Fail Out Of Bankruptcy: The Dark Side Of Personal Bankruptcy

Emery

The percentage of people who fail out of bankruptcy is on the rise. Many experts blame this phenomenon on the new bankruptcy laws implemented by Congress in 2005. When debtors file for Chapter 13 bankruptcy protection, they must submit a repayment plan to the court. Due to the inflexible provisions imposed by the Bankruptcy Abuse Prevention and Consumer Protection Act, many people are unable to adhere to their repayment plan for more than a few months.

All it takes is one missed payment to cause a person to fail out of bankruptcy. When debtors become delinquent with their Chapter 13 repayment plan, creditors can petition the court and request the bankruptcy be dismissed. If the bankruptcy judge approves the request, one of two things will occur. Either the judge will order the debtor to liquidate assets through Chapter 7 bankruptcy or entirely dismiss the debtor’s bankruptcy filing. The team of bankruptcy lawyers will be provided through the reputed companies to fight the cases of bankruptcy of the debtors. The repayment should be done as per the requirement of the client.

Whenever someone files for bankruptcy protection, they are protected from creditors through an “automatic stay”. Creditors are prohibited from initiating or continuing lawsuits, collections, repossessions, foreclosure, garnishments or levies. The automatic stay remains effective until the bankruptcy judge lifts it or grants the debtor discharge of their debts.

If bankruptcy is dismissed because the debtor fails out of bankruptcy, the automatic stay is lifted and creditors can commence with collection actions. In cases where debtors file for Chapter 13 bankruptcy to stop foreclosure, failing out of bankruptcy will cause them to lose their home. Once the automatic stay is lifted, foreclosure proceedings can resume immediately. In some instances, people who fail out of bankruptcy have been forced to leave their home in a matter of days.

When debtors are unable to make payments it is imperative they contact their bankruptcy lawyer. The attorney will contact the bankruptcy Trustee or creditors and attempt to work out a plan. If the financial setback is temporary, chances are good creditors will work with the debtor to help them avoid failing out of bankruptcy.

If the debtor is unable to meet the stipulations of their repayment plan for an extended period of time, the bankruptcy Trustee might allow the debtor to file Chapter 7. When this occurs, the debtor’s non-exempt assets will be liquidated to repay outstanding debts.

In cases where bankruptcy proceedings are dismissed due to failing out bankruptcy, the debtor no longer has protection from the court. Additionally, they cannot file for bankruptcy protection for eight years.

Chapter 13 repayment plans can offer consumers relief from mounting debt. However, debtors are required to fully comply with the plan or face the potential of failing out of bankruptcy. A large percentage of their monthly income must be contributed to pay-off outstanding debts. Repayment plans typically last between 36 and 60 months. During this time, no new debt can be incurred without permission from the bankruptcy Trustee.

Keep in mind bankruptcy remains on your credit report for up to ten years. If you fail out of bankruptcy, you could end up losing everything. Not to mention the added expense of bankruptcy filing fees and attorney expenses.

Before making a final decision to file bankruptcy, consider various alternatives such as debt consolidation, debt settlement, credit counseling and budgeting. While it might be tempting to file personal bankruptcy, there are other options that may be more effective and less detrimental to your credit.

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