Bankruptcy is not something that everyone wants to do, but there are times when your credit card debt and mortgage payments get behind and it becomes a decision whether or not to file bankruptcy. With the US financial meltdown and job loss at record numbers, it seems inevitable that many people are being forced into filing chapter 7. This fortunately is not the end of the road for these individuals. Consumers should take a lesson from their financial mistakes and fight on for a better tomorrow by eliminating their credit card debt. With the new law in place it's a little bit harder to file Chapter 7 bankruptcy. Now, under the 2005 Bankruptcy code everyone must take a means test. This test requires your income to be at or under the median income of your state. For most people filing bankruptcy is the last and only resort.
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The minute you file bankruptcy the court orders an automatic stay and it immediately stops all actions against your property by a creditor or collection agency and it also will temporarily stop any lawsuit or foreclosure filed against you. Essentially, when you file bankruptcy, anyone who you owe money to must prove to a bankruptcy court that you do in fact owe them the money. The bankruptcy trustee, who is assigned to you, will then decide based on your assets and current income who and what bills get paid with remaining unexempted assets. The Automatic Stay can be a powerful tool if you're being evicted, foreclosed on, behind on your utility bills and being threatened to be shut off, late on your car payment and numerous other reasons. You can see how this would help you buy time when you are in financial distress.
In a bankruptcy filing, there are two types of debts, secured and then unsecured. In a nutshell, secured debts have collateral and unsecured debts don't. Mortgages and car loans are two most common types of secured debts. Creditors take extra steps to reduce the risk of the loan by taking collateral for the loan, a lien on a house, car or other property. For these loans, there are two components: first, a promise to pay the debt and secondly, a right to sell the property if the promise is not kept. This right to the property survives bankruptcy discharge. If someone is in default of the loan, the right to sell the property is triggered. Bankruptcy law varies so it is very important that you seek the advice of a bankruptcy attorney to know if filing for bankruptcy will be a default in your state. If someone does not keep the loan current, the creditor's only remedy may be to foreclose or repossess the property. In fact that may be the only way that a creditor can get title to the property so that they can sell it.
Debts owed on most credit cards, like Visa or MasterCard, are almost always unsecured. That means that they will simply be discharged in a bankruptcy filing. It doesn't matter if you use the card for household goods, business expenses, or even travel. Of course, if you use a credit card within 90 days of filing for bankruptcy or at a time when you know you were going to have to file bankruptcy, you might find that such use is considered fraudulent and therefore not dischargeable. Typical types of secured cards are those from electronic stores like Best Buy. Electronic companies tend to securitize your use of the card with high-cost purchases, such as a computer. That can mean that when you file Chapter 7 bankruptcy you might have to give back the computer or keep making the payments. Often, however, the store can't produce the necessary documentation to prove the items being secured and you will get to keep the property anyway and discharge the debt.
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