New Bankruptcy Law That You May Not Know About

Although bankruptcy is one option to deal with financial problems, it’s generally considered the option of last resort because of its long-term negative impact on your creditworthiness. And the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, designed to curb abusive consumer bankruptcy filings, affects anyone who files for bankruptcy. The law is designed to prevent debtors from abusing the bankruptcy laws – using them to clear debts that they can afford to pay.

Under provisions of the new law, you must meet a pre-approved credit counsellor in your judicial district six months prior of applying bankruptcy. Debtors have to provide evidence to make the case look like theirs are special circumstances, with a crisis beyond control, which has forced you to bankruptcy filing. Moreover, you will be required to attend money management classes at your expense before your debts are discharged.

There are two kinds of personal bankruptcy: Chapter 13 and Chapter 7.

Chapter 13 – reorganization – allows you to keep property, such as a mortgaged house or car, that you otherwise might lose. It allows you to pay off a default in a 3-5 year period rather than surrendering any property.

The court will apply living standards derived by the IRS. You cannot subtract what you actually spend for things like transportation, food, clothing, and so on; instead, you have to use the limits the IRS imposes, which may be lower than the cost of living in your area. The new law is also more stringent about the homestead exemption.

Chapter 7 - straight bankruptcy - involves liquidating all assets that are not exempt in your state. Exempt property may include work-related tools and basic household furnishings. This is frequently the option for people who have few or no assets, often little or no income, and a lot of debt.
What you will be allowed to keep will depend largely on your state laws. Some states allow you to keep all of the equity in your home, while others exempt a certain amount. In some places, individuals may keep their household goods.

While you may able to keep some assets, you also keep some debt. Certain debts, no matter what state you live in, cannot be discharged. It will be now harder to get out from under car loans, overdue taxes, student loans and credit card debt.

The new bankruptcy law restricts the ability of debtors to wipe out their debts under Chapter 7, to file repeated bankruptcy petitions and to select a more favorable jurisdiction for bankruptcy filings. Debtors also need to pass the means test, i.e. when they file, their income must be less than the median income in their state.

The silver lining in the gloom of stringent rules is that retirement and college savings gain protection. If a consumer entering bankruptcy has funds in a retirement plan or an IRA, those funds aren’t included as asset available to creditors. College savings accounts for children are exempt, and debtors are allowed to continue to fund retirement plans, if possible.

Tips Before Filing For Bankruptcy

What You Should Do Before Filing For Bankruptcy

1. Get professional help.
   There are a number of practicing bankruptcy attorneys that you can consult before you take the first step of filing bankruptcy with a US court. Some of them can be found online, so they are very reachable indeed. And don't worry about fees. The bankruptcy process provides for the lawyer fees as well. So don't attempt to file bankruptcy alone. It is always best to do it with the guidance a bankruptcy expert.
2. Know the different types of bankruptcy.
   Chapter 7 bankruptcy and chapter 13 bankruptcy are two of the most commonly used bankruptcy law. However, the two accommodates entirely different groups of people. Chapter 7 is for individuals, partnerships, or companies. Chapter 13, on the other hand, is for the self-employed and the single proprietors. And there are other types still. Determine the one that will be most beneficial to you as the debtor.
3. Prioritize your debts.
   Even if you file bankruptcy, you can't be assured of full debt payment. There could be debts and payables that won't be covered by the entire process. Payables that won't be covered would be taxes, alimonies, and child maintenance fees, where they are applicable.
4. Analyze your options.
   With your lawyer, try to explore all the available option for you and your debts. Check if filing bankruptcy with your spouse is more beneficial than filing it under your name only.
5. Evaluate your debts against your assets
   While there are properties that are exempt from liquidation, there are certainly a lot that aren't. If you file for bankruptcy, you will certainly lose some assets. It is then important that you be open with the bankruptcy court so that your assets will be handled well. Anything you do with relation to your bankruptcy case that appears devious to the bankruptcy judge will be taken against you.

Finding the Source of Your Debts

You have a debt problem. No matter what you do it seems you always seem to fall behind on bills and you never seem to make a dent in paying off your debts. The first step, as you have heard a thousand times, is realizing that you have a problem. You’ve done that. Now what?

It is important to find the source of your debt. What is it that got you into trouble in the first place? Identifying the underlying problem can help you recover from debt. Plus, simply knowing the areas of money management you need help with will go a long way towards improving your finances in the future.

First, take a look at the debts you have. Do they come from one or two major purchases such as a home or a car? Or do you debts stem from many small purchases? The root of your debt can indicate the type of behavior or need that you debt comes from. For example, one or two major purchases putting you far into debt may mean that you live beyond your means. Think about it, is that extra bathroom really that important? Are you just driving that car to impress people? No one will be impressed if you loose everything because of debt.

What if you have minor purchases that seem to get out of hand? Simple shopping tips and basic financial planning can curb your spending habits. Try making a list before you go shopping and stick to it. Don’t buy items you don’t need. Staying in control of spending habits means setting strict rules for yourself and being more selective in what you purchase.

Make a list of all of your debts. Get out your credit card statements from the last year and make every purchase into a list of “necessities” and “not necessities”. Be honest with yourself. That new shirt for the office Christmas party is not a necessity. Medical bills are a necessity. Then, take your non-necessity list and divide into categories such as food, entertainment, travel, etc. See what you are spending your money on and be aware when you go shopping. Make notes of your spending habits and cut back in the areas where you overspend.

Reduce Credit Card Debt

Credit card debt can be overwhelming. You may find that paying even the minimum payments on your credit cards has become too much. If this is the case, you may want to consider reducing your credit card debt through an online debt reduction company.

Online Debt Reducing Services

Many people often wonder if online debt reducing services really work. They do—when you choose the right debt relief company.

When searching debt relief, you will find that there are two basic debt reduction services/companies to choose from:

• Profit
• Non-Profit

Non-profit debt relief companies can provide credit counseling and may be able to negotiate lower payments with your debtors, but can do little else for you. The other type of debt relief companies can offer advice and help you get loans to consolidate your debt.

Advantages of Online Debt Reducing Services

Debt reducing services can help you significantly lower your monthly bills. If you find yourself drowning in credit card debt, there is no shame in seeking professional help. A reputable online service works with cases just like yours everyday. They can quickly and efficiently reduce your credit card debt and help you get back on track.

Online Debt Reducing Services to Avoid

Unfortunately, not all online debt reduction services are trustworthy. Certain companies are only in business to take advantage of people. When looking for a reputable debt reduction service, you will want to be especially wary of:

• Unusually low payment quotes
• Large upfront fees
• Unreasonable deposit requests

What Can a Business Debt Management Consultant Do To Help?

Depending on when you seek help a Business Debt Management Consultant can provide survival guidance.

If you get help early, a Consultant can review your business data in an effort to nail down the root causes of your financial problems. Through the years we have uncovered many causes including poor management, dishonest employees, profitless sales, poor records, poor collections, high overhead, over-staffing, under-staffing, well... you get the idea.

If you are typical and procrastinate, your Consultant can help settle or avoid lawsuits, negotiate judgements, settle debts and help with business debt consolidation. Consulting fees pay dividends.

This is why I recommend that you find help for you and your business at the first signs of trouble. Experienced consultants can correctly analyze your situation and develop a solution that can mean the difference between saving your business and business bankruptcy. I have seen too many businesses fail for lack of guidance.

Six Tips to Escape Credit Card Debt

Here are some tips to help you stay out of debt with credit cards:

1. Pay Monthly Balance - The first sign of credit card problems is failure to pay your monthly balance which can result in fees and interest charges piling up quickly. If you avoid spending more than you can afford and pay off your balance regularly, you will never find yourself in trouble in the first place.
   
2. Pay More than Minimum - Those that can't afford to pay off their entire balance should at least pay more than their monthly minimum in order to reduce the principle amount that you owe and avoid further compounding interest charges.
   
3. Find a Solution Quickly - Credit card debts that are out of control may require further intervention from credit card issuers or even debt assistance companies. If you cannot afford to pay off your credit card, simply call up your credit card issuer and request that they lower your interest rate or you will transfer your balance to another issuer that offers a better deal.
   
4. Transfer to Lower Credit Card - Some credit card issuers offer low introductory rates that can allow you to pay off your debts more easily. You can transfer your existing balances to these new credit cards.
   
5. Consolidate Your Debts - Unsecured debts can be difficult to overcome and may require debt consolidation in order to escape. There are two main forms of debt consolidation: credit counseling and debt settlement. Credit counseling will let you pay off your entire debt in a new plan negotiated between you and representatives of your credit card company. Debt settlement involves a third party working to reduce the total amount you owe and setting you up on a payment plan.
   
6. Use Home Equity - Home equity loans offer interest rates far below that of credit cards and other loans. Therefore, many people use their home equity loans to pay off their credit card balances in whole and then pay off the home equity loan at a lower interest rate.