Declaring personal bankruptcy is often the right choice for those who are unable to pay their creditors because of certain circumstances in their life, such as medical bills, job loss, or a divorce. If you are thinking of declaring personal bankruptcy for these reasons, you may be wondering what it will cost you. Will you lose everything in the process?

Luckily, much of your property is exempt from being taken and sold during your bankruptcy proceedings. There are two types of exemptions: federal and state. While some states will only allow debtors to use state exemptions, other will let you choose whether state or federal exemptions will benefit you the most.

Before you decide to declare personal bankruptcy, you will need a bankruptcy attorney and a correct understanding of what exemptions actually are.

What Are The Different Types of Personal Bankruptcy Exemptions?

There are many different types of exemptions you may come across when declaring personal bankruptcy. Here are just a few.

• Homestead Exemption- The most common type of bankruptcy exemption is the homestead exemption. This exemption applies to the home where you live principally, and does not apply to second homes and vacation homes. Your specific state will determine how much this exemption is. For instance, in Alabama, the maximum claimed value of your homestead can not be more than $50,000. In Texas, though, there is no limit at all. Although your home may be exempt from your bankruptcy, this does not mean you are not still responsible for making your mortgage payments.

• Vehicle Exemption- Another typical exemption used while declaring personal bankruptcy is the vehicle exemption. This exemption allows debtors to keep one vehicle, as long as it is valued at a price below the state’s exemption requirement. Even if the price is about the requirement, though, you may still be able to keep the car if you pay the trustee the difference between the requirement and the value of the vehicle. Exemption requirements vary by state, and, like the homestead exemption, you must still make your monthly payments for the car if you wish to keep it.

• Other Exempted Property- Other types of personal property may also be exempt when you are declaring personal bankruptcy. For instance, your household appliances, clothing, life insurance, child support, alimony, retirement plans, and jewelry up to a particular value. Even expensive tools can be exempt if you must have them in order to continue your employment. For instance, a professional musician’s guitar would not be lost during bankruptcy, even if it was worth a lot of money. This type of ‘tools of the trade’ may also help you maintain a second vehicle if you use the second vehicle for business purposes.
  

There are many reasons you may be considering declaring personal bankruptcy. While this proceeding will help you gain a fresh start, you may be worried you will lose  your assets during the process. With a basic understanding of the types of exemptions available to you, and the right personal bankruptcy attorney, you will have no problem keeping the certain possessions you need.

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Declaring personal bankruptcy and divorce seem to go hand in hand these days, and, like the classic chicken or the egg scenario, it is often confusing which comes first.

Declaring Personal Bankruptcy and Divorce

According to www.divorcerate.org, half of all marriages in America end in divorce. This number is quite staggering, and only becomes worse in second and third marriages. Many times, these divorces often occur at the same time as the bankruptcy cases. According to the www.examiner.com, 32% of Americans file personal bankruptcy every year. There are two reasons for this.

• Bankruptcy Leads To Divorce- Declaring personal bankruptcy can be stressful for couples. As you and your spouse review all of your debt, this review may shed a light on communication and financial problems you never knew you had. You may argue over the stupidity of buying that second home while your spouse continues to justify the expenditure. Many times, a marriage is a balanced concept: one spouse is a spender while the other is a saver, verifying the phrase ‘opposites attract.’ During bankruptcy, this creates the perfect storm of marital and financial problems, often ending in divorce.

• Divorce Lead to Bankruptcy- If a couple has filed for divorce already, they may often find themselves contemplating declaring personal bankruptcy. This is typically because they are left with a significant amount of debt after the divorce and only half of the income. The divorced individuals must pay for two households at the same time as they split the bills from their marriage, and it can prove to be too much.

Saving Your Sanity and Bank Account When Declaring Personal Bankruptcy

For many couples, the thought of declaring personal bankruptcy at the same time as a divorce is a bit overwhelming. Before this leads to another fight though, try communicating and determine whether bankruptcy is going to truly lead to a divorce, or whether you can avoid a divorce while still declaring personal bankruptcy.

• To avoid a divorce caused by financial stress, consider creating a budget and a few spending guidelines for when your bankruptcy is complete. If you and your spouse can both stick to the budget, you may be able to avoid turning your financial problems into a divorce or second bankruptcy case.

• Communicate, communicate, communicate. You can prevent stress between you and your spouse by taking the time to communicate about your financial situation. Discuss how you are going to spend your money, why you need to spend it on certain items, and what you can do to reduce spending.

• Don’t play the blame game. Often couples who are considering divorce blame the other spouse for their current situation. A marriage is an equal partnership and you are just as responsible for your finances as your spouse is.

• If you decide that divorce is the best option, keep communicating. If one spouse decides to declare personal bankruptcy after a divorce without the knowledge of the other spouse, creditors can go after the other spouse once the debt is discharged. By communicating, both of you can work together to get rid of the debt for good.

Divorce and declaring personal bankruptcy often go hand in hand. Make sure understand how financial stress can affect your marriage before you decide to declare personal bankruptcy.

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Once you have met with your bankruptcy attorney and made the decision to declare personal bankruptcy, it is important for you to understand the process thoroughly. If you are looking for a step-by-step guide through chapter 7 bankruptcy, you have come to the right place. We can help you understand what will occur throughout this process.

Step-by-Step Process When You Declare Personal Bankruptcy

• Credit Counseling- Ever since the changes in the personal bankruptcy code, those who wish to declare personal bankruptcy must first undergo credit counseling courses. These courses must be approved by the government, and a certificate of completion must be presented to the court afterwards. During these courses, a credit counseling will help you determine whether bankruptcy is your best option, or if you could benefit from debt negotiation or other alternatives to personal bankruptcy.

• Automatic Stay- Once you have decided to declare personal bankruptcy and gone through your credit counseling courses, an automatic stay will be placed in effect by the court. This prevents your creditors from contacting you for collection while your bankruptcy is underway.

• Meeting of The Creditors- This meeting is required for all bankruptcy cases. During this time, you will meet with all of your creditors and swear under oath that all of the information in your bankruptcy petition is correct.

• Liquidation- If the trustee of your bankruptcy case determines you have non-exempt assets, he or she will seize and sell those assets at this time. The money gained from the sales will be used to pay back your creditors.

• Reaffirmation of Debts- If you want to keep your second car or other non-exempt debt you still owe money on, you can reaffirm those debts at this time. This means you will agree to keep making payments to your lender so your assets can not be sold by the trustee.

• Debtor Education- Before your bankruptcy case can be completed, you must first take part in debtor education courses. These courses are designed to help you gain a fresh start after you declare personal bankruptcy. Tips on how to save money, handle your credit, and manage money will be included in these courses.

• Discharge- A bankruptcy discharge is the final goal. At this time, your bankruptcy case will be completed and you will no longer have to worry about paying off your discharged debts. Make sure you understand what debts have been discharged and which have not though. Some debt, like taxes, student loans, and child support, may not be dischargeable through bankruptcy.

• Dismissal- A dismissal is not the same as a discharge. If your bankruptcy case is dismissed, your bankruptcy is over, but you will still owe your debts and will no longer be protected by the automatic stay. A dismissal can occur for a variety of reasons, such as mistakes on your petition, fraudulent behavior, or an inability to qualify for chapter 7 bankruptcy.

You will be unable to declare personal bankruptcy for another six to eight years, so make sure you consider your decision to declare personal bankruptcy to be a long-term helping hand, instead of a short-term fix.

For more information on personal bankruptcy, be sure to follow our website.

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If you are not currently a legal resident of the United States, you may be wondering whether or not you can declare personal bankruptcy. The simple answer to this question is yes. Before you take steps toward bankruptcy though, make sure you understand what is expected of you and what complications may arise during the process.

Declare Personal Bankruptcy In Spite of Your Immigration Status

While it may be surprising, the bankruptcy code does not state that illegal immigrants can not declare personal bankruptcy. In fact, no reference to citizenship is made at all. The code simply states that an individual who wishes to declare personal bankruptcy must be a debtor with residence or property in the United States.

Laws Surrounding Personal Bankruptcy

However, declaring personal bankruptcy as an illegal immigrant isn’t as simple as it is for a US citizen. There are a couple of factors you must consider before declaring personal bankruptcy.

• Every debtor who decides to declare personal bankruptcy must provide proof of permanent residency or proof of ownership of property.

• Identification must be provided to the court during a bankruptcy case. For individuals who do not have a social security number, an individual tax identification number, or ITIN, is needed. An ITIN can be obtained by anyone who lives and works in the United States, regardless of citizenship status.

• It is used by individuals who can not legally obtain a social security number, but wish to pay taxes to avoid trouble with the IRS.

• If an illegal immigrant decides to declare personal bankruptcy and has been using a fake or stolen social security number, this number can not be included in the bankruptcy proceedings. Any debt incurred under this social security number may not be able to be discharged.

The Threat of Deportation For Those Who Declare Personal Bankruptcy

Bankruptcy itself is not a crime, and therefore can not result in the deportation of an illegal immigrant. However, illegal actions before and during your bankruptcy case may result in deportation. For this reason, many illegal aliens are hesitant to declare personal bankruptcy. With help from an immigration lawyer and a bankruptcy lawyer, though, you should be able to file bankruptcy and continue your residency in the US, whether you have applied for citizenship already or not.

Here are some steps you should take to make sure your bankruptcy is a success.

• Be honest. Even if you have been using a fake or stolen social security number, it is important to be honest with your attorney and the court. Even though you may not be able to eradicate the debt you accumulated under this number, using it on your bankruptcy petition constitutes fraud and can result in jail time and deportation.

• Act as if you are a responsible citizen of the United States, even if you aren’t. Crimes of “moral turpitude” will result in deportation. This means you should not write fraudulent checks, should pay your taxes, and avoid filing fraudulent bankruptcy petitions.

• Transferring assets or money to another individual prior to filing bankruptcy is frowned upon and could result in a dismissal of your bankruptcy case. Unless you are paying for regular living expenses, avoid this situation altogether.

If you are having financial difficulties and wish to declare personal bankruptcy, don’t let your citizenship status stop you. According to the bankruptcy code, anyone can declare personal bankruptcy as long as they own property or live in the United States.

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So, you have decided to declare personal bankruptcy through chapter 13 and everything seems to be going well. It appears you have everything in order. There may be one little hitch though: you didn’t file a previous year’s tax return. How will this affect your case when you decide to declare personal bankruptcy?

Unfilled Tax Returns Can Stop You When You Choose To Declare Personal Bankruptcy

If you decide not to file your taxes, however, this may affect you when you declare personal bankruptcy. The IRS and your state department of revenue are both usually included in the list of creditors who must be notified when you declare personal bankruptcy. Once these offices are notified, they may decide to file a claim for estimated liability.

An estimated liability claim amount usually depends on how much money you earned in previous years, when you did file tax returns. For instance, if you only earned a little over $2,000 in 2009, but filed a tax return in 2008 stating you earned $47,000, the IRS will assume you made the same amount in 2009. Unfortunately, this is not always the case. You may have been fired from your job or laid off. However, this is the assumption the IRS will make, and they will also include any interest, tax liability, and penalties in the estimated liability claim.

Without the proof of a tax return showing you earned no income in 2009, the trustee for your bankruptcy case will either:

• Require a written statement from you stating you were not legally obligated to file your taxes for that year due to a low gross income.
• Dismiss the bankruptcy case due to the fact that your debt to the IRS and the state revenue department is not known.
• Hold off on the creditors meeting for up to 120 days. Your lawyer may have to request this if it is not done automatically. During the 120 days, you must ensure you have filed your tax returns for the past four years.
• Convert the case to a chapter 7 bankruptcy case, depending on the amount of money you are perceived to owe from the estimated liability claim and the best interest of both you and the creditors.

Take Care of Your Taxes Before You Declare Personal Bankruptcy

Before you choose to declare personal bankruptcy, make sure all of your taxes are taken care of. Even if you do not make enough money during the year to file taxes, file anyway. This will ensure you have a tax return to show the court should you decide to declare personal bankruptcy in the future. Also, filing your taxes allows you to enjoy many of the government benefits set up specifically for low income individuals, such as the earned income credit.

For more information on declaring personal bankruptcy, continue to follow our website.

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Unfilled Tax Returns Can Stop You When You Choose To Declare Personal Bankruptcy

It isn’t unusual to not have to file a tax return. According to the IRS Publication 501, single individuals under the age of 65 who make less than $9,350 a year are not obligated to file taxes. This publication also states when other individuals are not legally obligate to file. However, this doesn’t mean they shouldn’t. There are certain benefits to filing taxes outlined by the IRS at www.irs.gov, such as earned income credit, American opportunity credit, or additional child tax credit.

If you decide not to file your taxes, however, this may affect you when you declare personal bankruptcy. The IRS and your state department of revenue are both usually included in the list of creditors who must be notified when you declare personal bankruptcy. Once these offices are notified, they may decide to file a claim for estimated liability.

An estimated liability claim amount usually depends on how much money you earned in previous years, when you did file tax returns. For instance, if you only earned a little over $2,000 in 2009, but filed a tax return in 2008 stating you earned $47,000, the IRS will assume you made the same amount in 2009. Unfortunately, this is not always the case. You may have been fired from your job or laid off. However, this is the assumption the IRS will make, and they will also include any interest, tax liability, and penalties in the estimated liability claim.

Without the proof of a tax return showing you earned no income in 2009, the trustee for your bankruptcy case will either:

• Require a written statement from you stating you were not legally obligated to file your taxes for that year due to a low gross income.
• Dismiss the bankruptcy case due to the fact that your debt to the IRS and the state revenue department is not known.
• Hold off on the creditors meeting for up to 120 days. Your lawyer may have to request this if it is not done automatically. During the 120 days, you must ensure you have filed your tax returns for the past four years.
• Convert the case to a chapter 7 bankruptcy case, depending on the amount of money you are perceived to owe from the estimated liability claim and the best interest of both you and the creditors.

Take Care of Your Taxes Before You Declare Personal Bankruptcy

Before you choose to declare personal bankruptcy, make sure all of your taxes are taken care of. Even if you do not make enough money during the year to file taxes, file anyway. This will ensure you have a tax return to show the court should you decide to declare personal bankruptcy in the future. Also, filing your taxes allows you to enjoy many of the government benefits set up specifically for low income individuals, such as the earned income credit.

For more information on declaring personal bankruptcy, continue to follow our website.

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Declaring Personal Bankruptcy – Do You Know the Law?

When the new laws were set into place in 2005, it became mandatory for most individuals to obtain a certificate of credit counseling from an approved credit counseling agency. This certificate must be obtained 180 days prior to declaring personal bankruptcy or within five days after the individual has filed. The certificate must then be submitted to the personal bankruptcy court.

Lists of approved credit counseling programs are provided by the government and can be found for each state at www.justice.gov. According to the Federal Trade Commission (FTC), the counseling generally costs about fifty dollars, and last for an hour to an hour and a half.

There are exceptions to this rule, of course. According to the bankruptcy code 109 (h) (4), disabled individuals may be immune from having to undertake credit counseling. However, the code states that the individual must be so mentally or physically disabled they can not, under any circumstance, attend credit counseling through an internet, telephone, or face-to-face briefing. The disabled individual must also show he or she made a reasonable effort to participate in the credit counseling, despite his or her disability. This part of the code also provides exceptions for individuals currently participating in active duty military in combat situations.

What Happens to Your Personal Bankruptcy Case If You Miss the Credit Counseling?

So what happens if you don’t submit your credit counseling certificate? In most cases, the bankruptcy court will hold a hearing to determine whether you have good cause for skipping this vital step in the bankruptcy process. You will be required to attend this hearing, either in person or over the phone, as long as you are physically capable of appearing.

The judge will look over the evidence provided and decide whether you can move forward in declaring personal bankruptcy after determining these factors:

• Physically Or Mentally Disabled- If you can show a judge you are so severely disabled you were unable to attend credit counseling, your obligation may be waived.

• Reasonable Effort- One of the best reasons to hire a personal bankruptcy lawyer instead of going pro se is how much your lawyer can help you. If you can show you attempted to consult with your lawyer, accountant, or even tried to contact the credit counseling agents yourself, and these individuals testify that it was difficult communicating with you, you may be able to have your certificate requirements waived.

• Other Impairment- If you are in active duty military, participating in a credit counseling session through a face-to-face, telephone, or internet briefing may be impossible for you. If you are disabled and can not walk, hear well, or see well, this type of impairment may excuse you from participating in credit counseling.

While disabled and active duty military members may be able to prove their inability to provide a credit counseling certificate, others may not be. If you are in good health and are not in a combat zone, you will have no choice but to take an approved personal bankruptcy credit counseling course within the allotted time period and provide the court with your certificate of completion.

Without this certificate, you will not be able to continue with the process of declaring personal bankruptcy. Be sure you are aware of and comply with the personal bankruptcy laws to make your process smooth and stress free.

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Understanding Personal Bankruptcy and Student Loans

The battle between student loans and credit cards relating to declaring personal bankruptcy rages on, and these days, student loans are winning. According to an article by USA today, the student loan debt in the United States is more than $850 billion, while credit card debt is at $828 billion. While there may not be a significant difference between the two, it does give us a little understand as to why so many graduates are being forced into declaring personal bankruptcy.

Declaring Personal Bankruptcy and Student Loans

As you know, if you consider declaring personal bankruptcy for student loans, you must prove they are causing you undue hardship. With a failing job market, high interest rates, and already high tuitions, though, this usually isn’t too difficult. According to USA Today, a student with a $30,000 debt can expect to pay about 6.8% interest. This means their monthly payment for the next ten years would be about $350. For some, this is an entire rent or mortgage payment.

Students who are thinking of declaring personal bankruptcy should consider the following if they wish to declare undue hardship and discharge their student loans.

• You must show that you have made a reasonable effort to find employment within your specialized field. For instance, if you went to college and obtained a degree in psychology, you need to be working, or show that you have made an effort to find employment, in that field.

• Your personal bankruptcy case much show that your circumstances are not likely to change any time soon. If you are currently working at a fast food restaurant, for instance, you must show that you have made an effort to find higher paying employment and are unable to. And you must prove that no jobs will be available in your specific field within the next few months or a year.

• You must show that you have made an effort to pay on your loans. Even monthly payments that are lower than required will do, as long as you can show you are trying.

• If you can prove you attended a fraudulent school or your education played no role in helping you obtain a job in your current field, you may be able to discharge your student loans when declaring personal bankruptcy.

Without proof of undue hardship, you will not be able to discharge your student loans in bankruptcy. This means that even though student loan debt is higher in the US than credit card debt, you may be forced to consider declaring personal bankruptcy for credit card debt faster than you would be for student loans. It all depends on your specific circumstances and whether you are able to discharge your loans through bankruptcy.

Before you decide declaring personal bankruptcy is the best option for you, make sure your debt allows you to use this tool to obtain a clean slate. Credit card debt will more than likely be easier to discharge than student loan debt, unless you can show the court it is causing you undue hardship.

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Would it surprise you to find out that declaring personal bankruptcy is not always necessary? Many individuals who think about declaring personal bankruptcy may not even have to do so, because their credit reports have errors on them. These errors can prevent them from successfully obtaining loans, increase interest rates on already established credit, and make them susceptible to penalties and fees. Before you decide declaring personal bankruptcy is the best solution for you, consider the following.

Medical Bills Play a Big Role When Declaring Personal Bankruptcy

One of the most common credit report errors that individuals come across is medical bill errors. These are often caused by bills the individual didn’t even know existed. If you have recently been the hospital, you know what kind of debt you can rack up quickly. And all of this debt is sent in separate statement for the doctor, anesthesiologist, the pharmacist, the ambulance, the hospital, and so much more. It is likely you will receive about ten bills for just one hospital stay. So, what happens if you only receive nine of them?

If you don’t pay your medical bills, no matter how small, they will be sent to a collection agency. As soon as the collection agency receives the claim, the credit report agency is notified. Even the smallest debt left unpaid can have a serious impact on your credit score. According to the Wall Street Journal, there are individuals who tried to refinance their homes and discovered their credit rating has dropped 50 or more points. One man, who discovered a $42 medical debt on his credit report, was refused the opportunity to refinance his home, unless he paid over $4,000 in closing costs.

How Credit Report Errors Can Force You Into Declaring Personal Bankruptcy

Errors on your credit report can cause a significant amount of damage and may force you into declaring personal bankruptcy. Here are just a few ways a drop in credit can affect you.

• Inability to take out loans to pay off debt. Even if you have a steady income and could easily pay off a loan, without good credit, you will be unable to do so. This will leave you with nothing but your income to pay off the debt, and could put you in a bind, forcing you to consider personal bankruptcy.
• Increases your current interest on established loans or debt. With a poorer credit rating, you may not qualify for that fabulous interest rate on your credit card.
• Create fees and penalties on your debt. Credit errors and hidden medical bills don’t stay at the same rate for long if you don’t get rid of them. You may have forgotten to send in that last $25 medical payment three years ago, but today it may be $300 or more because of fees and penalties.

Before you consider declaring personal bankruptcy, take a good look at your credit report. If you see something suspicious or find a long lost bill, you may be able to avoid declaring personal bankruptcy altogether.

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Declaring Personal Bankruptcy & Your Business

With the current economy, more and more individuals with small businesses are facing declaring personal bankruptcy. Individuals which to get rid of personal credit card debt personal loans, but don’t want to involve the credit and loans associated with their small business. Is declaring personal bankruptcy without the involvement of the business possible for these individuals?

How Declaring Personal Bankruptcy may be a Problem for the Self-Employed

While act of declaring personal bankruptcy when you own a small business may seem like a simple solution, it can often be a big problem. If the business is a proprietorship, it may not be possible to separate your personal debts from the business’s debts. A proprietorship does not distinguish between the owner and the business. An example would be ‘Sarah’s House of Flowers.’ By law, this type of small business is considered to be a single entity and all debts are considered to be personal.

When you are declaring personal bankruptcy with a proprietorship, any assets that are not considered to be exempt could be seized and sold to help pay off your debt. Even customer lists, contracts, and pending agreement with customers can be sold for a profit and may be seized.

Often times, when declaring personal bankruptcy, your small business could actually impede you from being eligible for bankruptcy. A trustee for chapter 7 bankruptcy could object to your filing because of ‘income suppression.’ This means the trustee would argue you have:

• Intentionally left a high paying job to start the small business, which lowered your income significantly
• Refused to take opportunities in your small business that would have helped it to grow
• Have not used your current level of education to your advantage and are instead chasing a dream at the expense of the creditors you owe

If the judge determines in favor of the trustee, you will not be able to continue declaring personal bankruptcy and your case will be dismissed.

What Can You do to Avoid Problems When Declaring Personal Bankruptcy?

You are much more likely to avoid problems if your small business is incorporated. It is then separate from you and less likely to cause issues to arise when declaring personal bankruptcy. An incorporated small business means you are not the sole owner, but have partners. Keep in mind that a chapter 7 trustee may still frown on you declaring personal bankruptcy and may recommend you sell your share of the company to your partners.

To avoid having issues when declaring personal bankruptcy, here are some other steps you can take:

• Separate your individual finances from your business finances as much as possible.
• Incorporate your small business with partners.
• Keep records of your successful ventures and even your unsuccessful ones, to show the court you have made an effort to keep your business afloat.
• Make sure your education matches your small business.

Also, when declaring personal bankruptcy, you should always consult with an attorney. You’ve already handled plenty of issues that brought you to the decision to file personal bankruptcy. You certainly don’t need additional confusion and obstacles at this point of your financial future.

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