In the article, Dugas quotes Gerri Detweiler, a personal financier, on how you may not be able to afford bankruptcy. This is a common problem. While the filing fee of $299 for Chapter 7 and $274 for Chapter 13 may seem minor to some, to many that is money which might take months to collect.

The point addressed in the article is that if you lack the funds in such a way, you likely have little to no assets a creditor can take. Since bankruptcy lawyers are not free, you can use what’s been called the “do nothing” approach. Though it rarely works, for some who have no assets to lose, it’s an option. You have nothing they can take. You write the creditor a letter explaining you cannot repay the debt. And you ask them to stop collections against you. Sometimes it can be as simple as that.

But what if you own some assets and/or have a job? Dugas highlights how you should find out if your state has wage garnishments, and also to see your rights when it comes to your assets. If you have a job, creditors can try to get money from you by using a wage garnishment, though state laws differ on this. If you have a lot of assets, these can legally be taken and sold to pay off your debt. If either of these circumstances occur, you need to really consider bankruptcy. It may very well be your best option.

Whether you have decided to file bankruptcy or not, you should be aware many scam artists are out there looking to cash in on your mistakes. This occurs most commonly to home owners who are told they can save their home by paying the scam artist.

Foreclosure is of course a bad ending for your home. Once again, you may want to consider bankruptcy. It may very well be your best protection against losing your home.

Finally, the USA Today article makes another good point that should be addressed. Retirement money, 401Ks, and pensions should be off limits. The article does not take long in addressing this, so let’s be clear. If you have to choose between spending retirement money or filing bankruptcy, the majority of the time you want to file bankruptcy. Using this money may only buy you a few months. If you’re only buying time and not solving the problem, bankruptcy is a better choice.

There are both reasons to avoid bankruptcy and reasons to file. It’s good to educate yourself on the laws, but it’s okay to be somewhat confused on how it works. At the least, consult with a financial consultant if you feel your finances are out of your control. If you are considering bankruptcy, make the best choice and hire an experienced lawyer.

This is an uphill battle with a lot of problems, including high unemployment rates, the mortgage bust, and millions of Americans lacking in proper medical coverage.

According to government data, the U.S. bankruptcy filings have reached the highest point since 2005. The Reuters article points out how clearly unemployment is part of the problem. But it is more than that. With over 1 million filing bankruptcy in 2009, it would not have been wrong to see that as a watershed moment.

However, instead of improving, the economy is struggling. Consumer bankruptcies have not just gone up: since the calendar year as of June, we are looking at over 20% increase in filings.

Quarterly filings between April and June, cited in the Reuters piece, note how the problem is still less serious than the economic slump of 2005. In 2005, in one quarter over 600,000 consumers filed for bankruptcy.

Of note is that this is the year that new bankruptcy code made it more difficult to file for Chapter 7 bankruptcy.

According to the bankruptcy code changes of 2005, if you make more than the median income of your state, which can vary from $30,000 to about $50,000 per year for individuals, you are not eligible for Chapter 7 bankruptcy.

On the other hand, pushing consumers to file Chapter 13 not only encouraged financial responsibility but opened the door for less foreclosures to occur. If used correctly, a Chapter 13 bankruptcy can be more effective in protecting your home.

Because of the changes, filings for Chapter 13 increased. Whether this had a clear affect on the foreclosure rates may not be obvious. What we do know is that bankruptcies have once again increased. In the quarter of April to June, over 400,000 bankruptcies were filed, the first time the limit has gone that high since 2005.

This does not mean growth isn’t coming, nor does it mean filing bankruptcy is a bad idea. This news does mean there is a lot of work to be done.

If you are unsure of whether bankruptcy is right for you, it’s time to consult with a lawyer. If you’re scared you’ll lose your home, it’s best to act now. And if you have a huge debt over your head, understanding how the laws work can be invaluable.

What does that mean? Say for example you are falling behind on mortgage payments; you decide to do nothing, hoping it will work itself out. This isn’t a trial case, as by doing nothing you risk losing everything. Since bankruptcy can be complex, and since it has many advantages, you should consider hiring a lawyer prior to making any decisions.

If you try to save your own home by yourself, you might run into difficulty navigating laws. Let’s use these as the first reasons you should hire a lawyer before filing bankruptcy.

Do Nothing or Do Something and Benefit
You can avoid filing bankruptcy, of course. There are alternatives to bankruptcy, but this post isn’t about negotiating with creditors; it’s about getting a fresh start financially. If you do nothing sometimes it will work out. Your reasons for doing nothing can be many, but the disadvantages are too great. If you do nothing, you could lose your home to the lender and your car to the repo-man. If you hire a lawyer immediately, you actually save time and money.

Saving Your Home from Foreclosure
Did you know that if you way too long to file for bankruptcy, you could lose your home? If you fall behind in payments you should talk with a lawyer. And note Chapter 7 bankruptcy, which will absolve you of the debt, will often force your trustee to sell the home to pay back your debts. Chapter 13 bankruptcy is the alternative. An experienced lawyer can walk  you through the steps and help you save your home with Chapter 13.

Before Filing Chapter 13 Bankruptcy
Before you file bankruptcy, you should consider all your options. Chapter 13 bankruptcy is not for everyone. It does have distinct advantages — saving your assets from foreclosure the biggest. An experienced lawyer can save all your assets if you hire him/her before it’s too late. They can advise you on how to navigate the laws.

When Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy has advantages too. Before filing, you should be aware of laws such as exempt and nonexempt properties. Some property you can keep, some property you might lose. But what can you save? An experienced bankruptcy lawyer can explain and help on how to save the most property and how to eliminate the most debt.

Peace of Mind
It may sound minor, but peace of mind may be the best benefit of hiring a lawyer before you go into bankruptcy proceedings. It’s not impossible to do everything yourself, but in most situations hiring a lawyer saves you time, money, and headaches.

What really is foreclosure?
Foreclosure means you’ve fallen behind in mortgage payments and your lender decides to sell your home. If you do nothing, you will lose the home. If you act before the lender decides to initiate foreclosure proceedings, you can in fact protect your home with what’s called an “automatic stay,” which stops the foreclosure from going through.

How can Chapter 13 help?
Chapter 7 is a liquidation, Chapter 13 a debt repayment plan. You pay nothing, in most cases, with Chapter 7 as your assets are sold. Chapter 13 means you still owe money, but your payments are restructured over 3-5 years. That means if you can stay current with the Chapter 13 repayment plan, you can keep your home.

Foreclosure Process
Here’s what happens if you fail to act quickly enough. This is what could happen if you wait too long to file, or if you do absolutely nothing.

First, you fall behind in mortgage payments. How soon is this? It varies in different states, but technically foreclosure can begin after one missed payment. However, few lenders act that quickly; the majority wait until you fall far behind.

Second, depending on the state, the lender will usually send a notice explaining their intent to foreclose your property. This is a ten day notice, and by this time it may be too late to file for Chapter 13 to save the home.

The lender’s next step is to file a lawsuit with the courts; if you can catch up with payments, this won’t happen. You have a chance to fight this case in court after being given a summons, by responding within a few weeks. This is your opportunity to prove to the judge that something is wrong with this process. At this point, you might consider hiring an attorney to help you. The best choice would clearly be to hire a bankruptcy attorney before this process is initiated.

The next steps are pretty straightforward: you are told of intent to sell if the courts don’t stop it, an auction is held on your home, and you are either evicted or allowed to stay.

That last step, where you are either evicted or allowed to stay, depends on the state. Many states allow you to stay in the home until you are given an official eviction notice.

Steps to Avoid Foreclosure
These laws can be navigated if you take immediate action. Since the time involved depends on the lender, the court, and the market for your home, sometimes you have more time and sometimes you have little if any. There are few ways to gauge how this will work in terms of time. So upon falling behind in payments, if it’s clear you won’t be able to catch up, contact a bankruptcy attorney. The good news is, with Chapter 13 filing, you can save your home.

The first step in filing bankruptcy in New York is hiring a bankruptcy attorney. You must make this decision if you really want to file, and then who you’ll hire. This post will help.

Advantages of Bankruptcy

It was mentioned that alternatives to bankruptcy are often not as effective. Depending on how the courts treat your case, how much you owe, what assets you have, and what you make, filing bankruptcy has clear advantages
Chapter 13 Advantages: Save your home and property, and buy time to pay back bills
Chapter 7 Bankruptcy Advantages: You can clear most credit card debt, and many other debts

How to Hire a Bankruptcy Attorney in New York
If you look online, you can see thousands of bankruptcy attorneys just in the state of New York. Across the country, there are tens of thousands. However, they are not all equal, can have varying skills, and most important charge different rates. You want to hire a bankruptcy attorney in New York who is not overloaded with work, but is trusted. Referrals can really help in this process.

Create a list of potential bankruptcy attorneys you’re interested in. Research the topic, ask for referrals, and look over websites. Then, query attorneys on years experience, how many bankruptcies they file for clients on  a monthly basis, and how much they actually charge you.

How Can They Help You File Bankruptcy?
If you want to hire a bankruptcy attorney in New York, they must be knowledgeable of all laws concerning bankruptcy. They should also be willing to take calls from your creditors during the proceeding; if creditors call you constantly, this gives you peace of mind. Also, with new laws for filing  bankruptcy in New York and across the country, filing for Chapter 7 bankruptcy and liquidating your assets isn’t always an option. Now more bankruptcies are being changed to Chapter 13 bankruptcies, where you have to pay back debts and not discharge them.

With bankruptcy law changes, if you make too much money you may be forced to file for a Chapter 13 bankruptcy repayment plan instead of filing for Chapter 7 bankruptcy. If you’re unsure, hire a professional bankruptcy lawyer in your state today.

So when is Chapter 13 bankruptcy a good option? How are you eligible? And how can you fund the repayment plan? Let’s go over these questions.

When Chapter 13 Bankruptcy is a Good Option
Chapter 13 bankruptcy does have advantages over Chapter 7 bankruptcy, but clear disadvantages as well. This is again a case where professional counsel, a bankruptcy lawyer, can help.

In essence, Chapter 13 bankruptcy does not liquidate your assets and discharge certain debts like Chapter 7 bankruptcy does. You are not free and clear a few months after filing. Chapter 13 bankruptcy is about getting more time to pay back debts; it’s often a solution for those who earn a lot of money but still cannot pay all their bills. Also, rich or not, if you fear your house will go into foreclosure, Chapter 13 bankruptcy and the court can grant you an “Automatic Stay” to buy you several months time. You still have to make your initial mortgage payment, but the repayment plan grants you several years to catch up in a fair way.

Eligibility for Chapter 13 Bankruptcy
As noted earlier, businesses are not eligible to file for Chapter 13 bankruptcy. Businesses typically file for Chapter 11 bankruptcy. However, business owners can file for Chapter 13 bankruptcy as an individual.

For individuals, the key to Chapter 13 bankruptcy filing is to show the court you have enough disposable income for the repayment plan. This means that after your allowed expenses and secured debts, you can still have enough money to complete the 3-5 year repayment plan. Your repayment plan must show how you will pay all these debts back in full, or the court will deny the filing.

Funds You Can Use for Repayment Plan
There is a variety of income you can use to fund your Chapter 13 plan. These can get complex, and that’s where professional bankruptcy lawyers can help you. You can definitely use regular wages or income from self employment, for example, and also Social Security benefits.

Other Rules of Chapter 13 Bankruptcy
You cannot owe too much money and file for Chapter 13 bankruptcy. The number changes every few years, but if you have over one million dollars in debt you might have too much to file. You also must be current on income tax filings.

Hiring Counsel
Hiring a professional bankruptcy lawyer can help you navigate all these laws with ease, save your home from foreclosure, grant you time to pay back debts, and give you a fresh start.

How Cancellation of Debt Occurs

When you borrow money money, and the debt is canceled or forgiven by the lender, you sometimes have to consider this canceled debt income for taxes. If you borrowed $50,000 dollars, and paid by half of that, $25,000 would be considered as income for tax purposes. So if you bought a home for that price, you can expect some of the resultant debts to show up after bankruptcy.

What is Cancellation of Debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

More Info on The Cancellation of Debt and Taxes
This income isn’t always taxable. The most important part of the Mortgage Debt Relief Act of 2007 was how it applied to homeowners; if you have a qualified principal residence which went into foreclosure or where the debt was forgiven, you do not have to pay taxes on the forgiven debt.

Also, debts discharged through bankruptcy are not considered taxable income by the IRS. There are other ways your canceled debt may not be taxable, but let’s focus on the Mortgage Debt Relief Act of 2007 and how it applies to debtors and home owners.

How the Mortgage Forgiveness Debt Relief Act of 2007 Works
If you have debt reduced by mortgage restructuring or by foreclosure, you qualify for the relief. If on the other hand you are going into bankruptcy, your debts are not forgivable in most cases. That does not mean that you’ll lose your home, but mortgage debt isn’t part of Chapter 7 bankruptcy. If you are earnest in wanting to keep your home, Chapter 13 bankruptcy can buy you time to pay back the loan. If you on the other hand are considering foreclosure, you may consider the Mortgage Act of 2007 as a means of relieving debt.

There is some fine print to those statements. The best thing you can do is a contact a professional bankruptcy attorney in your state who can consult with you on options. A bankruptcy attorney can tell you restrictions and requirements on eliminating tax debt by filing Chapter 7 bankruptcy. The attorney can also explain how Chapter 13 bankruptcy is now much more common than ever before.

Let’s go over the 5 requirements you have to meet in order to eliminate tax debt.

1-Your tax return must have been due at least three years ago. That means, if you file behind one year or two years ago, you cannot get the tax debt discharged yet.

2-The return then must have been filed at least two years ago with the IRS.

3-The tax debt must have been assessed a minimum of 240 days ago. The IRS must recognize the tax debt at a minimum of 240 days ago, in other words.  So if you file for bankruptcy and want the tax debt eliminated, the debt needs to have been present for 240 days or longer, and the IRS must have in some way recognized this debt.

4-The tax return itself must be completely truthful. If there are errors, intended or not, the tax return is fraudulent in many respects, and the debt cannot be discharged.

5-Last, you cannot be guilty of tax evasion.

As you can see it can get complicated. However, in a nutshell, all you really have to worry about is the time frame, that the  IRS recognizes the debt, that the tax return is correct, and you’re not guilty of tax evasion. That likely keeps most options on the table.

What a Bankruptcy Attorney Can Do
There are some more footnotes to this discussion.  You should at a minimum consult with bankruptcy attorneys. While it’s true you can discharge your tax debt completely with Chapter 7 bankruptcy, in some cases home owners may have to pay back in other ways. This is because you cannot discharge a federal tax debt. If the IRS reported a tax lien on your home, you may have to pay back that lien before you can sell it.

A professional bankruptcy attorney knows how to handle not only situations in the courtroom, but all the paperwork involved in handling back taxes. This can be quite complex. You may try and do it yourself, but a few mistakes and you may be in trouble.

But if you successfully file Chapter 7 bankruptcy, you can expect major debts to be eliminated. If you file for chapter 13 bankruptcy, debts like taxes can be paid over a more reasonable time frame. Choosing between the two is a discussion between you and your bankruptcy attorney.

Kinds of Federal Loans
The two kinds of federal loans are FFEL(Federal Family Education Loans) and Federal Direct Loans. FFEL loans are made by private lenders and guaranteed by the government. In this case, if you default or file bankruptcy, the lender is reimbursed by the government. “Federal Direct Loans” pretty much speak itself: they are direct loans from the U.S. government.

Other Loans
There are also school federal loans, where the school issues a federal student loan. Repayment plans depend on the school. Lastly, there are private loans, which are made with federal funds and come with the least options for repayment. You typically need to discuss with the lender repayment options, along with what happens if you default or file bankruptcy.

If You Think You’ll Default on the Debts
If you do default, it’s best to find out in advance. For repayment plans, you don’t want to wait until you’re far behind on payments, as many of the following options will not be available to you. Also, you are not locked into any plan, typically being able to switch your plan once a year.

Repayment Plan Forms
Standard repayment plans are offered by your lender, where you make payments for up to 10 years. You pay less interest here, but your monthly payments are higher.

Graduated repayment plans are common too, mainly because you can start small (when you’re in school) and start paying more over time (as you get work).

An extended repayment plan allows you to pay smaller amounts for up to 25 years. You need to have a balance of more than $30,000.

Last, income-based repayment plans are unique in that, as it sounds, you can pay based on how much money you are making. If you had a job but lost it, the income would go down, and therefore the monthly payments would go down.

Default and Bankruptcy
If you think you’ll fall behind in payments and might default, it’s best to act early. If you fall far behind, the government can take money from your income tax return, garnish your wages, or even take back federal benefits (if you’re on social security, for example).

The best move is to hire professional counsel if you fall far behind and cannot catch up. In most cases, you cannot file Chapter 7 bankruptcy and get your student loans discharged. This is where a professional bankruptcy attorney can help you.

You can learn more by hiring a professional California bankruptcy attorney to go over your case. Even a brief consultation with a lawyer could save you a lot of headaches.

Before deciding if bankruptcy is right for you, let’s go over the bankruptcy basics.

For individuals, you’re going to be filing Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankrupt has for years been the more popular one, but new bankruptcy code has made it difficult for many to file under Chapter 7 in California and across the nation. Now, Chapter 13 bankruptcy is often advised.

Chapter 7 bankrupt liquidates your assets, clears you of most debts, and does so within a matter of months. Chapter 13 bankruptcy pays back assets over time, and you usually don’t lose much if anything as long as you stay with the repayment plan. If you feel you cannot pay back outstanding debts, Chapter 7 bankruptcy is wise. If you don’t want to lose your home and have income coming in regularly, get with a Chapter 13 bankruptcy attorney who can go over the advantages of Chapter 13 bankruptcy.

Now let’s go over the decision making process of California bankruptcy.

Alternatives
There are many alternatives to actually filing bankruptcy, including working with debt counseling agencies. This is another point where professional counsel is valuable. You often have more options than you think.

Limits on Bankruptcy
Did you know that if you have enough income, you may be forced to file Chapter 13 bankruptcy? That’s what was alluded to earlier: sometimes you are forced away from Chapter 7. On the other hand, if you wanted to save your house or car, you might think Chapter 13 is the way to go. If your debts are too high and your income too low, you will likely have trouble filing. These are things you should really study as filing bankruptcy is not usually a quick fix.

Debts Canceled
Not all debts will be canceled, even if you file Chapter 7 bankruptcy. Some debts can be canceled but do not limit what the creditor can do to take back property. This is a called a secured debt, and  some items can be lost.

Credit Cards
There are many good things about filing bankruptcy, especially in times when you feel debts are piling up. You can, for example, wipe your credit card debts by filing Chapter 7 bankruptcy. This is perhaps the biggest benefit of filing bankruptcy, as credit card debts and interest rates sometimes only grow.

Keep All Your Property
One big advantage of Chapter 13 bankruptcy is the options you have the time you can buy. For instance, you might be falling behind on house payments, have other outstanding debts, but have a good job about to start. You might be able to pay back all these debts, including your house payments, over an extended period of time. Chapter 13 bankruptcy typically gives you 3-5 years to pay these back. If you love your home, and would do anything to keep it, Chapter 13 bankruptcy is a good option.

Personal Life
Filing California bankruptcy is a way to clear debts, save property, and give you a fresh start. However, it will not make all your problems go away, nor will it be easy to file for. The best thing you can do is hire a California bankruptcy attorney who can help.