But for those who have served the United States as National Guard and military reservists will get to skip this minor step in the bankruptcy process, streamlining the path to debt relief for these individuals. The House of Representatives approved a bill by voice vote that would exempt individuals who have served at least 90 days in Iraq and/or Afghanistan from this portion of the bankruptcy process.

Reps. Jan Schakowsky (D-Illinois) and Dana Rohrabacher (R-California) co-sponsored the bill, HR 4044, which is just one of many provisions that have been passing to step up the financial and educational incentives offered to members of the military returning home from battle. Previously, disabled veterans were allowed exemption from the means test, but many lawmakers had called for expansion of this privilege to other classes of veterans.

The new measure would cover around 450,000 Guard members and reservists who have been deployed to Iraq and Afghanistan over the past six years, many of whom, it is reported, face financial problems when they return. Chapter 7 bankruptcy is one potential solution for individuals facing mounting debt from mortgages, credit cards and other loans, one that makes good sense for many people in this precarious situation.

The Senate must still consider and pass the bill before it becomes law; if it follows the House lead, it will mean good news for veterans.

The sad consequence, though, is that the ill effects of the problem may not be as equally shared as the blame. Studies have shown strong correlations between an increased number of subprime mortgage loans in a given neighborhood and a proportionally-high percentage of minority residents. Likewise, a new study from the Federal Reserve Bank of Boston suggests that African-American consumers have less access to credit than white consumers.

The study conducted by Ethan Cohen-Cole is titled “Credit Card Redlining,” and sought to determine ways to measure effectively how credit card companies might handle African-American consumers and white consumers differently. Like the subprime lending study on race, Cohen-Cole found that using the racial makeup of the neighborhood in which applicants lived offered the best results, since most credit card applications are completed online or via mail.

The second difficulty in the study was controlling for factors that might affect credit and skew the results by race: crime and home vacancy, for example, which tend to be higher in urban neighborhoods with large black populations, lead to decreased access to credit across neighborhoods.

Yet when controlling for these variables, the study found that racial minorities are given less credit than whites. Of course, the study found that if your credit history is weak, you won’t be given access to much credit regardless of race. The difference is found in those with unblemished and strong credit histories: racial minorities in this category were on average offered less credit than white consumers with similar credit histories.

Some have questioned the effectiveness of Cohen-Cole’s “control” efforts, . That is, not everyone is so sure a study can successfully eliminate the influence of high crime rates on a neighborhood.

Regardless of how accurate Cohen-Cole’s methods were, they highlight a problem that seems to be part of institutional practice in the lending industry. Previous studies found racial disparities in interest rate payments, as well as those targeted by fraud schemes.

However, these corners of the lending industry may not have the same widespread effect of credit card discrimination. Most Americans begin building their credit history by using credit cards, which means discrimination in this foundational stage can hinder them from developing a good credit score from the outset, a crucial factor in determining loan eligibility at a later date. Without the same chance to build a decent credit score as white consumers, black consumers will also be more likely to qualify only for subprime loans—a finding supported by previous studies as well.

According to an article in the Los Angeles Times, 90,000 bankruptcy cases were filed in March. That figure apparently marks the highest number of bankruptcy filings since 2005, when new bankruptcy laws made filing bankruptcy more difficult than before. The stat also indicates a 30% jump from bankruptcy filings in March of 2007.

The Times, which gathers its data from Jupiter ESources, notes that bankruptcy filings aren’t the only things that have increased since a year ago. Foreclosures and unemployment, too, are creeping upward. And the states where the housing boom was biggest (including California, Nevada and Florida) are reportedly feeling the worst of the economic distress.

California’s bankruptcy rate has increased a walloping 42% since last year, sources indicate, and the state’s unemployment rate is 5.7%, the highest in the nation.

Nevada is evidently facing a 5.5% unemployment rate, still greater than the 5.1% national average. But even the national unemployment rate suggests troubling economic times: sources indicate that unemployment in the United States is higher than it’s been since September of 2005.

A recent Bloomberg report noted that foreclosures have increased 57% since 2007, and mentioned that the former boom states are (perhaps unsurprisingly) hardest hit. Nationally, one in every 538 homes is currently in foreclosure, according to sources.
Financial experts estimate that $460 billion worth of homes will go into foreclosure in 2008, which will mean even more homes on the already saturated market and a likely continuation of falling prices.

As if these figures weren’t dreary enough on their own, some economists are apparently predicting that this recession could last twice as long as a normal recession, plunging the country into economic turmoil for at least 20 months.

Reports also suggest that many homeowners have grown frustrated with falling home values and resetting mortgage payments, and many are finding themselves “underwater,” with “upside-down” loans, meaning that they owe more on their mortgage loan than their homes are currently worth.

This is leading to an increase in so-called “walkaways,” who opt to mail their keys back to their lenders and simply give up on their mortgages. While no reliable figures exist for the phenomenon, anecdotal reports suggest that it’s becoming more widespread.

Ben Bernanke, the current Chairman of the Board of Governors of the United States Federal Reserve, has been dancing around the “r” word for quite some time now. Other economists have been avoiding the word “recession” as well, but it has been on everyone’s minds and causing a lot of worry.

Whether or not the U.S. economy is actually in a recession or inexorably headed into one makes little difference to most. Regardless of the way the currents economic state of the county is defined, most Americans are feeling the financial pressures and stresses associated with a recession.

The value of the American dollar is greatly diminished, yet the cost of necessities such as food and gas continue to rise. Americans are on a financial treadmill and losing ground as we try to stretch the dollar further than it can possibly go. Our paychecks just don’t go very far in today’s economy.

While things are getting more difficult day by day for those who actually have paychecks to work with, many people don’t even have that luxury anymore. Mass layoffs are sweeping the country as companies and corporations restructure and merge in attempts to remain viable in the American market. The loss of jobs and inability to even earn an income has caused record numbers of people to file for unemployment benefits and apply for government welfare programs such as food stamps according to a recent Salon.com article.

As Americans struggle to cope with financial stress, the value of their homes is in a state of freefall. The days of easy cash-out mortgage refinancing and home equity loans are all but gone and banks now own more of the American dream than we do. Without jobs that provide health insurance or money to pay insurance premiums, most people are living without health coverage. Credit cards have been maxed out in an attempt to stay afloat financially and millions of people now live on the verge of bankruptcy.

Economists have been forced to admit that the U.S. economy is now, more than likely, in a recession. Now that the “r” word has been spoken, it remains to be seen just how bad things will get. There have been frightening comparisons to the Great Depression with regard to the housing market and just how bleak the financial outlook for the country may really be.

In some markets home sales have actually started to pick up, and that has given renewed hope to those people who desperately need to sell their property in order to avoid foreclosure. Those homeowners who are able to sell have a chance to salvage some of their investments, rather than lose everything by having the bank foreclose on the property. The problem is, according to a recent Consumer Affairs report, that the housing market is not the root of the financial crisis for most people. The problem is the tremendous amount of credit card debt that Americans owe.

During easier financial times, people tended to spend recklessly and now are paying an extreme price for being so careless. Credit cards and home equity lines of credit were previously so easy to get that many Americans seemed to forget that they were spending real money. There was a false sense of security in rising home prices that caused many people to get deeply into debt. Now that the home prices have fallen, and continue to sink, the safety net of home equity is gone and the bills are still due every month. There are no more credit resources available to maxed out Americans and this has led millions of people into financial crisis.

The economy is so drastically different now from what it was only a few years ago that many people have been completely blindsided by the changes. Foreclosures and bankruptcy are affecting millions of American families who would have previously never dreamed that they’d find themselves in a financial spiral.

Very soon, many Americans will receive a little financial boost courtesy of the economic stimulus package. These checks will help some people pay past due bills or pay down credit card debt some, but for many the money will just not go far enough. Next month the same problems will still be there, but there will be no government check to help out.

As far as stimulating the economy, there are serious doubts that the economic stimulus package will do much to actually help. With so much outstanding debt, it could be considered foolish to go out and spend the money as it was intended when cash in hand is becoming increasingly rare. For people who are worried about catching up on mortgage payments to avoid foreclosure, or making credit card payments to avoid filing bankruptcy, shopping for anything other than necessities is probably not in the forecast.

Apparently, the tightening of credit from traditional sources like banks has led to increased lending by “non-traditional” or “fringe” lenders like payday lenders and auto-title lenders. Unfortunately, borrowing from sources like these proves extremely expensive for many consumers.

Payday loans are short-term loans advertised to help tide people over until their next payday. Unfortunately, because of the high interest rates and fees associated with most payday loans, many borrowers find themselves plunged into a cycle of debt and even pushed to a point where they’re forced to file bankruptcy.

A recent report from the Wichita Eagle outlines the problem of payday lenders in Kansas. Since 1993, the number of payday loan stores in Kansas has more than quadrupled, according to sources. And, because laws in that state are more permissive than in other parts of the country, the number of payday lenders continues to rise.

In some states, including Pennsylvania, Massachusetts and Oregon, legislation has eliminated or seriously restricted the practice of payday lending. In Virginia, a law to increase tax on payday lenders has been proposed, and elsewhere around the country legislators have moved toward minimizing payday lenders’ power.

Evidently, though, lawmakers in Kansas have yet to hop on board.

Ohio is reportedly plagued by similar growth of payday lenders – it seems more than 75 new payday loan stores have cropped up in the last year, meaning that Ohio now has more payday lenders than fast food restaurants. But the Buckeye State is reportedly addressing the problem of payday lenders very differently than Kansas.

According to the Columbus Dispatch, two bills concerning payday lenders are currently pending in the Ohio House of Representatives. HB 337, backed by the payday lending industry, would offer payday borrowers a one-time extended repayment plan to catch up on their balances.

The other, more borrower-friendly piece of legislation, HB 333, would cap allowable interest rates on payday loans at 36%. Currently, some payday loans can cost borrowers as much as 391% in annual interest. And other Ohio legislators have allegedly announced plans to introduce more laws that would protect consumers from the potentially devastating effects of payday loans.

If you would like a professional opinion about the state of your debt and/or finances, you should consider contacting a bankruptcy lawyer in your area.

And debt settlement is no exception. A recent post at The Consumerist titled “Confessions of a Debt Settlement” worker cracked open the door of this tightly-sealed group of agents, providing an invaluable look into this growing industry and the ways that it “helps” its customers.

Debt settlement companies often advertise as an alternative to bankruptcy, claiming that they can drastically reduce credit card debt without the legal entanglements and long-term consequences of bankruptcy. The anonymous author of the Consumerist article worked for a company that touted its ability to negotiate with creditors to reduce clients’ payments by 50%.

Of course, there’s always a catch.

Did You Read the Fine Print?

It’s never a good idea to sign a contract without reading the fine print, but when it comes to financial decisions, you can face devastating ruin if you aren’t careful. Just take the example of the recent housing crisis: many subprime borrowers took out adjustable-rate mortgage loans or other sophisticated financial tools, only learning after the fact—some during foreclosure— that the fine print in their contracts differed greatly from what their brokers or lenders had led them to believe.

The anonymous Consumerist author describes the contracts that he had debt settlement clients sign, typically without calling attention to any of these questionable terms:

• The company was not responsible for any damage to clients’ credit scores;
• The company could cancel a client at any time without providing a refund;
• Any client who cancelled his services was still obligated to pay in full for the services;
• Money for payments was taken directly from clients’ checking accounts;
• The company did not interfere with creditor/client relationships; and
• The company did not encourage clients to stop making payments on debts owed.

Of course, many of these terms were couched in legal language that was made to be as complex as possible to prevent easy understanding.

Of course, it’s not illegal to write complex contracts. However, the sales team’s practices behind closed doors support the idea that the company would do anything to confuse or outright deceive a client in order to get them to sign, then leave them unable to back out because of the fine print. The author recounts how agents would blatantly lie about the terms of the contracts in order to gain the bonuses associated with signing on new clients.

The Truth about Debt “Settlement”

Broadly looking at the promise of debt settlement in itself, the luster of the advertising promises lose their appeal as you begin to examine the facts. Like the anonymous author’s company, many debt settlement agencies promise to reduce debt by as much as 50%.

The author of the article noted that many clients were told to stop paying their creditors because the debt settlement agents could not negotiate better terms with creditors unless certain accounts were in default. Effectively, the agents told clients to put themselves into a worse financial situation so that they could help themselves.

The result of these dubious tactics?

By the time the agency had negotiated a 50% payment, many clients owed twice as much, and so ended up paying what they originally owed – plus fees for the service!

These clients also experienced the other negative consequences of massive debt, including lowered credit reports, liens on property, and wage garnishment. All in all, the consequences of entrusting financial security to a debt settlement company were devastating.

This anonymous author’s report confirms what many in the mainstream media have been suggesting for some time from the outside of the industry. An MSN article examining the practices and costs of some debt settlement companies found that fees for debt settlement services can total thousands of dollars – in many cases, more than a debtor would have paid a lawyer for financial advice and help.

Alternatives that Work

If you’re struggling with debt, there are options available. A lawyer can seem like an impossibly expensive aid, but when you consider the cost of the deception offered by debt settlement companies, you may see this in a different light.

To arrange for a free consultation with a bankruptcy lawyer, fill out this online form today. You can discuss filing for bankruptcy, working with a credit counseling service, negotiating lower payments with creditors and doing much more.

Why Credit Cards are Important

Since a 1978 Supreme Court ruling, limits on credit card interest rates have been determined by the laws of the state in which the card issuer’s headquarters are located. This allows credit card companies to set up headquarters in states with higher interest rate caps, so they can charge card users around the country more interest.

Twenty-seven years later, in 2005, Congress passed BAPCPA, the new bankruptcy laws that effectively made discharging credit card debt harder for bankruptcy petitioners. Not surprisingly, credit card companies invested hundreds of millions of dollars lobbying for these changes.

The result of all this is that credit card companies located in states without interest rate limits can charge absurdly high interest
rates without risking much of anything, since filers are less likely to have their credit card debt excused during bankruptcy cases.
But the consumer disadvantage might go even further. According to Littwin’s research, the generally accepted belief that credit card restrictions and reforms (such as usury caps and regulation of penalty fees) would harm card users because of the substitution effect might not hold true.

The Substitution Effect

Apparently, traditional thinking holds that, if restrictions on credit cards made them less available to low-income borrowers, those borrowers would turn to other, more expensive sources of credit such as pawn shops, payday lenders, rent-to-own stores and more.

This is considered unfavorable because many “fringe” or “alternative” lenders charge higher interest rates and fees and come with less borrower-friendly terms than credit cards. This line of thinking leads to the conclusion that low-income borrowers actually save money by borrowing with credit cards (because they’re not borrowing from more expensive sources). For this theory to be correct, according to Littwin, these credit sources must be interchangeable and credit cards must not be the least desirable source of credit.

But Littwin’s research suggests that these two conditions aren’t in place, meaning that the substitution effect of credit sources may not be as powerful as it has generally been believed to be. The results, in fact, suggest that most low-income borrowers actually would benefit from credit card restriction and/or reform.

The “Temptation” Effect of Credit Cards

Perhaps the most intriguing element of Littwin’s study was the “temptation” effect of credit cards her subjects reported. Littwin makes reference to previous studies that have found shoppers willing to pay higher prices for items when credit cards or credit card insignia are present.

The individuals Littwin interviewed confirmed those results, and added that they felt “tempted” to spend money when they knew they had a credit card at their disposal.

These findings may not come as a surprise – the promise of getting something in the present and not having to worry about payment until the vague and undefined future may be too good to pass up. But this very feature was why Littwin’s subjects ultimately rated credit cards as one of the least favorable forms of credit, including rent-to-own stores and pawn shops.

It seems Littwin’s subjects ultimately disliked credit cards because they didn’t have a complete understanding of the terms of their credit card loans at the time they made their purchases. Littwin even suggests that credit card companies encourage this delayed understanding, since many card issuers:

• Display the “minimum payment” more prominently than total amount due on bills;
• Advertise introductory (teaser) rates that reset after a certain time period; and
• Create terms and conditions that cover several pages in small font, discouraging users to read and understand them thoroughly.

Littwin even noticed that her subjects tended to follow similar cycles with their credit card use:

1. Getting a credit card (for emergency use, purchasing power, improvement of credit score or curiosity);
2. Experiencing “temptation,” using the card for purchases without paying off full monthly balance;
3. Failing to meet minimum payments and/or finding that an issuer refuses to raise credit limit.

Once subjects completed the cycle, they generally focused on paying off their debt, which had driven many into financial ruin. Littwin noted that many subjects inquired about filing for bankruptcy during her interviews.

Because the “temptation to spend” associated with credit cards does not apply to other sources of credit, Littwin concluded that the substitution effect of credit cards is much less influential than once believed. Other credit sources (such as pawn shops) allow borrowers to be familiar with the terms of their loans at the outset and prohibit borrowers from borrowing outside of their means.

Are Credit Cards Too Unmanageable?

Littwin’s subjects rated credit cards extremely low for the quality of “transparency” or “manageability,” which was largely the reason they were ultimately unhappy with credit cards as a credit source.

Littwin suggests credit card reform that would give credit card users a greater variety of options when paying off their credit card debt to help users better understand the terms of their cards and avoid serious debt in the future.

A recent report published in Business Week documents the fairly new practice of buying and selling debts discharged in bankruptcy courts by creditors. According to the article, companies are purchasing the rights to debts that have been excused by bankruptcy judge—debts that consumers no longer legally owe!

Receiving a discharge of debts (also known as cancellation of debts) is one of the primary purposes of filing bankruptcy. When bankruptcy filers are excused from their debts by a bankruptcy judge, they are given a chance to start over on their finances with no money owed.

Reviving these cancelled debts means that companies are actively seeking payments and reporting unpaid amounts to credit bureaus as overdue. This can be harmful to your credit score, especially if you’re trying to reestablish credit after filing for bankruptcy.

As an example of the effects of debt revival, Business Week offers the story of a North Carolina resident who successfully completed a bankruptcy filing in 2002. Among the debts forgiven by the bankruptcy court was one to Capital One for more than $9,000.

When the man checked his credit report, though, that amount was listed as an outstanding obligation—and that wasn’t good. When he applied for a mortgage loan a few years after his discharge, the lender wouldn’t offer any money until the man could prove he didn’t owe Capital One any money.

When Capital One ignored phone calls and letters from the man’s bankruptcy attorney, the man paid the charge to clear his credit report and qualify for a loan. The worst part? His story is by no means unusual.
Many people who find illegally-revived debts on their credit reports decide to pay the amounts only because paying is the fastest way to improve their credit scores. Companies know this—that’s why the debt revival business is so lucrative. And when applying for loans, time can be crucial.

The most worrisome part of this trend is how common it has become. Even companies like Lone Star Funds and Bear Stearns, which are sizable and publicly traded, reportedly participate in the purchase of cancelled debts.
Sources indicate that bankruptcy judges are usually confused and shocked when they learn about the practice of buying and selling discharged debts. And with good reason: legally, nobody owes these debts to anybody, and all collection efforts are forbidden.

But, sadly, as long as companies report discharged debts as unpaid to credit bureaus, consumers who want to improve their credit scores will continue to pay.

Business Week notes that not every company handles illegal debt collection in the same manner. Some actively seek payment from customers, while others simply refuse to stop reporting the debt to credit bureaus until they receive payment. Either way, the consumer loses.

The good news is that, if you decide to take legal action, the law is on your side. The North Carolina man mentioned earlier did so, and a bankruptcy judge ordered Capital One to repay the $9,000 plus $14,000 in legal costs.

As yet, no definitive statistics have been gathered on the prevalence of the practice of reviving discharged debts. But observations by judges and bankruptcy lawyers suggest that it’s becoming more common. Remember that your bankruptcy lawyer is a priceless resource. If you have reason to believe that you’ve been victimized by debt revival, consult your lawyer immediately.

The same often happens to pro athletes who retire and continue to live the lifestyle of someone earning professional-athlete sized paychecks. One of the latest of such riches-to-rags stories is that of Jason Caffey, a one-time NBA star whose career ended five years ago.

Caffey, 34, played for the Chicago Bulls, the Golden State Warriors, and the Milwaukee Bucks during his tenure in the NBA. According to the Alabama Press-Register, he has recently filed for bankruptcy in response to child support payments he can no longer afford on top of his other debts.

Apparently, Caffey has already been in legal trouble twice in 2007 because of missed child support payments to the seven mothers of his eight children. In Georgia, a judge allegedly issued a warrant for his arrest, and he actually spent time in an Alabama jail. Sources indicate that Caffey hasn’t made a child support payment since May, 2005.

In bankruptcy cases, child support is considered a non-dischargeable debt, which means that Caffey will eventually have to cough up the money he owes his children’s mothers. But the automatic stay protection bankruptcy provides will prevent creditors (including the mothers) from making any collection efforts while the bankruptcy is pending.

Some of the mothers’ lawyers are allegedly glad to hear about Caffey’s decision to file bankruptcy. The protection will excuse Caffey from some of this other debt obligations, thus freeing up his resources for child support.

But how did Caffey, who signed a contract for $35 million in the not-so-distant past, end up in bankruptcy court?
According to sources, Caffey did not actually receive all of his $35 million because his career finished three years before his contract expired. And of course, taxes take a big chunk of that, and Caffey’s wife got a lot in their divorce.

Caffey’s bankruptcy attorney has allegedly insisted that the child support and alimony Caffey is currently expected to pay are not reasonable for someone no longer earning the salary of a professional athlete. Sources indicate that Caffey’s various investments offer him a monthly income around $11,500, and his child support payments cost him $7,000, or more than 50% of that sum.

Plus, according to the Press-Register, Caffey has invested around $2.5 million in restaurants and other business ventures that he expects to benefit his children financially years down the line.

Whether or not you think Caffey could have handled his finances better to avoid his depressing downfall is ultimately unimportant. His experience illustrates an important point: anyone can need bankruptcy protection. And, in some cases, filing bankruptcy is the most effective way to manage and protect what remains of your assets.

Often referred to as debt negotiation or debt arbitration, a debt settlement typically involves an experienced professional who works with creditors on your behalf to settle your debts at a lower amount than what is owed. In some instances, creditors may be willing to forgive a certain amount of debt in exchange for a lump-sum settlement payment.

Once a monetary amount is agreed to during the debt settlement process, the debtor will typically save up and then make the one-time payment in full. The debtor should later receive a letter from creditors stating that the debt has been fulfilled.

When Does a Debt Settlement Typically Apply?

Creditors may be willing to settle debts when:

• past attempts to collect have been unsuccessful;
• bankruptcy is a serious consideration of the debtor; and
• the debtor has been able to demonstrate severe financial hardship.

But why would creditors be willing to settle a debt at a lower lump sum than what you owe?

If previous attempts to collect the debt have been made and the debtor has shown severe financial hardship, creditors may be better off to negotiate and accept a lump-sum payment rather than taking the risk of getting less money after bankruptcy.

Learn More about the Debt Settlement Process from an Experienced Professional!

If you have massive unsecured debt and would rather not file for bankruptcy, speak to a professional debt negotiator as soon as possible. An experienced debt negotiator can help you look at your current financial difficulties and learn more about the debt settlement process.

Chapter 13 bankruptcy combines the automatic stay feature with a 3-5 year payment plan for catching up on payments, which makes it an attractive option for those seeking to avoid repossession or stop foreclosure.

A Chapter 13 Bankruptcy Lawyer in Your Area Could Be Your Best Resource

The Chapter 13 bankruptcy process is detailed and complex. Making mistakes can mean the loss of the automatic stay, the rejection of a payment plan, or extensions and delays for the bankruptcy filer. If you’re not sure if Chapter 13 bankruptcy is the right choice for you, you should consider consulting a bankruptcy lawyer in your area.

If you do choose to file under Chapter 13 bankruptcy, your bankruptcy attorney will be able to advise you during your filing process and help you navigate the various filing requirements and deadlines involved. Your lawyer can make sure your proposed plan will leave room for regular expenses as well as payments and affirm that you’ve accounted for all your allowable expenses.
Chapter 13 Bankruptcy Cases: Pre-Filing Requirements

New legislation enacted in October, 2005 dictated that all those filing personal bankruptcy under Chapter 13 or Chapter 7 of the United States Bankruptcy Code must complete a Credit Counseling Briefing approved by the U.S. Trustee. When your bankruptcy lawyer files your bankruptcy petition, he will also file your Credit Counseling certificate.

Those who attempt to file bankruptcy without a Credit Counseling certificate may not be accepted, which can be disastrous. A dismissal might give creditors an opportunity to take collection action, including foreclosure proceedings and repossessions, since the automatic stay would not be in effect.

You can either ask your bankruptcy lawyer to direct you to an approved Credit Counseling agency or opt for the approved Credit Counseling briefing available online at Start Fresh Today.

The Process of Chapter 13 Bankruptcy

Chapter 13 bankruptcy cases officially start when the bankruptcy petition is filed. Most of the time, the court will enact the automatic stay immediately after the case is filed, which prevents creditors from making any collection efforts while the bankruptcy is pending or until the bankruptcy court gives further notice.

The bankruptcy court will then provide notice of the filing to all creditors named in the Chapter 13 petition, and assign a bankruptcy trustee to the case.

The court will send a Notice of Commencement of Case to the petitioner and all creditors named in the petition within approximately 15 days of the petition being filed. In this notice will be key information like deadlines for claims and/or objections from creditors and the details about the creditors’ meeting (date, time, location).

Schedules detailing the petitioner’s assets, debts, expenses and income have to be filed within 15 days of the case’s start. In many cases, these schedules are filed at the same time as the petition, but in emergency situations (as when a bankruptcy filer is trying to prevent repossession or foreclosure), they can be filed separately so that bankruptcy protection isn’t delayed by the collection of information.

The Chapter 13 repayment plan must also be filed within 15 days.

The Repayment Plan in Chapter 13 Bankruptcy

One of the main contrasts between Chapter 7 bankruptcy and Chapter 13 bankruptcy is that Chatper13 involves neither liquidation of assets nor quick completion. Intended to allow those who are struggling financially to maintain ownership of their property, Chapter 13 filers develop a plan to catch up on their past due balances while staying current on new payments. A typical Chapter 13 bankruptcy repayment plan includes 36 to 60 months of payments during which debts are paid based on their priority. Secured creditors receive payment first, and remaining disposable income is funneled toward paying unsecured creditors. The hierarchy of payment has been established by U.S. Bankruptcy Code.

If all payments are made on time, any unsecured debt left over at the end of the plan can be discharged.

Chapter 13 Bankruptcy’s Pre-Discharge Requirements

Besides making the payments outlined in the Chapter 13 bankruptcy repayment plan, Chapter 13 petitioners must complete a financial management course (”Debtor Education”) approved by a U.S. Trustee to be eligible for a discharge. Your bankruptcy lawyer can recommend a Debtor Education course for you, or you can buy an approved Debtor Education course online at Start Fresh Today.

Who Is Eligible for Chapter 13 Bankruptcy?

Not everyone qualifies for Chapter 13 bankruptcy. To be eligible, a debtor must:

• Have a steady source of income from which to make pre-established payments to the bankruptcy trustee to benefit creditors;
• Have adequate disposable income for these payments after covering necessary living expenses; and
• Fall between the acceptable limits established for secured and unsecured debts.

These limits are periodically updated, and a bankruptcy lawyer in your area can let you know what exact current limits are. As of April, 2007, the limit for secured debt was just over $1 million, and the limit for unsecured debts was about $337,000.

If you do not qualify for Chapter 13 bankruptcy, you may still be eligible to file for Chapter 7 bankruptcy.

Chapter 13 Bankruptcy Benefits

As yet, no “cure-all” has been discovered for financial difficulties. The best alternative, whether it’s Chapter 13 bankruptcy, Chapter 7 bankruptcy, or some other alternative entirely, depends upon the debtor’s circumstances, amount and nature of debt, current income, and many other variables. Many people find Chapter 13 bankruptcy beneficial in the following situations:

• They’ve fallen behind on payments for secured property they want to keep. Many Chapter 13 bankruptcy petitions are filed specifically to stop vehicle repossession or foreclosure, but Chapter 13 can also be used to catch up on secured debts while keeping the property that secures those debts.
• They’re facing tax debts that are non-dischargeable through Chapter 7 bankruptcy. Some tax debts cannot be discharged, but can be included in a Chapter 13 repayment plan to be paid off over time.
• They have non-exempt property they wish to keep. Non-exempt property can be sold (liquidated) to benefit creditors in Chapter 7 bankruptcy, but Chapter 13 allows debtors to maintain ownership of their property while making scheduled payments.
• They’ve already filed for Chapter 7 in the past eight years and so are ineligible to file under Chapter 7.
• They want to protect cosigners on some debts. In Chapter 7 bankruptcy filings, cosigners who do not file bankruptcy are still liable for debts even if that debt has been discharged to the primary debtor. In Chapter 13 repayment plans, though, cosigners are protected as long as the debtor adheres to the plan.
• They have overdue student loan debt. Student loans are only dischargeable in Chapter 7 bankruptcy in very rare cases, but they can be included in Chapter 13 repayment plans.

Could Chapter 13 Bankruptcy Be the Choice for You?

Discussing your situation with a bankruptcy lawyer is not a final decision, it’s a step on the way to learning about bankruptcy. Too many people wait until they are in dire straits to contact a bankruptcy attorney, and then realize they have only a few days to stop vehicle repossession, foreclosure or other collection actions. Sound decisions can only be made with complete and accurate information. A Chapter 13 bankruptcy lawyer may be the best source for such information.

Also, they cannot take or continue any legal action against you, or repossess your car or other assets. And even if a garnishment order has been issued, the automatic stay stops garnishment of your wages.

What Can I Stop with the Automatic Stay Protection?

Foreclosure: If your home is undergoing foreclosure proceedings, the automatic stay will stop the foreclosure action. Though Chapter 13 bankruptcy is the best option for stopping foreclosure of your home, a Chapter 7 bankruptcy filing will also temporarily halt foreclosure action in most cases.

Utility shut-offs: One of the worst situations you can find yourself is in to be forced to live in an apartment or house with no lights or gas. If your lights and gas have been disconnected by the utility company, the automatic stay in your bankruptcy petition will require the utility company to reconnect your home to their utilities. Sometimes the utility company will require a small deposit within a reasonable time after you file for bankruptcy relief—if you cannot provide the deposit, they may be able to turn off your lights and heat after the bankruptcy filing.

Repossession: If you have an automatic stay, creditors or repossession agents cannot take your car. However, in this case, the automatic stay is just a temporary solution. In order to keep the car on a permanent basis, you will have to reaffirm your car loan or return the car in your bankruptcy filing.

Lawsuits/Garnishments: If you file for Chapter 7 bankruptcy, your automatic stay will stop all lawsuits and wage garnishments, effective immediately from the time that you file your petition. And, on top of getting your full pay check, if your debt is dischargeable, you will likely be able to eliminate the entire outstanding debt in bankruptcy.

SSI/Food Stamps/Public Benefit Overpayments: Public assistance agencies can collect any overpayment that they may have mistakenly issued to you in the form of SSI or food stamps. If this overpayment is being collected, the automatic stay will stop that process. Also, if your debt is discharged, this overpayment debt will be eliminated, unless the government agency can prove that it arose from fraud.

Tax Levies: An automatic stay can protect you from some IRS processes, including a tax levy or property seizure, for any debt you might owe. However, the IRS still has authority to audit you, require filing of tax returns, assess a tax liability and require payment of the assessment.

What Will Not Be Stopped with the Automatic Stay in My Bankruptcy?

Criminal Proceedings: The automatic stay will not stop a criminal action from proceeding. If you are facing charges of driving under the influence, drug charges or another other criminal charge, filing bankruptcy cannot prevent the state from prosecuting you or imposing fines and court costs. On the other hand, if your criminal charge can be separated into criminal and debt liabilities, the court may be able to stop a creditor from collecting the debt. Regardless, it is a smart idea to consult a local criminal defense attorney for a consultation if you’ve been charged with a crime.

Child Support Actions: The automatic stay is not able to stop a lawsuit against you seeking to establish paternity or to establish, modify, or collect child support or maintenance.

How Long Will the Automatic Stay Remain in Effect?

If you’ve filed a Chapter 7 bankruptcy petition and received an automatic stay, it will remain in effect until:

• You complete the bankruptcy and receive a discharge;
• The bankruptcy judge lifts the stay at the request of the creditor;
• The property you wish to protect is no longer part of the bankruptcy estate.

In exceptional circumstances, the automatic stay will not be automatically granted when you file your bankruptcy case, or may require a motion from your bankruptcy lawyer to remain in effect. This most often applies to those who have filed one or more other bankruptcy cases recently. However, a bankruptcy attorney will know whether or not these restrictions might apply to your bankruptcy case.

Whatever your current financial situation and interest in Chapter 7 Bankruptcy, an experienced bankruptcy attorney can be a useful resource for advice and up-to-date information for consumers. To be put in touch with a Chapter 7 bankruptcy attorney in your area, take a moment to fill out our free online case bankruptcy case evaluation form, or simply call 1 (877) 226-6844 today!

The Debtor Education Course is a mandatory part of the bankruptcy filing process, which must be completed after your bankruptcy attorney has filed your bankruptcy petition, but before you receive a discharge. Courses are available in person, by phone and via the Internet. A course that is approved by the U.S. Trustee’s list will include information on creating a budget, managing finances, and using credit wisely.

Where Can I Find an Approved Debtor Education Course?

You’ll find an affordable, interactive, online Debtor Education Course that can be taken anywhere at www.startfreshtoday.com. For other approved courses, check the U.S. Trustee’s list at www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm.

Is a Debtor Education Course Expensive?

Of course the cost will vary depending on a number of factors, including where you live and whether you sign up for an online, phone or live course. However, the U.S. Trustee’s office states that the average course runs between $50 and $100. The Start Fresh Today Debtor Education Course currently costs $49.

Law requires an approved agency to tell you the fees up front, without any extra cost for issuing the certificate.

When Should I Complete my Debtor Education Course?

The Debtor Education Course must be completed after you’ve filed your bankruptcy petition and before you receive your discharge. Because you will be filing for Chapter 7, you will only have a fairly small window of time during which the course must be completed.

How this Different From the “Credit Counseling” Briefing?

The Credit Counseling Briefing and the Debtor Education Course are both requirements for bankruptcy filing, but are completely separate. Each requires completion of a different program a separate certificate for proof that you completed both two programs. You must receive proof of finishing the Credit Counseling Briefing before you file, and with some very limited exceptions, your bankruptcy case will be dismissed if you have not completed the Credit Counseling Briefing beforehand. The Debtor Education Course must be taken after filing, but before discharge.

Call a Local Bankruptcy to Answer Your Chapter 7 Questions Today!

If you have any other questions about the debtor education course you will be required to take, the credit counseling briefing, or any other Chapter 7 Bankruptcy questions, speak to an experienced bankruptcy attorney as soon as possible. Get started by filling out our free bankruptcy case evaluation form, and we’ll help you schedule a free, no-obligation consultation with a local bankruptcy attorney.

Keep in mind: this requirement is not optional! Many bankruptcy cases have been thrown out because the individual filing did not complete or file the credit counseling certification, and bankruptcy court judges have hardly any room to waive or offer an extension to complete this step. It cannot be stressed enough that the course must be completed before you file you bankruptcy petition.

You may complete the Credit Counseling Briefing in person, over the telephone, or via the Internet. Sessions that qualify include an evaluation of your personal finances, discussion of any possible alternatives to bankruptcy, and help you design a personal budget plan.

After you’ve finished, you’ll get a certificate of proof that you must include with your filing.

Where Can I Locate an Credit Counseling Agency that the Court Approves?

One option for an affordable, interactive, online credit counseling briefing can be found at www.startfreshtoday.com. Other approved courses are available directly from the U.S. Trustee’s list at www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm.

Is Credit Counseling Expensive?

Of course the cost will vary depending on a number of factors, including where you live and whether you sign up for an online, phone or live course. However, the U.S. Trustee’s office states that the average course runs about $50. The Start Fresh Today Credit Counseling Briefing currently costs $30.

Law requires an approved agency to tell you the fees up front, without any extra cost for issuing the certificate.

When Should I Complete my Credit Counseling Briefing?

You must have completed the credit counseling briefing within six months before you file the bankruptcy petition.

I Have my Credit Counseling Certificate. Now What?

Your bankruptcy lawyer will file the credit counseling certificate along with your bankruptcy petition, as proof that you have observed the pre-filing requirement.

Are there Any Exceptions to the Credit Counseling Requirement?

There are very limited exceptions to the credit counseling requirement, and these are strictly prescribed by statute. Bankruptcy court judges have little or no authority to waive the credit counseling requirement. If for some reason you think you may not be able to complete the credit counseling requirement, speak with your bankruptcy attorney far in advance of your planned filing date to see whether or not you might fall under an exception and what documentation might be required.

Is This the Same Thing as the “Debtor Education” Course?

No, the Credit Counseling Briefing and the Debtor Education Course are two completely separate programs with separate certificates. However, you must successfully complete both if you are to receive a discharge in your bankruptcy filing. The Credit Counseling Briefing is done before bankruptcy filing, while the Debtor Education Course takes place after filing, but before discharge.

If you’d like to learn more about bankruptcy before getting started, feel free to explore the Chapter 7 website. You can learn more about the protections offered by Chapter 7 bankruptcy, including the automatic stay, as well as alternatives to Chapter 7 bankruptcy, such as Chapter 13 bankruptcy.

Whatever you choose to do, don’t let your creditors control your life any longer. Fill out our free bankruptcy case evaluation form and get in touch with a local bankruptcy attorney today.

Updated as of: February 22, 2008.