Finish The Bankruptcy Process
Youre almost done! But there are still a couple of things that need to happen before your bankruptcy case comes to a close, and they depend on which type of bankruptcy you filed.
If you filed Chapter 7, your debts will be cleared as soon as your trustee sells your nonexempt assets and pays off your creditors. If you filed Chapter 13, youve got to complete the payment plan and make sure all your creditors get their money before your debts can be erased. If you fall behind on payments or dont stick to the plan, your case could be dismissed, putting you back at square one.
When your bankruptcy case is closed, youll most likely get a letter in the mail telling you your debts have been cleared. If you dont get a letter, you can always contact the clerks office, or check your case online if your trustee gave you that option. When your debts are discharged, youre officially off the hookyoure no longer legally required to pay back those debts.
But remember, even after your debts are cleared, a bankruptcy stays on your record for up to 10 years. And if youve got any secured debt that you reaffirmed or any debt that wasnt bankruptable , you want to be sure to take care of those ASAP.
Take A Credit Counseling Course
Everyone who files for bankruptcy has to take a thats approved by the Department of Justice. In this course, you and someone from a credit counseling agency will talk about your finances to decide if bankruptcy is really the right choice. Like we said, there may be other options that will help you get back on your feet better than a bankruptcy, and you want to be sure youre making the best decision for you and your family.
The credit counseling course usually takes about an hour to complete, and you can do it online or by phone. The cost of the course depends on where you take it, but if you dont make enough money to pay for the course, you can have the fee lowered or waived entirely.1 Once you finish the course, make sure you keep your certificate of completionyoull need it when you file.
Need Help Contact Walker & Walker Today
Have you had enough of creditors calling and bills you dont know if you can pay every month? It may be time to investigate bankruptcy and how it can help you get the chaos in your life under control. Contact us today to see what Walker & Walker Law Offices can do to help you get started with and get through the bankruptcy process.
The bankruptcy filing fees effective January 1, 2017 are as follows:
- Chapter 7 $335
- Chapter 13 $310
The most common type of bankruptcy, a Chapter 7 filing, erases most consumer debts and typically costs anywhere between $1,500 to $3,000 with an attorney. Chapter 13 filing, which involves a debt repayment or reorganization plan, can cost from $3,000 to $4,000 with an attorney.
After the passing of the 2005 Bankruptcy Reform Act, costs for both types of bankruptcy filings rose considerably. This increase in cost was due to the imposed Means Test and other limitations on filing, which was a direct result of the 2005 Bankruptcy Reform Act.
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What To Consider Before Filing Bankruptcy
There will be instances in which bankruptcy is the best, or only, option. If you are truly unable to repay your debts, filing for bankruptcy protection will stop collection efforts so you can begin to recover and get back on your feet. Some examples of when bankruptcy may be a necessary option:
- When you are facing serious financial consequences due to divorce.
- When your financial liabilities far exceed your current income and assets.
- When you have exhausted all your other options, including credit counseling, payment accommodations with your lenders and other assistance.
Before making a decision, order copies of your credit reports from each of the three credit reporting agencies and make a list of all the debts you owe. You should also seek advice from a qualified credit counselor or financial advisor.
The Chapter 13 Plan And Confirmation Hearing
Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 14 days after the petition is filed. Fed. R. Bankr. P. 3015. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.
There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. Secured claims are those for which the creditor has the right take back certain property if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.
The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all “disposable income” – discussed below – to a five-year plan.11 U.S.C. § 1322.
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How Upsolve Works
In a Nutshell
Upsolve is a nonprofit that helps you file bankruptcy on your own, using a free online tool to generate your bankruptcy forms and clear your debt. Think TurboTax for bankruptcy.
Here’s how it works!
The bankruptcy system empowers you to file on your own when you canât afford a lawyer, known as filing âpro se.â Upsolve is here for you through our free tool, attorney-written articles, and community support.
What Not To Do
The biggest mistake people make in bankruptcy filings is trying to game the system. All your assets may be seized in a bankruptcy and failing to disclose all of them can result in criminal charges
Just ask tennis player Boris Becker, currently looking at jail time in the U.K. for hiding assets. Do not transfer property to family or friends before you file. It will be clawed back.
Honest debtors get a fresh start, while dishonest ones can potentially go to jail.David Leibowitzhead of Lakelaw
Also don’t max out your credit resources before you file. The court will not look kindly upon it. Never use funds from retirement accounts to pay off debt.
“Truth and transparency are critical to the bankruptcy process,” said Leibowitz. “Honest debtors get a fresh start, while dishonest ones can potentially go to jail.”
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What Happens When You Declare Bankruptcy
Filing a bankruptcy petition automatically stays your creditors’ claims against you. This means that your creditors have to stop trying to collect the money you owe them. They will not be able to:
- Repossess your car
- Foreclose on your home
Your case will be assigned to a bankruptcy trustee, who is a lawyer who will oversee your case. The trustee will send notices to your creditors and schedule a hearing.
From there, the procedure depends on whether you’ve filed for protection under Chapter 7 or Chapter 13 of the federal Bankruptcy Code.
Am I Unsure How Much I Actually Owe
Uncertainty about your total outstanding debts is cause for concern. Whether your balances have grown larger and you’re unaware of the total, or you’ve forgotten creditors that have sent your debt to collections, you should consider alternative repayment options if you can’t tabulate how much you owe.
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Chapter 7 Vs Chapter 13 Bankruptcy
The main difference between Chapter 7 and Chapter 13 bankruptcy is that in Chapter 13 bankruptcy, you don’t immediately erase any debts. You propose a repayment plan based on your ability to repay certain debts. The bankruptcy trustee and all creditors review the Chapter 13 reorganization plan and, if itâs acceptable to all involved, the court confirms your repayment plan, which lasts three to five years.
Most people file Chapter 13 bankruptcy instead of Chapter 7 for two reasons. First, they fail the means test due to their high income and donât qualify for Chapter 7 bankruptcy. Second, they own a home they want to keep thatâs not covered by the Chapter 7 bankruptcy exemptions.
If you’re considering filing Chapter 13 because you don’t pass the means test, look at the reasons you aren’t passing. The lookback period for the means test is 6 months, so if you recently experienced a drop in household income, you might qualify for Chapter 7 in the near future.
Fill Out And File The Chapter 7 Bankruptcy Forms
You’ll tell the court about your property, debts, income, expenses, and more on Chapter 7 bankruptcy forms. When finished, you’ll have disclosed everything about your present and past financial situation, including whether you want to keep your car, house, and other secured property or let it go back to the lender. You’ll also disclose property transactions that occurred up to ten years before your case.
Your case starts after filing the completed bankruptcy forms . Because a bankruptcy filing can be up to 60 pages in length, you can use the emergency filing procedure if you’re short on timeit requires fewer forms. If you don’t file the remaining forms within 14 days, the bankruptcy court will dismiss your case.
You’ll also pay a filing fee. If you can’t pay it, you can ask the court to split it into four payments or waive it entirely. Your household income must be 150% of the federal poverty guidelines or less, and you can’t have sufficient income to pay in installment payments. Learn more about bankruptcy filing fees and costs.
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Where Do I File For Bankruptcy In Beverly Ma
Where to file your bankruptcy case depends on where you live and on whether you have a business close to home. Usually, youâll file in the federal district court closest to where youâve lived for the past 180 days . But if you run a business in a different district and most of your property is located there, you may have to file in the federal court serving that location.
The reason behind these filing rules is that the bankruptcy court wants the person overseeing your caseÃ¢called the bankruptcy trusteeÃ¢to be able to easily find, evaluate, and, if necessary, sell your property.
If youâve moved recently, you may have to file at the bankruptcy court serving the county where you used to live. That will depend on where the greater portion of your property has been for most of the past 180 days. For example, if you lived in Oregon for most of your life, but moved to California a month ago, youâll file in Oregon because you lived there for 150 of the past 180 days.
You can handle most interactions with the court, including filing your bankruptcy forms, by mail. However, you will need to visit the courthouse in person at least once, for a meeting with the bankruptcy trustee.
How Does Filing For Bankruptcy Affect Your Credit
The two most common types of consumer bankruptcy are Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, you do not repay any of the debt owed. The bankruptcy listing remains on the credit report for 10 years from the date it is filed. Under Chapter 13 bankruptcy, you are responsible for paying back a portion of the debts that you owe through a debt repayment plan. A Chapter 13 bankruptcy is removed from your reports seven years from the date it is filed.
In both cases, having a bankruptcy in your credit history will seriously affect your ability to obtain credit for as long as it remains on your report. If you do qualify for credit while the bankruptcy is part of your credit history, you will likely have to pay higher interest and fees than you would otherwise. It can also affect your ability to qualify for things like an apartment, utilities and even employment. Even car insurance rates may be affected.
Aside from the impact on credit, filing for bankruptcy can come with other negative consequences, such as:
- The cost: There will likely be court fees as well as bankruptcy attorney fees to pay when you file.
- Loss of property: If you are unable to show the court you can continue making payments, you could lose property such as your home or your vehicle.
- Bankruptcies are public records: As part of the public domain, they may be seen by others and affect personal and business financial decisions, even when a credit report is not accessed.
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Here’s How Bankruptcies Impact Your Credit Score
While bankruptcies on your credit report will always get factored into your credit score for as long as they are on there, the impact on your score lessens with each year that passes. So, you may see a dramatic drop in your score in the first month immediately following your bankruptcy filing, but by the end of the first year it could have less weight, and certainly less in later years compared to year one.
Your own credit profile will also play a part in how much your credit score is affected when you declare bankruptcy. Similar to how having a higher credit score can ding your more points if you miss a credit card payment, so, too, is the case if you file for bankruptcy. According to FICO, someone with good credit may experience a bigger drop in their score when a bankruptcy appears on their report than someone with an already poor credit score.
Estimates we found online from places like Debt.org show how people with different credit scores would be impacted by a bankruptcy filing. Someone with a credit score of 780 or above would be dinged between 200 and 240 points, while someone with a 680 score would lose 130 to 150 points.
Whatever the case, no one really benefits from filing for bankruptcy. It’s an option of last resort that sometimes even those with good credit find themselves making.
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.
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How Long Does Chapter 7 Bankruptcy Take
Most people can file their bankruptcy forms within one week if theyâre organized. The 341 meeting with the trustee who oversees your case takes place about one to two months after you file.
If all goes well, two to three months after your meeting with your trustee, youâll get a letter in the mail that your debt is officially discharged. This means that that Chapter 7 bankruptcy from beginning to the discharge of your debts takes about 3-5 months.
How Do I Declare Bankruptcy
To declare and file bankruptcy, you are required to complete a credit counseling class to learn about bankruptcy, alternative options, and managing your finances on your own.
After completing the course, you must submit a petition to the U.S. bankruptcy court in the federal judicial district where you live. This petition will list your:
- Assets, such as cars, homes, and bank accounts
- Monthly income and expenses
You’ll also need to submit a copy of your most recent tax return with your petition. You can have an attorney prepare the petition for you, or you can obtain bankruptcy forms and instructions from the U.S. courts.
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What Happens When You File Chapter 13
If you can’t file a Chapter 7 bankruptcy, or if you have some money to pay creditors and there are assets that you want to keep, a Chapter 13 bankruptcy may be an option for you. In a Chapter 13 bankruptcy, you will:
- Develop a plan for making payments to your creditors over a three-to-five-year period, depending on your income
- Make all of your payments on time to said creditors
- Complete a budget counseling course
After these milestones are complete, the remainder of your debt that is eligible for discharge will be erased.
Chapter 13 is a good option for someone with a steady income who has some money left over every month to make debt payments but who needs some breathing room and extra time to get caught up.