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Thread: Dancers, if you're anywhere near bankruptcy ...

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    Default Dancers, if you're anywhere near bankruptcy ...

    ... you may seriously want to file for bankruptcy NOW before the recently passed new bankruptcy law takes effect.



    The major reason for concern is that unlike the previous law which basically accepted the person's 'statements' in regard to their income and delinquent bills, the new law requires that attorneys VERIFY the income and delinquent bill situation of their clients before filing. Thus, unless you have a 'squeaky clean' record in regard to bookkeeping and paying income taxes, it's highly probable that attorneys will either shy away altogether or charge exorbitant prices to file for bankruptcy on behalf of a person whose actual income is unverifiable.

    Besides the verification of personal financial situation issue, the new bankruptcy law also brings into play new rules which essentially will require anybody with the potential of a non-poverty level income to file Chapter 13 instead of Chapter 7. Where Chapter 7 basically erased past debts, Chapter 13 requires that after bankruptcy the person continue to make small payments to previous creditors. Chapter 13 basically allows a bankruptcy judge to establish the bankrupt person's monthly budget and forces the person to follow that budget for the next 5 years. This court determined budgeting process takes into account IRS data on average costs of living in a particular area, and may force a bankrupt person to move into a cheaper apartment, live on a cheaper grocery budget, do away with 'luxuries' like cable TV or high speed internet, and otherwise micromanage a bankrupt person's financial life for the next 5 years.

    The new bankruptcy law also essentially 'overrides' state law bankruptcy exclusions for a person's house to close a huge existing loophole.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    I never understood why a person would get to keep their house after a bankruptcy anyway.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    In theory, this law is to help the "common people" by allowing financial institutions to collect on bad debts and then pass the savings on to their customers. (Savings, as in: reducing the sums of money budgeted to be written off per anum and passed on to the paying customers.)

    In reality, we all know that the only ones that benefit from these policies are the companies themselves. They take the extra money and... Well, nothing. They just keep it and pass it onto the shareholders and top executives.
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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    I never understood why a person would get to keep their house after a bankruptcy anyway.
    My understanding is that the various state 'bankruptcy exclusion' laws regarding cars and homes were intended to make it possible that a person's life would not be totally turned upside down after going bankrupt, i.e. not getting evicted from their 'homestead' which might have been in their family for 50 years and not losing their ability to drive to work and keep earning money. However, both of these have been sorely abused since the dot.com crash. Example, a young entrepreneur knows a few months in advance that his company is going belly up. He writes himself a 'bonus check' for 2 million dollars and buys a $1,000,000 house in Florida, furnishes it with tons of nice stuff, buys a Lexus, and takes a world cruise to boot. When the company goes under and his paychecks stop coming, he declares bankruptcy. Under Florida law his creditors can't touch the $1,000,000 house, but he can sell the house 2 years later after all of his other debts have been 100% written off via bankruptcy, use the proceeds to start a new company, and start the cycle all over again.


    In theory, this law is to help the "common people" by allowing financial institutions to collect on bad debts and then pass the savings on to their customers.
    In theory this IS the stated purpose. A less obvious but just as important purpose is to send a message to subprime credit lending banks and finance companies, and to 'marginally qualified' borrowers, that 'bad credit loan' defaults are about to become much more painful in the future. This in turn will lead to a significant increase in the actual 'standards' potential borrowers must meet in the future in order to obtain credit/loans, as future bankruptcies will cost both the lender and the bankrupt person much more money than in the past.


    n reality, we all know that the only ones that benefit from these policies are the companies themselves. They take the extra money and... Well, nothing. They just keep it and pass it onto the shareholders and top executives.
    I'm betting this winds up not being the case ... to the point of already having sold my COF shares.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    Maybe I'm missing something. How do you see it becoming more costly for the lenders? The paperwork and the filings are the same for them. What am I missing?
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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    You also have to take into account that the home and vehicle will be at the discretion of a judge, so if the individual filing and their family will be left homeless and without transportation if everythings taken, it would stand to reason that any reasonable judge would make provisions for such events.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    How do you see it becoming more costly for the lenders? The paperwork and the filings are the same for them. What am I missing?
    Chapter 7 paperwork is much simpler than Chapter 13 ! Under Chapter 7 the lender simply states the debt and charges it off against reserves. Under Chapter 13 the lender must state the debt plus administer court ordered collections for the following 5 years plus account for the ongoing miniscule payments plus reappear in bankruptcy court every time a judge approves a 'change' in the person's Chapter 13 debt repayment schedule.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    When I filed Chapter 7 my attorney told me that was the best way to go unless you HAVE to file 13, i.e., have assets that aren't exempt.

    And the reason that you can keep your house and car is becuase they are considered necesities. You need a place to live and transportation. You just can't have equity over the limits allowed by law. Also in some states (not FL though) you can keep your tools of the trade so basically if you have a job that requires certain tools you will not be required to give them up. The idea is to get you back on your feet financially, not make you lose your job, house and car. That is what bankruptcy is supposed to PREVENT.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    Quote Originally Posted by Melonie
    Chapter 7 paperwork is much simpler than Chapter 13 ! Under Chapter 7 the lender simply states the debt and charges it off against reserves. Under Chapter 13 the lender must state the debt plus administer court ordered collections for the following 5 years plus account for the ongoing miniscule payments plus reappear in bankruptcy court every time a judge approves a 'change' in the person's Chapter 13 debt repayment schedule.
    Ahh, that's what I was missing. Much bigger mess. Thanks, Melonie.
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    "Every man dies; not every man really lives." (William Wallace from Braveheart)

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    Of course, the other people who will get rich off of this change are the Chapter 13 lawyers. With tougher laws/rules/regs to do a bankruptcy...they'll be charging more than ever!!

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    I work for a Bankruptcy attorney... our phone has been ringing off the hook!!!


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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    And the reason that you can keep your house and car is becuase they are considered necesities.
    Well the new bankruptcy law takes the position that a $1,000,000 house on a Florida beach and/or a late model Lexus are not 'necessities' - and that such assets should be sold off to satisfy creditors, with the bankrupt person being allowed enough monthly budget to rent an efficiency apartment and lease a Hyundai.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    I actually thought the old law looked at what kind of house or car you had too but maybe it just depended on who you ended up with reviewing your case. When I went to court they questioned the people that went before me about having a snake as a pet.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    There are certain exemptions that you are allowed to claim. If you are a homeowner, and your payments are not delinquent, you are allowed to keep your home under a Chapter 7 BK. Same with your Car. Each state civil code is different in regards to exemptions allowed.

    There are also exemptions for household goods, clothing, family heirlooms etc.

    The only way you are forced into a Chapter 13 is if your payments on your home and car are delinquent and you wish to reaffirm them (keep them) or if you owe any type of taxes. A chapter 13 gives you the opportunity to repay your debts over a period of three years through a trustee, and the payments are set by the courts based upon your monthly income after all your necessary expenses are paid. You do not have to pay all your debt back in full, but instead only about 10-15% of the total debt.

    However, in a Chapter 13, you can not go out and purchase anything large (home, car etc) without providing an explanation to the trustee as to why you need it, and the Trustee has to grant permission for you to purchase a new vehicle or a new home within the guidelines set in your Chapter 13 plan.

    If anyone has questions, let me know.


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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    I'd also like to add, that the new law will make it necessary for everyone who is considering BK to go through debt counseling for six months. So not only are bankruptcy attorneys going to be hiking up their fees, they will also be getting into the debt counseling business as well. Our firm has already began the licensing process to get licensed as debt counselors as well, however, we will not be able to do those people who are counseled under BK, they will have to be referred, but, each attorney is going to be in the same boat.. not able to do both, but instead one and referr the client to someone else who specializes in BK.

    Currently, the rate for a Chapter 7 is $800 and a Chapter 13 is $2000.00- the filing fee for Chapter 7 in Idaho is 209.00 and the fee for Chapter 13 is 194.00. However, the amount of time, and energy and paperwork that goes on in Bankruptcies, it takes three days to process a Chapter 7 and about five for a Chapter 13.


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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    The only way you are forced into a Chapter 13 is if your payments on your home and car are delinquent and you wish to reaffirm them (keep them) or if you owe any type of taxes. A chapter 13 gives you the opportunity to repay your debts over a period of three years through a trustee, and the payments are set by the courts based upon your monthly income after all your necessary expenses are paid. You do not have to pay all your debt back in full, but instead only about 10-15% of the total debt.
    This was true prior to the passage of the new bankruptcy law. Under the new law, any person whose income is above a certain 'poverty' threshold may be denied the option of Chapter 7 by a bankruptcy judge ... thus the previous 'may' file under Chapter 13 has essentially turned into a 'must' for persons whose incomes are significantly above 'poverty' level. Also, the percentage of debt repayment will now have to follow federal guidelines based on total debt owed versus expected income versus local costs of living and non-dischargeable commitments (i.e. child support, student loans, back taxes).

    There are certain exemptions that you are allowed to claim. If you are a homeowner, and your payments are not delinquent, you are allowed to keep your home under a Chapter 7 BK. Same with your Car. Each state civil code is different in regards to exemptions allowed.

    There are also exemptions for household goods, clothing, family heirlooms etc.
    Again this was true under the old bankruptcy law, where state civil codes set exemptions for various items and various amounts. However, under the new law, federal limitations will supercede overly 'generous' state exclusions i.e. Florida's famous 100% home value exemption even if that home was worth millions.

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    Default Re: Dancers, if you're anywhere near bankruptcy ...

    well, it's now official ... GWB has signed the new bankruptcy law, and the six month clock is ticking for the new law to take effect.



    (snip)"Under the current system, a federal bankruptcy judge determines whether individuals must repay some or all of their debt.

    Under the new law, those with insufficient assets or income could still file a Chapter 7 bankruptcy, which, if approved by a judge, erases debts entirely after certain assets are forfeited. Those with income above their state's median income who can pay at least $6,000 over five years -- $100 a month -- would be forced into Chapter 13, where a judge would then order a repayment plan."

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