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The first step to overcoming a debt problem is recognizing it. If worries about your credit cards or a pending foreclosure are keeping you awake at night, you probably already know you’re in over your head. Just cruising along, juggling credit cards, taking from one to pay the other is not the answer. If this describes your situation, then doing nothing just makes the hole bigger and your position more desperate.

Here are 12 signs that that could indicate financial stress.

  1. You routinely spend more than you earn.
  2. You make only the minimum payment required on your credit cards.
  3. Your credit limit is maxed on most of your cards.
  4. You’re unsure about how much you owe or what may be on your credit report.
  5. You skip payments on some bills in order to pay others, or use cash advances on one credit card to pay off another.
  6. You find yourself arguing with your spouse about money.
  7. You’ve recently been turned down for credit or a loan.
  8. You panic when faced with an unexpected expense, such as a car repair.
  9. You owe more on your car than it’s worth.
  10. There’s no more equity in your house.
  11. Creditors are calling you about overdue bills.
  12. You’re thinking lately about filing for bankruptcy.

Though it is a common enough word, what exactly does bankruptcy mean? And what are its implications?  As is to be expected, filing for bankruptcy is a complicated process but before such a step is taken it is essential to understand exactly what it is all about.

Simply put, bankruptcy can be defined as the legal process thorough which individuals or businesses in financial trouble are able to work out their debts and pay them out under the protection of the bankruptcy court.  Often “liquidations” or “reorganizations” are the words that are used to sum up the process that unfolds when you file for bankruptcy.

The two kinds of bankruptcy that you can file for are Chapter 7 and Chapter 13.  There are various factors that would determine whether you should opt for Chapter 7 or Chapter 13.  Through Chapter 7 Bankruptcy you liquidate all unsecured debt, providing any assets you may have are exempt under bankruptcy rules. Most people never lose anything, because they don’t have any non-exempt assets.  In the event debtor is making too much money, they choose Chapter 13 Bankruptcy, which is the reorganization type of bankruptcy. The debtor is allowed three to five years over which to pay back a portion of the debts, based on disposable income. Say that you have $100.00 in disposable income. You would have to pay that into a plan for 60 months. After 60 months, the balance of your debts would be discharged in full, even if they are far from being paid off.

One should keep in mind that there are intricate details to this legal process that need to be taken into consideration before decisions are made to file for bankruptcy.  Who qualifies? Which kind would apply to you? Will you be able to keep all of your property?  There are many such questions that arise in such a situation.  In this situation, you need to consult with an experienced bankruptcy law firm that can guide you through these complicated decisions and procedures.

Filing for bankruptcy may not be the solution to all your financial problems though.  In fact, bankruptcy does not cover all debts.  For example, debts related to child and spouse support, or taxes are not covered in bankruptcy.

Do you have a Co-signer?

Before filing for bankruptcy it is important to know that your co-signer might be held liable for the co-signed debt. However, a Chapter 13 bankruptcy may protect your co-signer, since it offers a partial repayment plan. With a Chapter 7 bankruptcy, only the debtor is protected and the co-signer would be liable for the debt.  In this case, the creditors have the right to demand that your co-signer pay off the outstanding payments.

Under chapter 13 bankruptcy, as long as the bankruptcy plan is active the co-signers will receive a stay for the duration of the debtors payment plan. At the end of the plan, a co-signer could once again liable to pay any outstanding payments, even though the debt is discharged in favor of the bankruptcy debtor.

Don’t lose another sleepless night! For advice on bankruptcy, debt consolidation or mortgage loan modification, call the Law Offices of Paul M. Allen. Consultations are free, but by appointment only. Offices in Glendale 818-552-4500 – 818-334-5445, Cerritos 562-865-4480 – 562-356-9931

(This article is for information purposes only, and does not necessary reflect the company’s opinions and views on general issues. We make no warranty, prediction nor representation, nor do we assume any legal liability for the completeness of any information and its effect on any case. Each case is different and results depend on the facts of each case. Consult with and retain counsel of your own choice if you need legal advice.)

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