Can I repay a creditor if I want to – even after bankruptcy?

repay creditor consumer bankruptcy

Can I repay a creditor if I want to – even after bankruptcy?

You can always repay a creditor if you are in Chapter 7, after the Chapter 7 is over. In a Chapter 13, most debts are paid through the trustee except post-petition mortgages and leases.

(Reviewed 11.14.08)

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My husband and I were injured in a bus accident. My husband will be out of work for a year and my part-time income cannot support our family. Our attorney says a structured settlement will give us regular payments, but he never has put one together. He would hire an expert. Should we trust him? What kind of questions should I ask? Should I shop around?

Structured Settlements Should I Do It Structured Settlements

My husband and I were injured in a bus accident. My husband will be out of work for a year and my part-time income cannot support our family. Our attorney says a structured settlement will give us regular payments, but he never has put one together. He would hire an expert. Should we trust him? What kind of questions should I ask? Should I shop around?

It is always better to have an attorney who is experienced rather than a novice for most purposes. You don’t want to pay your attorney for the time he will be learning what he has to know to help you. That is not to say, however, that your attorney can’t become educated in the process by engaging an expert. (Perhaps you can negotiate a lower fee with him because of his limited knowledge and simply rely on an expert to get a good portion of the information you need on this one issue.) You will have to ask the right questions to make sure you know all you need to know before settling on a structure. Without an experienced attorney, however, you are taking somewhat of a risk that you will not be getting all of the information you need to make an educated decision.

Most structured settlement experts are brokers, so do be careful. They know their “stuff,” but they are trying to sell a structured settlement to the defendant’s insurance adjuster to get the claim settled. Comparison-shopping is not a bad idea under the circumstances, especially if your attorney cannot tell you if what is being presented is a good deal or not for you and your husband. Some brokers represent just one insurance company that underwrites annuities for structured settlements, and some represent a number of companies, just like some mortgage or insurance brokers, so ask questions about their representation. Sometimes insurance companies only use one broker, but you can still shop around for information. There are “plaintiff brokers” but you would have to pay for their service.

Make sure the broker comes up with several different scenarios and payment schedules so you can see what all of your options are. If you talk to more than one broker, compare the information you’ve been given and ask lots of questions if you do not understand what you are looking at. You should be able to compare the payment schedules and the bottom line-how much you are guaranteed to get and over what period of time. Ask questions about the investment:

(1) Are they or are they not government insured in case of insolvency.

(2) What happens if you should die before all of the funds are paid out?

(3) Will the money go to your husband’s designated beneficiary(ies) or does the structure end upon his death?

(4) Will the structure give your husband monthly payments for the rest of his life or is there a set time limit?

These are important questions and you will want to know the answers before you make a choice.

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Key terms used in bankruptcy

key words consumer bankruptcy

Key terms used in bankruptcy

After Notice and Hearing: doesn’t actually require a hearing. Notice to interest parties must be provided and the opportunity for a hearing must be provided. Depending on the issue and on the preferences of the individual bankruptcy judge, there may not be an actual hearing unless a party in interest requests one.

Automatic Stay: an injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.

Bankruptcy Estate: all legal and equitable interests of the debtor in property at the time of the bankruptcy filing.

Claim: means a right to payment, whether or not it has been reduced to a judgment, liquidated, fixed, contingent, matured, unmatured, disputed, secured or unsecured.

Confirmation: approval of a plan of reorganization by a bankruptcy judge.

Consumer Debt: means a debt incurred by an individual primarily for a personal, family, or household purpose, as opposed to business.

Creditor: is a party who has a claim against the debtor that originated at or before the time that the debtor filed the bankruptcy petition.

Debt: means liability or obligation to pay a claim.

Debtor: the person who has filed a petition for bankruptcy.

Dischargeable Debt: a debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.

Equity: the value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered.

Exemption: property that the Bankruptcy Code or applicable state law permits a debtor to keep from creditors.

Joint Petition: one bankruptcy petition filed by a husband and wife together.

Liquidated Claim: a creditor’s claim for a fixed and known amount of money.

Means Test: determines whether a debtor can file a Chapter 7 liquidation case or be required to file a Chapter 13 case.

No-Asset Case: a chapter 7 case where there are no assets available to satisfy any portion of the creditors’ unsecured claims.

Non-dischargeable Debt: a debt that cannot be wiped out (eliminated) in bankruptcy.

Objection to Discharge: a trustee’s or creditor’s objection to the debtor’s being released from personal liability for certain dischargeable debts.

Priority: the Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full.

Priority Claim: an unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.

Secured Creditor: an individual or business holding a claim against the debtor that is secured by a lien on property of the estate or that is subject to a right of setoff.

Statement of Intention: a declaration made by a Chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.

Substantive Consolidation: putting the assets and liabilities of two or more related debtors into a single pool to pay creditors.

341 Meeting: a meeting of creditors at which the debtor is questioned under oath about his/her financial affairs. Despite the name, creditors rarely attend these meetings, and the questioning is done by the trustee.

Undersecured Claim: a debt secured by property that is worth less than the amount of the debt.

Unliquidated Claim: a claim for which a specific value has not been determined.

Unscheduled Debt: a debt that should have been listed by a debtor in the schedules filed with the court but was not.

Unsecured Claim: a claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.

Venue: which courthouse a case is heard in. For a bankruptcy case, venue typically lies in the district in which the debtor resides.

(Reviewed 11.14.08)

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How long does my bankruptcy remain on my credit report?

credit report consumer bankruptcy

How long does my bankruptcy remain on my credit report?

Your credit report can show your bankruptcy filing for up to 10 years, but many credit reporting agencies will remove it after 7. Having a bankruptcy on your credit record could make it harder to rent an apartment or to obtain a credit card at a favorable rate of interest. It might also make it very difficult to obtain a home mortgage loan or insurance.

“Wiping the slate clean” through bankruptcy also puts all future lenders on notice that you have had difficulty repaying your debts; creditors are more likely to either refuse to extend credit, or to make you pay (through higher interest rates, for example) for the additional risk they are taking in extending you credit.

However, even with a bankruptcy on your credit report, many lenders will do business with you and extend you new credit. This is because the discharge obtained in bankruptcy leaves all future earnings free from the claims of past creditors.

Copies of a credit report can be obtained from one of the following sources: (1) Experian (formerly TRW), http://experian.com; (2) Equifax, http://equifax.com; (3) Trans Union, http://tuc.com. The reports contain loans and credit card accounts, balances and payment history, bankruptcies and liens. In many cases, you’ll be entitled to a free copy of your report so long as you don’t ask for extra-cost “products” like a credit score or automatic update reports.

(Reviewed 11.3.08)

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What is Chapter 13 bankruptcy?

thirteenth chapter bankruptcy-law

What is Chapter 13 bankruptcy?

Chapter 13, which has also been known as a wage earner’s plan, is an interest-free repayment plan where a debtor repays at least some of his or her unsecured debts with regular payments over five years. Under the new bankrtupcy law, effective for filings on and after October 17, 2005, more bankrtupcy filers will have to choose Chapter 13’s repayment plan because of the application of a complicated, two-part means test.

Generally the creditors expect to get more than they would have received from the debtor’s estate if the debtor had sought a complete liquidation under Chapter 7 Bankruptcy.

One of the important benefits of Chapter 13 is that the debtor generally can more easily continue to live in his or her home. If the debtor fails to comply with the Chapter 13 plan, the Court will usually dismiss the bankruptcy case

Another advantage of Chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 plan. Doing this may lower the payments.

The disadvantage of Chapter 13 to the debtor is that the debts can linger for years, burdening future income.
(Reviewed 11.9.08)

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Can I keep my house if I file bankruptcy?

taking house consumer bankruptcy

Can I keep my house if I file bankruptcy?

It depends. In a Chapter 7 case, while you will lose assets but get rid of debts, you can either formally reaffirm the mortgage loan or, in some judicial districts, just keep making payments. If you fall behind on payments, and have some equity in your home, Chapter 13 bankruptcy may be a better choice for you because it allows you to pay off the arrearages (mortgage) over time and therefore face less risk to losing your home to the trustee. A critical consideration in a Chapter 13 case is whether a debtor whose home loan is in default can make the larger mortgage payments (the missed payments plus resuming the original payments) over the repayment period. Click “home foreclosures” for more information on this subject. Finally, if your home equity is larger than the state’s homestead exemption, Chapter 7 is not the choice since you would probably lose your home.

(Reviewed 11.14.08)

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The Divorce Process: From Separation to Final Judgment


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Divorce-Process Divorce Law

The Divorce Process: From Separation to Final Judgment

There can be many reasons why a marriage isn’t working out, and most couples do their best to work through their problems. But sometimes there is no way to work out the inevitable. While the reasons for a break-up are vast and varied, the legal process by which a marriage is ended is relatively uniform in every state. Some people separate or get a court order for a legal separation in order to test the waters or to see if some time apart can help in either resolving the conflicts or in working out the property, debt, custody, and/or support issues before filing for a divorce. Some people file for a divorce right away. Below, you will find an overview of the divorce process, from beginning to end.
Legal Separation
Filing a Petition for Divorce or Dissolution
Working Out Property Division
Working Out Debt Distribution
Working Out Spousal Support/Alimony
Working Out Child Custody/Visitation
Working Out Child Support
Mediation/Collaborative Law
Final Judgment of Dissolution

Legal Separation
You can get a court order for a legal separation and it can cover issues such as child custody, child visitation, child support, property and debt division, and spousal support. There is no need to get this order before filing for a divorce or dissolution of marriage, but some people prefer to legally separate instead of divorce for religious or other reasons. The couple may also want to make sure that their agreement about the children, finances, debts, and so on, are clear while they try to repair a faltering relationship.
Filing a Petition for Divorce or Dissolution
Residency
Most states have a residency requirement for filing a petition for divorce or dissolution, which simply means that if you are filing for a divorce in that state, you must have lived there for a certain period of time. Residency periods are typically from around 6 months to 1 year. A few states don’t have a residency requirement, and you just need to live there on the day you file your petition. If you have recently moved to a new state, check the law before you file.
Grounds
The grounds for a divorce are simply the reasons why the person filing for the divorce wants out of the marriage. Most states used to require, as part of the divorce paperwork, that the reasons, or grounds, be specified in the petition for divorce. Legislators soon realized, however, that it was really unnecessary for the state to require a showing of fault in a divorce. If the parties were no longer happy together, they should be able to get a divorce no matter whose fault it was or what the grounds were. So the no-fault divorce was born, and is now the dominant law in the U.S.
No-Fault
All states now have a provision for what is called a no-fault divorce or dissolution. This means that the spouse filing the petition does not have to claim that the other party is at fault in some way in order to get a divorce. There is no way the other spouse can stop a no-fault divorce, though there may be disputes about issues like child custody and property division. See No-Fault on the Free Advice Family Law page for more information.
Fault
It is still possible to file a petition for divorce or dissolution that claims the other spouse was at fault for the divorce. The traditional grounds for fault are cruelty, either physical or emotional; adultery; desertion (check your state law for the length of time); imprisonment (see state law for length of time); and an inability to have sexual intercourse that wasn’t revealed before the marriage. See Grounds for Divorce on the Free Advice Family Law page for more information.
There are a few reasons why a spouse might bring a petition based on fault: The state law may have a shorter waiting period for the final decree and the state law may consider fault in dividing property. Many states do not use fault to decide property division and the proof of fault may cause delays in the case, so be sure to check your state law before you consider this option.
Paperwork
A divorce or dissolution usually begins with the filing of a form, typically referred to as a petition. This must be filed with the court that deals with marriages in the county where you live, which may be called a family law court. After the petition has been filed, a copy must be served on (or delivered to) your spouse. Neither you nor your children can do that. The petition must be served by an adult who isn’t involved in the case. Read instructions carefully or get advice on how to do this properly.
You can often get the forms you need from the clerk of the court, but the clerk won’t be able to help you fill them out. (Clerks aren’t allowed to practice law.) There is a short or simplified form you can use in some states or counties if you meet certain conditions, such as agreeing on all issues and having no children.
Working Out Property Division
You will need to either work out an agreement on how your property is to be divided or argue about it at a trial. Courts prefer that the parties work things out for themselves, and some states or counties require a mandatory mediation, which means meeting with a neutral third party who will help you resolve conflicts over who gets what.
If the parties can’t agree on a way to divide their property, the court will decide. There are two ways courts usually divide property, depending on state law. See Dividing Up Property in a Divorce: Community Property vs. Equitable Distribution.
Working Out Debt Distribution
The debts incurred during the marriage need to be divided between the spouses along with the property. Joint debts may be deducted from the amount of property the spouses own together or some debts may be considered the responsibility of only one spouse. This depends on the system the state uses for dividing property. See Dividing Up Property in a Divorce: Community Property vs. Equitable Distribution and Debts on the Free Advice Family Law page for more information.
If both spouses have signed for a debt like a mortgage, car loan, credit card, or joint tax return, they are both liable for the debt, no matter what the divorce decree or property division agreement says. If the spouse who agrees or is ordered to pay a debt in a divorce decree doesn’t do it, the creditor can still collect from the other spouse. The other spouse has the responsibility of collecting from the one who didn’t pay. Because of this, it is best to close joint accounts and refinance as much as possible to free both spouses from the debts of the other.
Working Out Spousal Support/Alimony
Support paid by one ex-spouse for the support of the other used to be called alimony, but is now often called spousal support or maintenance. The laws for spousal support vary a great deal from state to state, and you should be sure you know what your state requires. Spousal support can be awarded to both husbands and wives.
Spousal support can be permanent, for a set time, for a time that will allow the supported spouse to become self-supporting, or a lump sum. A court can consider factors like the length of the marriage, the physical and emotional states of the spouses, the income and assets of both spouses, homemaking contributions, time needed for parenting, and whether one spouse helped the other to advance in a career.
Working Out Child Custody/Visitation
The single most important thing parents need to work out in a divorce or dissolution is the way they will continue to raise their children, and it’s always best if they can work out this plan cooperatively. Some states call this a parenting plan and no longer use terms like custody and visitation.
There are many questions that must be resolved, such as where the children will live, how much time they will spend with either parent, where they will spend holidays, and which parent will make decisions about the children. One or both parents might make legal decisions, such as where the children will go to school and what medical care or medication they will receive. Parents also have to resolve issues about the religious training and activities of the children.
Parents are not the only people who have an interest in parenting plans. Other people who have had a significant relationship with a child, such as grandparents and stepparents, can petition for visitation rights.
If the parents can’t agree on these issues, the court will consider the best interests of the children in resolving the conflicts. The court will look at the gender of the parents and children, their physical and mental health, emotional bonds, the effect on children of changing their living situation, and-if a child is around 12 years or older-the child’s preference. The court also considers practical matters such as the ability of the parents to provide the necessities of life, such as shelter, food, and clothing. Court orders involving children are never final. They can always be changed if the best interests of the children require it. If there’s a change in circumstances while the children are minors, the parents can always go back to the court that made the original order and ask for a change.
Working Out Child Support
After a divorce or dissolution, both parents remain responsible for supporting the children. Divorcing parents need to decide how they will divide up the childcare expenses. There are several factors to consider in working this out, such as the income and assets of the parents and whether one parent has primary childcare responsibilities. Child support may have tax consequences. See Effect of Divorce on Taxes.
If the parents can’t work this out cooperatively, the court will make the decisions and order the parents to comply. Child support is usually for minor children, but a court may order that a parent continue to pay support when a child is an adult if the child is attending school or is disabled or otherwise dependent. Some courts require the non-custodial parent to pay support directly to the state to make sure that child support is actually paid, unless the parties agree to a direct payment to the other spouse. Check your state laws.
If the circumstance of the parties change, such as an increase in income, loss of a job, or high medical costs for a child, the parties can go back to the court that made the original child support order to ask for a change. If a child becomes dependant on government funds, the government can enforce child support orders, so it’s important to have an order changed if a parent is unable to pay.
Mediation/Collaborative Law
Divorce mediation is a process where the divorcing parties sit down with a mediator (a neutral third party) to work out and resolve conflicts over property division, finances, debts, support and/or child custody/visitation. If the state is paying for the mediation, the mediator often reports back to the court with information about the mediation session(s). The parties can also arrange their own privately-paid-for mediation sessions, which will be completely confidential. Decisions reached in mediation aren’t legally binding, but can be included in the court’s final order or decree. Attorneys usually don’t attend mediation sessions, though they may be available to advise the parties on legal issues.
Collaborative law is a process where attorneys represent the parties, but everyone agrees that the issues are to be resolved without resorting to litigation. A provision is usually added that both attorneys will be fired if the case goes to litigation. The main goal of collaborative law is to resolve issues quickly and much more cheaply than in adversarial legal proceedings. See Collaborative Law on the Free Advice Family Law page for more information.
Final Judgment of Dissolution
The final judgment of dissolution is the final order of the court that legally ends the marriage. The final judgment can also contain legally binding orders about other issues, such as child custody, child support, visitation, spousal support, property division, and how property division is to be carried out. It can also restore the pre-marriage name to one or both spouses.
One party (or his or her attorney) is often required to prepare the final order, which may incorporate part of the spouses’ agreement, if they have reached one. Check with your state laws for details.
You are not divorced until the final judgment is signed by the judge.

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How does homeowner’s insurance pay for property damage to my home in the event of a fire, theft, or other disaster?

Property Damage Homeowner Injury Law

How does homeowner’s insurance pay for property damage to my home in the event of a fire, theft, or other disaster?

“There are a variety of coverage options available to you when purchasing homeowner’s insurance. These options are designed to help you pay for damage to your home, or the things in your home, in the event of fire, theft, or other type of disaster. Homeowners’ insurance can also help pay for injuries suffered by other people on your property.

There is coverage for your home and its contents (contents coverage is usually 10% of the value of the home) against loss from fire, theft and other perils (or from any cause of damage under an “”all-risk”” policy, unless the cause is specifically excluded). In addition, there is liability coverage to protect you in case someone is injured on your property. Many policies also provide coverage for your property if it is lost or stolen, even if the loss occurs away from the home (for example, if your camera is stolen while you are on vacation, your homeowner’s insurance may cover this loss). Most homeowner’s insurance policies exclude losses due to floods and earthquakes although riders or separate coverage for these perils may be obtained.

In determining what liability limits you should purchase, you need to consider the amount of exposure that you have. As a general rule, the more property and wealth that you have, the greater your exposure is and the need for higher liability limits for protection against claims from third parties. Often, liability limits are set as a combination of numbers, such as 15/30, which means coverage of loss of up to $15,000 per person and up to $30,000 for all injuries which occur in a single accident. This is referred to as the minimum liability limit. Often the minimum liability limit is inadequate to protect all of your property and wealth. Increased limits, such as 100/300 or 300/500 are very common and can be purchased at modest additional cost to you. There is no minimum liability limit for a homeowner’s insurance policy, although most lenders require you to carry insurance at least equal to the amount of your outstanding mortgage. If you have suffered damage to your home or belongings and your insurance company won’t pay, you should seek the advice of an experienced insurance lawyer right away. You may be entitled to coverage for your losses, but you won’t know unless you ask.”

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My lender is foreclosing on my home. Will filing bankruptcy stop this action?

lender foreclosing consumer bankruptcy

My lender is foreclosing on my home. Will filing bankruptcy stop this action?

Filing a Chapter 7 case only temporarily sidetracks a lender’s right to foreclose until it gets permission to go forward with the foreclosure proceedings by requesting and receiving “relief from the automatic stay” from the court. That relief is likely to be granted unless you can immediately bring your account up to date, demonstrate a likelihood and that you’ll continue to make payments when due, and show that your equity in the home provides a sufficient “cushion” for the lender. In some bankruptcy districts, you must also negotiate a formal “reaffirmation agreement” with the lender.

A Chapter 7 never permanently stops a foreclosure, unless the creditor agrees and homestead (exemption) laws stop the trustee from selling the property.

Most people who file for bankruptcy have big arrearages on their mortgage that they can’t pay off right away. The solution to that problem that allows them to keep their home is to file under Chapter 13 bankruptcy. The Chapter 13 plan provides for continuing monthly payments on the mortgage and paying off the arrearages over the life of the plan (three to five years).

(Reviewed 11.14.08)

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