file for
credit card bankruptcy
Chapter 7 is the liquidation chapter of the Bankruptcy Code. Chapter 7 cases are commonly referred to as “straight bankruptcy” or “liquidation” cases, and may be filed by an individual, corporation or a partnership. Under Chapter 7, a Trustee is appointed to collect and sell all property that is not exempt and to use any proceeds to pay creditors. In the case of an individual, the debtor is allowed to claim certain property as exempt. Chapter 7 individuals may receive a discharge, which means that the debtor does not have to pay certain types of debts. Corporations and partnerships do not receive discharges. Consequently, any individuals legally liable for the partnership’s or corporation’s debts will remain liable. Therefore, individual bankruptcies may be necessary as well as the corporation or partnership bankruptcy.
Chapter 9 is only for municipalities and governmental units, such as schools, water districts and so on.
Chapter 12 offers bankruptcy relief to those who qualify as family farmers or family fishermen. There are debt limitations for Chapter 12, and a certain portion of the debtor’s income must come from the operation of a farming or fishing business. Family farmers or fishermen must propose a plan to repay their creditors over a period of time from future income and it must be approved by the Court. Plan payments are made through a Chapter 12 Trustee who also monitors the debtor’s farming or fishing operation while the case is pending.
Is Credit card bankruptcy a good idea ?
Chapter 11 is the reorganization chapter available to businesses and individuals who have substantial assets and/or income to restructure and repay their debts. Creditors vote on whether to accept or reject a plan of reorganization which must be approved by the Court. In addition to the filing fee paid to the Bankruptcy Clerk, a quarterly fee is paid to the U.S. Trustee in all Chapter 11 cases.
There is no debt limit under Chapter 11. However, only a Chapter 11 debtor that qualifies as a small business may request expedited treatment under Chapter 11. To qualify as a “small business,” the Debtor must be engaged in commercial or business activities, other than the ownership of real property, and the total of secured plus unsecured debts must be less than $200,000.00. Due to the expense and complexity of Chapter 11, the decision to file a Chapter 11 petition should be made in consultation with an attorney.
Chapter 13 is the debt repayment chapter for individuals with regular income whose debts do not exceed $1,230,650 ($307,675 in unsecured debts and $922,975 in secured debts), including individuals who operate businesses as sole proprietorships. This chapter is not available to corporations or partnerships . Chapter 13 generally permits individuals to keep their property by repaying creditors out of future income. Chapter 13 debtor proposes a repayment plan which must be approved by the Court. The amounts set forth in the plan must be paid to the Chapter 13 Trustee who distributes the funds for a small fee. Many debts that cannot be discharged can still be paid over time in a Chapter 13 Plan. After completion of payments under the plan, Chapter 13 Debtors receive a discharge of most debts.
Is it a good idea to file for credit card bankruptcy ?
Bankruptcy generally is considered the debt management option of last resort because the results are long lasting and far reaching.
The filing process may be difficult for debtors:
* Debtors must file more documents; including itemized statements of monthly net income, proof of income (pay stubs) for the last 60 days, and tax returns for the preceding year (four years for Chapter 13).
* Debtors must take a pre-filing credit counseling and post-filing education course to have debts discharged.
* Debtors face increased filing fees, plus fees for credit counseling/education.
* The bankruptcy petition and process are more complicated, so it’s very difficult to file without an attorney.
The filing process is difficult for lawyers:
* An attorney’s signature on a petition certifies that the attorney has performed a reasonable investigation into the circumstances giving rise to the petition.
* Attorneys must carefully review documents such as tax returns and pay stubs, as well as ask clients for credit reports and any information on any past cases of credit card bankruptcy
* Attorneys are more apprehensive about sanctions.
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