Secured Vs Unsecured Debt
When filing for bankruptcy, it is critical to understand that not all of your debts will be treated the same. Your debt will be labeled as either secured or unsecured.
With unsecured debt, your creditors have no right to seize your property if you fail to repay them. Some common examples of unsecured debt are credit card debt, medical bills, and court judgments. Some types of unsecured debt, like child support payments, must be paid in full.
Secured debt covers situations where your creditor can seize your property if you fail to pay. The two most common secured debt situations are when you have either a mortgage or a car loan.
If you choose Chapter 7 bankruptcy, most of your unsecured debt will be eliminated. But you will have three options for secured debt:
- Return it to the lender. In this case, you lose your property but are no longer responsible for the debt.
- Keep the property and continue your payments. If you can protect your equity in the property using an exemption and are current with your payments, you can often keep the property and continue paying down the debt.
- Purchase the property. In the unlikely situation where you can afford to purchase the property, you will be allowed to do so. However, the property must fall within one of the exemptions, and other requirements must be met.
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Bankruptcy Usually Wont Help If Youre Collection Proof
Filing for bankruptcy will usually not help you if you are collection proof. You are a collection proof debtor if all of the following are true:
- You have no income, your take-home pay from work is below $495 a week, or your income is only from a protected source like public benefits, child support or Social Security.
- You do not own a home, or own one with less than $15,000 in equity. Equity is the difference between how much is owed on the mortgage and how much the house is worth right now.
- You do not own a car, or own one with less than $2,400 in equity.
- You do not have personal property, including money in bank accounts, worth more than $4,000.
If you are a collection proof debtor, you do not need bankruptcy to stop debt collectors from contacting you. You can use our Letter from Collection Proof Debtor to ask the debt collectors to stop contacting you.
Is Chapter 7 Bankruptcy Right For You
Make sure you know the difference between Chapter 7 bankruptcy vs Chapter 13 bankruptcy. Chapter 7 makes sense when:
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You dont have many assets.
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Your problem debts total more than 50% of your annual income.
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Your problem debts can be discharged, or forgiven, by Chapter 7. These include debts such as medical bills, credit card debt and personal or payday loans.
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It would take five years or more to pay off your debt, even if you took extreme measures.
Some debts typically cant be erased in bankruptcy, including recent taxes, child support and student loans. Bankruptcy still may be an option for you, though, if erasing other kinds of debt would free up enough money to pay the debts that cant be erased.
The other common form of consumer bankruptcy, Chapter 13, may be better if you have more assets or secured debts, and can repay some or all of what you owe.
Other debt relief options are available, too, such as a debt management plan through a agency. Take advantage of the free initial advice that credit counselors and many bankruptcy attorneys offer before deciding on a path.
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Filing For Chapter 7 Bankruptcy In Maine: Getting Started
Important! This information is for individuals who need to file for bankruptcy and who cannot get help from a lawyer. Important steps you need to take before trying to file for bankruptcy on your own:
If you have taken all of the above steps and have no other options left but to file on your own, then you may want to use this information to help you get started.
This information will not help you if you need to file under Chapter 11, 12 or 13 of the Bankruptcy Code. This information is for Chapter 7 filers. If you are not filing under Chapter 7, we recommend again that you get a lawyer.
Thanks to William Sandstead, an experienced bankruptcy attorney with offices in Portland, for his help in developing this information.
Three: File All Required Forms And Documents
Make copies of all of the above completed court forms. These will be for your files. To prepare for filing with the court, you will also need copies of these documents:
- certificate of credit counseling
- any debt repayment plan you developed during your credit counseling
File with the Clerk of the Bankruptcy Court all of the forms and documents listed above. Make sure that you have provided complete information on all of the court forms. Your petition can be dismissed for failure to provide all required information.
Maine has bankruptcy courts in Portland and Bangor. File in the court serving the area where you have lived for the last six months . Go to list of counties served by each of these Maine Courts.
At the same time you file, you must pay the filing fee and related court fees. The total cost is $353. A husband and wife filing a single petition will pay one filing fee.
If you have a low income and cannot afford these fees, you have two other options:
- You can ask the court to let you pay the fee in installments. Use Form B3A.
- You can ask the court for a fee waiver. Use Form B3B.
File this form with your other court papers. The court must waive your filings fees if your income is below 150% of the current poverty level and you cannot afford to pay in installments. If the court grants your waiver or installment plan, your case will be filed. If your waiver is denied, you will have to follow the court’s order on payment of fees to avoid dismissal.
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Take A Personal Financial Management Instruction Course
Finally, you must complete a post-filing Personal Financial Management Instruction Course within 45 days of your meeting of creditors. Take a look at the U.S. Trustee Program’s site to find an approved course near you. After you’ve completed the course, the last step is to wait to hear from the bankruptcy court whether your debts have been discharged.
Chapter 7 Statement Of Your Current Monthly Income And Means Test Calculation
To qualify for Chapter 7 bankruptcy, a debtor’s disposable income must be low enough to pass the means test. The means test compares your average gross monthly income for the six months before bankruptcy against the median income for a similar household size in your state.
If your income is below the state median, you automatically pass and don’t have to fill out both forms. However, if your income is above median, you have to complete the second form and disclose your expenses to see whether you qualify.
Click the link to view or download Form 122A-1Chapter 7 Statement of Your Current Monthly Income, Form 122A-1SuppStatement of Exemption from Presumption of Abuse Under §707, or Form 122A-2Chapter 7 Means Test Calculation from the U.S. Court bankruptcy form webpage.
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Alternatives To Chapter 7
Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707.
Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.
Chapter 13 Bankruptcies And Other Situations
While in some cases you can file bankruptcy without a lawyer, there are exceptions, depending on the type of bankruptcy. Some examples include:
- If your corporation or partnership is facing bankruptcy, you’ll need a bankruptcy lawyer.
- If you fail the Means Test because your income is too great, you may have to file a Chapter 13 bankruptcy rather than a Chapter 7. In that case, you can still file for bankruptcy without a lawyer, but it will be more difficult. That’s because Chapter 13 cases are much more complicated than Chapter 7 bankruptcies.
In addition to filling out the needed paperwork, you’ll have to create a repayment plan detailing how you plan to repay your creditors. As with Chapter 7 cases, downloading a bankruptcy forms package will help you stay organized by providing you with all the paperwork you need to file.
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Do You Need An Attorney To File For Bankruptcy
You can certainly file yourself. Unfortunately, you can also fail to have your debts discharged by the court simply for not following the right procedures for filing, having documents ready, or not properly dealing with other administrative issues. Things you will need to do include attending and completing a pre-bankruptcy credit counseling class within 180 days of filing. You need to fill out the correct bankruptcy forms and pay the filing fees. You will need to attend a creditors meeting with a bankruptcy trustee. If you file under Chapter 13 and succeed, you need to make all Chapter 13 plan payments in a timely manner. And, you will need to understand and follow all orders of the court.
It is perfectly understandable that when you are in financial trouble that you want to avoid taking on even more debt. But without expert advice and assistance by an experienced bankruptcy attorney such as David A. Bhaerman, you run the risk of completely failing in your attempt to gain relief from your creditors.
When you have an attorney like David A. Bhaerman on your side, you will not be in for any surprises and will be likely to succeed instead of ending up with a worst case scenario such as being charged with fraud!
Flat Fees Versus Hourly Fees
Many attorneys, especially bankruptcy attorneys, will charge a flat rate to represent you in a bankruptcy case. Youll pay a fixed amount for the attorney to represent you, regardless of the amount of time the attorney spends on your case.
Other attorneys will charge you an hourly rate, although its uncommon in consumer bankruptcy cases. The more likely scenario is for the attorney to charge a flat fee for the bulk of the matter. The lawyer will charge an hourly fee for any extra work required for services like defending against an objection to discharge. Your contract should spell out what the flat fee covers.
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Get A Free Bankruptcy Consultation In New Jersey
Consulting with an experienced bankruptcy attorney is a great way to evaluate your needs. Do you want to know whether or not youre eligible to file for bankruptcy in NJ? Call to contact the Law Office of Joel R. Spivack today.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney/client relationship. If you are seeking legal advice, please contact our law firm directly.
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Average Cost Of Chapter 7 Bankruptcy In Major Cities
So, lets take a look at some PACER info on the actual bill for an attorney. We took a look at a random sample of Chapter 7 cases in a few major metro areas to get a sense of the bankruptcy attorney fees in each area. In Los Angeles, the tab ranged from $1,500 to $2,000. In Dallas, it was $774 to $1,820. In Miami, attorneys charged anywhere from $1,000 to $2,000, and in New York City, the bill was in the range of $1,000 to $2,200.
Theres a lot of variation depending on the complexity of the case. In addition, many debtors qualify for free or discounted legal help, leading to even more variation.
One bankruptcy attorney in Los Angeles warns consumers to be on the lookout for competent, board-certified attorneys to handle their case. A bankruptcy is delicate, and you want someone with plenty of experience to represent you. A difference on the front end of a few hundred dollars could actually cost thousands in the long run, including refiling fees.
People looking to file for bankruptcy should be careful about focusing solely on the cost, said M. Erik Clark, managing partner of Borowitz & Clark, LLP. There are so many ways that a bankruptcy case can turn out wrong and having an experienced attorney can help them avoid a bad outcome.
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What To Expect From Bankruptcy Software
Except for the official form on the U.S. Courts website, this is what you can expect commercial vendors to provide:
- Instructions on the type of information and the level of detail youll need to provide
- Explanations of common terms
- A way to save your work as you go so you dont have to enter all the info in one sitting
- Automatic math calculations
- Information specific to your jurisdiction, like state exemptions
- Instructions on where to file your case
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Approval Process For Credit Counseling And Debtor Education Courses
In Alabama and North Carolina, the bankruptcy administrator approves credit counseling and debtor education providers. Lists of approved providers for the six judicial districts in Alabama and North Carolina are maintained by the bankruptcy administrator for that district or bankruptcy court.
An entity seeking to become an authorized credit counseling or debtor education provider in Alabama or North Carolina must go through an application process administered by the bankruptcy administrator for that district.
Student Loans In Chapter 7 Bankruptcy
Student loans are not dischargeable in Chapter 7 bankruptcy unless the debtor can demonstrate that loan payments impose undue hardship. To eliminate a student loan under the undue hardship exception, the debtor must file a separate motion with the bankruptcy court and appear before the bankruptcy judge with evidence of hardship. As a practical matter, it is difficult for bankruptcy debtors to demonstrate undue hardship unless the debtor is physically unable to work.
Most bankruptcy courts use the Brunner test in determining hardship. Under this test, to discharge student loans in bankruptcy, the debtor must show:
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Types Of Bankruptcy Filings
Chapter 7: Liquidation
Chapter 7 is designed for individuals and businesses experiencing financial difficulty that do not have the ability to pay their existing debts. Under Chapter 7 a trustee takes possession of all of your property. You may claim certain property as exempt under governing law. A bankruptcy trustee then liquidates all non-exempt property and uses the proceeds to pay your creditors according to a distribution scheme required by the Bankruptcy Code.
The main purpose of filing a Chapter 7 case is to obtain a discharge of your existing debts. A bankruptcy discharge is a court order releasing you from liability for many types of debts. If, however, you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, your discharge may be denied by the court and the purpose for which you filed the bankruptcy petition will be defeated.
Even if you receive a discharge, there are some debts which are not discharged under the law. These include certain types of taxes, student loans, alimony and child support payments, debts fraudulently incurred, debts for willful and malicious injury to a person or property, and debts arising from a drunk driving charge. Generally speaking, a bankruptcy discharge does not remove liens from your property.
Chapter 11: Reorganization
Chapter 11 is designed for the reorganization of a business. It is also available to individual debtors who exceed the thresholds for Chapter 13 bankruptcies.
