How Long Will It Take For Me To Get A Bankruptcy Discharge
For a first bankruptcy, you are eligible for an automatic discharge after 9 months or 21 months if you have income exceeding a reasonable standard of living. For a second bankruptcy, it may take 24 to 36 months. In any case, if you are an individual with tax debt of over $200,000 that totals more than 75% of your total debt, you cannot receive an automatic discharge. The Licensed Insolvency Trustee will have to file an application with the court. Company debt obligations are not included in the $200,000 calculation for directors.
Preparing For Chapter 7 Bankruptcy
Theres some protocol to follow in the months before filing for bankruptcy. Failing to follow these instructions could undermine your efforts.
Dont Pay Creditors It seems counterintuitive and you should definitely make routine payments. But any large or unusual payments could be viewed as preferential transfers. That means one creditor has benefited unfairly over others.
No New Debt A new creditor could claim you took out a loan or ran up the balance on a credit card without intending to pay it back. Legally, thats fraud and it will not be forgiven.
No Unusual Transactions Dont stray from the routine. Dont transfer titles of cars or homes. Dont buy luxury goods. Dont transfer your business or remove your name from it. They can all be classified as fraud.
Be Truthful You are required, while filing for bankruptcy, to provide full and complete information. You must disclose any debt, assets, accounts or other financial information. Failure to comply could lead to fraud and potential criminal charges.
Dont Touch Retirement Funds You are generally allowed to keep retirement plans and accounts, so keep them safe while considering bankruptcy and dont use those funds to pay down debt.
Never think you can get away with something sneaky or dishonest. Your bankruptcy lawyer is always a good resource for what you should and shouldnt do.
Look At Your Disposable Income
If your disposable income after expenses is less than $128, you qualify for Chapter 7 under the means test. If its more than $214, you do not qualify. If you fall into the gray area between, youll have to complete one more step.
First, multiply your monthly disposable income by 60 to find the total amount you could pay to creditors over a five-year Chapter 13 plan. Next, add up all of your unsecured, non-priority debt and divide the total by four. If the first number is less than the second, meaning that you will not have enough disposable income to pay off 25% of your unsecured debt over 5 years, you still qualify for Chapter 7. If youll have enough to pay the 25%, youll have to file for Chapter 13.
After all that, the court may still reexamine your qualification for Chapter 7 by evaluating the totality of the circumstances surrounding your case. For example, you may drive a very expensive car and live in a luxurious home and qualify for Chapter 7 by the numbers. The court likely will not approve a Chapter 7 filing in that situation. Conversely, you may have more than $214 in monthly disposable income and still demonstrate your need for Chapter 7 bankruptcy, in which case the court will allow it.
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Things To Consider Before Filing For Bankruptcy
There are other debt-relief solutions than bankruptcy available for people who are struggling financially, but have enough resources to right the ship.
Calling a counselor from a nonprofit credit counseling agency is a good first step. They offer a free counseling service that looks at your finances and discusses the pros and cons of a debt management program, a debt consolidation loan or even debt settlement, any of which might help guide you back to safe ground.
Another step in the right direction would be to get serious about creating and living within a budget. You could supplement your current income with things like taking a second job or trying to sell some assets to pay bills.
Other things to consider before making a final decision: Did I try to negotiate the debt down to manageable numbers? Is my current status permanent or is the situation expected to improve soon?
A final consideration: Do I have a big bill or series of big bills coming due soon? You might want to hold off on paying that until you decide whether or not to file bankruptcy since those bills could be dismissed through bankruptcy.
Here are some other questions you need to answer before making a decision on whether you want to file bankruptcy.
Do My Debts Qualify For Bankruptcy
Not all debts qualify for bankruptcy.;Debts that cant be wiped out are child support, alimony, some types of taxes, debts to government agencies, debts for personal injury caused by driving while intoxicated and any court fines or penalties.
Debts that can be wiped out in Chapter 7 bankruptcy include credit card debt, medical bills, personal loans, lawsuit judgments and obligations from leases or contracts. Chapter 13 bankruptcy wipes out those debts, plus debts from a divorce , debts for loans from a retirement plan. Technically, student loans can be discharged if you prove undue hardship, however, this is often a difficult task.
There are some people who are considered judgment proof because everything they have is exempt under state law. People that are judgment proof may not need to file bankruptcy because creditors cant touch their assets if their source of income is from social security, pension plans, 401 retirement savings, disability benefits, veterans benefits, alimony or support payments.
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Frivolous Spending After You File Could Put Your Case In Jeopardy
Spending money willy-nilly after you file for bankruptcy could appear like fraud and upend your court ruling. Courts view spending large sums of money within 90 days of filing for bankruptcy as acting in bad faith or potential fraud, says Matthew L. Alden, a bankruptcy and debt relief attorney at the Columbus, Ohio-based firm Luftman, Heck & Associates LLP.
This increased suspicion always has a negative impact on the bankruptcy process and could result in additional legal penalties, he says. Its not worth it on your journey back to financial health.
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So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
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Section Three Disposable Income
If you earn too much income to qualify for Chapter 7 under the median income test, you could qualify for Chapter 7 under the disposable income test. Disposable income is the amount of money you have each month after deducting your ordinary living expenses and mandatory payroll deductions. In Chapter 13 cases, you must include disposable income in your Chapter 13 plan. See the able median calculator below to see whether you may still qualify for a Chapter 7 bankruptcy even if your income exceeds the median income based on your household size and state.
In a Chapter 7 case, if your disposable income is below a certain level, you can still qualify for a bankruptcy discharge even though your annual median income is higher than the income limit for Chapter 7. Examples of expenses that may be deducted from CMI to calculate disposable income include:
- Required payroll deductions, such as payroll taxes, uniforms, union dues, and mandatory retirement savings
- Food, clothing, and household expenses
- Car payments, rent, lease payments, and mortgage payments
- Out of pocket health care costs
- Health insurance, term life insurance, and disability insurance premiums
- Childcare costs and school expenses for minor children
- Vehicle operating costs or public transportation costs
- Court-ordered child support or alimony payments
Chapter 7 Bankruptcy In Washington State
Hardly a week goes by in the news without a story on a business filing for bankruptcy. As layoffs and business closures, continue, it’s likely that the number Chapter 7 bankruptcy in Washington state will also increase. Chapter 7 is the most common bankruptcy in Washington state, but that doesn’t make it any less stressful if you have questions. What is Chapter 7 bankruptcy? How does it work? Can someone make too much money to file for bankruptcy? Can you keep any of your belongings or will you lose everything? Can you afford to file bankruptcy? Here’s what you need to know about Chapter 7 bankruptcy in Washington state.
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Contact A Cleveland Bankruptcy Lawyer For Help
If you have filed for bankruptcy but now your circumstances have changed, it is not too late to get the help of an experienced bankruptcy attorney at Luftman, Heck & Associates. A change in your income may not lead to any major alterations of your bankruptcy plans. However, if your income has significantly grown, you may need to prepare for higher payments toward your debts.
To learn more, contact Luftman, Heck & Associates at and schedule a consultation.
The Chapter 7 Income Limits And The Bankruptcy Means Test
The bankruptcy means test is a calculation laid out in the Bankruptcy Code. The starting point for this calculation is the stateâs median household income. This median income can be considered part of the Chapter 7 income limits. If your household income is less than the median household income for the same household size, you make less than the income limits. You pass the Chapter 7 means test and qualify for Chapter 7 bankruptcy.
If your household income is greater than the median, you may still qualify for Chapter 7 bankruptcy, if your household expenses under means test calculation donât leave you with any disposable income. More on that in Part 2, below.
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Can You Make Too Much Money To File Bankruptcy
Submitted by the Bond & Botes Law Offices – Wednesday, April 1, 2015
To some, this may sound like a foolish question.; After all, why would someone need to file bankruptcy if they earn a lot of money?; Wouldnt someone who makes a good income be abusing the system if they filed for bankruptcy?; The answer is that everything is relative.; It really doesn’t matter how much money someone makes if they cant pay their bills as they become due.
What Happens When You File For Bankruptcy
If bankruptcy is the option you choose, you will work with the LIT to complete the required forms. The LIT will then file these documents with the OSB and you will be formally declared bankrupt.
From that point on, the LIT will deal directly with your creditors on your behalf. Once you have been declared bankrupt
- you will stop making payments directly to your unsecured creditors
- any garnishments against your salary will stop; and
- any lawsuits against you by your creditors will also be stopped
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Chapter 13 Can Get Rid Of A Second Mortgage
One powerful benefit offered by Chapter 13 bankruptcy but not Chapter 7 is the ability to remove unsecured junior liens from your house in a process known as lien stripping. If the balance of your first mortgage exceeds the value of your home, your second mortgage or another junior lien is considered wholly unsecured. In that instance, it can be eliminated through lien stripping in Chapter 13 bankruptcy.
The downside is that you’ll have to prove the value of your home to the court. Hiring an appraiser to testify can be costlyas well as paying for your attorney’s time. Although if you’re paying a lot of unsecured debt, the attorney might be able to roll it into your plan payment without changing the monthly amount. Find out more about removing a second mortgage in bankruptcy.
Consequences For Failing To Report An Income Increase
If your income has grown, for whatever reason, do not be tempted to hide it from the bankruptcy court. You may think the change is not much and that you can safely pocket it. However, the change may be enough to alter your payment schedule or eligibility for a Chapter 7 proceeding. If you fail to report an income increase, your bankruptcy case could be dismissed and you would be back to being overwhelmed with your debt. Your creditors would have the right to demand payment on their own schedule and now the courtâs payment plan.
In some cases, you could be charged with bankruptcy fraud, which is a criminal offense. It could lead to fines and imprisonment.
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Who Needs To Fill It Out
If your completed Form 122A-1 shows your income is higher than the median, you must file Form 122A-2. This is the actual means test the calculations you enter on this form determine how much money you have available to pay off other debts.
If that amount is high enough, you may be presumed to have too much income to qualify for Chapter 7 bankruptcy. This is called a presumption of abuse. If Form 122A-2 indicates a presumption of abuse in your case, you may still qualify for Chapter 7 bankruptcy if you can show special circumstances that reduce your income or increase your expenses.
Contact An Experienced Bankruptcy Lawyer
So can you make too much money to file for bankruptcy? Generally, no. However, the bankruptcy chapters available to you will depend on several factors.;While Chapter 11 bankruptcy is available, the vast majority of individual debtors qualify for Chapter 7 or Chapter 13 bankruptcy. At the Law Offices of Craig L. Cook, our bankruptcy attorneys are able to assist consumer debtors with filing for protection under Chapters 7 or 13. To learn more about the type of bankruptcy for which you qualify, contact us online;to schedule a consultation.
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How Your Spouses Income Impacts Your Bankruptcy
When considering Chapter 7 bankruptcy youll have to pass a means test to prove you dont make too much money to be allowed to file. Even if you file individually, youll still have to include your spouses income when the court considers your eligibility. The court wont allow you to enjoy the discharge of debt that Chapter 7 provides when you and your spouse earn too much money each month.
The one exception is that you can leave off any income your partner brings in that isnt used in support of the household. This is known as the marriage adjustment. The adjustment can subtract some of your spouses expenses such as a car payment, child support and alimony, and medical expenses. This adjustment could change the figures in your favor and allow you to get under the maximum income figure to file for Chapter 7 Bankruptcy.
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After A Bankruptcy How Long Will My Credit Score Be Affected
It varies by credit agency. In general, your credit score will be affected for 6 years for a first bankruptcy and for 14 years for a second bankruptcy. You may be able to rebuild your credit earlier, though. Our experts can show you how to fix your credit.
However, if you make a consumer proposal your credit score will be affected for 3 years after you have paid the full amount promised to your creditors in your proposal.
Using Your Expenses To Pass The Means Test
If you have enough disposable monthly income to pay back unsecured creditors, you won’t qualify for Chapter 7 bankruptcy. As a result, if your income is high, your expenses must also be high to pass the means test.
The means test requires debtors to use national and local standards for most living expenses, rather than the actual amount of the debtor’s expenses. Otherwise, debtors could just claim they don’t have the money to pay back creditors because they wear name brand clothing or eat at expensive restaurants.
But you are still allowed to claim your actual expenses for certain things. These deductions include obligations you’re required to pay as well as expenses necessary for your health and welfare. As a result, these expenses may sufficiently reduce your disposable income to qualify you for Chapter 7 bankruptcy.
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How Can Legal Aid Help A Veteran Facing Issues With Money Housing Family Health Or Employment
Are you a low-income U.S. Veteran;facing problems with:
Money?
- Have your veterans benefits been terminated or reduced due to overpayment?
- Have you been denied or terminated from other government benefits?;
- Do you have debts that cause problems with meeting your needs, for example obtaining;utilities, drivers license, or housing?
- Have you received any letters or notices from the IRS about your federal taxes?
Housing?;
- Have you applied for and been denied a subsidy to help pay for housing?
- Is your rent subsidy being terminated?
- Does your apartment need repairs that your landlord refuses to make?
- Has your landlord given you a notice to leave your apartment or are you being evicted?
- Are you behind on mortgage payments or facing foreclosure?
- Did you receive a shut off notice for your lights, gas, or water?
Family?
- Are you afraid for your safety because of your current or former significant other;or household member?
- Are you afraid for your childs safety?
- Do you have problems paying child support?
- Does your child have problems in school with learning or with behavior?
- Do you have trouble accessing health care?
Health?
- Do you have trouble filling your prescriptions for medication?
- Do you have a criminal record that prevents you from getting a job?
Employment?
