Posts Tagged ‘chapter 7’

Courses Required Under the 2005 Bankruptcy Laws.

Sunday, June 14th, 2009

The 2005 Bankruptcy Laws require debtors to take 2 courses called “credit counseling” and “debtor education”. These courses are mandatory for all individual debtors.

The first course is called credit counseling and its purpose is to go over your income and expenses budget. It is mandatory that you complete this course PRIOR to filing your bankruptcy petition. There are many non profit organization that provide these service however they must be approved by the court that you will be filing your bankruptcy in.

Usually the attorney who will help you file your bankruptcy can guide you to such an agency. At our office, we provide our clients with a 30 minutes video to watch prior to taking the course and we also electronically register the client to take this course online. It has been our experience that this helps our clients in expediting the completion of the courses. Once the course is completed, our office will receive the certificate automatically and we will proceed in filing the petition.

The second course is required to be completed within 45 days from the creditors meeting. This course is called debtor education and its purpose is to educate the debtor of different financing and credit information to better prepare them for their future credit needs.

The court will not grant the debtor the bankruptcy discharge until this second course is completed and the certificate of completion filed with the court.  Again, your attorney can help guide you to agencies that provide this course as well.  Most agencies provide both courses to the debtor thereby streamlining the process.

Our office will also register you automaticaly upon retaining our services and provide you with the ability to complete this course over the internet or by phone and help you get the discharge.

I should be noted that the agencies that provide these two courses are called “credit counseling” and should not be confused with “credit consolidation” companies.

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The Stigma of Bankruptcy, is there one? who perpetuates it?

Saturday, June 6th, 2009

A common concern I hear from clients is the stigma with filing bankruptcy. Bankruptcy is a legal option that the United States Congress has made available. A debtor should not dismiss Chapter 7 or chapter 13 bankruptcies as an option until they have taken a short time to educate themselves on this subject.

The stigma is perpetuated by creditors who want to discourage debtors from filing bankruptcy, companies who have a financial interest in keeping debtors in debt such as debt consolidation companies, or individuals who simply do not know.

The stigma against debtors has greatly diminished over the past years and particularly in these times where even major corporations are forced to seek bankruptcy protection. Under the bankruptcy laws, a debtor cannot be discriminated for employment due to a bankruptcy filling. And while a chapter 7 or 13 bankruptcy can remain on your credit report for up to 10 years, you will begin to rebuild your credit within one to two years. (see our prior posts about bankruptcy and credit.)

Its best if debtors take a minute and explore the legal options made available to them by law. They should not be misinformed by rumors or self-serving statements of companies who have their own interest in mind. Bankruptcy is not an easy decision, but in certain financial situations, it’s the right decision.

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Credit Consequences of Filing Bankruptcy

Monday, May 25th, 2009

To start with, its important to know where your credit is at this time. If you have been late in paying of obligations for the past 6 months, filing bankruptcy will no longer negatively impact your credit score since your credit is already ruined. In fact, filing bankruptcy may begin the process of restoring your credit than simply ignoring your obligations.

Once bankruptcy is filed, whether chapter 13 or chapter 7, the bankruptcy filing will be reflected on your credit report for the 10 years. However, this will also begin the process of reestablishing your credit score, as new creditors who would review your credit report would be more inclined to provide credit since:

  • 1) You are no longer responsible for debts that were prior to your bankruptcy petition and have been discharged in bankruptcy.
  • 2) And you can not file Ch7 bankruptcy again for another 8 years. So they are in a sense protected from subsequent chapter 7 filings for the next 8 years.

Therefore if you have income, the creditor will be more inclined to provide credit to you. It is important to understand that in the begining, you will not be getting the best interest rates nor the highest credit limits. However soon (within 2-3 years) you would have reestablish your credit.

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Bankruptcy Chapter 7 or Chapter 13?

Sunday, May 24th, 2009

First step in determining if you should file a chapter 7 or a chapter 13 depends on what assets you have and what type of protection you need. Both chapters provide you with the option to protect certain assets but chapter 13 also provides you with the opportunity to get current on certain assets that you may have fallen behind on. e.g. a house. The second step in determining is whether you have the funds or the excess income at the end of the month to enter chapter 13. Here are the differences.

Chapter 7 (Straight Bankruptcy)
In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors.
If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

Chapter 13 (Reorganization)
In a chapter 13 case you file a “plan” showing how you will pay off some of your past due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property specially your home and car which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind.
You should consider filing a chapter 13 plan if you
(1) own your home and are in danger of losing it because of money problems;
(2) are behind on debt payments, but can catch up if given some time;
(3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time.
You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due.

On the next blog entry, I will cover the consequences of filing a chapter 7 or a chapter 13

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  • Roland H. Kedikian, Esq.

    Mr. Kedikian has been a practicing attorney since 1997 and has concentrated his practice in Bankruptcy ever since his admittance to the California State Bar. He has developed his skills and understanding of bankruptcy with emphasis on Ch7 consumer and business filings. Over the past 12 years as a bankruptcy attorney, he has successfully filed and obtained bankruptcy discharge to all his clients to date.

    Mr. Kedikian is proud to provide professional legal advice to his clients and has an exemplary record.

    • BREAK THE BANKRUPTCY TABOO

    Financial difficulties are a part of life, much like health, happiness and the other ups and downs of life. Some days you have them, some days you will not. If you agree with the above, BECOME A FAN and break the bankruptcy taboo.