Credit Card Offers and Avoiding Bankruptcy

Undoubtedly bankruptcy is a good idea to avoid, be it as an individual or a business owner.

There was a time that Walt Disney himself suffered with a breakdown along with bankruptcy. But he did overcome it; people who suffer bankruptcy end up with a tarnished credit score, other people from history that suffered bankruptcy such as H.J.Heinz who was forced in to it by his creditors, and then there is Milton Hershey who ended up dominating the chocolate industry after he came out of his bankruptcy.

And surprisingly when Henry Ford had his first motorcar company he had to file for bankruptcy. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (S.256), which went into effect in October 2005, would be benchmarks in understanding it, say you were using unsecured personal credit to finance a small business.

Chapter 7 labels the term straight bankruptcy i.e. your assets are liquidated and sold on as repayment for your debt. There is an exemption that can allow you keep your house and car for the purpose of your work. Most often if there is more debt once you have had all your stuff sold it is voided i.e. unsecured debt like loans also credit card bills. Once you have filed though chapter 7.

There are other forms of bankruptcy that are the more major ones. Chapter 13 covers this in the fling of an individuals debt also chapter 11 covers the business mans reorganization in both instances the creditors and your self along with the court must arrange a suitable agreement that is based upon the repayment of your debt over a length of time.

It is now a lot harder for any one to file for a chapter 7 with the law the way it is. It is more probable you will have no choice but to file for a chapter 13 bankruptcy. If you have a lager to mid-size company that demonstrates the ability to survive with bankruptcy protection they would be able to file for chapter 11 reorganization protection.

There is without a doubt going to be impact the small business and individual in 2003 in the United States there were about 1.175 million chapter 7 bankruptcies filed. (Source: November 14 2003 News Release, Administrative Office of the U.S. Courts).

The larger amount of people that filed was individuals that wanted relief from debt. Around the same time less then haft looked at filing for chapter 13 protection now though you can assume this number will get greater.

It is estimated that 20% of bankruptcy filings from consumers (according to the National Association of Consumer Bankruptcy Attorneys) are attributable to the small business. With this in mind you can conclude that both business and individuals will be more liable to such an extent that has never before been known.  

As it is now harder for you to file under chapter 7, it has become a whole lot easier for the small business owners to get what they deserve. This is what you call great news as if they were creditors that were looking at collecting debt from their customers and vendors.

You can now get paid for any service of goods you provide 20 days before bankruptcy is filed for. In the parts you had to wait for your secured creditors were paid up giving the end result of the business owner losing out.     

As a debtor it is conceded a lot harder to be able to have your debts wiped clean as an individual. It is also conceded the same if you are a trader or a small business or an entrepreneurs looking to seek protection just down the road after your bankruptcy was filed.

They will not believe how much harder it would be to try and stay in business or even think about starting a new business. After all it is said that at least a third of business tend to fail around the 3-year mark, the harsher rules will make a huge impact on the economy.   

The law regarding business owners defines that you are looked upon as an individual i.e. haven less then two million in debt you can expect to have a court appointed bankruptcy trustee that analyses your financial records and make a report to determine if you should file under chapter 7, allowing the sale of all your assets to clear up your debt. Or if they think you are eligible for the Chapter 11 or 13 Reorganization protection.

However the trustee determines what is best it can especially be a problem if you have used your personal assets to finance your business. Anyone who dose not follow the (e.g. LLC, Sub Chapter S Corp, C Corp, etc.), and fails to separate there business and personal credit and assets will with out a doubt be at risk and regret it. As you will end up loosening a part of your personal assets whether it is chapter 7, 11 or 13 bankruptcy

The legal experts’ fear that now the law is clamping down entrepreneurs will be discouraged from starting over again if they do not clear their debt. In turn this could well stop new businesses from starting up.

The Executive director of American Bankruptcy Institute said there are a couple of key considerations to take into account when it comes to the new bankruptcy laws.

The biggest change is that you must seek assistance from a credit agency before you file for bankruptcy. You must show that you are doing everything you can to sort out your financial problems. Plus you need to attend a money management course. The court can make some exceptions in the case of an emergency.

The court has special rules that can decide if your case qualifies for chapter 7 protection. And everyone is subject to a means test; this is a test that measures how much you can comfortably afford to pay off your debt. If you income is higher than the median for your state the court can in fact refuse to allow bankruptcy. They do take into account your living expenses plus that you can pay at least 25% of your unsecured debt. Which includes credit card debt.

If your net income is above the state median and you are able to pay 25% you cannot apply for Chapter 7 protection but you can try for Chapter 13 protection. If your income is below the state median but you can still pay 25% your state will decide if you are eligible for Chapter7 or 13. Protection.

Another interesting fact is that if you give your attorney false facts to file they can be held liable for the inaccurate facts you supplied. They must inform you of their fees, give a written contract, and verify your information.

Tell you that legally you do not have to have an attorney to file your bankruptcy. And they must not tell you to acquire more debt so that you can then go for bankruptcy. Because of this your attorney may be less inclined to fight for you and charge you more for his service.

If you do not file within 45 days, apart from the fees that you will accrue your file could be dismissed this includes providing proof that you have been for money management, credit, information on net income, and employment.it counselling, financial records such as a tax return,

You cannot be discharged of debt through Chapter 13 if you filed Chapter 7, 11, or 12 in the last four years. Had you filed Chapter 7 you would have to wait six years but now there is a new law it will be eight.

Lastly, you cannot be granted a discharge of debt through Chapter 13 if you already filed Chapter 7, 11 or 12 in the past four years. Previously, if you had filed a Chapter 7 bankruptcy, you would have to wait six years to file again, but under the new law you will have to wait eight years.

Although bankruptcy should only be used as a very last resort sometimes there is no option and in these day of climate change the unexpected can and does often happen.

However it can also be to your greater advantage to try to come to some agreement with your creditors yourself. They will listen if you are making a genuine offer, but do not make the mistake of offering what you know deep down you simply cannot manage as this will only make things that much worse, on the other hand if you make an offer that although smaller than they would like is genuine and you know you are able to maintain it then this will by far be the better route to take.

Bankruptcy is never a nice position to be in but you can climb out of this hole that you feel trapped in many great people have had to face the same struggle and many more are bound to follow in your footsteps.

So be strong, stick with the arrangements that you make, try to keep your finances as well looked after as you would look after yourself and if the worst cannot be avoided keep a calm head and take just one step at a time.