Bankruptcy

What is Bankruptcy? A federal court process that can eliminate your legal responsibility for many debts or let you replay them over time

Common Reasons People File Medical expenses Lack of adequate insurance Over-extended credit Divorce

Chapter 7 Bankruptcy? “Liquidation” Bankruptcy: removes debts that are not secured by collateral or property/gets rid of most debt The means test: compares your income to the state median Requirements Pre-bankruptcy counseling and education Copies of tax returns Certification of credit counseling win in last 6 months Evidence of earning within the past 60 days Net income/photo ID

What debts cannot be discharged? Child support Alimony Student loans Legal fines and penalties Income tax from last 3 years Luxury items purchased 60 days before filing Cash advances made 70 days before filing

Types of Bankruptcy Chapters 13 (11 similar businesses) “Reorganization” Debt payments over 3 to 5 years Keep property if making payments on time Some creditors will be paid back in full with interest, others in full and the remainder will be repaid a percentage of the debt. *Bankruptcy panel decides on debts, not person filing *Missing a payments can result in liquidation

Consequences of Declaring Bankruptcy Difficulty getting credit, finding a job, getting insurance and renting Rate 6.25% to 6.50 above prevailing rate Annual fee credit cards… Chapter 7 Bankruptcy remains on credit report for 10 years; Chapter 13 remains for 7 years Costs money to file – chapter 7 more – family heirlooms, bank accounts, investments, second cars and vacation houses, just to name a few -- will be sold and distributed to your debtors. If the case is dismissed, you will lose all bankruptcy protection and go back to square one, still liable for all your debts.

Bankruptcy Facts Average age: 38 Education Level: slightly better than the population at large Filing status: 44% files as a married couple