If you are familiar at all with bankruptcy you will know that significant changes were made to United States bankruptcy laws in 2005.  One of the most noteworthy changes was in regards to means testing.  Wikipedia described the amendments by saying, “The amendments effectively subject most debtors who make above an income, as calculated by the Code, above the debtor’s state’s median income to an income based test.  This test is referred to as the means test.  The means test provides for a finding of abuse if the debtor’s income is higher than a specified portion of their debts.  If a presumption of abuse is found under the means test, it may only be rebutted in the case of special circumstances.  Debtors whose income is below the state’s median income are not subject to the means test.”

If you’re in a rough financial situation, don’t fear because the means test is generous in regards to which bankruptcy you qualify for.  Almost everyone seeking bankruptcy qualifies under the means test.  Anyway, the rules regarding the test are confusing to a newbie, so it would be best to speak with a bankruptcy attorney for help.  You can also use a means test calculator to help you determine if you qualify, but it won’t include all the details that you will need.

If you are struggling under the weight of mounting debts, bankruptcy can be your second chance.  Contact a great bankruptcy attorney.

There are three basic times of bankruptcy businesses can file.  Sole proprietorships exist as legal extensions of their owners.  Thus, the owner is responsible for all assets and liabilities of the company.  These types of companies are eligible to file for Chapter 7, Chapter 11, or Chapter 13 bankruptcy protection.  Corporations and partnerships, on the other hand, exist as separate legal entities and their owners are not personally liable for company assets and liabilities.  These types of companies can file for either Chapter 7 or Chapter 11 bankruptcy.

Chapter 7 bankruptcy is typically the best choice in situations where you know the business just isn’t going to make it out of bankruptcy intact.  Usually referred to as liquidation, most companies only use this form of bankruptcy when the business debts are just so overwhelming that there is no feasible way to restructure the finances.  Chapter 7 is also a good idea in cases where the business lacks any substantial assets.  For instance, if the company is really just an extension of the owner’s skills or services, it usually isn’t worth it to reorganize so Chapter 7 just makes the most sense.

How does Chapter 7 bankruptcy protection work?  Simply enough.  The court appoints a trustee to oversee the distribution of the assets among the creditors.  Typically this involves selling off eligible assets and then paying as much as possible to the creditors.  However the trustee distributes the business assets, once they’re all divvied up and the trustee is paid, the business receives a “discharge” and the bankruptcy proceedings come to an end.  At that point, the business owner is releases from all obligations relating to those debts.  Partnerships and corporations, however, do not receive a discharge.

Chapter 11 is more appropriate for businesses that just need some breathing room to get things back on financial track.  Under Chapter 11 bankruptcy, the company is reorganized under a court-appointed trustee and remains in operation throughout.  The business files a reorganization plan detailing how it plans to handle its debts.  Creditors get the opportunity to vote on the plan.  Should the court find that the plan is fair and equitable, the plan will be approved.  Reorganization plans provide for payments to be made to creditors over a period of time which may exceed twenty years.  This type of bankruptcy protection is fairly complex and not always successful.

Chapter 13 bankruptcy is also a form of reorganization bankruptcy, although it is usually reserved for consumers.  Sole proprietorships can also take advantage of this type of protection.  You file a repayment plan with the bankruptcy court setting out how you plan to repay your debts.  The amount you’ll be required to repay depends upon how much you earn, the amount of your liabilities, as well as the value of your assets.  In situations where your personal assets are involved with your business assets–such as with sole proprietorships–you may be better able to avoid losing your home if you file Chapter 13 bankruptcy rather than Chapter 7.

The first step to take if you think you may need to file for small business bankruptcy is to find a good, reputable bankruptcy attorney with a proven track record to consult with.  Many of them offer free consultations and can advise you on whether it’s a worthwhile course for you to pursue.

The news is ironic on several levels.  One would think after incurring convictions for money laundering and corruption, Jefferson would feel a bit more compelled to dot his “i’s” and cross his “t’s”.  For some reason, he slipped up in providing good information to his attorney.  Probably the paramount lesson to be learning from Jefferson, other that avoiding corrupt practices, is to give your bankruptcy good information.  The quality of their advice to guide you through the bankruptcy process will only be as useful to you as the quality of the information that you provide.  The sanctions for providing filing false or misleading information can be extremely critical to your financial health.  A bankruptcy attorney will not be happy once he finds out that you attempted to manipulate the bankruptcy process.  In order to avoid complications with your bankruptcy filing, disclose every source of income to your bankruptcy attorney so they can correctly determine which type of bankruptcy you qualify for through the means test.   If you are not sure whether or not an item qualifies as income or a loan, provide that information as well to your attorney out of an abundance of caution.  A good bankruptcy attorney can help you make your filing as smooth as possible.  However, the eventual success of your bankruptcy starts with gathering good information.  So take the time to plan for a successful bankruptcy.

The book speaks of Chapter 7 bankruptcies slightly different than Chapter 13 bankruptcies in regards to this situation when it says, “Loans taken to pay nondischargeable federal taxes aren’t dischargeable in a Chapter 7.  They’re treated similarly to any debt incurred while contemplating bankruptcy.”

Then it goes on to talk about a Chapter 13 bankruptcy.  The book says, “If you’re contemplating a Chapter 13, you may be tempted to borrow money to pay nondischargeable taxes with the aim of wiping out this new loan in bankruptcy (because debts from fraud get discharged in a Chapter 13).  In our view, this is a lousy stunt if indeed you are intending to defraud that lender.  And it may even cause your Chapter 13 to get dismissed if the judge thinks you acted with suspicious motives.”

Nevertheless, the best thing you can do is speak to a bankruptcy attorney before doing anything.  They are the experts in this type of situation, and they will know exactly what you should do.  You do not want to risk having your bankruptcy thrown out due to some kind of trick you come up with.  If you would like to find out more, please contact a bankruptcy attorney.

So far, however, home foreclosures appear to remain one of the number one causes of consumer bankruptcy filings.  The American Bankruptcy Institute (ABI) reported that personal bankruptcy filings in the U.S. jumped 36.5% in the first half of 2009 versus the same time in 2008.  Relying on data from “the National Bankruptcy Research Center (NBKRC),” ABI says that “[t]he overall June consumer filing total of 116,365 was 40.6 percent more than the 82,770 consumer filings recorded in June 2008″ and does point to a small silver lining in the sky: Even though “the June total represented an increase over the previous year, it was a 6.8 percent decrease from the May, 2009 total of 124,838 consumer filings.”

On the flip side, though, “Chapter 13 filings constituted 27.7 percent of all consumer cases in June, a slight increase from May.”  That would mean that approximately 70% of filings were most likely Chapter 7 cases, meaning more consumers are liquidating rather than working out payment plans.  “As unemployment, foreclosures rates and health care costs continue to rise, more consumers are turning to bankruptcy as a last financial resort,” said ABI Executive Director Samuel J. Gerdano. “We expect that there will be more than 1.4 million new bankruptcy filings by year end.”

Unfortunately, it seems like President Obama’s plans to help keep homeowners home sweet home is having a tough time gaining ground.  The San Jose Mercury News reported on July 16 that “Banks say they’re swamped with inquiries and are just now completing the first mortgage ‘loan modifications’ under the Obama administration’s Making Home Affordable plan, the program begun in April requiring borrowers to make three months of renegotiated payments before securing new loan terms.”  The unpleasant reality is that “frustrated borrowers are still battling red tape and delays in their attempts to negotiate lower payments, even as hundreds of thousands of them lose their homes every month.”

Some do their absolute best to work out a fair compromise, but to no avail:  “Angelo Gallo, 46, of San Jose, sought help from his bank lowering his monthly payments in January, before the Obama plan was announced. He said he and his wife, Mary, worked with their lender for five months, fulfilling numerous requests for more documents, but recently they were told they had to start over. ‘I was so frustrated,’ Gallo said. ‘Every time you call it’s a different person, and it seems like the files are all over the place.’ “

“There is an amazing lack of staffing to support the flood of modification requests the banks are getting,” said San Jose bankruptcy lawyer Norma Hammes, past president of the National Association of Consumer Bankruptcy Attorneys. “Lenders lose stuff all the time, and they ask for stuff they don’t need. We have to jump over hurdles and through hoops.”

Bankruptcy lawyers, the article says, “are particularly critical of the banks. The banks’ current efforts are ‘largely a farce,’ according to Cathy Moran, a bankruptcy lawyer in Mountain View, CA. She said most of her clients have been unable to modify their home loans.

‘I don’t think the people in the loan modification departments at banks are empowered to make deals,’ Moran said.”

San Jose bankruptcy lawyer James “Ike” Shulman agrees: “I’m seeing several people each week with the same hard-luck story of how mortgage lenders have led them on for months, lose the paperwork and then find one excuse or another to turn them down.”

Of course, bank reps say they’re doing the best they can.  “Chase is moving through a backlog of 155,000 loans ‘as fast as we can, having hired nearly 3,000 people to help in the process, including 950 loan counselors,’ spokesman Thomas Kelly said. The bank, which took over failed subprime lender Washington Mutual, has approved 87,100 trial loan modifications under the federal plan, Kelly said, and an additional 50,900 under the bank’s own program.”

But the Mercury’s reporter, Pete Carey, says this in his article: “Though the reasons are many,” he writes, “the problem is simple: Banks aren’t renegotiating enough loans to stem the rising tide of foreclosures, either through the federal program or on their own.

‘If the banks wanted it to work, it would work,’ said Fred W. Schwinn of the Consumer Law Center in San Jose.”

Those at their wits’ end with trying to negotiate with unhelpful mortgage lenders would do well to consult with an experienced bankruptcy attorney to find out whether bankruptcy could be the solution to their financial woes.

Q:  Have I done my sincere best to negotiate with creditors?

If you’ve tried to work out a repayment plan with one or more of your creditors, but they’re not willing to budge on wanting the full payment now, bankruptcy may be your best option.  During bankruptcy proceedings you’ll have the benefit of an automatic stay prohibiting your creditors from making any collection attempts while the court oversees your case.  Just think–no more harassing telephone calls or dealing with inflexible people unwilling to negotiate a practical payment plan you can actually afford.

Q:  Do my liabilities outweigh my assets?

This is often the bottom line question when it comes to deciding whether or not to file for bankruptcy.  If your money out exceeds the money you have coming in, it’s only a matter of time before you find yourself drowning financially and bankruptcy may become your only option.  By considering it before things get completely out of control, you may find yourself with a little more control than if you wait until your hands are tied.

Q:  Are my wages being garnished?

If your wages are being garnished and you’re now having an tough time making ends meet, bankruptcy may help give you breathing room while you juggle all your financial responsibilities.  While certain types of debt–such as child support and alimony–are non-dischargeable in bankruptcy, you may be able to have enough of your other debt discharged that the wage garnishment won’t financially strangle you anymore.  Alternatively, if you don’t qualify for Chapter 7 bankruptcy, you may be able to work out a manageable payment plan through Chapter 13 bankruptcy instead.

Q:  Are most of my debts unsecured?

Unsecured debts are those like credit cards bills and medical bills that do not have some form of physical property securing them, like car loans or home mortgages.  In most cases, you are going to have to pay most if not all of your secured debt like car loans or mortgages if you wish to retain possession of your car or home.

Q:  Am I more than 30 days late on more than one bill?

The more and more delinquent you become on multiple bills, the harder you’re going to find it to catch up, and the more damage that’s being done to your credit score.  Once this happens, you may well do less damage in the long run by filing for bankruptcy and then re-establishing responsible credit use than continuing to become more delinquent on your bills.

These are just a few questions to consider when looking at your bankruptcy options.  It’s better to look at the situation logically, and with as little negative emotion toward the thought of filing for bankruptcy, as possible.  Only then can you truly make the decision that’s best for you.

The book, Personal Bankruptcy for Dummies, gives an example of an exemption that people often try to take advantage of before bankruptcy.  It says, “For example, if you had $1,000 in a bank account that wasn’t covered by an exemption, you’d lose it to a Chapter 7 trustee.  If, however, you make extra payments on your mortgage with that $1,000 before you file for bankruptcy, the increase in your homestead may be exempt.”

At the same time, another court can have a very different view of a transfer of assets.  You can be denied a discharge, your exemptions can be denied, or the court can force you to reverse the transaction.  Each of these can cause you a lot of headaches.

The book goes on to say, “Courts frequently render a finding of fraud whenever someone liquidates all his assets and pays off a mortgage, especially in states with unlimited homestead exemptions.”

In conclusion, you really need to check with a bankruptcy attorney before making any questionable pre-bankruptcy moves.  An attorney will be able to tell you exactly what to do for your situation.  That way your bankruptcy can go smoothly and you can make sure that you are making all the right moves.

Here is how a Ponzi scheme works: The scammer, Madoff in this case, has to constantly look for new investors. Why? Because he has to use their new money to pay the older investors’ returns! Madoff promised the new investors out-of-this world profits, so they handed over their cash. Then, he turned around and used some of that money to pay older investors who wanted to draw from their so-called portfolios. It’s a delicate balancing act that, as we have come to see, and will implode eventually. You really can’t blame some of the victims here, as they really had no clue as to what they were getting into. After all, he was Bernard Madoff, a trustworthy member of society at the time.

As of May 14, there are 8,848 people claiming losses from Madoff. An involuntary petition for Chapter 7 bankruptcy (liquidation) was filed by Madoff’s creditors on April 13 of this year. The court appointed trustee, Irving Picard, told reporters that legal action against Madoff’s family “is a matter being looked into”. Picard has also alleged that Madoff’s immediate circle of family and friends spent investor money carelessly, financing their posh lifestyles. The allegation appeared in bankruptcy court filings. This circle would include Madoff’s wife, sons, brother, and a few key employees. As the court-appointed trustee, Picard has the responsibility to try and locate as many assets as possible to pay Madoff’s customers. Picard has already filed suits in bankruptcy court attempting to get large investors and hedge fund managers to return $10.1 billion in profit paid out by Madoff over the years. Of course, Madoff claims that everyone was in the dark – including his lawyers.

Although Madoff did plead guilty to securities fraud in March of this year and is facing 150 years in prison, it is interesting to note that recently as November 2008, investors received statements claiming their assets had grown to $65 billion total. Picard says that only $1 billion in useable assets has been identified so far. That is undeniably a $64 billion dollar mistake. What does this tell us? Had Madoff not been caught, he would have continued to steal money!  Stephen Harbeck, head of Securities Investor Protection Corporation, or SIPC, is vowing to get tough with anyone else who is a part of this Ponzi scheme. Congress has authorized the SIPC to guarantee brokerage accounts for up to half a million dollars – and SIPC has definitely stepped in to cover a portion of the claims, estimating a payout of $61.4 million to 125 victims by the end of next week.

An involuntary chapter 7 bankruptcy petition can be filed by your creditors when a significant amount of money is owed.  Once filed, you have 20 days to file an objection. If no objection is filed, bankruptcy proceedings commence. If you do file an objection, the case goes to trial. Don’t be surprised by an involuntary petition! If you are having problems paying your debt, contact a bankruptcy lawyer today.

Simply put, a means test is a standard measure of income and expenses, used to demonstrate a person’s anticipated ability or inability to repay their debt

Working with a qualified attorney, you and your spouse will need to complete Bankruptcy Form 22A  “Chapter 7 Statement of Current Monthly Income and Means-Test Calculation”.  The form looks similar to a standard tax form, with specific questions pertaining to income.  You will be asked to report income from all sources, including salary, wages, interest, rent and unemployment.

If your household income is less than the median family income for a family of your size in your state, then you qualify for Chapter 7.If your income exceeds the median income for your state, then you and your attorney will need to review your household expenses to further investigate whether or not you are qualified to file Chapter 7.

To calculate your deductions from income, the court follows the Standards of the Internal Revenue Service.  The national standards for food, clothing and other items as well as healthcare are combined with local standards such as housing, utilities, transportation, taxes, payroll deductions, term life insurance, court-ordered payments, some education, childcare, healthcare, telecommunications, etc.

Your income and deductions are multiplied to show a five-year projection.  If it appears that your income does not exceed your expenses by about $6500 (for a five year period), then you may file Chapter 7.  If your income exceeds your expenses by more than $10,950 (over five years), then you may not file Chapter 7.

As you can see, it is really important that you review the details of the form with a qualified attorney.  He or she will be able to help you remember where every penny you earn is spent.  Your attorney will help you make sure you are exhausting your options so that you can make an informed decision about filing.

If you do not qualify for Chapter 7, don’t feel discouraged.  It may be an indication that reorganizing your debt under Chapter 13 is a better option.

If you are considering filing for bankruptcy, there are a small number of special circumstances where your best option would be to delay filing for bankruptcy.  Of course it would be best to speak to a bankruptcy attorney as soon as possible, but there are a few general situations that an attorney might mention as reasons to delay your filing.

The first is if you owe taxes that might become dischargeable in the near future, but are not currently dischargeable.  If the tax bill is high, this could end up saving you a lot of money.

Second, if you are filing for divorce and are considering bankruptcy, timing is everything.  As a general rule, if you are going to have a very simple bankruptcy case (you have no joint-delinquent accounts, you do not have a lot of assets that need split up, and there are not kids in the picture) you need to file for bankruptcy before your divorce, because it will be a joint case and it will be cheaper.  If you have some of the items listed above, that make your case more complicated, you will probably want to get divorced first and then file for bankruptcy.  Again, bankruptcy and divorce timing is complicated, so you should speak with a bankruptcy attorney before doing anything.

Next, if you are expecting a huge tax refund, you should consult with your Bankruptcy attorney on timing to see if it will be yours or taken.

In a Chapter 7, if you repaid debts to any family members within the last year (over $600), you might wait until a year passes since you paid them.  If you do not the trustee might force your family member to pay the money back.

Another common thing that creditors check is if you racked up a large amount of debt leading up to the bankruptcy.  Creditors could claim fraud and could ask the court to not discharge those debts.  Waiting for a while will help keep creditors from claiming that you are trying to scam the court. Your attorney is very familiar with these timing issues.

A final reason to delay your filing is if you have large medical bills coming up.  The reason behind this is you will have to wait six more years to have any debts wiped out.  If you just wait till the bills are due and then file, they can be eliminated.

In conclusion, these are just a few reasons you should consider delaying your filing, but they are not the only ones.  Also, the above examples are not golden rules either.  You need to speak to a bankruptcy attorney and they will be able to tell you what the best plan is for your situation.