Archive for January 24th, 2010

Top 4 Reasons People File For Bankruptcy
Bankruptcy can be a way out for many families who find themselves overwhelmed with too much debt It is a big decision with long-term consequences, and you should never be entered into lightly Nevertheless, it does provide relief for many people who need drastic assistance in debt relief . .Here are four common reasons people file for bankruptcy . .1 Avoiding foreclosure . .Chapter 7 bankruptcy can wipe out many consumer debts, but it doesn’t guarantee that you’ll get to keep your assets For example, if you owe credit card debt, chapter 7 can protect your home from creditors Credit cards are unsecured debt, which means that there is no collateral backing up the loan . .However, if you are behind on your mortgage payments and are facing foreclosure, you may need to file Chapter 13 bankruptcy and establish a payment plan so you can catch up on your mortgage payments This is because Chapter 7 does not eliminate your obligation to the lien holders such as the mortgage company or bank . .2 Prevent repossession of your vehicle . .Just like your house payments have to be made even if you file for bankruptcy, your car loan has to be paid off if you intend to keep the vehicle You can use Chapter 13 bankruptcy to form a repayment plan for your debts, usually over the next three to five years . .3 Medical bills . .A common reason why many families have to end up in bankruptcy court is the high cost of medical bills Catastrophic events like the need for emergency surgeries can overwhelm a family who is uninsured or underinsured . .4 Unemployment . .Many unfortunate people have lost their jobs or had their hours reduced during this economic downturn This reason doesn’t need much explanation, since it’s obvious that a reduction in income will make it more difficult to keep up with your bills What we should say is that filing Chapter 7 or Chapter 13 can help with your situation, but you should explore all options carefully before making a decision . .Sometimes simple solutions like getting a part-time job or using debt negotiation can solve your problems without resorting to legal action that can damage your credit score for years to come .
Source: www.rsstnx.com

Shouldn t you be able to discharge your student loans in a bankruptcy?
Many students today leave college and graduate schools with mounting bills before they ever commence their employment life. In many cases these student loans can amount to an excess of $200,000. The monthly payments new graduates face can be as significant as $1,200 per month. Couple that payment with the uncertainty of the US and world economy and the situation truly appears to be grim. Many of today s young professionals and working class amass large unsecured debt through credit card purchases just to get by. They do not earn even as much money as the median person in their state. Many have purchased homes with current fair market values worth many thousands of dollars less then their mortgages, and in many cases fall behind on their payments. What are their options negotiate with their creditors? If these debtors can not afford to commit to the massive payments, then negotiation is not an option. Their only true salvation is a chapter 7 bankruptcy. The debtors certainly can get some relief from filing for bankruptcy. If they have incurred massive credit card debt, medical bills, or even judgments for failure to pay debts, those all can be wiped out as unsecured debt. If they can not afford their home, they can always walk away from it. Even if the bank can not recoup their money and obtains a deficiency judgment against the debtor, that judgment is not secured as the mortgage was, it can also be stripped. However, many young debtors largest concern and most significant payment comes in the form of their student loan. What happens to that debt? Currently, a student loan is not secured in any collateral, but it is considered a priority debt, and can not be wiped out quite so easily. In order for a debt to be discharged, it first must be classified as a consumer debt. The debt must have been incurred for a personal, household or family purpose. For example, most courts have held that taxes are not consumer debts within the meaning of the Bankruptcy Code. Debts incurred in the production of income are generally not considered consumer debts. Compass Bank v. Meyer (In re Meyer), 296 B.R. 849 (2003). Other courts, including two courts of appeals, have adopted the ”profit motive” test. Baskin v. G. Fox and Co., 550 F. Supp. 64 (D. Conn. 1982). Under this test, a debt is not a consumer debt if it ”was incurred with an eye toward profit.” In re Booth, 858 F.2d 1051, 1055, (5th Cir. 1988). If a debt is incurred partly for business purposes and partly for personal, family or household purposes, the term ”primarily” in the definition suggests that whether the debt is a ”consumer debt” should depend upon which purpose predominates. Presumably, this determination would normally turn on the purpose for which most of the funds were obtained. In re Booth. Under this test, courts have concluded that student loans may or may not be consumer debts, depending in part on the motivation for obtaining them. In re Stewart, 175 F.3d 796 (B.A.P. 10th Cir. 1997). The court held a student loan classification depends on facts; in the case, classification of a portion of medical school loans as consumer debt was not erroneous. If a court determines that a student loan is a consumer debt, which in and of itself still will not provide grounds to discharge the loan. A court must find pursuant to Section 523(a)(8) of the US Bankruptcy Code, that the student loan qualifies as an undue hardship which allows the court to discharge an otherwise nondischargeable priority debt if excluding the debt from discharge will necessitate an undue hardship on the debtor or the debtor’s dependents. Such a judicial decision is discretionary with the bankruptcy judge in determining whether payment of the debt will cause undue hardship on the debtor, thus defeating the ”fresh start” concept of the bankruptcy laws. The most widely used test for evaluating the dischargeability of a student loan under section 523(a)(8) states that the debt is dischargeable if three conditions are met: 1. The debtor cannot maintain, based on current income and expenses, a ”minimal” standard of living if forced to repay the loans; 2. There are indications that the state of affairs is likely to persist for a significant portion of the repayment period; and 3. The debtor made good faith efforts to repay the loans. Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987) The Supreme Court has stated that section 523(a)(8) is ‘’self-executing” and that ”[u]nless the debtor affirmatively secures a hardship determination, the discharge order will not include a student loan debt.” Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440 (2004). In other words, student loan debt remains due until there is a determination that the loan is dischargeable. Underwood v. United Student Aid Funds, Inc. (In re Underwood), 299 B.R. 471 (Bankr. S.D. Ohio 2003). To demonstrate the current criteria used by the Bankruptcy court to discharge a student loan, the district of Massachusetts has set a high bar. The debtor was a 32 year old unmarried woman who suffered from relapsing, recurring Multiple Sclerosis. The debtor’s currently monthly income totaled $ 1101. The court found that the debtor’s minimum expenses exceed her income. The debtor would have to give up her telephone and her gas money to become even marginally solvent. The court also found that the debtor had made Herculean efforts to both find work of a type she could perform and actually work despite facing daunting physical obstacles. Finally, the court found that the debtor’s current condition, which had worsened since she first became symptomatic, would continue to impair her ability to find employment that would improve her financial status. The court reasoned in part that it had been able to observe many of the debtor’s symptoms first-hand. Denittis v. Educ. Credit Mgmt. Corp. (In re Denittis), 362 B.R. 57 (First Circuit for the District of Massachusetts 2007). As a further example of how precarious a debtor s situation must be, the same court as above denied the debtor s motion to discharge her student loan. The court held the educational loans were not dischargeable under 11 U.S.C.S. 523(a)(8) because the debtor’s prospects for increasing income over time were promising and, by slightly cutting her expenses, she could make the minimal payments towards her student loan obligations under the Income Contingent Repayment Plan. Brunell v. Citibank (SD) N.A. (In re Brunell), 356 B.R. 567 (1st Circuit, 2006).The forgoing article on bankruptcy relief from student loans was drafted by Attorney Michael Goldstein, a <a href="http://www.goldsteinandclegglaw.com/bankruptcy_blog">Massachusetts Bankruptcy Attorney</a>.
Source: www.ArticlePros.com

Bankruptcy Around the World
Wherever you go in the world, finance is a language that is spoken fluently by some, and a completely indecipherable one for others There is such a wide range of topics connected with finance that a strong command of rules, regulations and options coupled with an ability to recognize money-making opportunities can bestow real purchase power upon an individual However, the world of finance is so fast-moving that if you take your eye off the situation for even a moment, you can end up in serious difficulties No matter where you are in the world, the circumstances that lead to bankruptcy exist And where the circumstances exist, so does the practice Just like in America, people go bankrupt all over the world Many of the practices are much the same - but there are some differences . .In Australia, for example, the process of filing for bankruptcy is largely similar to that in the United States You can commence proceedings yourself, or it can be the subject of a petition from a creditor looking to realize some of their asset - your bad debt - before you become a “won’t pay” customer However, a bankruptcy term in Australia is three years, but with the potential to pay it out If, before the three-year period is up, you can pay the debts off in full the bankruptcy will be annulled This encourages individuals to see bankruptcy as an opportunity to learn sound financial practice It is also possible to raise an Offer of Composition, which pays each creditor a certain percentage of what they are owed If they accept the settlement, the bankruptcy can again be annulled . .In Canada, it is possible to file a consumer proposal as an alternative to bankruptcy if your debt amounts to more than $5,000 and less than $75,000 The higher figure does not include the mortgage on the debtor’s home For debts larger than $75,000, it is necessary to file for bankruptcy under which there are additional rules and requirements, which include the appointment of a “Proposal Administrator” who is given the task of overseeing the debt to ensure that it is fully analyzed In many cases, creditors will choose to accept the consumer proposal even though it generally entails paying a reduced amount, because they will receive less under bankruptcy rules . .In the United Kingdom the Enterprise Act of 2002 made it possible for a bankruptcy to last less than 12 months This has led to a larger number of people filing for bankruptcy and a suspicion that many of those filing are people for whom bankruptcy is simply another financial service However, the banks themselves are markedly reluctant to lend money to a recently bankrupt individual, and in most cases it will take six years for bankruptcy to roll off an individual’s credit record, making it virtually impossible to get credit on anything resembling reasonable terms While some lenders have begun to offer loans and credit cards at prohibitive rates of interest, individuals are strongly discouraged from taking them . .Disclaimer: This article is for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter .
Source: www.rsstnx.com