Wednesday 27 March 2013

5 Major Differences Between Chapter 7 and Chapter 13 Bankruptcy

Title 11 of the United States Code lays down provision for individuals to file for bankruptcy.

Two of the most used chapters of the Bankruptcy Code are Chapters 7 and 13. Chapter 7 is all about liquidation of properties and assets in cases when the debtor has no steady income so as to meet the credit amount. Chapter 13, on the other hand, lays down the guideline for adjustment of debts by using a debtor’s regular income.

5 Major Differences Between Chapter 7 and Chapter 13 Bankruptcy
  • Liquidation vs. Adjustment of Debt: When a debtor files for bankruptcy under Chapter 7, all his debts are paid off in one go. To make the adjustments most of his assets are liquidated. However, only his non-exempt assets can be liquidated. Not all assets are sold off to pay the creditors and debtors get to keep some of their properties or their personal belongings such as clothes with themselves. In Chapter 13 bankruptcy, the debt is repaid over a period of time of 3-5 years. The debt is adjustment by using the monthly income of the debtor.
  • Short-term vs. Long-term: All Chapter 7 bankruptcy dealings can be completed in a short span of time. Since the debtor’s assets are liquidated, the debtors get their payments in one go. On the other hand, filing under Chapter 13 means that the debtors and creditors have to go through a long-term procedure. While Chapter 7 lasts only a few months, Chapter 13 allows repayment over a period of 3-5 years.
  • Exemptions Rules: In Chapter 7, most states allow exemptions for the debtors. There are certain assets that debtors can select and not liquidate. These include equity of the debtor’s house known as homestead exemption, insurance (where the debtor is allowed to keep the cash value of the policies), retirement plans and some other personal belongings. For Chapter 13, while debtors have to pay some debts in full such as back taxes, alimony and child support, they are also allowed various exemptions under state laws. To understand Chapter 13 exemption rules, state rule books have to be studied.
  • Additional Protection for Debtors Filing Under Chapter 13: Debtors using Chapter 13 for bankruptcy get a benefit that is not available under Chapter 7. Under Chapter 13, there is an additional protection to homeowners. If a debtor has more than one mortgage, the debtor can use the second mortgage as an unsecured debt and can have it stripped from the property. This can only happen when the first mortgage is declared unsecured.
  • Means Test Differences: A Chapter 7 means test is done mainly to see whether a debtor is eligible to pay under Chapter 13 or not. Under Chapter 7, comparison is made of the individual’s household income and median annual income. On the other hand, a Chapter 13 means test is done to mainly understand whether the debt period should be 60 months long or 36 months long.
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Tuesday 19 March 2013

How To Go About Handling Chapter 7 Bankruptcy Cases In California?

Chapter 7 bankruptcy is a procedure that allows you to eliminate your unsecured debts and make a fresh beginning. This bankruptcy procedure is so named as under the United States Code (Bankruptcy Code) Chapter 7 of the Title 11 lists down the procedure of filing for liquidation. The Chapter 7 bankruptcy is also called straight or liquidation bankruptcy.

If you are a person with zero assets, the Chapter 7 bankruptcy is for you as you get to do away with unsecured debts such as credit cards, most of the personal loans, medical bills etc. Another advantage of filing for Chapter 7 bankruptcy is that you are normally allowed to retain your property, your car and most of your personal belongings.

Who is Eligible to File For Chapter 7 Bankruptcy?

All individuals can file for Chapter 7 bankruptcy. However, to be eligible for this section, you will have to pass the Means Test, a clause added to the bankruptcy code in 2005. The means test checks your income and expenses and accordingly allows you to file under this chapter. However, if you already have a bankruptcy discharge under your name in the last six to eight years, you are not allowed to file under Chapter 7. Moreover if after checking your income, expenses and debt burden it is found that you fulfill the criteria for Chapter 13, you cannot use Chapter 7.

How to Handle Chapter 7 Bankruptcy Cases in California

Once you are allowed to file for Chapter 7 bankruptcy, you will have to file for a petition in the bankruptcy courts of California and fill out a number of forms. These forms will ask you several things such as-details of the property you own, your current income and expenses, the details about the debts etc.

Since there are several things to be filed it is best you hire a bankruptcy attorney based in California. The lawyer will be able to guide you through the legal procedure from the first step to the end. While the whole procedure can take about four to six months, it will cost you approximately $299. Moreover you will need to visit the court just once.

Once you apply for exemption under Chapter 7 bankruptcy, you are literally handing over all your property and assets to the courts. While your case is in the court, you cannot sell or give away your property or pay-off your other debt without getting the court's approval.

The court appoints a bankruptcy trustee whose job is to look over your case. The trustee checks that your creditors are paid at the best of your ability. The more the trustee recovers from the creditors on your behalf, the more the trustee is to be paid. There are certain debts that are exempted under Chapter 7 bankruptcy in California. Debts on child support, tax, students' loan are automatically exempted unless the court directs otherwise.

Chapter 7 should be ideally used if you want to get rid of your unsecured debts and want to retain your property and other assets.

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Thursday 14 March 2013

What are the Procedures for Hiring a Bankruptcy Lawyer in San Jose?

Under the U.S.A law, any person can file for bankruptcy. While the term 'bankruptcy' is filled with negative connotation, in reality it is not just a bad thing. You can look at bankruptcy as a means of doing way with your accumulating debts and starting with life afresh. However, bankruptcy is a complex procedure having several 'Chapters' to consider. You need to understand the nuances of each chapter and according file for bankruptcy. Since it isn't an easy job, it is always advisable to hire a bankruptcy lawyer if you are based in San Jose.

Tips While Hiring A Bankruptcy Lawyer in San Jose
  • Look For Experience: Bankruptcy is a specialized subject and should be handled by experts. It is complex and one has to consider several things before filing for bankruptcy. If you have a family lawyer who doesn't specialize in bankruptcy, it is advisable that you do not go to him. However, if he holds experience in dealing with bankruptcy successfully he is the man you are looking for.

  • Experience Speaks Volumes: Filing bankruptcy doesn't mean your problems have ended. Unless the court gives a favorable verdict and directs creditors to waive off your debts, you do not see success. To see success, you need an experienced person with you. Always look for lawyers who have a minimum experience of 8-10 years behind them.

  • Check For Lawyer's Credentials: In most cases you would be filing for bankruptcy for the first time and wouldn't know lawyers specializing in bankruptcy. If this is the case and you also do not know anyone who can refer a bankruptcy lawyer, check with the San Jose bar association and find out the list of practicing bankruptcy lawyers. Once you have the list, you can also cross-check it with the local bankruptcy court (which also keeps a list of practicing lawyers).

  • Charges Reasonably: Since you are already in a financial mess, you should look for lawyers who do not charge unreasonably. The amount of fees lawyers charge will however depend on a case-to-case basis. If you are filing for Chapter 7 bankruptcy, the attorney fees would be high. Chapter 7 is complex and thus more the charge. On the other hand, most states have directives limiting the amount lawyers can charge you. Be wary of attorneys you are quoting very less as their charges. This can be an indication that he isn't very good.

  • Availability: If you have zeroed down on a bankruptcy lawyer who is extremely popular, be careful. The reason is simple - since he is popular, he would have lots of clients. And when he has many clients he may not be able to give you enough time. This can be risky as you would be left in a lurch only trying to fix appointments with your attorney. When you are selecting a lawyer, ask him straightforward how much time he can devote to your problem. Accordingly choose the lawyer.

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Sunday 10 March 2013

What to Choose? Chapter 7 or Chapter 13 Bankruptcy

Bankruptcy is a process in which individuals and businesses try to eliminate their debt or have some protection while repaying the creditors. When it comes to filing for bankruptcy in the United States, most individual debtors get confused in choosing between Chapter 7 and Chapter 13 of bankruptcy. Both these chapters have their own pros and cons and it can be quite a task to choose the right Chapter. Here, we shall analyze the pros and cons of these chapters, which shall help you make the right choice.

Chapter 7 is ideal for you when you have little property except for the basic necessities like, furniture and clothing or you have little money after paying your basic monthly expanses. Under this chapter, a court appointed trustee oversees the liquidation of all your assets and repays to your creditors charging you a small commission for overseeing the bankruptcy process. The biggest advantage of this Chapter is that all your debts can be discharged and the entire process takes only a few months.

Here, once you file for bankruptcy, the courts automatically grant you a stay which protects you from creditors, their phone calls and collection agents. Most individual debtors prefer to file for bankruptcy under this Chapter. You can also get certain assets, such as your home and vehicle are exempted from the liquidation process. To qualify for this chapter, you shall have to pass the 'means test' and complete a required pre-filing session with a credit counselor. However, this chapter doesn't apply to debts such as alimony, child support, fraudulent debts, and student loans.

For individuals, who have significant equity at home or other property and want to keep it, Chapter 13 is the way to go while filing for bankruptcy. If you have a regular income and have failed to pay your creditors on time and need to make a fresh start, this is the Chapter for you. It is often known as 'debt adjustment' chapter at it allows you to keep possession of your assets and work out on a new plan to pay back to the creditors. To qualify for this chapter, your unsecured debt should be below $360,475 and secured debts should be below$1,081,400.

This chapter can stop foreclosure of homes and repossession of things like cars purchased with loans, which makes it ideal for people who have regular flow of income. One of the major downsides of this debt adjustment program is the fact that it can last for 3 to 5 years.

You need to keep one thing in mind that all bankruptcy cases are unique and need to be approached in a methodical manner. Thus, it is advisable that you get in touch with a bankruptcy attorney who has experience in this field, as not only will the attorney guide you in choosing the right chapter in filing for bankruptcy but will ensure that the repayment process is favorable to your condition.

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Wednesday 6 March 2013

Effects of Chapter 13 Bankruptcy on Foreclosure

Every year in the US, a lot of people lose their precious homes due to foreclosures and the cases are constantly on the rise. There are a number of reasons for the bankruptcy and foreclosures but the people who have to actually deal with the process are the only ones who can describe what it is like to leave their dear property. To understand the process of a foreclosure, it is important to first know what a foreclosure is and why does it happen.

What is foreclosure process and why does it happen?

A legal process in which an action is taken by the state authorities against an individual or a group when there is failure in making the specified payment on time on their mortgage and the lender has the right to take over the property to meet their payments regardless of the reason of the failure. The details of the process of foreclosure are specified in the Chapter 13 of Bankruptcy and the proceedings and notices, and the amount of time depends on the nature of the case. Foreclosure cases usually take 5 to 6 months for the finalization of the case. The action of foreclosure is a detailed one comprising of a number of orders, notices and hearings.

What is the Process of foreclosure in Florida?

This problem arises when the borrower isn't able to pay on time and it can be anything from the mortgage payment, insurance dues on the property or failure in paying property taxes. Short collection sales are followed by negotiations between the lender and the borrower and if the problem continues, the Notice of Default is issued which states all the details of the due payment with the late payment charges and other fines. After the Notice of Default has been sent to the borrower, the mortgage lender files the Lis Pendes or the paperwork in the court which specifies that the lender is going to sue the borrower at the failure of payments and the borrower is notified about the lawsuit terms.

Next comes the Notice of Action which is printed in the newspaper, which states that the mortgage holder has failed to pay the dues and is required to complete the payments on the date given on the current notice. This works as an official signal and begins the foreclosure action. It consists of the lawsuit aiming at evicting the borrower from the mortgaged property by posting the date and time of the auction that will be conducted to gain back the payment that were not completed.

After the lawsuit, and during the time of 3-4 weeks to auction the owner has an option to pay all the dues to the lender and can gain back the full ownership of the mortgaged property and all the auction proceedings will be halted. If the borrower still fails to pay the dues, the foreclosure reaches its last step, the Sheriff's sale where the final auction of the property takes place at the county courthouse and the highest bidder wins the property. At this point, the borrower loses all right to the property and the documents of the property are transferred in the name of the new owner's name. This completes the foreclosure process and the files, and formalities are completed.

How to avoid foreclosure?

Though it is almost unavoidable after the property has been taken over, the borrower can do a few things which would help him/ her in dealing with the banks and lawsuits. A good lawyer can be a very useful tool in dealing with the case of foreclosure and can also help the borrower in communicating with the mortgage lender. These are the specifications of the foreclosure under the chapter 13 and must be understood well to avoid bankruptcy and loss of property.

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Tuesday 5 March 2013

What Is The Basic Information For Use Of Wage Garnishment In California?

When debtors fail to repay their dues, creditors resort to the last option available and that is, wage garnishment. According to the California federal laws, creditors can garnish or take payments directly from the debtor's wages for getting back their dues. Wage garnishment is used as the last resort when the creditor fails to get their money back from the debtor directly. Wage garnishment applies to debtors who are not self-employed but have a steady monthly income from an employer. In California, there are a few basic things, one needs to remember while using wage garnishment. The federal law of the state has put some restrictions on wage garnishment and the percentage amount, a creditor can withdraw directly from the debtor's wage.

What Does Wage Garnishment Mean?

A wage garnishment can be initiated when a debtor fails to repay a creditor even after court orders to do the same. In wage garnishment, the creditor contacts the debtor's employer and asks them to with-hold some amount from the paycheck as a percentage of the impending amount to be paid by the debtor. However, the creditor cannot do so without court's permission.

How Does A Creditor Use Wage Garnishment in California?

Though, it may seem by the above explanation that any creditor can go for wage garnishment, this is not the case. For wage garnishment to be executed, a creditor has to obtain a document from a California court known as the Writ of Execution. This is a certificate that states the amount owed by the debtor to the creditor and allows the creditor to send a levying officer to the debtor's employer, informing him about the issuance of the wage garnishment. In California, the Sheriff is the levying officer.

To finally use wage garnishment, the creditor also needs to get an Earnings Withholding Orders (EWO) from the court, using which the creditor can direct the debtor's employer to with-hold a percentage of the wage.

Amount That Can Be Withheld For Wage Garnishment in California

When a creditor issues for a wage garnishment, he has to keep in mind that a percentage of the wage has to be kept for the debtor to enable him to meet his daily expenses. As such, the California law puts a limit on the amount that can be garnished from the employer. For any work week, a creditor can garnish the lesser of 25% of the disposable earnings or any amount that exceeds the debtor's earning by 30 times the federal hourly minimum wage.

Under the Title III of Consumer Protection Act, even with a lot of debt on his head, a creditor can only ask for a small percentage from the weekly wage of a debtor. All taxes such as federal, state and local taxes, unemployment insurance, social security payments, state employee retirement system and unemployment insurance are however protected against garnishment.

When Creditors Use Wage Garnishment Without Court Orders

Though, it is compulsory for a creditor to get court orders to use wage garnishment, there are certain exceptions when he can directly ask an employer to withhold percentage of the wage for debt repayment. These exceptions include:

  • For clearing unpaid income taxes,

  • To fulfill court ordered child support,

  • Child support arrears, if any,

  • Any impending students' loan.

Threat of Employment Termination

A debtor is also protected from the threat of termination of employment, in case the employee gets a wage garnishment notification. An employer cannot discharge a debtor's duty if he has one impending wage garnishment on him. However, the state doesn't protect the debtor if he has more than one wage garnishment on him.

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Sunday 3 March 2013

How Bankruptcy lawyer Works in Tax Relief Cases

A situation of bankruptcy is a condition where a person fails to pay his or her own dues and payments, and after it is filed it becomes a legal process in which the debtors are helped in paying their dues and the lenders are also paid back what they deserve. It has been a fact that a bankruptcy releases the borrower or the defaulter from a number of debts and taxes and the discharged debts are not supposed to be paid. However, contradictory to popular beliefs, all debts are cannot be discharged in bankruptcy and some of them include family support, student loans, tax debts and others. This is the reason why you cannot expect to get a tax relief so easily and it can be a problem if you do not have enough knowledge in hand. Now, first you need to identify the nature of your situation and see as to how serious the problem is.

Consulting a lawyer right at the beginning when you have just decided to file a bankruptcy can help you in more than one way. A tax and bankruptcy lawyer who is able to understand your problem more deeply, might just help you in figuring out an alternative way in which you do not have to resort to filing a bankruptcy and the problem can be sorted out with the help of some other source.

If you have just decided to file a bankruptcy, having a lawyer on your side will definitely help you in choosing the right bankruptcy form and will also inform you about the various clauses and tax related effects that you would face on filing that particular form. A tax attorney is well versed with such cases and can guide you as to what is right and what is wrong as one small mistake in just filling a wrong form can lead to far reaching consequences.

If you have a serious problem of tax in your bankruptcy case and you still haven't consulted a lawyer, then it's never too late and doing it as soon as possible, so that your situation doesn't aggravate further, is a good idea. The advantage of choosing a bankruptcy lawyer who is also well versed with tax issues is the best option you can go for as they know exactly what they are doing and are able to keep all the dimensions of the problem in mind. A bankruptcy lawyer will help you in understanding the forms, different chapters of bankruptcy and the tax consequences which arise with it. He will not only have knowledge but also a good experience in handling cases in both issues.

Another plus point in consulting a lawyer who has a bankruptcy and tax case experience is that due to the history of so many similar cases as yours, they already have a tie up with a number of professional tax and accounting organizations which help in discharging tax, and consulting the lawyer helps you more as now you do not have to deal with them on a one-on-one basis and the lawyer will handle your case in every way possible. Dealing with the IRS, the tax collecting agency can be hard and the lawyer will help you with this also by looking for points which argue in your favor and help you buy some time also. Mentioned above are some of the advantages that you have if you consult a bankruptcy lawyer in tax relief cases and avoiding one can lead to circumstances which can cost you much more than what it would have been if you had followed legal advice on the issues.

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