Most people have heard of chapter 7 bankruptcy. In this posting, I want to explore how it works.
Chapter 7 is based on the idea that you cannot afford to make any payments on your debts. To put it another way, even if you had no debts, your living expenses alone leave you broke by the end of the month. The court doesn’t take your word for this. You have to prove you can’t pay your debts. You submit a statement of your monthly income and living expenses. You must provide proof of earnings and tax returns as well. People with above-median income have additional requirements. Continue reading
Its possible to reduce the debt on your vehicle by filing a bankruptcy case. This benefits vehicle owners who owe more than their car is worth. Both chapter 7 and chapter 13 allow for reducing the vehicle loan. Continue reading
Debt consolidation companies advertise that they can negotiate with your creditors for lower payments and interest rates. They claim they can help you repay your debt quickly and improve your credit score immediately. If this sounds too good to be true, that’s because it is. Problems with debt consolidation include:
A client told me recently that her employer reduced her hours. She expects to earn $500 per month less that her previous income. Fortunately, chapter 13 provides flexibility in situations like hers. In many cases, its possible to change the payment amount. The law requires a showing of a substantial change in circumstances. She should have no trouble in meeting this requirement. Continue reading