Attorney Fees for Bankruptcy Chapter 7

attorney fees for bankruptcy chapter 7

Attorney Fees for Bankruptcy Chapter 7

Filing for bankruptcy is the last thing any business, corporation, or individual wants to do. Unfortunately, sometimes there is no other option. When you file bankruptcy, you essentially declare that you are unable to repay your debt or otherwise meet your financial requirements and commitments. The process can help you get debt relief and begin rebuilding.

It is advisable to talk to a bankruptcy lawyer to ensure a case runs smoothly and is compliant with the procedure. Need professional help to guide you as you file for bankruptcy? Hiring an attorney is the way to go.

Fees vary, as do other costs that come with this type of case. Here is a guide to all you need to know about chapter 7 bankruptcy and what you can expect to pay for legal services.

Types of Bankruptcy

There are several variations on the theme of bankruptcy- all working toward the same goal but taking slightly different routes. In total, there are six different classifications:

  • Chapter 7 Bankruptcy: The most common type, also known as going into liquidation.
  • Chapter 9 Bankruptcy: This is a form of debt re-payment plan for municipalities, such as schools, towns, and cities.
  • Chapter 11 Bankruptcy: Not many people opt for this type of bankruptcy as the specifications are fairly unique. A corporation or person with a lot of debt and many valuable assets may prefer to reorganize them via chapter 11.
  • Chapter 12 Bankruptcy: Farmers and Fishermen can file for chapter 12 bankruptcy to avoid having to sell everything they own. It works similarly to chapter 13 but is a bit more lenient, and the debt limits are higher.
  • Chapter 13 Bankruptcy: The second most common bankruptcy case, chapter 13, is more of a payment plan that helps you hold on to your assets and get back on top of your debt.
  • Chapter 15 Bankruptcy: International bankruptcy cases fall under chapter 15. Debtors from overseas can file an application via an attorney in the US bankruptcy court.

Each of these chapters offers a way out of the black for businesses and individuals whose finances are beyond repair. Monopoly may make bankruptcy seem simple, but it is not a “get out of jail free” card. There are consequences that come with filing for bankruptcy, especially under chapter 7.

What Is Chapter 7 Bankruptcy

Chapter 7 is a class of consumer bankruptcy that accounts for more than 60% of personal bankruptcy cases in the US every year. Essentially, it is the last resort when there is no possibility of ever repaying the debts owed by a business or individual. It works by liquidating any assets the debtor has to cover some of the money owed and providing relief for the rest of the unsecured debt.

How Is it Different from Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is less harsh than chapter 7 but equally serious. If someone earns too much to qualify for liquidation, they fall into this category. A payment plan through a chapter 13 bankruptcy case could be the answer.

The most common reasons for filing for chapter 13 are avoiding foreclosure on a home and earning too much to be eligible for chapter 7.

A chapter 13 bankruptcy case takes time and puts the debtor on a very short leash, but it does have fewer consequences than chapter 7. Let’s look at some of the prime differences between the two:

  • Attorney fees are higher for chapter 13 because there is usually a lot more work involved.
  • Chapter 13 aims to repay the most debt over time rather than wipe it out.
  • Rather than qualifying based on income, anyone with debt below a certain amount can apply for chapter 13.
  • Individuals are more likely to be filing for chapter 13, whereas businesses more often go for chapter 7.
  • After seven years, chapter 13 is wiped from your credit report, whereas chapter 7 stays for 10 years.
  • The chapter 13 process is long and difficult. It can take up to five years, whereas Chapter 7 bankruptcy filing is usually over in a few months. Because of this, a chapter 13 case is more likely to be dismissed due to failure to comply.

Filing for chapter 13 is the only option for those who have a higher income, but it often ends in dismissal. If you do not keep up with monthly payments, the assets you hoped to protect can end up laid bare. Any kind of bankruptcy should be an absolute last resort; that goes for both of these chapters. An attorney can better explain the alternative routes you can try.

What Qualifies a Person for Chapter 7 Bankruptcy?

Because so much unsecured debt is being wiped away, the state must agree that the debtor in a chapter 7 bankruptcy case is truly unable to repay the money they owe. All income is scrutinized and open for cross-examination and questioning from anyone owed money by the debtor.

Earnings are measured against the means test. This test compares a person’s income to the average income in that particular state. It then examines any disposable income or another source of funds and determines if there is any possibility for the debt to be repaid. If the belief is that there are simply not enough funds, they can begin officially filing for chapter 7.

What Is the Process for Chapter 7?

chapter 7 bankruptcy process

There are differences in the chapter 7 process depending on where the debtor lives. If you file bankruptcy, be sure to look for specific information related to your state. Primarily, the same level of asset protection is not permitted in all states.

In some areas, you may be forced to liquidate everything, whereas other states allow you some choice in what you keep. That being said, in more than 80% of cases, the debtor loses their home. On the other hand, around 60% were able to keep their cars.

How Much Does it Cost?

It may seem strange that it costs money to go bankrupt, but it does. On average, a chapter 7 bankruptcy costs between $1,000 and $2,000. There are exceptions. Sometimes, the fees can be as low as $500 or go as high as $4000. Because there are so many variables, it is hard to state exactly what you should expect to pay for filing a bankruptcy petition.

Going pro se is likely to cost less than hiring a bankruptcy lawyer, but it could take longer if anything goes wrong. Objections from creditors can draw out the process and rack up fees with or without an attorney, which is why you should go in well prepared.

Filing Fees

The filing fee is $338. When filing for chapter 7, this fee is due at the same time as your case enters bankruptcy court. Although there are many variable bankruptcy costs that come with filing a petition, this is one fee that remains the same regardless of the complexity of your case.

chapter 7 bankruptcy filing fees

Fee Waivers

In cases where the debtor’s income is lower than 150% of the poverty line, it is possible to ask for a filing fee waiver (that applies to total household income). A waiver is granted if the court believes the debtor is incapable of paying the fee and that doing so could be detrimental to their wellbeing.

If you do not fall below 150% of the poverty line, this waiver is not available. However, because this type of case is often dealing with someone with extremely low funds, it is possible to pay it in installments over time.

Payment Options for Filing Fees

The most common way to pay the filing fee is with a money order. Cashier’s cheques are also a valid form of payment. You cannot pay using a bank card or a personal cheque linked to your account. Some states allow the fees to be paid in cash. The only requirement is that you provide the exact amount.

If you want to pay in installments, you fill out an application and find out how much of the fee your state requires to be paid upfront. After the application is accepted, you have 120 days to pay back the entire amount.

The repayment days are specified by the court and you must not miss any payment. If you do, you could risk having your case thrown out.

Other Fees

Aside from the filing fee and attorney fees, there are other miscellaneous costs involved in a bankruptcy filing. They include:

  • Costs of printing documents and sending them via mail can add up over time.
  • Traveling to and from the court, other set appointments, and visiting your attorney is not free.
  • Bankruptcy counseling courses can be priced up to $50, but they are advisable and highly beneficial. Low-income debtors can apply for a fee waiver.
  • Other post-bankruptcy courses to help you get back on your feet all come with a price, be it a small and worthwhile one.

When you are in a pit, every little fee can feel like a mountain. Knowing all the potential costs you may face helps to reduce the stress and allow you to get through the case a quickly and smoothly as possible.

Chapter 7 Bankruptcy and Lawyers

A bankruptcy attorney is an expert in all the legal proceedings involved with chapter 7. Using an attorney to help you get things moving is advisable, but not mandatory. Let’s look more into the reasons why using an attorney is beneficial and the fees you can expect to come with them.

Do You Need a Bankruptcy Attorney?

It is possible to begin filing for bankruptcy without an attorney. In fact, some people choose to go through the entire process pro se. Representing yourself can certainly reduce the price tag, but it may cost you in other areas. Self-help services may be a good place to start for anyone who feels they cannot afford the attorney fee.

There are legal aid apps and websites that can help you. Use of the site is often restricted to those who qualify for a filing fee waiver. Search how it works via listings on this site to find out more. If you plan to use this type of service and no attorney, make sure you are confident in every aspect of your petition.

Why Hire a Bankruptcy Attorney?

Bankruptcy attorneys can provide detailed insight into the best way to proceed. They can navigate the complexity of your case and smooth any possible bumps in the road. An attorney who specializes in bankruptcy knows everything that could come your way and can better prepare you for what is ahead.

Even if you decide to exercise your right to pro se representation in bankruptcy court, consider meeting with attorneys in your area at least once for some legal advice. If you still do not want to sign up as an attorney-client or confidential relationship, at least you have some expertise behind you before you launch your petition.

Of course, it is always beneficial to hire a bankruptcy lawyer whenever it is possible. If you have the means to pay the attorney fees and have the chance for professional representation, it is worthwhile.

By using a bankruptcy lawyer referral service, you can find a qualified attorney in your area zip code. Search for a reputable site, the attorney listings, and find one that matches your needs.

Some listings on the site are paid attorney advertisements.

Average Bankruptcy Attorney Fees

Depending on the complexity of your case, the average attorney fee for filing bankruptcy chapter 7 is between $500 and $3000, with the US average sitting at $1500. It seems like a scary number at first, but it can ensure you get debt relief as quickly and compliantly as possible.

Flat Fee or Hourly Fee?

Attorney fees can be charged as either a flat fee or an hourly rate. In the vast majority of chapter 7 cases, an outright flat fee is discussed and agreed upon before proceedings start. This is beneficial in several ways:

  • You know exactly what to expect from the bill at the end of the proceedings.
  • Nasty surprises during a time as turbulent as filing for bankruptcy are not welcome.
  • Hourly bankruptcy attorney fees are likely to rack up quickly and could cost you more.
  • Most lawyers allow you to set up a plan for payment, just like the filing fees, to pay off the balance.
  • Proceedings tend to follow the same path, all of which is covered by the flat attorney fee.

Attorney fees are very rarely charged hourly. If a case is exceptionally straightforward and likely to be over in a short time, an attorney may offer hourly fees as an alternative. It could work to your advantage, provided nothing goes wrong unexpectedly.

How to Pay the Attorney Fee

Bankruptcy attorney fees are usually allowed to be paid in installments. However, although payments do not necessarily have to be paid upfront, the full balance should be met before the attorney submits the case.

The reason attorneys insist on all fees being paid before filing the petition is that they may not be permitted legally to bill you once the case goes through. Because chapter 7 relieves you of most debt obligations, the people you owe money to are not allowed to press you for payment.

Even the person you are paying to make that possible cannot ask you to pay them if they do the job successfully. Confusing, yes, which is why a bankruptcy attorney is unlikely to proceed with your application until all fees are paid.

The method of payment is specified by the attorney or their firm. It is often a money order, bank transfer, or cheque, but payments must clear before any work begins.

Choosing a Bankruptcy Lawyer

Before you file bankruptcy, it is essential to confer with an experienced and suitable lawyer. Not every law firm has expertise in filing bankruptcy, so take the time to research before you start racking up fees. An excellent way to find bankruptcy attorneys in your area is through a lawyer referral service.

Please remember, the use of this website may be considered only for advisory purposes. This advice does not constitute legal aid or official information from a professional law firm, which this site is not.

Legal advice provided on this site should not be considered a lawyer referral. Some information on this website may be paid attorney advertising.

In some states, the court may constitute a lawyer referral or recommend certain cases to pro bono firms.

Conclusion

When it comes to any legal proceedings, it is always beneficial to speak to a lawyer. Need professional help? It is okay to seek advice. A bankruptcy attorney is a great person to have on your side during a time that nobody ever wants to face.

Chapter 7 is very final and is not something you can brush off easily. There is a good chance the person filing ends up back at square one with a black mark on their credit rating.

Having an attorney is the best way to get through the process as intact as possible. The fees involved may be off-putting, but the long-term benefit of using a professional could be tenfold.

Bankruptcy chapter 7 is a serious legal proceeding. It should be used only as a last resort when there are no other paths to take. Attorney fees are a necessary evil to make this difficult time go by quickly and compliantly.

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Going Bankrupt Consequences

Going Bankrupt Consequences: All You Need to Know

going bankrupt consequences

Going Bankrupt Consequences: All You Need to Know

Thousands of people declare themselves bankrupt each year because they understand they can’t pay for each debt they have.

If you notice you can’t pay off your debts, and you’re struggling to make ends meet at the end of each month, it may be time to take a look at your credit report and determine if you should file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.

A bankruptcy case is not easy because you have to fill out several forms, which is why you should at least understand the bankruptcy basics.

On the other hand, getting a bankruptcy attorney could be a great idea, especially if you’re aiming to work on a repayment plan to get a fresh start.

When you declare yourself bankrupt, you have to go through a complicated legal process, choose if you want to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, and even go to court to determine what happens to you in the next three to 10 years.

Some Things You Should Know About Bankruptcy

Bankruptcy is simply a legal process where you declare yourself unable to pay off your debts. When you begin all the bankruptcy proceedings, you have to prove to your creditors and the court that you can’t pay each debt you have.

Therefore, the legal part involves a court. After showing your credit report, they must decide whether or not to discharge you from your debt.

Furthermore, there are six types of bankruptcy in total, but the only ones you can file for as an individual are Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Lastly, you should keep in mind that bankruptcy is not a fun experience. Most people and experts might suggest you should avoid it if you can because you have to involve your credit report, work on each debt, and might even have to say goodbye to your property or other assets if you’re behind on mortgage payments or have similar issues.

Can You Get in Trouble for Going Bankrupt?

There are consequences of bankruptcy you should keep in mind when you’re thinking about all your alternatives.

In many cases, a bankruptcy filing is the last resort for you if you know you can’t pay all your debts. However, it doesn’t mean it can solve all your money problems.

Regardless of the type of bankruptcy you file for, it leaves a mark on your credit card score, and your credit score overall. In other words, it could affect your chances of getting credit, even after 10 years of filing.

It doesn’t matter if you get discharged or not. Once you start the process with the bankruptcy court, your credit score drops. While you can work to recover from that, it can still hinder you if you ever want to get credit, since your score can drop 100 or more points.

Additionally, there are other negative outcomes you could experience if you fire for bankruptcy. Even though you may have a job right now, if you ever need to find a different one in the future, employers could access your credit report. Federal laws forbid them from not hiring people solely based on that fact, but it still is an important factor.

When you file for bankruptcy, you may be able to keep some of your possessions, and the bankruptcy court can discharge your debts. Nonetheless, they don’t take care of every single debt you have, especially if you owe a specific loan or if you have to pay something like insurance or child support.

The bankruptcy court can’t discharge your federal student loans, taxes, different services, and fines you may owe to the government. Therefore, although you don’t actually get in trouble if you file for bankruptcy, there are different consequences you shouldn’t forget before starting your process.

Should You File for Bankruptcy?

Many people feel scared when they think about filing for bankruptcy. They fear what can happen once they begin the process, especially if they have student loans to pay, child support to take care of, and other assets.

Even though the consequences of bankruptcy may be scary, you should focus on paying off each debt, improving your personal credit, saying goodbye to the loan you got, and guaranteeing you don’t miss any mortgage payment.

If you’re thinking about starting the bankruptcy filing process, it means you probably should begin so you can settle your debt.

The best advice to follow is to improve your behavior as a debtor and make sure you’re free of debt as soon as you can. You can only do that if you focus on each loan and debt.

Filing for bankruptcy does not mean your life is ending, regardless of the type of bankruptcy you’re filing for. On the contrary, it means you get a fresh start, you can work on a repayment plan to manage each debt you have, and you can feel free to begin new personal financial habits.

Thousands of people file for bankruptcy each year since everyone can have a debt they cannot pay, so you should keep in mind that anyone can go through it.

Would You Lose Your Home If You Declare Yourself Bankrupt?

Many people who file for Chapter 13 bankruptcy don’t lose their homes. However, if you file for Chapter 7, then it depends on the equity you have in your house.

When you start your bankruptcy filing process, you can exempt specific property, for example, your house.

Exempting property means you can protect a percentage of its value. If what you have in equity is less than that amount, then the trustee is probably not going to sell your house off because it’s not enough to pay off your debt to the creditors. However, if you miss mortgage payments, your lender could still foreclose the property.

On the contrary, if your equity is higher than your exemption, then the trustee could sell your house to pay your debt, and you may get the rest of the money. You decide what to do with that because it’s personal revenue from the property sale.

Thus, even though bankruptcy might affect the chances of keeping your home, there’s still hope. The most important thing about the procedure is to be able to pay off your debts and feel free.

Can You Keep Your Car While You’re Filing for Bankruptcy?

Keeping your car after your open your bankruptcy case is not that hard if you’re able to complete all your debt payments.

If you can pay for your car debt, then you can keep it. Nonetheless, if you can’t keep up with all the payments, then the court has to decide depending on several factors: how much money you owe, how much you can exempt depending on your state, and how much the car is worth.

Laws vary from state to state, but if the exemption is lower than the equity, then you may not be able to keep your car. The trustee may decide to sell it off, and you would get the exempt portion. Even so, it’s rare for that to happen.

Even though it all sounds negative, when you can’t keep up with your debt payments, there are still some options that might bring you some relief.

You may be able to keep your car under certain circumstances, but you need to know all your alternatives. Overall, you should try to keep it because, after bankruptcy, you may have a hard time trying to get another one due to your debt.

Firstly, getting a loan after bankruptcy is not an easy thing to do. Additionally, you may not be able to find a good deal to buy a car if you lose the one you have because you may not qualify for it. Thus, finding ways of paying off what you owe might be a great option to ensure you keep your vehicle.

How Much Money Can You Keep If You File for Chapter 7 Bankruptcy?

If you’ve never filed for bankruptcy before, you may not know if you can even keep cash money once you start your repayment plan, or simply continue with your Chapter 7 proceedings to say goodbye to your debt.

Regardless of whether you file for Chapter 13 or Chapter 7 bankruptcy, you may be able to have some cash depending on the state you’re in.

However, if you have a debt to settle with some financial institution, they might take money from your account held with them. At the end of the day, all creditors want their money back, so the goal in your bankruptcy is to stabilize your financial situation and make sure you make as many payments as you can.

Even so, there are some exceptions, for example, disability and child support payments, unemployment, alimony, and Social Security.

Does Your Bankruptcy Appear on a Public Record?

Unfortunately, yes. All bankruptcies are on public records, which means anyone with an internet connection can find you.

Since your bankruptcy appears on a public record, anyone can ask to see it and they have the right to. Via the internet, someone may also pay for it, but it’s costly, which is why it’s usually something only an attorney would do.

However, it is normal to feel uncomfortable and anxious at the thought of filing for bankruptcy and everyone finding out about it. Since you have to list all the people you owe, that may make you feel even worse.

Consequently, many people are scared of filing for bankruptcy and getting a bankruptcy attorney because they’re afraid of the stigma, and what they might have to endure in the future.

What you always need to know is that debt is more uncomfortable than the bankruptcy procedures you have to go through. It’s highly unlikely someone is going to start investigating who you owe money to, and bankruptcy cases aren’t usually famous unless they involve a celebrity. Therefore, try to focus on your personal path to improve your financial state, and don’t worry about anything else.

Can Your Employer Find Out About Your Bankruptcy?

They can find out, but it’s not something that happens to everybody. Under certain circumstances, one of your creditors might sue you and garnish your wages. If that occurs, then your employer needs to know because it cuts your checks.

Nonetheless, if your employer notices one of your creditors is garnishing your wages, they might even feel relief when they find out you filed for Chapter 13 or Chapter 7 bankruptcy because it means you want to change your repay all you owe and improve your situation.

If you file for Chapter 13, the court might order each debtor is paid directly from your wages, which means you would receive less money in your paycheck.

Lastly, you should remember that even though bankruptcy sounds like a completely negative situation to go through, laws forbid employers to base solely on bankruptcy filings when they deal with an employee since it’s discriminatory.

Therefore, even though not all employers know about their employees completing bankruptcy proceedings, if yours finds out, it may even be for the best. On some occasions, they might even give you some advice and suggestions to turn your life around.

How Long Does It Take to Rebuild Your Credit Score?

There is not a specific answer because it varies depending on your starting point. If you had a good credit score (for example, 700), it may drop more than 200 points.

People who have a score lower than 700 often have a 130-to-150 drop in their numbers. Even so, almost everyone who files for bankruptcy ends with a credit score that’s lower than 600.

Worrying about your credit score is completely normal because you would have to pay a much higher interest rate whenever you want to get a loan, and sometimes you may not even qualify for them.

Another way to improve your credit score is to get an unsecured credit card, which may be more expensive but might help you.

At the same time, a Chapter 13 and a Chapter 7 bankruptcy can stay on your credit report for years, which is why getting credit counseling is so important if you want to ensure you keep your property or guarantee that you quickly recover from your current situation.

While it takes three to five years to pay everything when you file for a Chapter 13 bankruptcy, it stays on your report for seven years. Filing for a Chapter 7, on the other hand, means your report shows it for much more time.

How Can You File for Bankruptcy?

Filing for a Chapter 7 or Chapter 13 bankruptcy is complicated because you have to complete several steps before your debts are discharged. On most occasions, learning more about the services an attorney can provide you is the best way to manage everything you need to do. Even so, the stages of the procedure are as follows:

  1. Choose the type of bankruptcy you’re filing for
  2. Gather all your personal documents and organize them
  3. Pay all the bankruptcy fees
  4. Complete a credit counseling course
  5. Hire an attorney
  6. Fill out the paperwork with your attorney
  7. Ensure you can afford all the fees (including what owe to your attorney)
  8. Print all the paperwork
  9. Send everything to the trustee
  10. Have your meeting with your creditors
  11. Take a specialized debtor education course
  12. Finish everything, and finally, feel some relief!

Should You File for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy?

If you’re trying to determine which bankruptcy type you’re filing for, there are a few things you should think about. Even though both types can bring some relief into your life, they also have disadvantages you should evaluate before deciding.

Chapter 13 bankruptcy is a convenient alternative if you’re sure you’re paying off all your debt in three to five years. Paying everything you owe is not easy, but if you’re sure you can do it with a specific plan, then it may be the option you’re looking for.

Many people feel scared about filing for a Chapter 7 bankruptcy because its consequences are much worse if you’re a debtor. Loans are harder to get after it, but after everything is over, you may look back and notice the best advice you got was to start the procedure in the first place.

Chapter 7 is necessary if you know you can’t keep up with your property payments, credit card payments, medical bills, and more. Even though Chapter 7 doesn’t solve all your problems, it can ensure you’re discharged of a specific debt (or more), which would allow you to make better decisions with your income.

Conclusion

When you realize you have no credit left to rely on, your credit card numbers are scary, you’re behind on mortgage payments, you can’t get any more loans, and your income doesn’t cover all the fees you need to take care of, it may be time to consider declaring bankruptcy.

Bankruptcy covers most of your unsecured debts, which means that you wouldn’t have to repay them if the court decides you’re discharged. As a debtor, you may have a lot of things on your mind – everything from loans to mortgage payments, your property, assets, and personal loans. However, you should try to focus on the court’s decision.

One last thing to keep in mind is that many experts offer services without paying for anything in advance. That doesn’t mean they’re free, but you can get their advice and help and start paying their fees once you improve your income and overall financial situation.

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what types of bankruptcies are there

What Types of Bankruptcies Are There?

what types of bankruptcies are there

What Types of Bankruptcies Are There?

Were you aware that there are different types of bankruptcies depending on your financial situation? 

When your position appears hopeless, bankruptcy may appear to be your only option. We understand that you may be afraid and feel pushed into a corner; however, bankruptcy is not a choice to be taken lightly. It is critical to understand what bankruptcy is and the many types of bankruptcy so that you can choose the best option possible for your case.

What Is Bankruptcy?

Bankruptcy is much more severe in real life than just a method to lose a game of Monopoly: The different types of bankruptcies occur when a debtor appears before the bankruptcy courts and informs them that they are unable to pay your bills. Next, based on the circumstances, bankruptcy allows the courts to either cancel the debts of the debtor or devise a repayment plan for them depending on their income and assets. Individuals file for bankruptcy for a variety of reasons, including job loss, medical emergencies, divorce, and death in the family. In reality, in 2018 alone, almost 730,000 non-business bankruptcy petitions were filed. 

However, bankruptcy is a serious life event that has ramifications beyond the pocketbook of a debtor. It can track you down while you are applying for jobs, buying a property, or starting a business. Despite the fact that it may appear to be a “new beginning,” bankruptcy just addresses the symptoms, not the root of the issue.

Student loans, government obligations (fines, taxes, or penalties), reaffirmed debt (when you commit to the terms of a current loan), child support, and alimony are all excluded from bankruptcy. Hence, if those are your sole debts, bankruptcy is not the best option for you. When it comes to child support and the other above-mentioned debts, it is best to consult an attorney.

What Are the Common Types of Bankruptcies?

Despite the fact that the fundamental purpose of bankruptcy is to eliminate debt, not all bankruptcies are the same. There are actually six main types of bankruptcies:

  • Liquidation – Chapter 7
  • Municipalities – Chapter 9
  • Large Reorganization – Chapter 11
  • Family Farmers – Chapter 12
  • Repayment Plan and Reorganization – Chapter 13
  • Used in Foreign Cases – Chapter 15

You might be feeling slightly overwhelmed after looking at this list of the different types of bankruptcies. That is okay. You are almost certainly only going to be working with the two most popular types of personal bankruptcies: Chapter 7 and Chapter 13. (A chapter simply refers to the portion of the United States Bankruptcy Code in which the law is found.) However, let us go over each type so you are aware of the possibilities.

Liquidation – Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as straight bankruptcy or liquidation, is the most prevalent type of personal bankruptcy. The liquidation (selling) of your assets (everything you own that has worth) to pay off any creditors is overseen by a court-appointed trustee (the parties you owe money to). Any unsecured debt (such as credit cards or medical expenses) is usually forgiven. However, as previously stated, this does not include debts that are not forgiven by bankruptcy, for example, taxes and student loans.

Furthermore, based on which state you reside in, the courts may not order you to sell certain items; for example, most people can keep their homes, cars, and retirement savings if they file for Chapter 7 bankruptcy; however, nothing is guaranteed. A foreclosure cannot be stopped with Chapter 7 bankruptcy, but it can be postponed. Reaffirming the secured or unsecured debt, which involves recommitting to the loan agreement and continuing to make payments, is the only way of keeping the items you still owe money on. However, the majority of Chapter 7 bankruptcies are no-asset cases, which implies there is no property worth selling.

Only if the court determines that you do not earn enough money to repay your debts may you petition for Chapter 7 bankruptcy. This judgment is based on a means test, which examines your financial accounts and compares your revenue to the state average to determine whether you have enough income (or the ability) to pay back a reasonable amount of what you owe to all creditors. If your revenue is too low, you may be eligible for Chapter 7 bankruptcy.

Remember that filing for bankruptcy under Chapter 7 bankruptcy means you are required to attend a creditors’ meeting, where those who owe you money can interrogate you about your finances and debts. That sounds about as entertaining as it gets. A Chapter 7 bankruptcy appears on your credit report for 10 years, and you are not allowed to file again for another eight years.

Municipalities – Chapter 9 Bankruptcy

An alternative repayment strategy is Chapter 9 bankruptcy, which allows cities, towns, school districts, and other entities to reorganize and repay their debts. While finding a situation where parties file chapter 9 bankruptcy is rare, it is essential that people still know it is an option.

Large Reorganization – Chapter 11 Bankruptcy

Chapter 11 bankruptcy is most commonly used to reorganize a corporation or business. Companies must devise a strategy for how they are going to continue to operate while paying off any debt, which must be approved by both the creditors and the court. Some people, such as real estate investors, can choose to file under Chapter 11 bankruptcy if they have too much debt to apply for Chapter 13 bankruptcy but have a great deal of high-value assets and properties. You are probably not going to tamper with this option unless you are a celebrity or a professional athlete.

Family Farmers – Chapter 12 Bankruptcy

Chapter 12 is an option that consists of a repayment arrangement that allows family farmers and fishermen to avoid having to sell everything they own or having their property foreclosed on. While Chapter 12 bankruptcy showcases similarities to Chapter 13 bankruptcy, chapter 12 is more versatile and has larger debt limits.

Repayment Plan and Reorganization – Chapter 13 Bankruptcy

While Chapter 7 bankruptcy generally results in debt forgiveness, Chapter 13 bankruptcy essentially reorganizes your debt. A monthly payment plan is approved by the court, allowing you to pay back a percentage of the unsecured debt and all of the secured debt over the course of three to five years. The amount of monthly payments is determined by your income and the amount of debt you owe. However, the bankruptcy court has the authority to place you on a strict budget and monitor all of your expenditures, which is not so fun.

Unlike Chapter 7, this type of bankruptcy allows you to maintain your assets while catching up on non-bankruptcy debts. Chapter 13 bankruptcy can also help you avoid foreclosure by allowing you to catch up on your mortgage payments.

Anyone who owes less than $419,275 in unsecured debt, as well as less than $1,257,850.3 in secured debt, can petition for Chapter 13 bankruptcy. In addition, you must keep up with any tax filings. Individuals should also be aware that a Chapter 13 bankruptcy appears on a credit report for seven years, and you are not able to apply for another one until two years have passed.

Used in Foreign Cases – Chapter 15 Bankruptcy

Chapter 15 of the United States Bankruptcy Code deals with international bankruptcy concerns and enables foreign debtors admission to bankruptcy courts in the United States.

Which Type of Bankruptcy Is Ideal for Your Situation?

Chapter 7 vs. Chapter 13

Most individuals only qualify for Chapter 7 or Chapter 13 bankruptcy since the other categories of bankruptcy are tailored to specific persons or businesses. To demonstrate how they vary, here is an in-depth comparison.

The most significant distinction between Chapter 7 and Chapter 13 bankruptcy is the individual’s assets and regular income level. If a person has recently lost a job or has inconsistent income, for example, they may be forced to file Chapter 7 bankruptcy. However, if the means test shows that they make sufficient money to pay off their obligations, they are going to be placed in a Chapter 13 bankruptcy instead. If preventing house foreclosure is a key goal, someone might file for Chapter 13 bankruptcy, or they might file for Chapter 7 bankruptcy if time is an issue – as it is quicker than Chapter 13.

However, bankruptcy is a frightening process, and deciding between Chapter 7 and Chapter 13 is like choosing between two evils. Privacy is thrown out the window in both circumstances. All of your information is physically placed out on a table for the judge to review. Then there is the factor that nearly half of all Chapter 13 bankruptcy cases get dismissed since the debtor is unable to meet the required monthly payments. 

Although creditors are not allowed to pursue the money from you while you are in bankruptcy, the court may pursue you more aggressively than any credit card company if you miss payments in Chapter 13. If the bankruptcy case is rejected, creditors are then able to deduct their fees directly from your salaries or wages, and your home may be repossessed.

Chapter 7 vs. Chapter 11

Businesses can petition for bankruptcy under Chapter 7 or Chapter 11. Furthermore,  businesses that file for Chapter 7 bankruptcy are on their way out. All of the company’s nonexempt assets are sold, including personal property and real estate, and unsecured creditors are repaid in terms of priority. Businesses are not allowed to seek exemptions; everything is subject to the same rules.

A Chapter 11 type of bankruptcy, alternatively, can be utilized to restructure a company’s financial commitments and debts. The automatic stay provides bankruptcy protections to businesses, allowing them to establish a payment plan. Small firms are able to file a less difficult form of Chapter 11 called Subchapter V, which commenced on February 20, 2020.

Bankruptcy can appear to be a magic wand that may solve all of your troubles. However, it is far from a wonderful event, and it has a significant emotional cost. A bankruptcy attorney can help you determine whether you qualify for chapter 7, chapter 9, chapter 11, chapter 12, chapter 13, or chapter 15 bankruptcy. Many individuals declared bankruptcy before entirely changing their financial habits, and they never recommend others to do so. In fact, many people compare bankruptcy to divorce, claiming that it should only be used as the last resort after exhausting all other options.

Therefore, let us have a look at several alternatives to filing for bankruptcy.

Are There Any Alternatives to Filing for Bankruptcy?

It is possible to escape bankruptcy, no matter how much debt you are in. You simply need to be aware of your possibilities. Here are some actions you may take to get out of debt without having to file for bankruptcy:

  • Develop a budget
  • Prioritize necessities
  • Boost your disposable income
  • Develop your own repayment plan
  • Sell items you no longer have use for

Develop a Budget

As we previously stated, in Chapter 13 bankruptcy, the court places you on a budget and keeps track of your expenditures. However, you can do all of these things without declaring bankruptcy. Establishing a budget may be a game-changer if you are on your last legs. You may find the money you were not aware you had if you track where the money goes instead of speculating over where it went. Budgeting also entails eliminating all superfluous expenses in order to pay off debt. Subscriptions and cable may have to be canceled. There is no more eating out. There are no more vacations. You are in the midst of a survival situation.

However, instead of the government instructing you how to handle your money for five years as they would in a bankruptcy case, you get to make the decisions.

Prioritize Necessities

Before doing anything, make sure you have covered the Four Walls: food, utilities, housing, and transportation. If you do not have food to eat or a place to sleep, you cannot get the energy to figure your way out of debt. As a result, ensure you prioritize your own health and that of your family. 

Boost Your Disposable Income

Your income is the most effective weapon you have for accumulating wealth (and avoiding debt). The more money you earn, the more money you have to put toward your debt. As a result, you may have to take on a second job or work longer hours at your present employment to help you make ends meet while you catch up on your monthly payments. Yes, it is exhausting at times; however, your short-term sacrifice is always well worth it in the end.

Develop Your Own Repayment Plan

Were you aware that before your debt may be erased, most bankruptcy courts demand you to take a financial literacy course? This is due to the fact that debt has become a way of life for so many people. It does not have to be that way, though! It might be simpler for you to start a financial plan that is cheaper than going to the bankruptcy court.

Sell Items You no Longer Have Use for

Recall how we said that under Chapter 7 bankruptcy, the court liquidates your assets? What if you tried selling your belongings? Sell any item of value you do not need, such as boats, fancy leaf blowers. Everything you do not need may have to go: furniture, jewelry, collectibles, and that instrument you swore to learn to play soon. Doesn’t it seem a little out there? This is essentially what happens if you file for bankruptcy, only you are not able to decide how your belongings are auctioned. So go to Craigslist or Facebook Marketplace and sell your goods for a quick profit.

The Bottom Line

Nobody enjoys being in debt. However, if this is your situation, there are various kinds of relief available for different types of filers under the United States Bankruptcy Code. The chapter of bankruptcy that best fulfills your aims is usually determined by your financial situation, with the assistance of a bankruptcy attorney.

If you are looking to avoid a repossession because of a temporary loss of income, Chapter 13 bankruptcy can be the best option for you. If your auto or property payment is not the issue, but you are facing income garnishment due to medical costs or credit card debt, Chapter 7 may be a better option.

In any case, keep in mind that bankruptcy is a safety net, and there is no shame in utilizing the United States bankruptcy laws to gain a fresh start, even if it doesn’t feel like it. That is why they are there in the first place.

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if i file bankruptcy what happens to my house

If I File Bankruptcy What Happens to My House?

if i file bankruptcy what happens to my house

If I File Bankruptcy What Happens to My House? 

Homeownership is something many strive for and is a common part of the ‘American Dream’. One of the biggest fears homeowners have when filing for bankruptcy is losing their house that they have worked so hard to call their own. 

However, you shouldn’t let this fear of losing your house stop you from gaining debt relief. This is especially the case if paying your unsecured creditors is putting you at risk of not paying your home mortgage. 

In this article, we’re breaking down your fears and highlighting how you can keep your house or equity in your home when you file bankruptcy. Let’s dive in! 

It’s important to note that the information on this website might be classified as a lawyer referral service in some states. However, this information isn’t categorized as legal advice, and it does not constitute a lawyer referral service. Additionally, no attorney-client or confidential relationship is formed when using this site. 

Can I Lose My House in Bankruptcy? 

Filing a bankruptcy case is an effective method of getting rid of debt that you can’t pay. Doing this can make it easier to stay on top of your mortgage payments and keep your equity in your home, not the other way around. 

How Can Filing Bankruptcy Make Paying a Mortgage Easier? 

When you file for bankruptcy, the discharge that you receive after your petition has been granted wipes away most of (if not all) of your unsecured debts. These generally include loan payments, credit card debt, and medical bills. The accumulated bills that are making it difficult to make ends meet right now are eliminated when you make a bankruptcy filing. 

With these debt repayment obligations being wiped away, you have the opportunity to focus on the expenses that matter most. These might include utilities, mortgage payments, and regular living expenses. This is also the case if you’re renting. Rent constantly needs to be paid, like electricity, mortgage, water, and other utilities. However, your past rent payments get wiped away during this petition, so you can focus on your current rent expenses. 

What Happens to Your Mortgage Payments When You File Bankruptcy? 

Home loans, such as home equity loans, mortgages, or home equity lines of credit are classified as secured debts. Meaning, the bank has a form of ownership interest in this real estate. Hence, the home is yours to keep as long as you continue making your monthly payments. 

The Bank Can Take Your Home

However, the bank can take this property back through foreclosure if you don’t pay your mortgage. This is true even when you get a bankruptcy discharge. That’s why you need to keep paying your mortgage if you want to keep your home. 

Chapter 7 Bankruptcy and Your Mortgage 

Chapter 7 bankruptcy is known as being one of the fastest ways of receiving debt relief. In this form of bankruptcy, there isn’t any payment plan associated with any of these debts. Additionally, the filer generally keeps all of their personal property when applying the legal bankruptcy exemptions to their property. 

What Does That Mean for Filers? 

If a filer is on top of their mortgage payments, the ownership of this property basically remains the same when these individuals receive a bankruptcy discharge. The filer is required to continue making mortgage payments until this home is paid off. 

However, there are some legal nuances surrounding bankruptcy. Some of these legal nuances include the discharge of personal liability on a home loan, and how it protects the filer if they lose their real estate later down the line. 

Nonetheless, the most crucial takeaway here is that you can keep your home after filing for Chapter 7 bankruptcy if you have enough income to continue paying your mortgage lender. Yet, it becomes more complex if your property is worth more than what you owe on your mortgage. In these instances, you might have to consult your trustee. 

What If You’re Behind on Your Mortgage? 

If you are behind on your mortgage payments, you have varied options depending on what outcome you wish to gain. Here’s what you should do for each instance: 

  • If you don’t want to keep this property, Chapter 7 bankruptcy offers a mechanism where you can surrender your home to the bank and discharge your mortgage obligation. This protects you if this mortgage is a ‘recourse’ loan where the bank can try to collect a deficiency judgment after foreclosure. 
  • If you want to keep this property, Chapter 7 bankruptcy isn’t an ideal option. This is because it doesn’t offer a way for filers to catch up on their mortgage payments if they’re behind. Hence, individuals remain at the mercy of the bank and the lender’s willingness to modify the home loan to deal with the debtor’s arrearage. If you wish to keep your home and can afford to make your mortgage payments now, filing for Chapter 13 bankruptcy might be the best option. 

Can You Keep Your House After Filing for Chapter 13 Bankruptcy? 

The bottom line when filing for Chapter 13 bankruptcy is that you can keep your home as long as you have sufficient income to keep up with your mortgage. When filing for Chapter 13 bankruptcy, you’re required to fulfill a repayment plan that can either last for three or five years. 

Like when you file for Chapter 7 bankruptcy, your long-term secured debts remain in place with Chapter 13. Hence, you’re required to make regular home mortgage payments after you file for Chapter 13 bankruptcy. If you’re current with your mortgage, everything typically remains the same. However, this isn’t the case if you’re behind on these payments when filing for Chapter 13. 

What If You’re Behind on Your Monthly Mortgage? 

Yes, we did mention above that filing for Chapter 13 bankruptcy can help filers catch up on their mortgage. A repayment plan is included when you file for Chapter 13 bankruptcy, allowing you to catch up on missed payments. Additionally, you might have a few methods (related to your state of residence) to save your property from foreclosure when filing for Chapter 13. Here are two of the available options:

Catching Up

You can save your home from foreclosure when you fulfill the repayment plan of your unsecured debt when filing for Chapter 13. Typically, it takes between three and five years to pay off these debts, which means that you also have up to five years to catch up on any missed payments on your mortgage. 

However, you should have enough monthly income to afford to pay your Chapter 13 bankruptcy repayments (to catch up with your home loan) and your regular monthly mortgage moving forward. 

Mortgage Modification 

Many bankruptcy courts have included a mortgage modification mediation program when you apply for Chapter 13. This is used to help homeowners who are going through Chapter 13 bankruptcy. The program can’t force your lender to do anything that it isn’t already doing. However, it can (and does) streamline the process. 

One of the best features of this court-provided program is that you don’t need to mail, FedEx, email, or fax documents to your lender’s modification department only for no resolution to come from your efforts. 

Bankruptcy is Now Streamlined

With this mediation program, you’re still required to submit certain information and documents. However, everything is managed through an online portal that all participants need to use. Once you have submitted this paperwork, the lender can review everything to determine if you meet the necessary criteria for any of the modification programs offered. 

If you don’t match the criteria of these modification programs, mediation can be scheduled. At this time, you, with the help of a mediator, can identify why you don’t meet these qualifications and what you can do to change the outcome of this. 

Final Thoughts on Filing for Chapter 13 

When it comes to choosing Chapter 13, it’s vital to understand that it’s a long-term commitment. You have the opportunity to accomplish much with it. However, you can only reap these benefits if you set realistic goals. 

Going through the ups and downs of Chapter 13 can be challenging if you’re paying a mortgage that you can’t afford. This is especially the case if you qualify for a fresh start when filing for Chapter 7 bankruptcy. 

Sometimes saving your home can push you to choose this form of bankruptcy. If this is the case (and the only reason you aren’t selecting Chapter 7 bankruptcy), you should remember that it’s a marathon and not a sprint. 

What Do You Lose When You File Bankruptcy? 

In most instances, bankruptcy filers don’t lose anything. Any property that you own free and clear is yours to keep. Mostly, you get debt relief when filing for bankruptcy rather than losing your property. However, this is only if you apply a bankruptcy exemption to protect your belongings. Additionally, any property that gives a lender the right to payment of this secured debt, such as mortgage installments and car loans, is yours to keep if you’re paying this debt. In such cases, your trustee doesn’t necessarily need to get involved in these issues. 

Can a Bankruptcy Trustee Take Your Home? 

Although it isn’t common, it is possible in certain circumstances. The role of a bankruptcy trustee is to sell any non-exempt property for the benefit of any unsecured creditors owed money being discharged in such bankruptcy. This includes real property and personal property. Whether your house is safe from being sold during bankruptcy depends on if this property has any ‘nonexempt equity.’ In turn, this depends on its market value. 

Home Market Equity Matters

If the market value equity in your home is larger than the homestead exemption amount available to claim, the Bankruptcy Code empowers the trustee to sell this equity to pay any unsecured creditors. The amount of homestead exemption claimable is related to your state, despite Bankruptcy Code falling under federal law. This is because these exemptions mainly align with state law. 

You can find out if you have any non-exempt home equity if you subtract the balance of your mortgage and the homestead exemption from the value of your property. The amount of equity that isn’t covered by this homestead exemption is available for the trustee to sell. 

State Bankruptcy Homestead Exemptions 

Bankruptcy Code falls under federal law but it allows states to enact its own exemptions. Depending on where the individual files for Chapter 7 or Chapter 13 bankruptcy, that filer might be required to use these state bankruptcy exemptions. Otherwise, they can choose between federal or state bankruptcy exemptions. 

Federal Bankruptcy Homestead Exemptions 

As we mentioned above, the protections offered by federal and state bankruptcy exemptions are different. An example could be that the homestead exemption under Florida state is unlimited in many cases. Meaning, your home may be protected no matter what its equity amounts to. 

However, the current homestead exemption under federal law is $25,150. Moreover, couples who file a joint bankruptcy and are both on the home’s title might double this federal homestead exemption, which would protect this property up to $50,300 of equity in their home. 

Some States are Different

It’s vital to note that federal bankruptcy exemptions are subject to adjustment every three years. Additionally, some states allow filers to choose federal bankruptcy homestead exemptions. These states include: 

  • Alaska 
  • Arkansas 
  • Connecticut
  • The District of Columbia 
  • Hawaii
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota 
  • New Hampshire 
  • New Jersey 
  • New Mexico 
  • New York 
  • Oregon 
  • Pennsylvania
  • Rhode Island 
  • Texas 
  • Vermont 
  • Washington 
  • Wisconsin 

Why Should You File Chapter 7 If You’re Giving Up Your Home? 

You might find it pointless to file bankruptcy if you’re already planning on giving up your home. However, this can be a necessary step to take, especially if you’re still drowning in debt even after foreclosing on this property. You might be wondering if a bankruptcy filing even makes sense if your lender is going to foreclose anyway. However, many benefits come with filing bankruptcy, even if you aren’t hanging on to a house with an expensive mortgage. Some of these advantages that come with filing bankruptcy include: 

You Can Get Rid of Other Debts

When you file bankruptcy, Chapter 7 gets rid of most (if not all) unsecured debts. Meaning, your medical bills, credit card debt, previous rent payments, many personal loans, payday advanced loans, and outdated income tax debt are wiped away when filing bankruptcy. Hence, you can get debt relief when you file for bankruptcy, even if you don’t plan to pay your mortgage or keep your home equity. It’s also vital to note that it’s permitted in all states to get debt relief when you file for bankruptcy. 

No Deficiency Judgment

A lender can request a deficiency judgment when they foreclose on a home. However, when you file for bankruptcy and surrender your home, the lender can’t receive a deficiency judgment. Additionally, if they already have a deficiency judgment against you, Chapter 7 can get rid of this. 

When Should You Talk to a Bankruptcy Lawyer? 

Bankruptcy Code can become extremely complicated. This is especially when it comes to saving your house while filing for bankruptcy. Understanding the various exemptions that you can apply to your home equity can help you ensure your bankruptcy trustee doesn’t sell your house to pay your unsecured creditors. However, failing to correctly exempt your property is known as bankruptcy fraud, which is subject to $250,000, 20 years in jail, or both if you’re found guilty. You can avoid this from happening if you talk to a bankruptcy attorney. 

Lawyers have the Expertise You are Seeking

Moreover, these professionals have the expertise to effectively handle your case. You might be struggling to pick between Chapter 7 or Chapter 13 bankruptcy. Your attorney can help you weigh your options and find the best choice. Additionally, this bankruptcy lawyer is equipped to manage any mediation that might arise when trying to save your house. This is especially helpful if you’re behind on these secured loan payments. 

Let’s break down what you can expect to receive when you hire a bankruptcy lawyer: 

  • Possibly the most vital starting point is that your attorney can tell you if filing for bankruptcy would be the best option. 
  • After identifying if you should file, your lawyer can help you understand if Chapter 7 or Chapter 13 could be the right choice to achieve your financial goals. 
  • This lawyer should have the experience to tell you what you can expect during the bankruptcy process and whether your case involves any specific risks or difficulties. 

Although these are all great resources to have, a bankruptcy lawyer is mostly needed when it comes to advising you on how you can ensure your house remains in your possession during this bankruptcy process. 

Lenders are likely to take a bankruptcy lawyer more seriously when dealing with a mortgage modification or mediation meeting after filing for Chapter 13. Overall, legal advice in a bankruptcy case is always a good idea, especially if you want to save your home from foreclosure. 

Wrapping It Up 

Whether bankruptcy is the best decision for you depends on an array of factors. However, the fact that you own property doesn’t have to be one of the reasons you avoid gaining this debt relief. If the amount of equity making up your property is protected through homestead exemptions in your bankruptcy filing, this ‘fresh start’ might make paying your mortgage more manageable. Hence, improving your overall financial situation. 

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is filing for bankruptcy a good idea

Is Filing for Bankruptcy a Good Idea?

is filing for bankruptcy a good idea

Is Filing for Bankruptcy a Good Idea?

Bankruptcy is commonly seen as a bad idea. That’s because people think it represents the end of a person or their business. But that’s not entirely true. Filing for Chapter 7 bankruptcy or the Chapter 13 alternative can be beneficial for you in certain situations, such as credit card debt or personal debt.

Many people think that declaring bankruptcy means losing all your money. They don’t know how this process works, though. Filing for bankruptcy should be a last resort for you. That’s because it’s a tricky and stressful process that can make you lose your property and other belongings.

Regardless of that, if you tried everything you could and still can’t pay off your debts, the bankruptcy process may help you take that off your plate. You need to know the bankruptcy basics if you want to go through this solution. That includes learning where to get a credit report or how to address credit card debt.

Keep reading to learn what you need to know about bankruptcy laws and everything related to it! However, we recommend you get legal advice if you want to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.

The most important part of this process is to know that this is not an end to your financial life. You can recover from this.

What Is Bankruptcy?

The first thing you need to know if you want to file for bankruptcy is how everything works. On a basic basis, bankruptcy consists of letting a judge know that you can’t pay your debts or bills. That includes personal debt, credit card debt, or a specific loan you owe to someone.

After examining your case and financial situation, the judge may decide to discharge all your debts or create a repayment plan for you to repay everything you can.

As a debtor, you can file different types of bankruptcy. The one you choose to file determines what the court can do for you. Many people file for bankruptcy to have a fresh start. Yet, not everyone is eligible by the court to go through this process. Apart from that, you can’t go through that process for free.

Your regular income, credit scores, and properties are essential for the court to decide if you can file for bankruptcy or not. This is a stressful and difficult process. That’s the reason we recommend you do it as a last resort.

There are also some moral setbacks in declaring bankruptcy. That’s because some people try to use the bankruptcy process to escape from debts they could pay. They do that to trick the system. You shouldn’t do that. People should only file for bankruptcy when they truly have no way to pay their bills.

Different Types of Bankruptcy -Chapter 7 Bankruptcy and Chapter 13 Bankruptcy

As we mentioned before, certain types of bankruptcy give you different benefits and have diverse consequences. The bankruptcy process works that way to give room for people under different circumstances to use this alternative. However, bankruptcy cases aren’t similar to each other.

Owing some money to the bank because of your credit card score it’s not the same as having personal debt.

Many articles online confuse the different types of bankruptcy. We want to make things simpler for you. Here are the most important ones:

Chapter 13 Bankruptcy

If you want to go through this process for yourself and not in the name of a company, then the only types of bankruptcy you care about are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Those are the only ones related to individuals and natural people. The others are involved with legal entities and specific circumstances.

The bankruptcy laws for each of the bankruptcy types are different. If you want to file for bankruptcy Chapter 13, you need to have a stable income. Apart from that, your secured debt has to be less than $1,257,850, and your unsecured debt less than $419,275.

This type of bankruptcy may seem better for some people because it allows them to pay for their debts without losing their assets. That includes credit card debt, personal loans, medical bills, and mortgage issues.

When you go to a bankruptcy court and file Chapter 13 bankruptcy, the judge gives you a repayment plan you must follow with no excuses.

That plan requires you to pay an amount of money monthly to repay your debts. Considering that, you don’t get complete debt relief. Your payments are monitored by the court. You get no privacy when this happens. Take that into account if you decide to go through this process.

You have from three to five years to pay off all your debts. There can’t be any debt unpaid when the deadlines come. That’s because your bills aren’t fully discharged when you are filing this type of bankruptcy.

As a debtor, you could think it’s difficult to get all that money. After all, that’s the reason you decided to go through this process in the first place. Fortunately, the court’s plan aims to address that issue. Some articles say filing bankruptcy for Chapter 13 can make it difficult for you to pay for everything, but that couldn’t be further from reality.

Chapter 7 Bankruptcy

When filing for bankruptcy, Chapter 7 is the most popular among people. That’s because it helps the debtor to have all their debts and bills discharged. This doesn’t come for free, though. The court sells all your valuable assets to pay as much as possible of your debt. You could lose your house, vehicles, and other properties.

Everything expensive you have may be sold out by your bankruptcy trustee. However, there are some exceptions to that. Those exceptions apply to exempt properties, which are things protected by the law to keep creditors from taking them away.

The bankruptcy filing process has pros and cons. Many people end up keeping all their belongings because they are exempt properties while others lose most of them. That’s because all bankruptcy cases are different from each other.

You should hire a bankruptcy attorney if you decide to file bankruptcy. Doing that helps you keep the assets safe from being taken away from creditors. However, if you bought a property just before declaring bankruptcy, the court may sell it to reduce your debt.

Creditors can’t ask you for money if you file for Chapter 13 or Chapter 7 bankruptcy. That means they have to stop sending you letters or calling you. At least temporarily. If you want to start filing bankruptcy under Chapter 7, then those creditors may not call you ever again.

That’s because all your debts are discharged when that happens, so they don’t have to keep asking you to repay that money. Regardless of that, that doesn’t apply to all kinds of debts. You can’t ask a judge to give you debt relief for all your pending payments. Some exceptions are untouchable by the bankruptcy laws, so you still have to pay for those bills.

Many articles avoid that information, so it’s essential to understand it when filing for bankruptcy. However, as it happens with Chapter 13, there are some circumstances in which you can’t go on with the bankruptcy filing process.

When it comes to Chapter 7 bankruptcy, your request may be denied by the judge if you have a high income or a high credit score. The court may ask you to go through a means test to make a credit report and see if you are fit to go for a Chapter 7 bankruptcy. When that happens, they receive information about your credit cards, your assets, and any property you have.

Other Bankruptcy Types

As we mentioned before, you can file for bankruptcy in many different situations. Even if the only ones you need are Chapter 7 and Chapter 13, knowing the others is not a bad thing. Learning about that helps you understand how bankruptcy laws work in a better way.

Chapter 11 is one of the most popular bankruptcy types worldwide. That’s because it’s the one that businesses use when they need to get debt relief.

Filing for bankruptcy is not easy. Doing it’s a difficult and stressful process, so you have to take some time to consider your alternatives. If you’ve already made up your mind, the first thing you need to do is study your situation and see which time of bankruptcy you should file.

When someone files Chapter 11 bankruptcy, the judge creates a plan for the company to pay all its debts without stopping to work. More than one attorney is required in these matters. That’s because more things are involved in the bankruptcy process when it comes to business payments.

Fishermen and farmers use Chapter 12 when they need to declare bankruptcy. Chapter 9 applies only to towns and cities. However, Chapter 9 cases are not that common, so don’t worry about them. The last of them is Chapter 15 bankruptcy, which addresses all international bankruptcy cases in a special bankruptcy court.

How to File for Bankruptcy

Filing for bankruptcy is a difficult and stressful process. That’s because you can’t do it for free. Apart from paying some fees, many of your things can be taken away to pay your creditors. It’s a process that has many pros and cons. Yet, if you still want to file bankruptcy, you need to know how to do it.

The first thing you need to do when filing for bankruptcy is to study your situation and see which type of bankruptcy you should go for. You can ask an attorney to help you with that. Some people even get credit counseling to help them with that matter.

Make sure to hire a bankruptcy attorney you can trust. These processes are long, so you need someone who can give you all the attention you need. Some attorneys even offer you free debt evaluation. After that, you should gather all the documents you need to start the process.

Those documents include your tax returns for the last two or four years depending on which type of bankruptcy you are filing. Additionally, you have to get your income documents, identification documents, bank account statements, retirement information, mortgage information, vehicle information, and any documents related to other debts, such as a credit report of your credit score.

You can take a credit counseling course to help you understand all that. Taking it helps you when you have credit card debt. By doing that, you can learn everything you need to know about getting a credit report, paying off your credit card debt, and how to improve your credit score. Having a credit counseling certificate is needed to go on with the bankruptcy filing process.

Make sure you have funds to pay for all the fees and payments needed when filing for bankruptcy. Many articles don’t say that information, but it’s essential to know it. After that, you can start filling out your bankruptcy paperwork. Print everything and send it to your bankruptcy trustee. Have a meeting with them to discuss the terms and consequences of the bankruptcy.

Taking a debtor education course is also needed to complete the bankruptcy filing process. After that, you only need to wait for the judge to announce their settlement and act accordingly.

Is It Good to File Bankruptcy?

It depends on your situation. Many articles say that doing it can help you in many ways. That’s not entirely wrong, but bankruptcy is neither easy nor for free. It’s not as simple as asking a judge to discharge all your bills and loans and give you debt relief.

The first thing you need to consider when declaring bankruptcy is the funds you have to do it. This process is not free. That’s because of the fees of going through the bankruptcy itself and the attorney payment.

Apart from that, there are some downsides when you declare bankruptcy. One of them is that it’s more difficult to get a mortgage or any type of loan. That’s because your bankruptcy records are public, so everyone can see them. That includes banks, business owners, and real estate agents.

Those records tend to be available for seven years or more. Banks may be less eager to give you financial aid if they see you have bankruptcy records. However, not everything’s bad about it. Declaring bankruptcy still keeps creditors away from you.

If you are in a bad financial situation, this process could be the only option for you. Debt relief gives you a fresh start with the support of a bankruptcy court. Since a judge can discharge debts from loans or credit debts, you can forget about those issues.

Be careful if you bought a property before starting the bankruptcy filing process, though. Creditors want their money back, so the judge may sell some of your personal belongings and properties to make for that money they are missing. Some articles say you can declare bankruptcy without losing any property, but that doesn’t happen to everyone.

Does Filing Bankruptcy Discharge All my Debts?

The short answer is no. There are some situations in which the judge can’t let you walk free from your debts. That’s because some specific bills and financial assets are untouchable by the bankruptcy court, so it can’t discharge them or help you create a plan to pay them.

These are the bills you can’t discharge with bankruptcy:

  • Student loans.
  • Child support.
  • Alimony.
  • Taxes and any kind of debt with the government.
  • Any loan coming from an expensive item bought days before filing bankruptcy.

Take that into account when you analyze your financial situation. Naturally, you can’t use bankruptcy to avoid child support, paying off a student loan, or a loan for a property you just bought. However, there are always new ways of generating income to pay for those things.

Wrapping Up

As you could see, filing Chapter 7 bankruptcy can help you in case you have problems with credit card debt or any kind of debt in general. This process has some pros and cons, though. It’s not for free, and the attorney fees are not inexpensive.

Regardless of that, it allows you to forget about creditors calling you and disturbing your personal life. The life of a debtor is not easy, so there is no shame in filing bankruptcy to find debt relief. Many articles say doing this is a bad thing, but that’s not true.

You can recover from bankruptcy. There are always new opportunities to improve your credit score and find new ways of income. The bankruptcy filing process also brings a lot of stress to your personal life, though.

Take all the time you need to think about this matter. If you want to open a bankruptcy case, hire a lawyer and get ready to ask a judge to discharge your debts! Remember this is a long road, but you can recover from that and live your life like you used to.

The only thing you need to do is hire the best attorney you can find. Do your best to find more ways of income. Bankruptcy should always be a last resort. Keep in mind that, and don’t use it as your first option. 

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what does filing for bankruptcy do

What Does Filing for Bankruptcy Do? – Understanding the Process

what does filing for bankruptcy do

What Does Filing for Bankruptcy Do? – Understanding the Process

Bankruptcy is a legal proceeding in which a judge and a bankruptcy trustee review the assets and liabilities of consumers, partnerships, and companies whose debts have become too onerous to pay.

The court determines whether to dismiss the debts, which means that individuals who owe are no longer legally obligated to pay them. The court may also dismiss the case if it considers that the individual or company has sufficient assets to pay their liabilities.

Bankruptcy rules were enacted to allow people to restart their lives after their finances had crumbled. Whether the crisis was the result of bad judgments or bad luck, politicians may recognize that a second chance is an important safety net in a capitalist system. The good news for anyone hesitant about this option is that nearly everyone who files for bankruptcy gets that second chance.

Bankruptcy: How It Works, Types & Consequences

Such matters are heard by the Bankruptcy Court, a federal court that is a branch of the United States District Court in your area. A bankruptcy case begins with the filing of a “bankruptcy petition,” which is a specific proposal for relief under bankruptcy regulations.

The Department of Justice oversees the United States Trustee Program, while the United States trustee oversees bankruptcy administration and reports to the court. Here, the goal of the trustee is to maximize the productivity and authenticity of the bankruptcy proceedings.

This trustee regulates the conduct of all parties in bankruptcy cases, controls related administrative activities, and ensures compliance with legislation and procedures.

Chapter 7 Bankruptcy

Chapter 7 is known as a “liquidation bankruptcy” because the law demands that certain possessions be sold in order to satisfy your unsecured creditors in return for a fresh start. A bankruptcy trustee handles the sale (or liquidation).

The trustee can only sell property that is not excluded from the sale (called nonexempt property). If all of your assets are excluded from the sale, the trustee cannot sell them. In that instance, your creditors receive nothing and you retain all of your possessions.

In most personal Chapter 7 bankruptcy proceedings, all property is secured under a legislation exemption. Most personal Chapter 7 bankruptcy proceedings last no more than four to six months when there are no non-exempt assets. The bankruptcy discharge – the court decision that cancels your dischargeable debt – is typically given three to four months from the filing date. As soon as that occurs, you can reestablish your credit.

Chapter 13 Bankruptcy

Individuals file this as the second most popular form of bankruptcy. A reorganization is so named because it entails a repayment plan that often only pays a part of the filer’s total debt. To petition Chapter 13, you must have a particular amount of secured and unsecured debt (including personal loans) to do so.

Chapter 13 Bankruptcy Process

You design a plan based on your regular income and living expenditures and inform the bankruptcy court how much you can afford to pay toward your debts each month. Your suggested repayment plan is reviewed by the court and the bankruptcy trustee. Once the court has granted it, all you have to do is pay your disposable income to the trustee and file your tax form each year. Once completed, your outstanding debts are discharged.

Some people petition for Chapter 13 bankruptcy because their monthly income is too high to qualify for Chapter 7 bankruptcy. Others prefer to file Chapter 13 to obtain a benefit that they would not be able to obtain under Chapter 7.

By filing Chapter 13, you can, for instance, prevent the sale of nonexempt property. It also allows you to pay back certain nondischargeable debts such as past-due alimony, child support, and your car loan at a cheaper interest rate. Furthermore, based on your normal salary, you can pay for it all in affordable monthly installments.

Business Bankruptcy: Chapter 7 vs. Chapter 13

Companies can declare bankruptcy under Chapter 7 or Chapter 13. Companies that file for Chapter 7 bankruptcy are in the process of closing down. All business assets are sold, from real estate to personal items, and unsecured creditors are compensated in the order of preference. Companies are not allowed to seek exemptions; everything is subject to taxation.

Consumers who pass a means test (which evaluates whether their income is too little to enable full repayment) are the only ones who can file for Chapter 7 bankruptcy.

A Chapter 13 bankruptcy, on the other hand, is referred to as a reorganization bankruptcy. Instead of selling your possessions, you can construct a repayment plan that can allow you to pay your creditors a predetermined sum over a specified period, usually three to five years. Your remaining unsecured debts may be discharged once you have paid off the agreed-upon percentage of your debt.

How Do I File for Chapter 7 Bankruptcy?

1. Analyze Your Debt

Some debts are not dischargeable in Chapter 7 bankruptcy, including alimony payments, most student loans, and recent tax bills. In addition, if you pledged security for a debt such as a house or a car, the creditors can seize the property if you are not current when you petition and do not remain current after your trial is over.

2. Determine Your Property Exemptions

Every jurisdiction has exemption regulations that govern what categories of property (or, in some instances, how much equity in a specific sort of property) you can keep if you petition for Chapter 7 bankruptcy. Most people can keep their household furniture, retirement money, a small car, and some home equity. Before actually filing, make sure you can protect anything you wish to save.

3. Make Sure You Are Eligible

Most persons must undergo and exceed the means test before being eligible for a Chapter 7 bankruptcy relief, those who are not eligible include those with mostly company debts and some military members. You are eligible if your average gross income during the six months preceding your filing is greater than the typical income for a household of your size in your jurisdiction. If not, you would reduce allowable expenses from your income to see if you can file for Chapter 7 bankruptcy.

4. Redeem or Reaffirm Secured Debts

If you pledged property as security for a loan, you must continue to make payments to the creditor in time to retain the property. When you declare bankruptcy, you would be asked if you want to “redeem” the property, “reaffirm” the debt by choosing to continue paying according to the agreement with the creditor, or “surrender” the property, which means giving it over to the creditor.

5. Fill out the Bankruptcy Forms

You need to fill out few more pages of paperwork in which you inform the court about your properties, liabilities, income, expenditures, and previous transactions. You must list all of your creditors, property, and income, as well as your property exclusions, and determine what to do about each one of your secured debts.

6. Take a Credit Counseling Course

Individuals who petition for bankruptcy must finish a course either before or soon after declaring bankruptcy.

7. File the Forms

Once you file for bankruptcy, you officially begin your lawsuit. Most people file all of the papers in one go, but if you’re short on time, you can do an urgent filing by completing only a few essential forms. You have 14 days to file the additional forms.

8. Pay the Filing Fee or Request a Fee Waiver

Instantly after you submit your papers, you must pay a filing fee. If you are unable to pay it all at once, you may petition the court to divide it into four installments. If you are unable to pay it, you can seek a fee waiver by completing an application and submitting it with your bankruptcy case. A court may consider it and, in most cases, grant the fee waiver if you appear to meet all of the requirements.

9. Submit Documents to the Bankruptcy Trustee

You are required to provide documents proving the veracity of the facts on your bankruptcy filings. You should expect to send bank statements, pay stubs, profit and loss statements, tax returns, and any other papers requested by the trustee.

10. Go to a Meeting

In most circumstances, you would only need to appear in court once for a brief meeting with the trustee. The trustee assigned to your case should verify your identification and ask you typical questions that all debtors must answer, as well as particular questions concerning the content of your papers.

11. File Objections or Motions If Needed

If you want to challenge a creditor’s lien against you or remove specific liens, you must do so before your bankruptcy action is discharged.

12. Wind up Your Secured Debts

When you file Chapter 7 bankruptcy paperwork, you need to fill out a form detailing how you plan to manage your secured debts. You must take action on these issues before your case can be closed.

13. Complete a Debtor Education Course

After you file for bankruptcy, you must finish the second course, known as a debtor education course before you may be discharged. If you do not present your certificate promptly, the court may conclude your case without granting you a discharge. Resolving this issue can be costly because you would most likely need to file a motion and pay another filing fee to reopen the investigation.

14. Get Your Discharge

The court may issue an order dismissing your eligible debts at the conclusion of a valid bankruptcy. You no longer have a legal obligation to pay your creditors once you have been discharged and your creditors have no standing to recover the debt.

How Much Debt Do You Need to File Chapter 7 Bankruptcy?

This is assessed by seeing if you meet the means test requirements. You would be eligible to file Chapter 7 bankruptcy if your current monthly earnings (or CMI, the average of your last six months’ earnings) is less than the state median limit. If your CMI is higher than the state median income, you cannot qualify. The means test is based on a person having greater discretionary income than they save in their income tax return and the primary spending expense.

How Do I File for Chapter 13 Bankruptcy?

Consult with a credit counselor from a nonprofit credit counseling service as well as a bankruptcy attorney if you are thinking about filing for bankruptcy. Both introductory consultations should be provided at no cost. These discussions can assist you in better understanding your situation and determine whether bankruptcy is the ideal option for getting your finances up and running again.

Once you’ve decided to file for bankruptcy, follow these procedures.

1.Credit Counseling

Complete pre-bankruptcy counseling with a non-profit credit counseling organization. Your counselor may also assist you in developing a repayment plan.

2.Get an Attorney

Utilize the services of an experienced bankruptcy attorney. Chapter 13 is a complicated process, and missing a step or incorrectly filling out paperwork might result in your lawsuit being dismissed or some debts not being covered.

3.Fill out Paperwork

Your attorney can assist you in completing the numerous forms necessary for filing. You need to collect data on your entire financial situation, including debts, revenue, property, and monthly bills.

4.Submit Practicing Petition

Submitting the appropriate forms, also known as “filing” the bankruptcy, initiates the procedure. A trustee in bankruptcy would be selected. When you file, you automatically enter what is known as an “automatic stay,” which indicates that most efforts to collect on your debts must stop.

5.Submit Payment Plan

You must provide a suggested payment plan within 14 days of submitting the petition. Even if the petition has not yet been authorized, you must begin paying repayments on the plan within 30 days of submitting it.

6.Meeting of Creditors

The trustee would hold a meeting between 21 and 50 days after you file the application to allow creditors to raise any complaints they may have with you.

7.Confirmation Hearing

You, the trustee, and any creditors who desire to join must meet in court no later than 45 days after the creditors’ meeting to finalize the repayment schedule.

8.Payment

Creditors are compensated by the plan over a period of three to five years.

9.Debtor Education Course

Before filing for bankruptcy, you should first take a “debtor education course” from a nonprofit credit counseling service.

What Do You Lose If You Declare Bankruptcy?

Your property would be placed in a bankruptcy estate owned by the Chapter 7 bankruptcy trustee assigned to your case after filing. You do not lose everything, because you can remove (exempt) assets generally needed to maintain a house and employment. Any remaining assets would be sold by the trustee, and the earnings would be distributed to your creditors.

The difficult part is that if you make an error, the bankruptcy judge is reluctant to allow you to dismiss the case, and you may lose your home. So you must follow the guidelines attentively.

Pros and Cons of Chapter 13 Bankruptcy

Pros

1. An option is given to you for repaying your creditors over a greater length of time. If you are currently behind on your expenses, you would have more time to grow your income and improve your spending patterns.

2. You may be able to minimize the amount of debt you owe. In some cases, you may not be forced to pay the entire amount of your debt. Creditors are not entitled to the full amount of money due to them once you have completed the conditions of your repayment schedule.

3. It is possible for you to prevent the repercussions of defaults and missing payments from appearing on your credit record. If you are falling behind on your financial responsibilities, filing Chapter 13 bankruptcy can help you establish a plan to repay your debts reasonably.

4. Under Chapter 13, you can keep your property as long as you make payments. This is an excellent service for individuals who have fallen behind on their mortgage or other secured loans.

Cons

1. A Chapter 13 bankruptcy would appear on your credit report for roughly seven years. You can focus on rebuilding your credit during this time.

2. Certain types of debts are not dischargeable in Chapter 13 bankruptcy. Student loans, child support, and spousal support are some of the debts that remain unpaid after the bankruptcy filing.

3. In exchange for debt relief, you should repay your loan to creditors, this may take around three to five years. Filing for Chapter 13 bankruptcy necessitates a lengthy commitment to the process.

How Do You Get a Chapter 13 Debt Discharge?

You must finish the payments indicated in your repayment plan if you qualified for Chapter 13 bankruptcy. Furthermore, before you can be discharged, you must adhere to the following:

  • Attest that you have met all of your domestic support obligations.
  • Take a financial management course.
  • Demonstrate that you have not obtained a Chapter 13 bankruptcy discharge in the last two years.
  •  Before issuing a discharge, the court would first determine if there is a current process that could result in a restriction on your homestead exemption.

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filing bankruptcy in california pros and cons

Filing Bankruptcy in California Pros and Cons

filing bankruptcy in california pros and cons

Filing Bankruptcy in California Pros and Cons

Filing bankruptcy in California is in important decision that comes with several pros and cons. It’s important to note that bankruptcy filing involves several factors that may affect how your financial situation evolves. Many people believe bankruptcy is a safe and quick way to relieve financial pressure. Although it has several benefits that can help people, it also has its cons.

When it comes to a bankruptcy filing, people must consider both the advantages and disadvantages of the process before choosing the tools they’re going to use. This article is going to go over the pros and cons of filing bankruptcy in California, as well as how to choose the best option for your particular case.

What Does Filing Bankruptcy in California Involve?

According to U.S. law, bankruptcy is a legal process where an individual or business can’t pay for their loans or debts in any way, so they start a bankruptcy process to remove these debts and get a fresh start. In these processes, the bankruptcy court gives creditors the chance of obtaining a repayment plan based on the person’s or business’s assets that can be liquidated.

Every bankruptcy case is handled in federal courts according to the Bankruptcy Code. The person responsible for administering the bankruptcy cases is typically a trustee, which is an officer appointed by the U.S. Trustee Program. While bankruptcy filings may seem like a reasonable idea, it’s important to note that declaring bankruptcy can make these records stay on your credit reports for some time, making it more challenging for you to take loans in the future.

What Are the Different Types of Bankruptcy in California?

The two primary methods to file for bankruptcy in California are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Each method has different benefits for the individual/business, but keep in mind that both methods don’t apply to everyone. To learn more about Chapter 7 and Chapter 13 bankruptcy, keep reading.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common bankruptcy type. There, individuals or businesses with not many assets may be able to dispose of unsecured debts (medical bills, credit card debt, etc.) In case the person has non-exempt property, such as cash, bonds, or stocks, they must liquidate these assets to repay some of the debts to the creditors.

On the other hand, people with an exempt property only may not need to repay their unsecured debts to creditors, depending on the case. Once the person sends the required forms to the bankruptcy court, the assigned bankruptcy trustee is going to review them and interview the person about the content. If everything gets approved, the person is going to get a notice of the bankruptcy discharge.

Keep in mind that Chapter 7 bankruptcy can help someone get rid of unsecured debts, but it cannot erase them all. In cases of child support, tax debts, or a student loan, the person may not be able to get relief from those loans.

Who Qualifies for Chapter 7 Bankruptcies?

As mentioned before, not everyone can file Chapter 7 bankruptcy with a court of law to get a clean slate. Generally speaking, people who earn under the median income for California, based on their estate size, may file Chapter 7 bankruptcy. To evaluate this income, the court of law considers the person’s average monthly income over the past six months.

People who don’t pass the “Means Test” may have to file Chapter 13 bankruptcy. Overall, people with low income or credit scores, who don’t own expensive assets, or have problems paying their personal loans may need to file for Chapter 7 bankruptcy to relieve their financial situation.

How Long Does Filing Chapter 7 Take?

In most cases, people could fill out their Chapter 7 bankruptcy forms in about seven days. The meeting with the assigned bankruptcy trustee could take up to two months after filing the forms.

Finally, it could take from two to three months after the meeting to get the discharge letter.

It’s important to note filing for bankruptcy is not free; to file for Chapter 7 to relieve yourself from some financial obligations, you must pay a $338 filing fee. However, in case you earn below 150% of the Federal Poverty Line, you could be able to receive a fee waiver. Additionally, unemployed people or people on social security could also receive a fee waiver.

You must also pay for a personal finance course online, which can cost from $10 to $50. There, you could also request a fee waiver, depending on your current personal financial status. In case you decide to pay for a bankruptcy attorney, you may have different fees depending on the service.

Chapter 13 Bankruptcy

Individuals that can’t file the former type of bankruptcy must go for Chapter 13 bankruptcy, which is also known as the “Wage Earner’s Plan.” Chapter 13 is for those who have significant income and don’t apply for Chapter 7. Here, people create a debt repayment plan for their creditors. Except for non-exempt assets, debtors can keep their assets without any problems.

Filing for bankruptcy with Chapter 13 means that the debtor must create a plan for their creditors and follow through with it within three to five years, according to California law. If needed, the creditors can use the disposable income from the debtor for the repayments. At the time of filing for bankruptcy, the debtor starts the process by making a list of all the creditors and all the debts in place; with that information, the debtor creates the repayment plan to gain some relief for their personal loans.

As with Chapter 7, Chapter 13 doesn’t apply for student loan debt, alimony payments, or other related debt types. However, it can be used to pay for credit cards or other personal payments. While Chapter 13 can give the debtor relief for their financial situation and a clean slate, it may make it harder for them to borrow money in the future.

Who Qualifies for Chapter 13 Bankruptcies?

It depends on the case. In most cases, debtors are eligible for Chapter 13 if their debts are below $1,257,850 for secure debt and $419,275 for unsecured debt. Additionally, the person responsible for filing the forms must complete a credit counseling course to be eligible and get a discharge.

How Long Does Filing Chapter 13 Take?

Filing for bankruptcy, in this case, can take from three to six months for the pre-confirmation period. However, keep in mind that Chapter 13 involves a three to five-year repayment strategy for every loan. In essence, the person may only complete this legal process once they’re done paying all their financial loans.

In case the person follows through with the debt payments, the court of law can provide them with a discharge, excusing the rest of the financial debt and giving them a clean slate. Overall, the person is going to take from three to five years to complete all the processes and get a fresh start with their credit.

Pros of Filing for Bankruptcy

It’s important to note that bankruptcy filings are not an “easy” way to avoid paying for credit cards, paying off student loans or child support, or get a fresh start immediately. There’s a much more complicated process that everyone must follow carefully if they want to take care of their debt/credit with a bankruptcy discharge. In essence, it’s vital to know the pros and cons of filing for bankruptcy in California.

Here is a list of some of the most common benefits of filing bankruptcy:

Automatic Stays

An automatic stay is protection the individual or business gets for free as soon as they fill out the bankruptcy forms. Thanks to the automatic stay, no creditors can keep pursuing payments for any loan; additionally, they may not seek action against the individual until the bankruptcy gets a discharge.

The automatic stay applies for both Chapter 7-13 bankruptcies, according to California law. While automatic stays are not a permanent solution to ongoing debt or loan, they can give the individual some time to figure out how they want to proceed with the financial plan.

Avoid Future Legal Problems with Creditors

When someone has to pay off debt, they often have to deal with many creditors, which can get overwhelming. In a sense, filing bankruptcy can give the individual relief from having to deal with all creditors at once, especially if they get to avoid paying some of their financial obligations. Keep in mind this process may vary depending on the bankruptcy type.

Keeping Some Assets

Depending on how the processes go when you file for bankruptcy, you could be able to keep some of your property as soon as you repay the debt. While this is more common for assets in Chapter 13, this may also happen for people who fill out Chapter 7.

Getting Proper Representation

Unless you hire a bankruptcy attorney for legal advice and to foresee that you get your discharge, you’re going to get a court-appointed representative for free. These trustees handle everything regarding communication with the creditors. Additionally, if you’re working with Chapter 13, the trustee is responsible for processing every payment, making everything more comfortable for you.

Stop Car Repossession or Foreclosure

In the case of Chapter 13, the person may stop or delay car repossession or foreclosure, although it depends on the case.

Paying Debt More Comfortably

When you file for bankruptcy, it’s because you can’t keep paying your debt/loan. In these cases, the creditor must settle for any payment type they can receive. In the case of Chapter 7, the person can get all their disposable income liquidated to pay off the debt or loan; taking that into consideration, the person would not have to pay credit card debt or a small loan balance back.

Avoiding Some Debt and Loans Entirely

As soon as the individual gets a bankruptcy discharge, any remaining debt gets written off, meaning they don’t have to pay it anymore. While it’s challenging to avoid all loans entirely, people may still have a way to avoid paying some complicated loans.

Taking New Credit While Following a Repayment Strategy

Depending on the case, people may rebuild their credit score right after getting discharged. Once the person gets the discharge order, they can start requesting credit cards without any problems. There are some limitations at the time of taking new credit and increasing credit score, but it’s still possible under particular circumstances.

Increasing Credit Score

Bankruptcy can be fatal for a person’s credit score. However, working with creditors to pay off debt can help with increasing the credit score in the future. Keep in mind that eliminating existing debt can lower the debt-to-income ratio, which is a considerable influence on the credit score.

Cons of Filing for Bankruptcy

As mentioned before, you can file for bankruptcy in California and get many benefits for your credit and financial situation in general. However, there are still some cons of filing bankruptcy that you must be aware of.

Here is a list of the cons of Chapter 7 and 13 bankruptcies:

Losing Assets

Bankruptcy involves losing some equity on assets (or property in general), depending on the type of bankruptcy you file. That property can involve houses, cars, and others.

Bankruptcy Doesn’t Cover Student Loans

While bankruptcy can be helpful to take care of credit card debt and provide financial relief, it doesn’t cover student loans. There are some exemptions in which a bankruptcy attorney may address student loans, but these are rare cases, and even then, it’s challenging to get rid of them completely through bankruptcy.

Expenses

Filing for bankruptcy isn’t free. To file every form, you may have to pay a particular amount of money, depending on the Chapter you chose. In case you choose to work with an attorney for legal advice, you may have to pay attorney fees, which can make things even more expensive.

Time

Depending on the bankruptcy type you choose, from filling out the forms to receiving the discharge, you can take from months to even five years. In the case of Chapter 7, it may not take more than five or six months to receive the letter, which is not the case of Chapter 13.

Responsibility to Pay Some Debt

Even if the person can write off some debt after they file for bankruptcy, they may not be able to cover some taxes, child support, and other debts.

Problems with Renting in the Future

Considering that bankruptcies are made public, some landlords may choose not to offer their property to tenants who decided to file for bankruptcy at some point.

Possible Evictions

Once the bankruptcy gets discharged, the person may be requested to leave the property if they’re behind on payments.

Difficulty Holding a Position in Your Career

Whether you choose Chapter 7-13 bankruptcy, you may have some issues holding a particular position at work. Additionally, filing for bankruptcy may make you ineligible to work in any position that required handling finances.

The Bankruptcy Credit Report Stays for Up to 10 Years

The details for the bankruptcy can stay in a person’s credit report for up to 10 years after getting discharged. While bankruptcy can provide relief from some debts, there are some consequences that are hard to avoid in the future.

Bankruptcy Is Public

Bankruptcy records are public, making it possible for someone to go over them and notice that a particular person filed for bankruptcy. It’s not common for someone to investigate that information type, but it may still happen in cases where people need background information about someone they want to lend property, money, or any other financial asset.

Credit Score Decrease

A bankruptcy case in Chapter 7-13 can be fatal for someone’s credit score. Depending on what the person’s score was at the time they filed for bankruptcy, it may experience some significant drops which are hard to recover from.

High-Interest Rates When Requesting New Credit

Filing for bankruptcy in Chapter 7-13 doesn’t mean that it’s going to be impossible to qualify for new credit. However, it’s important to note that these new credits are going to lead to much higher interest rates and lower credit limits. Rebuilding credit after bankruptcy can be a slow and complicated task, but it’s still possible.

Difficulty Increasing Credit

In case you want to apply for credit of $500 or higher, you may need to report your bankruptcy, making it harder to get the credit approved.

It Sometimes Doesn’t Fix the Root Problem

While filing bankruptcy can be a good way to gain some relief from harsh financial situations, it doesn’t mean it’s going to solve the root problem that led the individual to not have enough money to pay off their debt. In case the person doesn’t learn from the decisions that led them to lose money, they may keep repeating the same mistakes and requesting bankruptcy over and over again.

Bottom Line

Now that you know the pros and cons of Chapter 7-13 bankruptcy in California, it’s time to consider all your options before making any decisions. When you file for bankruptcies in Chapter 7-13, there’s no turning back, and it should be seen as a last resort rather than a quick way to protect your assets.

In case you decide to start a case, consider talking to an experienced attorney for counseling. Some of them offer free consultations before diving deep into the case. The right attorney-client relationship could lead to positive results in the future, and in some cases, the ability to getting discharged successfully.

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how to file bankruptcy without an attorney

How to File Bankruptcy Without an Attorney

how to file bankruptcy without an attorney

How to File Bankruptcy Without an Attorney

It is rarely a good idea to file bankruptcy without the help of an experienced bankruptcy attorney. Whether you should file for bankruptcy pro se (without an attorney) depends on how complex your case is, and the type of bankruptcy you wish to file.

What Is Bankruptcy?

Bankruptcy is a legal proceeding where a judge and a court trustee examine an individual’s liabilities and assets. They can also analyze the assets, and liabilities of businesses that are unable to pay off their liabilities.

The federal court determines whether to discharge the debts, which means that those who owe sums of money to third parties are no longer legally obligated to pay them. This case may be dismissed by the court if the court has found that the individual or business has sufficient assets to pay off their liabilities.

Bankruptcy laws were put in place to allow people to restart their lives after their financial affairs had collapsed. Whether the collapse was the result of poor decisions or poor judgment, lawmakers may recognize that a second opportunity is an important safety net in a capitalist economy.

The good news for anyone on the fence about filing for bankruptcy is that nearly everyone who does so gets a second chance.

Who Declares Bankruptcy, and Why?

Most businesses and individuals that file for bankruptcy do not have enough money to cover their debts. It is also a financial planning tool if you have sufficient funds to make payments but need to change the terms.

Individuals file for bankruptcy more often than businesses because they often have many kinds of debts. The four most common kinds of debt that individuals have are credit card debt, a mortgage loan, a car loan, and student loans.

When to File for Bankruptcy

To determine whether you should file for bankruptcy, consider carefully whether you can pay off your debts in five years. If this does not seem likely, it may be time to declare insolvency. The bankruptcy law was designed to give bankruptcy filers facing hard times financially a second chance rather than penalize them indefinitely. If you have been financially devastated by a stroke of bad luck and poor decisions, and you cannot see that changing soon, declaring insolvency is your only option.

Even if you do not meet the criteria, you can still expect some debt relief. You can expect to receive help in the form of a debt consolidation loan, a debt management program, or debt settlement. These take approximately three to five years to complete, and none of them guarantee that your debts are paid in full upon completion.

Before filing for bankruptcy, keep in mind that it has long-term implications. It remains on your credit file for 7 to 10 years, making future loan applications extremely difficult.

However, there is a significant benefit both mentally, and emotionally when you are relieved of the burden of debt and receive a fresh start.

Types of Bankruptcy

There are many different types of bankruptcy that you can file. The most common are chapter 7, and chapter 13 bankruptcy.

File for Chapter 7 Bankruptcy Without a Lawyer

Chapter 7 bankruptcy, also known as liquidation bankruptcy, entails liquidating your assets to pay off your debts, which is the best option for those who do not own a property and have a small household income.

Because of state-specific, and federal exemptions, some of your property may be exempt from liquidation when you file for this type of bankruptcy, depending on where you live, and your marital status. Exemptions, whether they are from your retirement accounts, home equity, or other assets such as jewelry, allow you to receive the allowed exemption amounts while the remainder of the proceeds is used to pay off debts.

Before you begin any legal proceedings, consider what you risk losing. If you have valuable property, or real estate, declaring insolvency may pose the risk of losing your valuable assets. There may not be much risk for people who have no significant property, little income, and are burdened with overwhelming debt that they cannot pay.

However, if you have equity in real estate, or if you have vehicles or other personal property that you want to protect, it is advisable to seek legal advice from an attorney. During a free initial consultation, bankruptcy lawyers can often tell you whether you are a candidate. A bankruptcy petition preparer is not permitted by law to provide legal advice.

You could tell the attorney if you want to file Chapter 7 bankruptcy on your own. The important thing is to be truthful so that you can get the help you need. Bankruptcy attorneys should advise you on any foreseeable problems you may have when attempting to file a Chapter 7 bankruptcy on your own. Assuming you have never filed for bankruptcy, and your income is less than the median income for the size of your family, you may not be subjected to the means test.

When filing for bankruptcy without the assistance of an attorney, getting the test form completed correctly can be challenging. If you do not get it right, the United States Trustee’s Office might very well audit or investigate you. They may request additional information, and if they determine you are ineligible based on how you completed the form, they may request that the bankruptcy court dismiss your case.

Completing Chapter 7 Forms Yourself

If you choose to hire an attorney, the attorney completes the forms for you. When filing Chapter 7 bankruptcy on your own, you must obtain, and fill out all the necessary forms yourself. The bankruptcy forms are free and can be downloaded from the United States Courts website. Read through the documents carefully, and fill them out clearly, and correctly. A Chapter 7 bankruptcy petition is made up of several legal papers, and schedules.

Mandatory Chapter 7 Counselling

Everyone who files for Chapter 7 is required to take a credit counseling course. Most of these courses are available online and are reasonably priced. Credit counseling courses typically cost around $25. Some service providers may even lessen or waive the fee.

Before filing your bankruptcy petition for Chapter 7, you must complete the mandatory credit counseling course. Upon completion, you are provided a certificate, which you must then submit to the court. Failure to comply with this requirement could result in the court dismissing your case.

Chapter 13 Bankruptcy

Chapter 13 bankruptcies account for approximately 36 percent of all non-individual filings. In a Chapter 13 bankruptcy, you repay some of your debts to have the remainder forgiven. It is the best option for those who do not want to lose their property, or who do not meet the criteria for Chapter 7 due to a high income.

Individuals can only file for Chapter 13 if their debts do not exceed a predetermined amount. This amount is revised regularly, so consult with an attorney, or credit counselor to find the recent figures. Creating a three-to-five-year repayment plan for your creditors under Chapter 13 is essential. The remaining debts are erased once you complete the repayment plan.

Filing Chapter 11 Bankruptcy

Businesses can submit a petition for chapter 11 bankruptcy. Chapter 11 is also known as reorganization bankruptcy because it allows companies to continue operating while reorganizing their liabilities, and assets to repay creditors.

It is appropriate for any size of business, including partnerships, and, in rare instances, individuals. With permission from the court, businesses can continue to operate while bankruptcy proceedings take place.

How to File for Bankruptcy Without a Lawyer

1. Conduct a Means Test

When filing a petition without a bankruptcy lawyer, the first step is to perform a “Means Test” to see if you meet the criteria for Chapter 7 bankruptcy. A test form is provided by the federal government. You can also find simplified versions of the test online.

While you file bankruptcy, you should be asked about your monthly salary, debts, nonexempt assets, and how many dependents you have. If you have few assets, your household income is less than the state median, and you have not been accused of fraud, the bankruptcy process may be easy enough for you to handle on your own.

2. Compile a Credit Report

Contact all three credit bureaus to obtain credit reports. Because creditors do not typically report to all three bureaus, you must include all three reports. This is an important step because debts that are not reported cannot be discharged.

3. Receive Mandatory Counseling

You cannot file bankruptcy unless you have completed the mandatory credit counseling. It convinces the court that you have depleted all other options before filing for bankruptcy. The counselor must be approved by the court for the counseling to be considered valid.

You can often find this service online, or telephonically. Once the counseling has been completed, you should be issued a certificate of completion that you must include with the paperwork you file. If you do not complete this step, your application is certain to be rejected.

4. Complete the Bankruptcy Petition

Should you choose to file bankruptcy without a lawyer, the most complicated, and time-consuming task is usually filling out the official bankruptcy forms. You can access the bankruptcy forms online to save time. The packages are reasonably priced and include all the local forms required to file for bankruptcy in your state.

Once you have completed the files for bankruptcy, attach the necessary documents, and send the paperwork in person, or by mail, along with the filing fee. You must reply to any communication from the bankruptcy trustee as soon as possible. Failure to do so may result in the dismissal of your case.

5. File the Bankruptcy Petition

If you have not yet hired a bankruptcy lawyer, now might be the best time to do so. Although legal services are not mandatory for anyone filing bankruptcy, choosing to represent yourself can be risky. To file a bankruptcy petition successfully, you must understand federal, and state laws, and you need to know which ones apply to your bankruptcy case. Judges, and court employees, are not permitted to give guidance.

There are also numerous bankruptcy forms to fill out, as well as some significant differences between Chapters 7, and 13 that you must be aware of when making any decisions. If you do not understand or follow the correct guidelines, and practices in court, it may have a grave impact on the outcome of your case. You also run the risk of the trustee seizing and selling your property if you do not seek legal counsel.

6. Meet with Your Creditors

When your bankruptcy petition is approved, your case is designated to a bankruptcy trustee, who arranges for a meeting with your creditors. Attendance is mandatory for you, but not for the creditors. This is their chance to ask you, or the trustee questions about your bankruptcy case.

7. Attend a Financial Management Course

Finally, within 45 days of your creditors’ meeting, you must complete a post-filing Personal Financial Management Instruction Course. Visit the United States Trustee Program’s website to locate an approved financial management course near you. After finishing the course, the final step is to await word from the bankruptcy court about whether your debts were discharged.

What Happens After You File Bankruptcy?

Filing bankruptcy is a way to provide debt relief to those struggling financially. This can be accomplished by liquidating your assets to pay your debts, or by devising a repayment plan.

Both represent a new beginning, but often without some of the property, and assets that may very well have exacerbated, or caused the financial problem in the first place. Filing bankruptcy influences your credit score. It stays on your credit report for up to 10 years, depending on the kind of bankruptcy you have filed.

In this period, a bankruptcy discharge may make it difficult to obtain new lines of credit, and it may even lead to problems when applying for jobs. If you have loans that were taken with a family member, or a friend, they may be liable to repay at least a portion of the debt.

The truth is that if you are contemplating insolvency, your credit score is most likely already poor, and following this path allows you to improve your credit score over time if you consistently pay off your debt.

Even so, due to the long-term consequences of bankruptcy, some experts believe that at least $15,000 in debt is required for it to be beneficial.

The Debts That Bankruptcy Cannot Help You With

Although bankruptcy does cover most liabilities, there are a few that the court cannot discharge you of. These include:

• Certain taxes

• Debts acquired after the petition has been filed

• Child support, and alimony

• Fraudulent loans

• Debts obtained because of reckless driving or driving under the influence

• Loans, and other debt that has been acquired in the six months before filing a petition

• Bankruptcy does not cover the portion of the debt that is owed by a partner, or co-signer

Are There Any Other Options for Managing My Debt?

Most people consider bankruptcy only after they have exhausted their options for debt management, consolidation, or settlement. If none of these options are available, it may be worthwhile to investigate low-cost bankruptcy options.

Debt management is a service provided by nonprofit credit counseling agencies that aim to lower the interest rate on credit card debt and reduce monthly repayments so that they can be paid off. You could also choose to have your debt consolidated, which involves combining your loans to help you pay off all debts on time. Debt settlement is a method of negotiating with creditors to have them reduce your outstanding balance.

However, a settlement may not be the best bankruptcy alternative, as it is often reflected negatively on your credit report much like bankruptcy. Before you decide, it is advisable to consult with legal counsel to ascertain your best course of action.

Final Thoughts

Everything does not always go according to plan, and sometimes you may find yourself drowning in debts with no way out. The phone may be ringing off the hook with creditors demanding their repayments.

A bankruptcy filing may be your only way out in such a situation. It was designed to give those struggling under the weight of financial burdens a second chance and provide much-needed debt relief.

If you have exhausted all other options, and are looking for a fresh start, you can declare bankruptcy on your own. However, keep in mind that bankruptcy does not cover certain liabilities, such as child support, and that it may affect your credit score for up to 10 years.

While filing ‘pro se’ is possible, it does carry great risk. If you need to file for bankruptcy, you should talk to a bankruptcy attorney who can help you achieve your financial goals. If you need a bankruptcy lawyer near you, you can use a lawyer referral service to find one.

Another thing to keep in mind is that proceeding on your own still carries costs. Attorney fees may be what deters you, but you should always remember that employing the use of an attorney can show the court that you are indeed serious about your financial situation.

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Pros and Cons of Filing Bankruptcy

pros and cons of filing bankruptcy

Pros and Cons of Filing Bankruptcy – What You Need to Know Before Making a Choice

Filing for bankruptcy is never an easy thing to handle and can be the cause of stress for years to come. When Chapter 7 bankruptcy is filed, you can expect it to be displayed on your record for the next 10 years before the courts wipe the debt clean. Certain debts remain, such as child support, student loans, and most tax debts.

People often overspend on their credit cards and create unnecessary debt that could gather high interest rates as the years go by.

There are many individuals and corporations that make use of it to start an important business or resolve their financial crisis. It might just be what you need to get that fresh start and get out of the terrible financial situation that you are experiencing.

Should You Consider Filing Chapter 7 Bankruptcy?

Sometimes it is best to start with a clean slate and a manageable repayment plan so that you can get your life back on track. You should consider filing Chapter 7 bankruptcy if your current situation could benefit from it. If you are struggling to feel confident about going bankrupt, it would be best to read the reasoning behind filing for bankruptcy.

Today we discuss the pros and cons if you file for bankruptcy and explain the different kinds of bankruptcy that can be filed.

What is Bankruptcy?

When a company is in legal debt and wants to start on a clean slate, bankruptcy can be used as a legal action to make up for some of those repayments. It is a means of protection for unsecured creditors because they share a part of what can be contributed by debtors.

Each loan or credit card has an existing balance that helps to repay the balance partly or in full. It does this by reducing the monthly repayments under strict regulation and supervision of the courts.

This protects creditors and lenders from both debtors, creditors, or other creditor’s shares. There are pros and cons to filing bankruptcy and rebuilding your credit, so be up to speed with the latest information in your state.

Filing for Bankruptcy

Even though your credit cards are blocked when filing for bankruptcy (which is probably a good thing), you might still consider finding a way out of debt. The pros and cons need to be looked at, so you can be knowledgeable of the proceeding and the potential outcome of your situation.

Whether you choose Chapter 7 or Chapter 13 bankruptcy filings, your credit report is going to take a knock. Once you have filed for bankruptcy there is no going back, but you are able to rebuild your credit score up again. You can even take on more debt from providers willing to accept people that are in credit counseling. This route is not recommended and could make your financial situation worse than it was when you began.

It is a good idea to clear as much debt as possible to be able to keep free from financial stress. There are many articles that can teach you about personal finance and may be able to help you improve your situation.

So, before you decide on filing Chapter 7 or Chapter 13 bankruptcy, give the below information a read, so you can learn how you can find relief from debt collection services for a while.

The Pros of Chapter 7 Bankruptcy

In the last year, bankruptcy has risen over 60%. The pandemic ravaged the world causing loss of business and jobs around the world. When you file for bankruptcy with the courts, you protect yourself and your remaining assets. Debt collectors, creditors, and money lenders are not able to contact you with regard to any cash you might own.

Your vehicle or home might even be exempt from all losses or penalties that could occur. When you file a Chapter 7, you may still have access to more money than you thought was possible. You are no longer going to be burdened with debts that you are unable to repay.

If you have pending debt that has not been paid in a year or two, you are better off not paying it. It is going to damage your credit score even more, so the best choice would be to chat with a financial advisor.

Remember, when filing Chapter 7 bankruptcy, judges might potentially liquidate assets to help recover some of your debt.

The Advantage of Chapter 7 Bankruptcy

The entire process of filing Chapter 7 takes anywhere from three to six months. Most states exclude most items that you own from your bankruptcy claim, so this gives you a chance to keep some assets while getting back on your feet.

When wages or salaries are proportionately paid back by you, you may be entitled to keep that part of the payment once Chapter 7 is filed. You cannot file for bankruptcy if there is a previously pending Chapter 13 or Chapter 7 that was dismissed in the last 180 days.

You won’t be completely free from all loans like your student debt or other unsecured debts, but you are safe from secured creditor payments. Loans from secured creditors could be held back to give you enough chance to increase your income. When your income has improved, a repayment arrangement needs to be made with those creditors so you can sort out your debts.

Cons of Chapter 7 Bankruptcy

Your credit report could remain affected for at least 20 years once you file for bankruptcy. Once every eight years, you can go bankrupt. Insolvency can be recovered, so be sure not to stress to much about that.

For people who have ongoing financial issues, a Chapter 13 bankruptcy order may need to be put in place. It can be both embarrassing and intimidating for anyone who is currently in this sort of financial predicament.

Expect to be in court if the creditor disputes your discharge or if there is any other questioning that might need to happen. Any property or purchase from the creditor also needs to be returned and a settlement amount must be agreed on.

The law states if you are unable to make payment to creditors, your assests or property might be sold to cover the personal debt. This could leave you in a sticky situation if you have made use of any creditor that requires security.

Again a good attorney-client relationship is going to put you one step ahead so that when you file for bankruptcy you are protected on all fronts. These are some of the cons of Chapter 7, so please take them into consideration when deciding to file bankruptcy.

Only file Chapter 7 bankruptcy if the bank wants to foreclose your home or repossess your car. These situations are ones that need to be handled with care, and a trustee must be informed of all lawful requirements.

Disadvantages of Chapter 7 Bankruptcy

It imposes a time frame that prevents debt collecting authorities from visiting you more than eight times. This protects creditors from borrowers who have recently exited Chapter 7 by not giving them the chance to repeat the process again.

There are mixed results in this field of research so let’s explore more to find out more facts regarding the disadvantages of Chapter 7 bankruptcy.

A third of consumers filing for bankruptcy have received new lines of credit within the last decade. When you get new credit it may reflect your previous bankruptcy record. The card you get after bankruptcy is going to offer you a rate of 20 percent at the least.

How Do I File for Bankruptcy?

After strong efforts have been made to repay any debt, but you are struggling to stay afloat due to financial constraints, sometimes there is no other way other than filing for bankruptcy to protect yourself and your remaining assets.

If someone files bankruptcy, their company can put in a petition that is managed by the federal bankruptcy court. Additional information needs to be provided which includes the debtor’s assets and financial health, or any cost or losses they might incur. More often than not, debtors make use of an attorney who files information and prepares petitions for them.

In some cases, debtors represent themselves, but this route is not always recommended. Normally, it is filed seeking protection from the bankruptcy law of the United States.

Is it Necessary to Have a Bankruptcy Attorney?

The progress of filing for bankruptcy is a tedious one, which is why a bankruptcy attorney can help handle any issues. There are alternative methods that you can use to file for Chapter 7, and you can access these methods through some apps designed for filing Chapter 7 bankruptcy.

Chapter 13 is going to be a bit more complex, and a bankruptcy lawyer can help provide you with all the information you need regarding this. At the end of the day, there is no way to avoid a bankruptcy lawyer, although you can figure out what to do with all the online resources available out there.

Bankruptcy filings can take a lot of time so be prepared to be in it for the long run. You are liable for any bankruptcy court fees that come from any proceeds or dealings.

Automatic Stay

Once you file bankruptcy you eliminate the chances of getting kicked out of your residence before your bankruptcy discharge is complete. This helps you to get a fresh start and still be able to have a roof over your head.

With automatic stay, you can take care of other financial obligations before having to repay your debt. Things like personal loans can be put on hold, or payment arrangements need to be made with the courts. A bankruptcy trustee handles all of this and offers legal advice for any person that is eligible for filing bankruptcy.

Your credit score is going to be permanently affected once your bankruptcy has been filed, so take that into consideration when making your final decision.

The Pros of Chapter 13 Bankruptcy Filing

Chapter 13 bankruptcy filing says that the person in question creates a payment structure letting the court pay back the debt owed to the creditors. It is similar in many ways to the debt settlement process, so be aware of that and proceed with caution. Legal advice is the best thing you can do the circumvent the situation, as it allows you to be fully informed.

At the end of the day, the court decides whether extra charges need to be added and has the final say on the agreement contract.

The Cons of Chapter 13 Filing

The cons of filing Chapter 13 bankruptcy are something that is going to make you think twice about doing it.

The first thing to note is that attorney filing fees are going to be exceptionally higher than if you file for Chapter 7. Overall fees can range anywhere from $2000 to $5000 dollars and there is a chance that the bankruptcy trustee might deny your plea.

You also need to pay any unsecured debts from creditors you have dealt with in the process. These are debts from creditors that don’t take security when providing you with a personal loan or assets to add to your fleet.

Who Files for Bankruptcy?

A debtor who is struggling financially and needs a repayment plan to help settle their debts is someone who might file. It helps them secure themselves for three to five years while having a clean slate to regain control of their future and credit report. They can build a new credit rating while paying the interest rates of their previous financial commitments.

There are some people who might need up to 10 years to sort out their personal situation and for that debtor, it is a good idea to look at being discharged at a later stage. It gives you some free time to arrange a plan to pay off a large loan or provides relief of rent.

All of these factors are determined by the income to debt ratio which your attorney is going to help you figure out.

You Won’t be Free From All Debts

Filing bankruptcy doesn’t automatically mean you don’t have to pay your student loan or similar debts; far from it actually. It just means that other arrangements need to be made to pay your federal debt so that your credit score can grow again.

Depending on which section you file, debt could be recovered by selling your assets or property. This is normally the case when filing Chapter 7 bankruptcy. The creditor sells your assets so that you can be almost debt-free.

The law allows for the collection of your debt through terms set out when you file Chapter 7.

Child support is a liability that is never going to disappear, so make sure that you take care of that umbilically to stay on the right side of the law. Although filing bankruptcy might give you a fresh start you are still going to have to rebuild your credit over the next few years.

No Further Legal Action Until Discharged

If your income is unstable, and you need to pay loans, that is where Chapter 7 comes in to give you relief until payments can be made. The cons of filing could creep up on you if any debts were incurred illegally or if the courts find any reason to not provide relief.

It is a catch 22 situation that cannot go without a bankruptcy lawyer to guide you down the path. If you cannot afford professional help, the state might appoint assistance for you.

Final Thoughts

In these trying times, it could be difficult to make creditor payments if your income is not high enough. You might need relief from loans or other financial burdens that plague your income. A credit card is a large cause of financial difficulty, so you must remember to remove all credit card options from your expenses when filing for bankruptcy.

Being in debt is challenging and that’s why many people use the law to file for bankruptcy. Things like automatic stay only protect you for a short period while the debtor makes arrangements to pay a loan or property.

It is a risky thing to take out personal loans and because there is no security you must pay it back to the lender. The relief period is shorter and the company might demand payment from your income, which could come off in enormous amounts.

A debtor can be aided with the help of a lawyer who is versed in the cons of filing bankruptcy. They can advise you on how to repair your credit score and redeem your debt on your credit cards. Don’t file for bankruptcy without speaking to one first, as you can put yourself and your property at risk.

The law works with a debtor if you know how to take the advantages that are available. File bankruptcy so that loans can be paid off efficiently with the income that you have available.

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What Does Chapter 7 Bankruptcy Mean?

chapter 7 bankruptcy

What Does Chapter 7 Bankruptcy Mean?

Managing your finances is not always easy, especially when you start examining outstanding liabilities. 

Filing for bankruptcy is a complicated process, but it can help you settle your debt. Even though it can’t fix all your financial problems, when you file, your finances may improve because it can take care of most of what you owe. Read on, and find out everything you might need to know about Chapter 7 Bankruptcy and what it means.

What Is a Chapter 7 Bankruptcy?

When learning about Chapter 7 Bankruptcy, it’s important to start with the basics of what it means. It’s the most common bankruptcy term people refer to, especially if they’re talking about types of bankruptcy in general.

Chapter 7 is the liquidation bankruptcy, which means that it can enable you to discharge certain debts. That includes personal loans, medical debts, and even debit and credit card payments.

It is the simplest and quickest type of bankruptcy, which is why many people want to know if they qualify for Chapter 7.

Who Can File a Chapter 7 Bankruptcy?

Unfortunately, not everyone can qualify for Chapter 7 bankruptcy. If your state’s median income is higher than your gross income, you may qualify.

You could still file for bankruptcy if your income is higher, but you would have to make monthly payments, especially if a Chapter 13 plan for repayment does not work for you.

There are extra requirements to file Chapter 7 bankruptcy. If you received a bankruptcy discharge in the past six to eight years, then you can’t file for Chapter 7.

Filing for bankruptcy is a complicated process, and you must fulfill all the requirements if you want to obtain credit card debt relief, as well as other types of help. Therefore, getting a bankruptcy attorney might be a good idea if you want to know everything about the process.

You may already know some bankruptcy basics, but if you hire an attorney, they can answer questions and explain everything you don’t understand.

What Does a Chapter 7 Bankruptcy Do?

If you get discharged undedr Chapter 7, it means that the bankruptcy court approved your debt relief. In other words, you can forget about credit card debt, medical bills, and so on.

Having unsecured debts can be very complicated, especially if you are already in a tight financial situation. However, if you qualify for a Chapter 7 bankruptcy, the debts you owe might be secured, and everything else could be easier.

Even so, you should keep in mind that qualifying is not easy. The court must appoint a trustee, and you have to pass a means test that examines your unsecured debts, secured debts, income, and more.

Filing for bankruptcy is a complicated process, but it can help you if your monthly income is not enough and if you can’t pay off your debts.

Forms You Need to File Chapter 7 Bankruptcy

The first thing to do when you file for Chapter 7 bankruptcy is to fill out several different forms. You have to include information about the following aspects:

  • The debts you owe
  • Student loans you may have to pay
  • Personal loans
  • Credit cars
  • Living expenses
  • Your property
  • The property you’re allowed to have through the Chapter 7 bankruptcy process
  • Any property you have sold or gave away over the last couple of years
  • The property you used to own, and any money you spent over the last couple of years

You have to fill out all bankruptcy forms and file a petition. After that, you have to get credit counseling with a United States Trustee-approved agency. Otherwise, it is not allowed.

The credit counseling course trains you in several aspects of your financial education. If your qualify for Chapter 7 bankruptcy, then a few months after filing for it, your case may be discharged and all your debts might be paid.

Should You File for Chapter 7 Bankruptcy Right Now?

Several signs might tell you it’s the right time to file for Chapter 7 bankruptcy. However, the best way to know is to talk to a bankruptcy lawyer at least 180 days before filing since they are prepared to help you in your process. Going through it alone might be much more complicated. The signals you should look out for are the following:

  • You pass the means test because your monthly income is lower than the median in your state
  • Your credit score is below 600
  • It’s impossible to keep up with the payments you need to make
  • As much as you try, you can’t make the ends meet every month
  • Your dischargeable debt is more than $10,000
  • You’re not the owner of any expensive property
  • There is no way for you to pay off your debts in the following five years

If you feel identified with the mentioned signs, it means it’s time to get help so you can improve your debt management. A bankruptcy attorney might guide you in the right direction, and suggest you file for bankruptcy as soon as you can.

What Is Automatic Stay?

You have to keep in mind several things before filing. Chapter 7 bankruptcy can be very beneficial, but by far, one of the best parts of qualifying for it is the “automatic stay” effect.

When you qualify for Chapter 7 bankruptcy, it puts into action something called the automatic stay. In other words, creditors cannot take hold of your possessions right away.

Chapter 7 bankruptcy offers you a fresh start because it helps you manage a vast majority of debts you may have. Even though the bankruptcy filing process can be complicated, credit counseling can be very interesting, and it might help you learn things you didn’t know before.

With the automatic stay effect, creditors can’t access your possessions, at least temporarily. Thus, you don’t have to worry about them going for your bank account, properties, car, or anything else.

The Court’s Control over Your Financial Affairs

Even though creditors cannot access your possessions, when you qualify for Chapter 7 bankruptcy, you are putting all your possessions in the hands of a bankruptcy court. All your properties and debts are theirs now.

Qualifying for Chapter 7 bankruptcy means you can’t sell your property or give it away unless you get consent from the court. Even so, there are a few exceptions, and you should consider them as well when you’re talking to your attorney.

How to File Your Chapter 7 Bankruptcy

There are a few steps you have to complete if you want to apply for a Chapter 7 bankruptcy, but keep in mind that hiring an attorney can make the process easier. The stages are the following:

Find All Your Documents

If you are still employed, then you only need to find your most recent pay stubs as well as the last two years of the tax returns of your income. If you can, you should also get a credit report and recent statements from the bank.

Fill Out the Forms

The forms are your petition, and they include all types of questions about what you owe, how much you earn, etc.

At this stage, most people get an attorney to help them with their forms. Even so, you could still fill them out by yourself if that’s what you prefer.

Take a Course

After filling out the forms, you have to take a credit counseling course, and you can easily take it online with a nonprofit credit counseling agency. It usually lasts 60 minutes, so you don’t need to worry about spending a lot of time in it.

Fill Your Forms with the Court

You can fill your forms in person, by mail, or even online, depending on what your court allows. If you hired an attorney, then they can do it for you. Fortunately, at this point, you’re almost finished. Nonetheless, there are still a few things to do, like dealing with the trustee.

Mail the Documents to Your Trustee

The bankruptcy court has to assign a trustee, and you need to send them your documents. Their job isn’t to judge your case, but they still have to oversee it.

On most occasions, the trustee may give you a mailing address, so you can send them all the documents. Sometimes they may ask for extra information, such as different bank statements.

Take a Course

After mailing your documents to the trustee, you have to take a course on debt management and financial management.

Even though filling out the bankruptcy forms is important and sending everything to the bankruptcy trustee is also essential, you need to prove you’re prepared for life if you qualify for bankruptcy.

The course is similar to the first one you take, and you can also take it online. It lasts 60 minutes, and once you get your certificate, you can show it the day you’re in court.

Meet with Your Trustee

You must attend a special meeting with the bankruptcy trustee, but it’s extremely short. Get in touch with them and find out when you have to meet.

The meeting usually lasts between 10 and 15 minutes, and nowadays, you can even attend via videocall. It usually consists of very specific questions you must answer.

Get Your Discharge Letter

If everything goes well with the trustee and the court-appointed session, you may get your discharge letters a few months later, which means that you qualified for the Chapter 7 bankruptcy.

Trustee for Chapter 7 Bankruptcy

The trustee is the way the court can exert control over your case. Their job is to oversee what you do and make sure you pay your creditors everything you owe them.

Furthermore, the trustee’s payment depends on the assets they recover for creditors. Thus, they have to worry about ensuring creditors get the best deals, which is why they have to examine your documents.

After close evaluation of your documents, they have to determine if everything is complete or not. Additionally, they have to look for a nonexempt property you could sell to settle your debts.

They also have to try to find transactions they can undo to free some assets for your creditors and pay off your debts. However, the transactions must be a year old, at most.

Is It Better to File a Chapter 7 or 13?

The difference between Chapter 7 and Chapter 13 is that in the second one, you don’t erase each debt immediately. Instead, you have to propose a repayment plan, and you can organize it depending on your ability to pay debts.

Once you propose the repayment plan, the court must evaluate it, and confirms it if you and everyone involved find it acceptable. You usually get three to five years to pay for everything.

Is Chapter 7 a Bad Thing?

Trying to qualify for Chapter 7 bankruptcy is not a bad thing. On the contrary, it shows that you understand your credit card is not enough to pay for all your debts, you don’t have any non-exempt property to sell, and you may have a lot to pay for, such as different loans.

What Can Happen to Your Property

In most cases, the property of the debtor can’t be used to raise money for the creditors because it’s considered nonexempt property. Thus, if you are a debtor, you don’t necessarily have to lose your property, but it may happen sometimes.

Once the meeting of creditors finishes, the trustee might say you have nonexempt property. If that occurs, you may have to surrender and give it to the trustee or provide them with the equivalent in cash.

Sometimes, the property may not be worth a lot. In those circumstances, the trustee might abandon it and you could keep it.

Secured Debts When You Get Chapter 7

Secured debts occur when you pledge property as collateral for a loan you get. A good example of that occurs with houses and vehicles.

When you are behind on payments, the creditor could try to get the automatic stay lifted and take the property from you or foreclose on it.

Some Debts Can’t Be Discharged

Unfortunately, even if you pass your means test, a Chapter 7 or a Chapter 13 bankruptcy can’t settle all your debts.

When you are a debtor with income that’s lower than the median income in your state, you may notice that settling each debt is very hard, especially if you have different credit cards and your credit score is low.

However, when you file Chapter 7 bankruptcy, you must keep in mind that it can’t solve all your problems, which is something you may learn when you contact the nonprofit credit counseling agency. The bankruptcy discharge can take care of the following debt issues:

  • A credit card debt
  • Loans for your car
  • Judgments you can get from credit cards
  • Personal and payday loans
  • Judgments you can get from agencies specialized in debt collection

Nonetheless, if you are qualified for Chapter 7 bankruptcy, it can’t settle the next debt examples you may have:

  • Child support
  • Student loans
  • Debt from personal injury cases
  • The debt you may have from taxes or other government-related payments

What Happens at the End of the Bankruptcy Process

Unless the court says the contrary, after the bankruptcy process, the people in charge have to discharge each debt you have, except for student loans, child support, and similar examples mentioned above.

Sometimes, creditors may mention a credit report that shows debt is a product of fraud or any other malicious act, which might conclude in the court refusing to pay it off.

Your financial life, credit cards, property, and credit scores might need some attention after bankruptcy, particularly if you filed Chapter 13 bankruptcy because you have to follow a plan. At the same time, if you have payments to make such as child support, you may want to organize everything, so you can get positive outcomes.

To recover after filing bankruptcy, you should make a financial plan and try to achieve specific goals. A good creditor could help you especially if the trustee said your things were no asset cases, which means nothing you own is enough to pay your creditors.

Conclusion

Filing for bankruptcy is a complicated process, especially when you have low credit scores and you have to worry about everything from paying for the filing fee to finding the best attorney you can.

However, being free of debt is liberating. Even though it may be hard to make ends meet and pay everything you owe creditors, after filing there is an immense sense of relief.

Taking the first step is always the hardest part. Nonetheless, once you file for bankruptcy, your life can get better as you start paying off each debt.

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