Bankruptcy is the officially declared term defining the failure or impairment of organizations or individuals to pay off their debts. The legal formalities allow creditors to file a bankruptcy petition against debtors in an effort to recover the debt. In several cases, debtors start bankruptcy process in what is called “voluntary bankruptcy” filed by the bankrupt organizations or bankrupt individuals.
Usually, lawyers file economic failure cases in the United States Bankruptcy Court, which is an association of the U.S. District Courts. Numerous insolvency cases’ terms of validity of exemptions and claims mainly depend on State law.
Therefore, State law plays a vital role in various insolvency cases. In addition, it is often impossible to simplify insolvency law across various states of America.
There are six types of insolvencies under the Bankruptcy Code in the United States:
Chapter 7: This is a type of basic liquidation for businesses and individuals.
Chapter 9: Civil economic failure.
Chapter 11: Reorganization or rehabilitation, used mainly by corporate debtors, but is sometimes also used by individuals with huge assets and debts.
Chapter 12: Rehabilitation chapter for fishermen and family farmers.
Chapter 13: It is a rehabilitation chapter with a payment plan for people having normal income source.
Chapter 15: It is an economic failure chapter for subsidiary and other global cases.
The TRUTH is that the regular types of personal economic failure filings in the U.S. are Chapter 13 and Chapter 7. A national report revealed that around 65% of all U.S. consumer filings appear under Chapter 7. Organizations and other business classes file under Chapter 11 or Chapter 7.
Recovering from foreclosure can be daunting. But as bad as it seems all is not lost. By starting to re-build your credit today you should be able to purchase another home in a short amount of time sometimes within a year. You will pay a higher interest rate ( Bankrate.com) but you can rejoin the ranks of home ownership. If you wait 2 years, you may even qualify for an FHA loan, which carries a completive interest rate. So what will your credit look like?
The “foreclosure” on your credit report will have a dramatic effect on your scores. Sometimes they can cost you in the neighborhood of 200 points or more. The strangest part is that the only why to improve your credit is to use credit (as stupid as that sounds).
Here are some steps you can use to re-establish your credit:
Step 1 - Pay more than the minimum every month if you can. (I know duh!)
Step 2- Always pay one week before the due date. This literally forces you to budget and when you need that those last couple days you’ll have time to move money around.
Step 3 - Keep your balances at 35% or lower of the credit limit of any credit cards. I know easier said than done. This is something to shoot for. You are no longer paying a mortgage and hopefully you are rent is fairly reasonable.
Step 4 -A great part of your credit score is made up of the ratio of credit you use compared to the limit of credit you have available. If you close a credit card with a $5,000 credit limit for example, you reduce the available credit you have by $5,000 which increases your utilization ratio, which lowers your credit score.
The TRUTH is nobody likes losing there home but don’t lose your mind. You will make it back this is a small blimp in your credit history. Maybe you can be the inspiration for people losing their homes like you did. By then you should be an expert.
Picture this, you’re sitting at home, comfortably watching football on your 70″ big screen you bought a month earlier on credit. Your children are busy playing PS3 and your wife is at the salon getting her hair done, all of which has been paid for with credit. The only problem with this picture is you live in a crappy apartment with unopened mail on the floor. Then it appears, a huge, smelly, gray, hungry elephant. It’s so big you can’t deny it’s existence. At first you try to move your chair so you can get back to the game but the smell is ridiculous and everywhere you look you see elephant, he takes up the entire room.
Your wife comes home and all she talks about is this gigantic elephant in your home. Your kids think it’s cool to have a elephant to play with but they don’t understand it can crush them in an instant. Your next problem is you have to feed this animal and it’s very expensive. Every month the elephant gets bigger and bigger; shrinking your standard of living.
Then your boss calls you into his office on Friday and you find out you have been laid-off. Your first thoughts are of your wife and kids, then that freaking elephant that’s in your living room. By this time, the animal is so big it’s impossible to get it out of your living room without action. You must finally make something happen.
The TRUTH is the only way to get rid of the elephant (a.k.a. debt) is to remove it in pieces (and no, this is not encouraging animal cruelty, it’s a metaphor). When it comes to debt you don’t want to be forced into action. You may treat it like a pet at first but when it gets in the way of the TV that means it’s time to change your habits. So how big is the elephant in your living room?.
One of the most frustrating parts of my job is the amount of lies that I’m told on a daily basis. While popular opinion is the debt collectors lie and break the law to get paid, if you only knew the caliber of some of the people on the other end of the phone you would see that it goes both ways. In all honesty, I have more respect for the people who never pickup the phone than the people that blatantly lie or constantly bounce checks. Here is a list of my Top 3 Stalls and how we the debt collectors view them.
1. “I’ll pay you when I have the money” - It’s great that you take responsibility for the debt but when you agree to pay monthly and don’t that’s not acceptable. Don’t be annoyed that people are calling when you have this attitude.
2. “Send me proof of the debt” - Now, I understand full well people have the right to dispute charges. However, if you have made payments for 10 years without question and then suddenly are not able to and have stopped, we all know you have no need to dispute the charges. This is the ultimate stalls of all stalls.
3. “I need to speak with my spouse” - I love this one because it shows a lot about the individual. If you can’t make a decision about your own finances, then credit card debt is the least of your problems. I know that in some households one person is in charge of finances but if you have no clue as to what kind of payment you can afford to make, then some changes need to be made.
The TRUTH is that some people have a lot more creative stalls than others. However, all they do is delay fixing the problem; kind of like what the U.S. government has done with Social Security. I digress, as a collector my job is 1first to get paid and second to provoke action. Time, in the end, is always more valuable than money. If your credit means something to you, the longer you wait to fix the problem the more it’s going to cost you to stay on the sideline.
Credit Card Fraud is something we all think happens to everyone but ourselves. I recently found a video on Youtube that will show you that it can happen to you and that the person stealing from you could be within punching distance. I don’t show you this to worry you, I show you this to educate you and help you identify when someone is “cloning” a card”. If you do, I suggest a you call the authorities ASAP and get this scum off our streets.
The TRUTH is that unfortunately there is not much you can do to stop credit card fraud. If you live life worrying about this kind of thing you would end up locking yourself in your house and never leaving. If this is a concern, I suggest hiring a reputable credit monitoring service (I use PrivacySource through Bank of America). More than likely at least some point in your life you may become a victim of fraud. Don’t be surprised when it happens; be prepared.
