If You Need To File Chapter 13 Bankruptcy
There are many reasons to file a Chapter 13 bankruptcy instead of Chapter 7. You might want to file a Chapter 13 bankruptcy because you wish to catch up on mortgage arrears, get rid of your second mortgage, cram down your car loans, or pay back nondischargeable priority debts, such as back taxes or support arrears. Or maybe you make too much money to qualify for a Chapter 7 bankruptcy. No matter your reason, most Chapter 13 cases are too difficult to file on your own.
In addition to filling out the bankruptcy forms , you must also design a proposed repayment plan, which is very difficult to do without the expensive software that most attorneys use. Specific actions such as stripping your second mortgage or cramming down a car loan will require filing additional bankruptcy motions and paperwork with the court.
As a result, some attorneys limit their bankruptcy practice to Chapter 7 because they feel they are not qualified to handle Chapter 13. And, an overwhelming majority of Chapter 13 cases filed without an attorney get dismissed by the court. So if you are planning to file a Chapter 13, it is a good idea to hire a qualified attorney.
Just The Facts: Consumer Bankruptcy Filings 2006
Just the Facts is a feature that highlights issues and trends in the Judiciary based on data collected by the Judiciary Data and Analysis Office of the Administrative Office of the U.S. Courts. Comments, questions, and suggestions can be sent to the .
Bankruptcy can provide a fresh financial start for consumers who cannot pay their debts, either because of insolvency or insufficient income to meet creditor demands. Bankruptcy generally works in one of two ways: liquidating assets to pay ones debts under Chapter 7 of the U.S. Bankruptcy Code, or establishing a repayment plan under Chapter 13 of the code.
Under a Chapter 7 liquidation, a debtor generally can achieve a fresh financial start more quickly than under a Chapter 13 repayment plan, which can last up to five years. However, under Chapter 13, a debtor may be able to save a home from foreclosure, reschedule secured debts and extend them over the life of a Chapter 13 plan , or consolidate debt payments to a trustee who then handles distribution to creditors.
Table 1Miami Valley Bankruptcy Helps Those Who Are Filing Bankruptcy Whether Or Not Its The First Time
Dealing with the ramifications of not having enough money can be very stressful, but facing bankruptcy can be even harder. Whether or not you have filed for bankruptcy before, the process can prove quite complicated. That is why it is so important to consult with a knowledgeable and experienced Ohio bankruptcy attorney. At Miami Valley Bankruptcy, we can help you to navigate the process. To learn more or to schedule a free consultation, visit us or call us at today!
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Do Not Withdraw From Your Retirement Account
Whether it is intense pressure from creditors or just a mistaken belief that the benefits of paying down credit card debt take precedence, several people will attempt to liquidate their 401 or other individual retirement accounts before filing bankruptcy. There a multitude of consequences to doing this though.
First, you will have to pay taxes on this transactiontwice. There is the penalty of taking the money out early, and then there is the additional earned income that needs to be reported on your annual tax return.
Secondly, BAPCPA exempts most retirement plan assets from a debtor’s bankruptcy estate, typically up to $1 million for most IRA plans. In order to ensure your retirement plan is deemed to be qualified under BAPCPA, you should obtain a favorable determination letter from the Internal Revenue Service .
Filing Again With Bankruptcy Discharge
Different time limits and waiting periods apply to filing a second bankruptcy after your first filing was discharged successfully. The time frame is based on whether you first filed Chapter 7 or 13, and whether you plan to file Chapter 7 or 13 the second time.
The timing on the waiting period is based on the date you filed, not the date of discharge.
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When Is It Feasible To File Without An Attorney
The general rule is the simpler your bankruptcy, the better your chances are to complete it and receive a bankruptcy dischargethe order erasing debton your own. Your case is likely simple enough to handle without an attorney if:
- you pass the first portion of the Chapter 7 means test
- you don’t own much property
- you don’t have any priority debts you can’t discharge, and
- creditors aren’t alleging fraud against you.
However, keep in mind that even the most straightforward Chapter 7 requires you to fill out extensive paperwork, gather financial documentation, research bankruptcy, and exemption laws, and follow the local rules and procedures. At the very least, if you want to file pro se, use a good self-help bankruptcy book like Nolo’s How to File for Chapter 7 Bankruptcy, by Attorney Cara O’Neill and Albin Renauer, J.D.
Debts That Can And Cant Be Discharged In Chapter 7 Bankruptcy
Chapter 7 should dismiss most of the debts you owe, but there are some hard-and-fast debts that cant be discharged in Chapter 7.
The list of non-dischargeable debts includes:
- Child support
- Student loans must prove undue hardship
- HOA fees if you surrender your home or condo
- Any other form of unsecured debt.
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Chapter 7 Filing Limits
If a person filed a Chapter 7 discharge or completed a Chapter 13 bankruptcy repayment plan in the previous eight years, that individual is ineligible to file a for a Chapter 7 Bankruptcy. Under bankruptcy laws, debtors whose incomes are higher than the median income for a family of their size in the state where domiciled may not be permitted to file for Chapter 7. If a persons disposable income, less certain permitted expenses, would allow him/her to repay a portion of their unsecured debt over a five-year repayment period, the filing will not be permitted.
Bottomline: Bankruptcy Doesnt Give You A Free House
If your home is exempt through the bankruptcy proceeding, that doesnt mean you simply keep it. You will still need to pay the mortgage as usual. A Chapter 7 bankruptcy will discharge your personal liability under the mortgage, but will not extinguish the banks claim on your property. In other words, the bank wont be able to sue you for collection but will still be able to repossess and sell it if you dont make payments.
In Chapter 13, youll work through a three- to five-year repayment plan to pay back your debts. If your house is already in foreclosure, the automatic stay will stop any collection proceedings to give you more time to figure out your next steps.
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Which One Should I Choose
Chapter 7 is, by far, the more popular form because its cheaper, quicker and effective at relieving responsibility for debt if you qualify! And thats a big if. You must pass a means test, meaning your disposable income is under the median income in your state. If you dont qualify for Chapter 7, you can always fall back on Chapter 13.
Filing Again Without Bankruptcy Discharge
If your bankruptcy did not end with a successful discharge, in most instances you can immediately file a second time. Typically this means your case was dismissed, which puts you right back in the same debt position when you filed.
Reasons for dismissal could include not filing all documents properly and on time, not showing up for a required meeting with the court, not making the required payments or not being truthful with the court. All reflect poor judgment and the wrong approach for a court process, and often anger the court.
If you failed to appear for a required hearing, for example, or ignored a court order never do this the court may order a 180-day delay on filing again.
Another instance when the six-month stay can be placed involves the automatic stay, which the court usually orders on filing and protects you from foreclosure or having your wages garnished while your case proceeds. If, for whatever reason, you agree to dismiss the case when a creditor seeks relief from the stay, the court will see that as filing in bad faith and impose the six-month delay on filing again.
It is a good idea to receive pre-bankruptcy credit counseling to gain some guidance on your options. A nonprofit credit counselor can assess your financial position, and offer sound advice on the best steps to take toward financial recovery. Pre-bankruptcy credit counseling may offer ideas for developing a budget and ways to get back on sound financial ground without bankruptcy.
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Chapter To Chapter Options
Chapter 7 to another Chapter 7 bankruptcy 8 years Chapter 7 now filing for Chapter 13 bankruptcy 4 years Chapter 13 now filing for Chapter 7 bankruptcy 6 years Chapter 13 to another Chapter 13 bankruptcy 2 years
The wait times help prevent abuse of the system and high credit card debt that cannot be repaid. You are expected to make your best effort to pay off bankruptcy in between filings.
What To Do If You Think Time Limitations May Apply In Your Case
If you have filed bankruptcy before and feel you may need to file again, you should consult a bankruptcy attorney who can walk you through your options and help you determine your best course of action.
Most attorneys will provide a free initial consultation, said Yesner. However, you should make sure that the bankruptcy attorney you speak with also provides other non-bankruptcy solutions to prevent being forced to file when that solution may not be best or most appropriate for your finances.
Before you meet with an attorney, it can help to gather some information on your previous bankruptcy. Create a file of paperwork of earlier bankruptcies that includes information on dates and debts discharged. Also, ask yourself about your goals. Do you want to eliminate debt? Save your home? Stop creditors from calling?
If you find you cant file for bankruptcy again for several years, dont despair. Fleischman said there might be other options to consider that could leave you better off. Depending on your reason for considering bankruptcy in the first place, those alternatives may include:
- Dealing with creditors directly
- Settling debts
- Engaging in administrative remedies such as income-driven repayment on federal student loans and offer in compromise for tax debts
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Talk To A Bankruptcy Lawyer
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Bankruptcy Dismissed With Prejudice
When your bankruptcy case was dismissed with prejudice, there are some restrictions you will have to face, which occur when:
- You didnt follow the courts orders
- You dismissed your bankruptcy once motion was made by a creditor
- You lied about your assets
Judges can be discrete when it comes to bankruptcy that is dismissed with prejudice. As a result of your bad behavior, you wont be allowed to file for bankruptcy ordischarge your debts ever again.
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May When Can I File Bankruptcy Again
There is no limit on the number of bankruptcy cases that one may file. In fact, there is no limit in between time frames to file bankruptcy. Nevertheless, if sufficient time between filings does not take place, you may be not be eligible for discharge.
So if a bankruptcy case is filed too soon, even though it will not be dismissed, a discharge may not take place. Why would anyone do this? Well there are several reasons to name a few.
If enough time has not taken place, but a debtor wants to eliminate their debt in a subsequent chapter 7 and has sufficient assets to do so, filing another case may be a good idea. Suppose a debtor has a messy asset but wants to use that to pay creditors. By filing another chapter 7, the trustee can liquidate that asset to pay the debts. Although the debtor may not be getting top value for the asset since the trustee only cares about getting enough money to pay the creditors, it may be worth the peace of mind for the debtor in not dealing with the asset and having the trustee in charge of converting it to dollars.
Or, maybe a debtor recently filed a chapter 7 and has remaining non-dischargeable student loans or taxes. The debtor could then file a subsequent chapter 13 and be protected for the next 5 years without any worries of lawsuits, levies, or wage garnishments, even though at the end of 5 years no discharge is entered. Then, maybe at that date, the debtor might also be eligible to eliminate the debt in another chapter 7 or 13.
Discharge Limits For Bankruptcies
The law sets strict rules governing the number of years you must wait before discharging your debts. But it isnt as simple as a set number of years. The time you must wait depends on both the type of bankruptcy you last filed and the type of bankruptcy you plan to file now.
- Chapter 7 then and now eight years from the filing date
- Chapter 7 then, Chapter 13 now four years from the filing date
- Chapter 13 then and now two years from the filing date
- Chapter 13 then, Chapter 7 now six years from the filing date.
However, if you had unsecured creditors, such as credit card companies and bank lenders, and you paid them back by at least 70 percent, you may be eligible to discharge your debts a second time sooner. Its important to check with a bankruptcy attorney if you think you may be eligible to file earlier than what the law says.
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Repairing Credit After Bankruptcy
If youre considering filing bankruptcy twice, you likely already know the effects it can have on your credit report. Payment history makes up 35 percent of your total FICO score, and FICO is usually the score creditors use when trying to determine whether to issue you credit. Another 30 percent is the amount of debt you owe, so if youve had most of your debts discharged, it can actually help you.
But bankruptcies dont stay on your credit report forever. If you filed Chapter 7, it will remain on your credit report for 10 years, while Chapter 13 remains for only seven. However, its not guaranteed that the bankruptcy will disappear on schedule, so you may want to keep an eye on your credit reports.
References
Our Jacksonville & Gainesville Bankruptcy Attorneys Explain
Can you file more than once? The short answer is yes. These are referred to as an area as “repeat filings” or “multiple discharges.” There are only a few rules that will prevent you from simply filing another bankruptcy case, but there is a catch. You might beable to file a new bankruptcy case only to discover that the second bankruptcy doesn’t do you much good.
The goal of most bankruptcy cases is to get a “discharge” of some or all the debt obligations. There are other legitimate goals, of course, like stopping a foreclosure or stripping a second mortgage lien, but the most common goal of filing a bankruptcy is to obtain a discharge. That’s where the rules about multiple bankruptcies kick in. If you don’t wait long enough between bankruptcy cases, you may discover that you are not eligible for a discharge in your new case. Timing is everything in repeat bankruptcy filings.
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Using A Bankruptcy Petition Preparer Does Not Mean Your Case Will Be Filed Online
Even though you may be able to work with a bankruptcy petition preparer through an online portal, that doesnât mean youâll be able to file your bankruptcy case online. A petition preparer is any non-lawyer who prepares a bankruptcy petition for you and charges a fee for doing it.
The Bankruptcy Code requires that these bankruptcy petition preparers are heavily regulated. Different courts have different rules limiting the amount a bankruptcy petition preparer can charge. The maximum fees are usually less than $250.00.
Bankruptcy petition preparers may not offer legal advice under any condition. The law restricts these petition preparers to being little more than typists. Youâre still the one that has to submit the paperwork to the court.
If Your Previous Bankruptcy Was A Chapter 7
If you previously filed Chapter 7 bankruptcy successfully, this means you may have had some of your assets liquidated to pay off delinquent debts. You also had debts included in your bankruptcy discharged.
If you are in a position where you are once again struggling to repay delinquent debts, you must wait at least eight years before you can file for Chapter 7 bankruptcy again. Keep in mind, however, that the eight years begins from the original date of filing and not the original date of the first Chapter 7 bankruptcy discharge.
You may, however, file a Chapter 13 bankruptcy and receive a discharge after a successful Chapter 7 case after waiting only four years.
Yesner notes that occasionally you can file a motion for Chapter 13 bankruptcy sooner than four years after a Chapter 7 bankruptcy and that this scenario is a lot more common than people think. Its so common, in fact, that attorneys have come up with a slang term to describe a Chapter 7 bankruptcy followed promptly by a Chapter 13 bankruptcy. This slang term, which is not really a type of bankruptcy at all, is called a Chapter 20. According to Yesner, some courts allow this type of case to proceed and others do not.
Yesner offered the following example to explain how he is helping a client in this exact situation:
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