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Bankruptcy exemptions: Will I lose my home?

If you have been considering bankruptcy, you're probably not in the most peaceful mindset. You're probably swimming in debt, getting bills constantly in the mail and receiving constant, harassing telephone calls to your cellphone, to your home phone and even at work. In other words, you're feeling overwhelmed in more ways than one and you just want it to stop.

If you own your home, the chance of losing your home in your bankruptcy process can be even more frightening. Indeed, we work so hard for our family homes and -- to think that we could lose them and their accumulated equity in one fell swoop -- is terrifying. Fortunately, if you're a homeowner, you might not be in danger of losing your home.

Here's why credit card debt is so dangerous

American credit card debt has soared to unprecedented levels. Recent data reveals that the total amount of credit card debt in the United States is now at over $1 trillion. This is the highest it's ever been in history according to the Federal Reserve.

Approximately 57 percent of Americans have under $1,000 in their bank accounts at year-end 2016. Furthermore, the average household debt in the United States at year-end 2016 was $16,000.

Bankruptcy exemptions: What's exempt and what's not?

Most bankruptcy filers are aware that much of their property will be exempt from liquidation in Chapter 7 proceedings. In fact, it will be your bankruptcy lawyer's job to prevent as much of your property from being liquidated as possible. Your lawyer will also strive to determine, before you file, what property is potentially exempt from liquidation in your case before you choose to file.

Let's take a quick look at common property that will not be exempt from liquidation:

  • Costly musical instruments unless they are required for your occupation.
  • Valuable item collections, like stamps and coins.
  • Family heirloom jewelry.
  • Bank accounts, cash, bonds, stocks and different investments.
  • A second vehicle.
  • A second home or a vacation property.

Ready to pay off your credit card debt? Do this first

This summer, American consumer credit card debt rose to a whopping $1.02 trillion. As difficult as that amount of money is to conceive, it's enough to know that it's a monster-load of debt. Thinking about all this debt may also inspire you to think about how much debt you currently have rolling over on your credit card statements each month.

Maybe, just maybe, you're even considering the effort it will take to pay this debt off. Yes, if you're diligent and you have a sufficient amount of income, you may be able to tackle your credit card debt, but before you make your first payment, you'll want to do the following three things:

  • Make a list of your credit cards and the balances on them. Also, put a note about the interest rate being charged on those balances.
  • Add up all of your credit card debt and compare this debt to your annual income. Find out what percentage of your annual income your credit card debt makes up.
  • Decide how much money you can afford to spend on paying off your credit card debt. Make this amount as high as you can, but stay realistic. You want to keep enjoying life while not getting burned out on your debt payoff process.

What Chapter 7 bankruptcy exemptions can I qualify for?

Part of a bankruptcy lawyer's job when representing you in Chapter 7 proceedings involves getting you qualified for as many exemptions as possible. This will allow you to avoid the liquidation of different assets, so that you can keep them and continue to use them.

Interestingly, you may be surprised by how many assets you will be permitted to keep during your bankruptcy liquidation proceedings. Here is a list of some of the most common exemptions that you might be able to qualify for in this regard:

  • Homestead exemptions: Up to certain limitations, you may be able to keep your home from liquidation. Or, at the very least, you may be able to keep part of the value of your home.
  • Vehicle exemptions: Your personal vehicle, up to specific limits, could also be protected from liquidation. This will allow you to keep your car and continue to use to drive to work and carry out your other daily transportation needs.
  • Personal property exemptions: There are many personal items -- like jewelry, clothing, home furnishings, appliances and other items -- that will be exempt from liquidation up to certain limitations.
  • Wildcard exemptions: Some items you won't be able to categorize, but you'll still be able to get them exempt from liquidation. Your lawyer will try to use wildcard exemptions strategically on your behalf to prevent the liquidation of various uncategorizable property.

Mark Cuban talks about his past struggles with credit card debt

It's hard to imagine, but even billionaire Mark Cuban from the popular show "Shark Tank" has suffered from problems with credit card debt. Cuban, who achieved billionaire status in 1998 when he went public with his online streaming company, Broadcast.com, said that he suffered from money problems in his 20's.

In a recent interview, Cuban admitted that the most difficult lesson he ever had to learn involved tearing up his credit cards. He said he had a habit of putting a charge on his cards, then not being able to pay it back and having to rip them up afterward.

Trapped in a payday loan rut?

Payday loans can wreak havoc on your finances. These high-interest loans are insidiously destructive because they tend to affect the people who have the least amount of money to spare.

People desperate for a couple hundred dollars extra to get them through the week might be tempted to go to a payday loan provider. This company will offer an advance on the person's upcoming paycheck. Although it might help the person get through a rough patch financially, it might ensnare the person into a cycle of debt, where they have to return every couple of weeks for another payday loan to get them through the week. If the cycle continues, the person might not be able to pay the loan anymore, and then the interest, penalties and fees will become exceedingly unbearable.

What's pre-bankruptcy credit counseling?

If you want to complete your bankruptcy process, you'll need to complete pre-bankruptcy credit counseling and pre-discharge debtor education. The pre-bankruptcy counseling must be completed before you can file your bankruptcy and the pre-discharge education must be completed before you receive your discharge approval.

These counseling and education requirements are not only required by law, but most bankruptcy filers find them helpful and informative. They can help you get on the right financial track by addressing the potential reasons why you may have fallen into debt, and offering tips, tricks and practices to help you avoid falling into debt a second time.

Debt-burdened beauty students get relief from their student loans

Twenty-five years following the closure of a chain of schools owned by Wilfred American Educational Corporation, the Department of Education has decided to forgive the difficult-to-pay federal student loan debts that numerous students owe after attending the schools. Over 36,000 students -- primarily made up of low income earning, female immigrants -- attended the schools, racking up extensive, difficult-to-pay student debts.

According to an attorney from a legal assistance group representing the students, the Department of Education has been garnishing wages and collecting on the student loans for decades. However, with the new agreement to award debt relief to the students, they will finally be freed from the loan burdens.

What are creditors' rights with regard to secured debt?

Different types of debt will be treated differently during your Chapter 7 bankruptcy process. For example, secured debt will receive priority treatment compared to unsecured debt. Secured debt would be, for example, a home mortgage, which is secured by the home itself. If you default on your mortgage payments, the bank can take your home and it won't lose all of its investment. Unsecured debt would be, for example, credit cards.

Creditors' rights largely relate to each creditor's right to receive payment after a borrower has filed for bankruptcy. Creditors' rights can also refer to the ability to place a lien of a person's property, for example, in the case of default on a secured debt loan having to do with a mortgage. Creditors also have the right to seek the garnishment of a borrower's wages.

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Seattle, WA 98117
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