Credit card bankruptcy is one of the top three reasons people petition courts for financial protection. The other primary causes for filing include medical bankruptcy and to stop foreclosure. While this strategy can help consumers reduce or eliminate debts, it should be used as a last resort because it is expensive, time-consuming, and causes severe damage to credit scores.
Credit card bankruptcy petitions have shown a slight decline in 2010. The National Foundation for Credit Counseling contributes the 4-percent decline to the economic recession which has forced many consumers to spend less, along with new stricter lending criteria which has reduced credit card approval rates.
Chapter 13 Bankruptcy, Arkansas Bankruptcy Lawyer, Bankruptcy Attorney San Diego,
Another factor contributing to reduced personal bankruptcy petitions may stem from the limitations outlined in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which went into effect in 2005. These new bankruptcy laws require debtors to repay a portion of their debts by establishing a Chapter 13 payment plan and undergoing credit counseling prior to having their petition approved by a judge.
Prior to BAPCPA, consumers with extreme credit card debt opted to file for Chapter 7. Often referred to as 'fresh start' bankruptcy, Chapter 7 discharged debts and consumers were given a clean financial slate. Although their credit was blemished, it was relatively easy to overcome the credit stigma often associated with personal bankruptcy.
The Bankruptcy Abuse Prevention and Consumer Protection Act radically altered the criteria for obtaining Chapter 7 approval. Today, this option is reserved for debtors enduring exceptional financial hardships.
The process of filing credit card bankruptcy requires locating a lawyer to submit a petition to the court. Debtors must provide a list of all outstanding debts, monthly expenses, income records, bank statements, current and previously filed tax returns, and a list of all assets owned including financial portfolios, investment property, valuable jewelry or art, automobiles, or inheritance assets held in probate.
Approximately 30 days after the petition is filed, debtors attend a 341 creditor meeting which provides the opportunity to meet with creditors and develop a payment plan. The Chapter 13 plan is submitted to the judge for approval.
Debtors undergo a process known as the 'means' test to determine how much credit card debt must be repaid. The means test compares debtors' income to their states' median income. If debtors earn less than the median income level they may qualify for Chapter 7. Otherwise, they are required to enter into a Chapter 13 payment plan.
Bankruptcy payment plans usually last a few years to provide debtors time to repay all outstanding debts. Payments are submitted to a U.S. Trustee who distributes payments according to the approved plan until all debts are paid in full.
Chapter 13 payments can create additional financial hardship for debtors. If debtors do not comply with the payment plan, creditors can petition the court seeking dismissal of the petition. If credit card bankruptcy is discharged due to non-compliance, debtors lose protection from the court and creditors can commence with collection action.
Consumers who are considering filing bankruptcy to eliminate credit card debt should spend time researching alternative solutions. These can include: budgeting, credit counseling, debt consolidation, and debt settlement.
A reliable source for obtaining personal bankruptcy information is the National Foundation for Credit Counseling website at NFCC.org. Consumers can learn about debt management solutions, utilize budget worksheets, listen to podcasts, locate credit counselors, and discover numerous money management and savings strategies.
Is Bankruptcy Right For You? Talk to Bankruptcy Attorneys Free and Confidential. Licensed bankruptcy attorneys are available. Attorneys will call you to discuss your case for free. Find out if bankruptcy is right for your situation.
Rating of Bankruptcy Attorney Detroit
Get Online Application at online Bankruptcy Lawyer.
0 comments:
Post a Comment