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Bankruptcy Lawyers

Bankruptcy Filers

Bankruptcy has held a negative connotation for years, being seen as the financial response of those too careless or thoughtless with their money. However, this idea of bankruptcy is far from reality. Especially with the economic crisis of the past several years, many individuals and couples have turned to bankruptcy as a real solution to their severe debt problems. According to some of the figures cited in Harvard law professor Elizabeth Warren's 2001 The Fragile Middle Class: Americans in Debt, bankruptcy is much more the result of tragic circumstances than personal faults.

Some Statistics on Nation-Wide Credit Card Debt

In the past 10 years, Americans have seen their fair share of financial problems. With the collapse of the housing markets and massive hikes in credit card debt, the average American has been faced with challenges that have proven particularly difficult to overcome. For many, credit card debt is just too much to handle. With easy credit lines being available to cover everyday costs, the interest rates alone can pile up on what real money is available to spend. As a result, consumers may link together credit cards, paying one off with help from another, and so on.

Bankruptcy Letter of Intent

Just like anything else in life, if you are planning a drastic change you should probably inform those who will be affected. The importance of keeping people informed is a requirement in some circumstances. A "letter of intent" is used in these situations. This letter informs companies or the public that future legal proceedings will occur.

Businesses and Chapter 7 Bankruptcy

Businesses that have no way of repaying their piling debts may have to declare bankruptcy. Depending on the business's financial forecast, that bankruptcy may be Chapter 7, which will dissolve the corporation or partnership that owned the business.

Insolvency Verses Bankruptcy

Many people confuse the terms "bankruptcy" and "insolvency". A person files for bankruptcy when they are insolvent. A person that is insolvent does not necessarily have to file for bankruptcy. The delicate balance between insolvency and bankruptcy can be difficult to understand. Both have to do with the inability to pay debts on a person's current amount of cash flow. The essential difference between insolvency and bankruptcy is that bankruptcy is a legal action. It is recognized by the government as a way to pay creditors and help people regain control of their finances.

The Means Test

In 2005, The United States made adjustments to its bankruptcy laws in an effort to guarantee that only the most eligible individuals can file for Chapter 7 or Chapter 13 bankruptcy. Before the changes, there were many wealthy debtors who took advantage of the system in order to avoid paying off loans and debts they had accrued over time.

Means Test - Exemption Standards

When the United States government passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, the result was a significantly more stringent process for debtors wanting to file for Chapter 7 bankruptcy protection and debt discharge. However, the law was written in such a way to provide important exemptions in many of these additions, allowing those not targeted specifically by the law to continue using the benefits of the bankruptcy code.

Stalking Horse Agreements

When a debtor looks to maximize the value of their assets before a bankruptcy auction, there are few options available to test the market. However, a stalking horse agreement may be possible if they can find a third-party bidder to assist them. The idea of a stalking horse comes from hunting terminology, describing a horse that was specially trained to walk in front of hunters, obscuring the sight of fowl. As the birds believed the horses, being all they could see, were no danger, this tactic allowed hunters to get close enough for the kill.

Advantages and Disadvantages of Debt Restructuring

Debt restructuring is used by businesses as an attempt for recovery from high debts. This useful tool adjusts the way payments are made on debts. Restructuring the debts may also include adjusting interest rates and changing the length of grace periods. People choose to have their businesses go through this process if they have become unable to stay on top of their financial situation. It is different from bankruptcy in that it is less expensive and will not take as heavy of a loss of reputation.

When to Avoid Debt Consolidation

Debt consolidation sounds great in practice - you trade in all of your smaller debts for one larger one. Often, this means a smaller monthly payment. What many fail to realize, though, is that they will end up making payments for a longer period of time and will pay more interest in the long run.
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