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Since the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) went into effect, Chapter 7 has not been an option for many consumers. The reason for the reform was to end the abuse and fraud, which had been practised by huge number of borrowers for a very long time, and notwithstanding complains and denials of consumer advocacy groups and the likes had been a fraud, which ended costing to credit card issuers, banks and eventually to all of the consumers billions. Chapter 7 was a free way out, with all you debts discharged. Sure your credit became ruined for the next two or three years, but after borrowing tens of thousands and often even more and not having to pay them back, was a quite negligible price to pay. Many married couples would have all the credit lines open on one spouse, so even after going through the bankruptcy, the better half would still have clean credit with no debt.
The Means test makes Chapter 7 bankruptcy very difficult for many and impossible for others. Here is the nice chart explaining Chapter 7 vs. Chapter 13. Under Chapter 13, borrower will have to repay at least part of the debt.
Wikipedia general overview and BAPCPA explanation are quite extensive.
The lawyers.com page on Chapter 7 basics gives a breakdown of the dischargeable, possibly dischargeable and non-dischargeable debts.
Credit.com overview of bankruptcy reform and its impact on consumer credit reports and credit scoring.
Good collection of articles from credit info center on many related aspects of Chapter 7 and 13 Bankruptcies.
NOLO legal center explains Chapter 7 changes including restricted eligibility, counseling requirements, and more responsibility for bankruptcy attorneys.
US Courts offers quite comprehensive information here on alternatives to bankruptcy, Chapter 7 eligibility and discharges.
Q: We have a big problem with our adjustable rate mortgage. We bought this house 3 years ago and paid $160,000 with 10% down payment, getting a 3 year interest only ARM from a mortgage professional who explained every little thing about how this loan would work, even pointing out that our purchase price was a bit high in his opinion. We got 6.75% interest rate with no mortgage insurance. Now after making interest-only payments for 31 months, and facing possible 2% hike in interest, we have tried to refinance with 4 lenders/mortgage companies, but were denied. The same reason was cited by all 4 - the value of the our house is only $140,000, may be $142,000. That is bad enough, and we are quite upset. But even more upsetting is that we are looking at $240 increase in monthly payments. We simply can't afford that hike.
A: Sounds rather depressing, check the latest developments with the government relief programs, but I doubt they will work in your case. You didn't mention the lender but sounds to me that is not a sub prime loan. Call your lender and explain the situation. State that you would walk away from the house unless they send you a letter, promising to keep the interest at 6.75% or convert it to a fix rate. They may counteroffer you with say, 7.5% which is not too bad. They don't need another foreclosure. Emphasize that with the current market value you have nothing to lose, and will rent. See if your lender has what is popular now - a distress homeowner support or assist center. Be polite but straight to the point. With large amount of unsold homes which the banks are ending up today, they may simply agree. If they don't, you have little choice, I am afraid.
In response to quite a few questions on how to reestablish credit after certain life changing unfortunate events including but not limited to foreclosure, bankruptcy, divorce and job loss, Bad Credit Advisor assemble several excellent sources for your reading. Read carefully if interested and always use your best judgement. Remember, this is for the information only, you are to decide which credit repair path to pursue.
We start with the Total Bankruptcy which is the nationwide side of lawyers specializing in bankruptcies of all types. Here are the outlines of 4 steps on the life after Chapter 7 including short idea on how to rebuild your credit in step 4, fees and much more, including attorneys practicing in your area and things like auto credit repair loans and dealerships.
Two links from eHow - first outlining 7 steps on credit repair while the second features 12 do-it-yourself steps on how to rebuild credit. Both links also give few tips and warnings.
Credit.com shows secured credit cards which require no credit check and charge you less than 20% interest, in one case is less than 15%. Of course there are yearly fees from $60 to $80, but these cards have been the new beginning for many.
The short info page from military.com, giving only few bits of information but providing some useful links.
Infofaq.com explains few basics things, links to many useful FTC articles. Quite informational site to many credit related issues.
This one comes from University of Illinois at Urbana Champaign Urban Programs Resource Network. Some sound advice on how to rebuild your credit, including getting a job and bill pro-ration.
Also check credit rebuilding advice from Nolo, this is their rebuilding credit FAQ, read it and go from there.
The last one is from Legal Helpers warning you on payday loans among other things, and advising to search for bankruptcy friendly mortgage brokers (afraid you won't find any today) and car dealers.
In good times, financial markets embrace capitalism. In bad times, financial markets re-discover socialism. Currently, the U.S. Federal Reserve is engaged in a dangerous strategy to look after its Wall Street friends.
The origins of the current credit crisis lie in loose monetary policy and excessive capital flows that were turbo-charged by "financial engineering" techniques used by banks. Borrowing bought more borrowing, fueling price increases in financial assets: debt, equity, property, infrastructure. Read the rest.