In a Chapter 7 bankruptcy you are able to eliminate the majority of your debts. However, you have to liquidate (Sell) a certain amount of personal property to pay off your creditors. With that property that you sell your creditors will then be compensated. However, the compensation that the creditors receive is likely minimal. At first glance, it seems scary that, when filling for a Chapter 7, you may have to sell all your personal assets to satisfy your debts. You should not worry though because filing a Chapter 7, as a consumer, will not leave you destitute as federal bankruptcy laws allow you to keep certain items. These items you keep are known as bankruptcy exemptions. These bankruptcy exemptions vary from state to state. For example, when filing a Las Vegas bankruptcy you are allowed to keep your car, (Up to a $15,000 value), a single fire-arm, your home and a certain amount of clothes and furniture. Also, in Nevada, the bankruptcy exemptions allow a consumer to keep a personal and/or professional library. Please note, that you can only keep your house if you are up-to-date on your payments.

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Obviously, the drawbacks of losing a home to foreclosure are much greater and more numerous than any benefits. However, homeowners may experience some positive aspects of facing foreclosure. A financial crisis which leads to the possible loss of one’s property provides a number of opportunities for the foreclosure victims to learn important lessons about their current financial conditions and the future of their families’ lives. Attempting to survive a foreclosure situation without being aware of these more positive aspects is overlooking the real lessons to be learned, even when homeowners are unable to find a way to stop foreclosure and keep their homes. First of all, homeowners in foreclosure can begin saving money, whether they are able to get their mortgage back on track or not. They will, of course, not be making the mortgage payments any longer. In the midst of a financial hardship, it is questionable how much of the homeowners’ monthly income is freed up by not sending in the mortgage payment, but usually this payment can take up to 55% of their income before taxes. If homeowners need that money to begin recovering from the crisis, and there is no possible way to pay the mortgage on time, then it is better to start saving as much of their income as possible and recover from the financial hardship. Borrowing more money from credit card or payday loans to make the payment will only increase the burden later on.

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At the point where you already know you are behind on your payments and can’t catch up, you know you are headed for foreclosure. The bottom line is that the bank lent you the money and will use your house as a means to get all or part of the money they lent you back. While foreclosures are expensive and it is no secret that the bank wants to avoid it if possible via a loan modification, payment plan, refinance, etc., they will come after the house if forced to do so. Since there are so many foreclosures these days and banks are struggling to keep up, the foreclosure process isn’t as fast as it has been in years past. It can take several months of no payments before you get notice of their intentions to foreclose. Nonetheless, if they do decide to take action, the homeowner will get a notice of default, and/or complaint, and/or notice of sale. The reason you see a couple different types of notices listed here is because every state has different statutes and therefore follows different procedures when foreclosing on a property. When you get notice of their intentions to foreclosure then read that paperwork. Inside you will find their demands, maybe a court date, and/or a date they will auction your house. In some states, there is a time frame between notices. If you don’t pay the demanded sum in the notice of default, then no sooner than 90 days later you will get a notice of sale that has the date they will auction your house off to the highest bidder. In the state of Nevada, they cannot issue a notice of sale any sooner than 90 days. Each notice you receive will give you a general guideline, but please note that some states aren’t required to give you notice. Some will advertise your defaulted house in the local newspaper for 4 consecutive weeks under the legal section in the classifieds. That newspaper ad is all the notice that some homeowners may get before the auction. Again, what happens during foreclosure largely depends on the foreclosure process within your state. There are free public resources available in your state so that homeowners can become clearer on foreclosure proceedings so they know what they are up against.

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The most common types of bankruptcy filed are chapter 7 and chapter 13. While chapter 11 is not as common, it is worth considering if the debtor is a business entity that wishes to continue business. Chapter 7 cases are available to individuals, corporations, and partnerships. Essentially, almost anyone can file under chapter 7 except for railroad companies, banks, and certain companies. Chapter 13 cases are only available to individuals with a regular income. Chapter 11 cases are available to individuals and companies. A chapter 7 debtor will not usually have to appear in court unless there is an objection. A chapter 13 debtor may appear before court when there is a plan confirmation hearing. In a chapter 7 case, a debtor is given a court-supervised way of selling your assets to pay your creditors. To be eligible for a chapter 7, the debtor’s income must be below the state minimum income level. A trustee is appointed to look after your “estate,” which contains all of your existing assets and prepetition debt. Prepetition debt is debt that exists at the time that a debtor files a petition for bankruptcy. Under certain sections of the Bankruptcy Code, there is property that is protected from being sold. Individuals can keep exempt property and all non-exempt property is liquidated with the proceeds distributed to creditors. This chapter of bankruptcy results in a discharge, giving the debtor a fresh start. A successful discharge eliminates all of the debtor’s unsecured debt. Unsecured debt includes credit card debt, personal loans, and utility and medical bills. Educational loans are not included unless the debtor can prove an undue hardship. Most cases, the debtor has no assets. Corporations and partnerships are not given a fresh start like individuals because of the ability to dissolve. This is why it is especially important for individuals to seek legal advice. In a chapter 13 case, a debtor must be an individual with a regular income, who wishes to keep his or her non-exempt property. To be eligible under chapter 13, the debtor must have unsecured and limited debt, secured debt limited to $1,784,000, and some form of regular income, such as a pension, trust fund, wages, or family member support. Chapter 13 is only available to individuals who has enough income to pay the creditors over a three or five-year period. Here, the Code provides a court-supervised method for individuals to set up a payment plan with creditors over a three or five-year period. The payment plan includes prepetition debt only, which is existing debt at the time of the bankruptcy filing. The payment plan period is determined by the debtor’s monthly income. The debtor has the ability to retain his or her property while paying creditors with future earnings. To do so, identification of the property estate is necessary and the court cannot confirm the plan until the court knows the extent of the property of the estate. Creditors must confirm the payment plan and the court must approve the plan. If the payment plan cannot be confirmed, the case will be subject to chapter 7 liquidation. Additionally, in order to reach confirmation, the plan cannot pay less than what creditors would have received under chapter 7. In a chapter 11 case, the debtor can be an individual, business, or other entity. Chapter 11 provides the debtor a way to continue business and retain business property necessary to continue business by restructuring or reorganize the debtor’s debts. The payment plan includes preconfirmation debt only, which is existing debt at the time of the bankruptcy filing. To be successful, the debtor must be able to file a reorganization plan, obtain acceptance by creditors, and the court’s approval of the plan. If a reorganization plan cannot be agreed upon within 18 months or one and a half years, the debtor will proceed to chapter 7 liquidation. Debtor keeps its assets necessary to continue business and the debtor does not give up any property. In order to reach confirmation, the plan cannot pay less than what creditors would’ve received under chapter.

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When the owner of a property cannot make his mortgage payments, is in arrears on property taxes or cannot pay another loan that uses as collateral his home or other property, a foreclosure proceeding can be undertaken by the lender or lien holder in order to recoup the dues owed. If this process goes through from start to finish without a remedy being offered to the lender by the property owner, the result is most often seizure and sale of the property in question. As the foreclosure process is played out, the homeowner will have the opportunity to try to remedy the situation. The process is not horribly complicated but it is quite stressful when one’s home lies in the balance.After missing as few as three payments on either a mortgage or other qualifying debt, a property owner will receive an official document called a Notice of Default. At this point the owner has been made formally aware of the fact that the lender intends to exercise its right to seize the property if steps are not taken to make an acceptable arrangement to avoid the sale of the property. Generally, up until the last few days prior to the sale of the property, a lender will happily accept a payment in full of arrears and will stop the proceedings. After some time passes the lender will move to sell the property. A notice of Sale will be filed in the appropriate jurisdiction. The owner will receive a copy, and one will be posted to the property. Also, a Notice of Sale listing the details of the property auction date and time or the particulars for someone to step forward and buy the property will be placed in local newspapers. There is generally still some chance to save the property for the homeowner if the loan is made current, the payments caught up and all fees incurred by the lender are paid by the property owner. In some cases the lender may evict or ask a property owner to vacate, seizing the property and selling it at a future date.

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It is important to understand what the pros and cons are before following through with a bankruptcy filing. There are four positive aspects to this process.You get a clean slate. Depending on the type of filing, your existing unsecured debts are forgiven and payment schedules for secured debts like mortgage are created to facilitate making the payments. It stops the harassment. Creditors and collection agencies love to call day and night demanding their money and this can leave you feeling overwhelmed. Once your filing is in place, they can no longer harass you. All communications will go through the court or your attorney. Save your home from foreclosure. Because a plan is devised to make payments that the bank, the court and you agree to, you don’t have to lose your home, car and other items that are essential to daily living. No more credit cards. All of your credit accounts are closed so the temptation is eliminated. Now you have the opportunity to new learn a new way of life that will benefit you once you are allowed to apply for credit again. You learn to budget and save for big purchases instead of charging it.There are also four negative aspects to this process.Your credit is shot. For 10 years, your bankruptcy will be a red flag on your credit report. It can prevent you from getting a job, buying or renting a home, buying a car, getting insurance and definitely no lines of credit. You lose all of your credit cards. It will take many, many years to rebuild trust with creditors before you will ever get another card. This is not necessarily a bad thing, but in a society that deals with plastic, it can hinder certain purchases. Along with credit cards, you may have other non-essential items repossessed and sold by the court to cover some of your debt. It becomes public knowledge. There is a stigma attached to the word bankruptcy and if you file, a public notice must be placed in the local media for all to see. No matter how you got in this position, people will make their own assumptions. Not all debts are discharged. Your student loans and back taxes are not discharged. If you want to keep your home, you devise a payment plan to keep it.

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Homeowners facing foreclosure have approximately four months in order to resolve their outstanding mortgage debt. When a homeowner finds themselves in this situation, the most proactive step a homeowner can do is to act in a timely manner to get a realistic look at what their options may be. There are many choices that a homeowner can choose from in order to best reduce the overall loss during the stressful financial situation they may find themselves in; however, denial shouldn’t be one of them. In the slew of options that are available, there is a little known transaction known as a short sale, which to some homeowners in foreclosure may seem like a dream come true. Short sales occur when a lender allows a homeowner in default to sell a house for less than the total value of the loan. In many cases, the lender then forgives the remaining portion of the debt. But before a homeowner who finds himself in foreclosure gets too excited about what seems like welcome debt relief. So what’s the catch, lenders may claim whatever debt they’ve forgiven as a loss on their taxes and issue a 1099 form to the homeowner; in this case the seller, for the total amount. In other words, the forgiven debt is taxed as earned income and depending on the loss and the homeowner’s tax bracket it could mean a significant increase in their taxes. A homeowner should definitely check with his accountant for this information. On the other hand, if a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or a collection for the remaining balance often referred to as a deficiency judgment.

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If you are considering bankruptcy it is important that you understand everything that it entails before you make the very big decision to file or not file. It is our goal to provide you with some information to better help you make an educated decision so that you can be sure to make the right decision for your situation. First recognize that this is a very big decision. Sometimes with the pressures and stress of financial hardship one can come quick and poor decisions. Try to take a step back and really see if this is what is going to be best for you. If you honestly think that there is no other option then it is time to meet with a bankruptcy attorney. Finding the right attorney and representation for you and your case is critical. When heading down this path you will want to make sure you have someone that is going to explain everything in complete detail to you. Giving you all the correct information and expectations. It is important that you follow your instincts on choosing the correct person for you or you might end up choosing someone that is not the best fit for you.

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When housing prices in many parts of the country were booming a couple of years ago, there wasn’t much national attention given to short sales. But with the current subprime debacle and increasing mortgage delinquencies, many people are wondering if the short sale process is a way to avoid foreclosure.
Basically, the definition of the short sale process is when the lender of a property allows the property to be sold for less than the amount due on the mortgage loan.The obvious benefit to the short sale process is that it allows the seller to avoid the credit report damage associated with a foreclosure. A foreclosure can stay on your credit report for up to 10 years and can take an emotional and financial toll on you and your family.But the pitfalls of the short sale process should be considered as well. The I.R.S. may consider any debt forgiveness as taxable income, thus resulting in a tax liability. In addition, lenders can often pursue a borrower for the deficiency balance. In some cases you may be able to avoid taxation if you can prove you are insolvent. But if insolvency is unsuccessful, and you are faced with a tax liability resulting from the deficiency amount, it may make more financial sense for you to let the lender foreclose.

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Credit card debt bankruptcy is not a simple problem. Card holders need to adopt a step wise approach to get rid of this problem. The first step is to stop the usage of plastic money. Some people fail to understand this point and they continue using their cards. This is not the right approach. If you continue using plastic money for your purchases, the threat of credit card debt bankruptcy will increase. There is a simple reason behind this. The total payment which is made to the bank consists of the principal amount and interest charges. How does the interest amount vary with the usage of plastic money.Interest charges increase with the usage of credit cards You are paying interest on every single dollar. Thus, the more you spend, the more interest will be paid. Look at your credit card statement and analyze the interest charges. If you stop using your card, the interest amount will automatically reach zero. If you are using cash, you will not have to worry about paying interest. Counselors follow a particular strategy to educate the loan takers. The most important point required to prevent credit card debt bankruptcy is to prevent the usage of plastic cards. Are you ignoring the amount of interest which you are paying every month. Do not focus on the principal amount only. Interest charges make a lot of difference. Even if you get fifty percent discount, you will be paying a much smaller amount. If truly know about the losses of bankruptcy, you will never consider it a way to get rid of unsecured liabilities. Those who declare themselves bankrupt to get rid of credit card complications do not consider the financial future. An important aspect of the financial future is the credit score.

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