The majority of debtors' bankruptcy plans fail within the first year, leaving them at the discretion of their creditors. When debtors fail to emerge from bankruptcy, the court no longer provides protection, permitting creditors to repossess property, initiate collection efforts, and garnish wages.
The Bankruptcy Abuse Prevention and Consumer Protection Act severely constrained options for debt relief. Prior to BAPCPA, Chapter 7 protection was frequently sought by debtors. This chapter of bankruptcy permits the liquidation of assets to repay debts. The remaining balances are canceled, and the debtors are given a clear slate financially.
BAPCPA requires debtors to repay a portion of their outstanding debts through Chapter 13 payment arrangements. The quantity of payments is determined by the'means' test. The debtors' income is compared to the median income in their respective jurisdictions. When income is greater, Chapter 13 bankruptcy must be filed. If income is less, Chapter 7 bankruptcy may be an option for debtors.
Due to the complexity of BAPCPA's rules and regulations, debtors should retain the services of a bankruptcy attorney. BAPCPA requires attorneys to submit a letter attesting that all information in the petition is accurate.
Attorneys are required to conduct extensive research to confirm that debtors have accurately reported their personal finances. Otherwise, they may expose themselves to the possibility of breaking the law. Additional research increases legal fees. Additionally, debtors are responsible for court costs and mandatory credit counseling.
Before the court will sanction a petition for bankruptcy, the new laws require debtors to obtain credit counseling. Counseling must be obtained from specific, court-approved agencies.
Once the Chapter 13 payments are authorized, the debtors make payments to the bankruptcy trustee assigned to their case. The court monitors and distributes payments until all debts have been repaid. Debtors must maintain accurate records of all bankruptcy payments and court-issued check statements.
To prevent foreclosure, individuals who have filed for bankruptcy must adhere to their payment schedule. When mortgage debt is reorganized and the debtors subsequently fail to emerge from bankruptcy, efforts to save their home will be futile. Banks can resume foreclosure proceedings where they left off prior to bankruptcy. If they were going to foreclose in 10 days, they can foreclose in 10 days after bankruptcy failure if they were going to foreclose in 10 days.
Insolvency has far-reaching consequences. Your credit will be severely damaged for several years. The Bankruptcy Abuse Prevention and Consumer Protection Act prohibits debtors from incurring new debt until the payment plan obligation is satisfied. Those who fail to emerge from bankruptcy will not be eligible for credit for at least two or three years. When they are able to obtain credit, their interest rates will be significantly higher.
Auto, renter's, and homeowner's insurance policies may be affected by a bankruptcy. Additionally, it may impact employment opportunities and accommodation options.
It is prudent to investigate bankruptcy alternatives to determine if there are alternatives that can produce comparable outcomes without the severe consequences. Credit counseling, debt consolidation, mortgage refinancing, home equity loans, and debt settlement are common alternatives.
Occasionally, bankruptcy is the only viable alternative. If so, consult your attorney about including sufficient breathing room in your proposed payment plan. Unanticipated expenses are frequently the reason why the majority of bankruptcy plans fail.""
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