Bottom Line: Bankruptcy And Credit
I have personally seen the impact of the bankruptcy petition on some debtors five to seven years later and most are doing fine, says Arnold Hernandez, an attorney in Tustin, Calif., who handles bankruptcy cases. Bankruptcy is not forever.
How Your Creditors Are Paid
The official receiver will take control of your assets unless an insolvency practitioner is appointed. An insolvency practitioner is usually an accountant or solicitor.
The person who takes control of your assets is known as the trustee. The law says you must cooperate fully with them.
The trustee will sell your assets and tell the creditors how the money will be shared. Creditors must then make a formal claim. You cant make payments directly.
If you have assets, money from the sale of these will be used to pay the costs of the bankruptcy process before creditors are paid. If your case is administered by the official receiver the following fees will all be deducted from the money realised:
- an administration fee of £1,990 if you applied for your own bankruptcy or £2,775 if someone else applied
- a general fee of £6,000
- 15% of the total value of assets realised
- a fee charged at an hourly rate where money is paid to creditors
If there are insufficient assets in your case the official receiver will still process your bankruptcy.
Next, money will be used for:
- certain debts in relation to employees, if you had any
- your other creditors
- interest on all debts
Any money left over will be returned to you. If everyone is paid in full you can apply to have your bankruptcy cancelled .
Recovering From A Bankruptcy
Bankruptcies are designed to give you a second chance with your finances. Once you have a completed your bankruptcy, there are ways to speed the recovery of your credit score.
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Buying A Car Or House After Chapter 7 Bankruptcy
Many people are surprised to learn that filing bankruptcy won’t derail a car purchase or homeownership for long. If the bankruptcy helps clean up your credit faster than you’d be able to do on your ownas it does for many without the means to pay off outstanding debtsyour dream might be closer than you imagine. Specifically, if you take steps to rebuild your credit, it’s possible to get relatively reasonable interest rates when buying a new car within one to two years after bankruptcy. Securing a home loan within four years is well within reachand some people start the home purchasing process in as few as two.
The Chapter 7 Discharge
A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records failed to explain satisfactorily any loss of assets committed a bankruptcy crime such as perjury failed to obey a lawful order of the bankruptcy court fraudulently transferred, concealed, or destroyed property that would have become property of the estate or failed to complete an approved instructional course concerning financial management. 11 U.S.C. § 727 Fed. R. Bankr. P. 4005.
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Find Out If You Qualify To File Bankruptcy
When debt becomes insurmountable or your ability to pay debt changes due to job loss, a change in the family dynamic, or for any other reason, you might need the benefits and protection of filing for bankruptcy. The following people may qualify to file for Chapter 7 bankruptcy:
- People who have made a valid effort to repay debt
- People who cannot realistically repay their debt
- Individuals, married couples, and certain businesses
Your lawyer may explain whether you qualify to file for Chapter 7 bankruptcy and how discharging your debt might allow you to effectively erase debt and start over financially.
Monitoring Your Credit Report
Also, it’s essential to examine your credit report for mistakes after your discharge. If you notice an error, correct it promptly so that it doesn’t derail your efforts to rebuild your credit. You can check your credit report for free using annualcreditreport.com . You’re entitled to one free copy per year from each of the three reporting agencies. Requesting a report from one of the three agencies every four months is an excellent way to keep track of changes. Also, all of the three reporting agencies allow you to file a dispute online.
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The Benefits Of Hiring A Bankruptcy Lawyer
While the USC states that you may represent yourself when declaring bankruptcy, there are benefits to hiring a bankruptcy lawyer. Those benefits may include a lawyers ability to:
- Weigh the benefits and limitations of filing bankruptcy
- Recommend the best bankruptcy chapter for your financial situation
- Provide information on dischargeable and nondischargeable debt
- Review the bankruptcy consequences for your vehicle, home, and other property
- Define the effect filing bankruptcy might have on your taxes
If you opt to hire a bankruptcy lawyer, they will help you complete, and file necessary forms, advise you about continuing to pay debts, and familiarize you with relevant laws and procedures. A bankruptcy lawyer will also represent you at the Chapter 7 meeting of creditors and at any court hearing held in your case.
How Does Chapter 7 Bankruptcy Work
You’ll also get to keep the property you’ll need to maintain your home and job. Things that you can’t protect under your state’s exemption statutes get sold. The proceeds go to repay your creditors.
What Affects The Chapter 7 Bankruptcy Process
There are a lot of things that can affect how long Chapter 7 bankruptcy takes, some including court delays in the aftermath of the COVID-19 pandemic. But the biggest factor on how long your Chapter 7 bankruptcy case will take is you.
Cibik said things that commonly slow the process down include tardiness or noncompliance in getting the proper documentation to the trustee, as well as objection to discharge by creditors, too much income, excess equity in real estate, a pending inheritance, or outstanding lawsuit where the debtor is the plaintiff. Thats just to name a few things that could go wrong, he said.
Lyle Solomon, a bankruptcy attorney of Oak View Law Group in Sacramento, Calif, said the fact bankruptcy is complicated can cause issues. There is a lot of paperwork, things need to be filed in a timely and complete manner, he said. There are generally two things that can slow the process from the petitioners side: The speed at which they get me all of the information correctly if I dont have everything in time, this can force a rescheduling, which is typically a month or so. Also, the more assets you have slows things down, the courts have to assess your property and what should be sold and what should be kept. This can take months.
He said the worst delay is if a creditor doesnt believe the person filing should be eligible and files a lawsuit. This can delay your case by a year or more, Solomon said.
What Happens To Your Motor Vehicle
Your motor vehicle will be sold to pay for your bankruptcy debts, unless you need it:
- for your work or vocation
- to meet basic domestic needs where alternative transport is not practical
If the official receiver agrees you need the vehicle, it will be classed as exempt and not included in your bankruptcy. This does not apply if you own your vehicle through an ongoing hire purchase agreement .
If you are allowed to keep the vehicle you remain responsible for road tax, MOT and insurance.
If your vehicle is exempt but valuable it can be replaced with a cheaper alternative. The official receiver will use the money from the sale to either pay for the new vehicle directly or give you the money to buy one. You must provide proof of purchase for your new vehicle within 1 month. The guide price for a replacement is £1,000.
Stop the sale of your vehicle
If your vehicle is not exempt you may be able to keep it if a third party can pay to transfer it to them for you and you provide a:
- current insurance certificate
- vehicle registration document
- a valid MOT
The price paid will be the market value of the vehicle but must at least cover the agents costs for the sale of the vehicle.
If you dont want to keep the vehicle the official receiver will dispose of it.
Vehicles under finance agreements
A finance agreement can be a:
- hire purchase
- conditional sale
- leasing agreement
If the trustee decides they wont be claiming the vehicle they will give notice to you and the finance company.
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When Does The Discharge Occur
The timing of the discharge varies, depending on the chapter under which the case is filed. In a chapter 7 case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse . Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. In individual chapter 11 cases, and in cases under chapter 12 and 13 , the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing. The court may deny an individual debtor’s discharge in a chapter 7 or 13 case if the debtor fails to complete “an instructional course concerning financial management.” The Bankruptcy Code provides limited exceptions to the “financial management” requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if the debtor is disabled or incapacitated or on active military duty in a combat zone.
Have An Attorney Guide You Through The Chapter 7 Bankruptcy Process
The choice to seek bankruptcy involves many complicated considerations, while there are advantages and disadvantages of Chapter 7.
You’ll want to consider whether you can avoid bankruptcy altogether or how to preserve valuable assets if a bankruptcy is essential.
Contact a local bankruptcy attorney who can discuss ways the law can help you address your financial troubles.
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Chapter 7 Vs Chapter 13
To file Chapter 7 bankruptcy, you must meet certain criteria.
For example, you cant have disposable income or even any liquidity. Your monthly income also must be lower than the median rate of whatever state you reside. If you dont meet these requirements, you cant get this type of bankruptcy.
Chapter 7 bankruptcy also can stay on your record longer than Chapter 13. So if your goal is to get rid of debt and recover from the bankruptcy as fast as possible, you do better with Chapter 13.
Advantages And Disadvantages Of Chapter 7 Bankruptcy
There’s no question that deciding whether to declare bankruptcy is very difficult. It affects your future credit, your reputation, and your self-image.
It can also improve your short-term quality of life considerably, as the . Taken as a whole, it’s a difficult process with both advantages and disadvantages.
Chapter 7 bankruptcy, in particular, will damage your credit for a little while but also may provide much-needed relief and a roadmap for getting your financial house back in order.
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Your Public Records On Annulment
Youll need to check the details of the bankruptcy are removed from your credit record. If an IVA has been agreed, this will be put on your file.
You will need to apply to both Land Charges and Land Registry to have your bankruptcy entry removed from any properties you still own after paying your debts. If you dont, the entries will remain for 5 years.
How Long Does A Chapter 7 Bankruptcy Take To Complete
If you are one of the millions of debtor who has considered filing bankruptcy in recent years, you likely have a number of questions and concerns about the bankruptcy process. Deciding to file bankruptcy is never an easy decision to make. Understanding more about the process itself, however, can make the decision a little easier to make. One common question about the process is How long does a chapter 7 bankruptcy take to complete? The good news is that the answer to that question is that a Chapter 7 bankruptcy is typically complete within about three and a half months from the time the petition is filed until your Chapter 7 discharge is received.
The U.S. Bankruptcy Code is divided into chapters. Some chapters pertain to all types of bankruptcies that are filed. Other Chapters are specific to one type of bankruptcy. In other words, Chapter 7 of the Bankruptcy Code contains the law that creates Chapter 7 bankruptcy filings. Chapter 13 of the Bankruptcy Code contains the law that creates Chapter 13 bankruptcy filings.
If you are filing either a Chapter 7 or a Chapter 13 bankruptcy case, you and your attorney must complete a complicated form that is called the means test. Many individuals believe that the means test will require them to file a Chapter 13 bankruptcy case, which is five-year wage garnishment. However, Erin has studied the means test and the vast majority of her clients are able to file a Chapter 7 bankruptcy case.
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Count On An Attorney You Can Trust
Acclaim Legal Services specializes in helping people in Michigan gain a fresh financial start through the use of a Chapter 13 Reorganization Plan or a Chapter 7 Fresh Start program.
The goals for our clients are always to:
Improve and repair their credit
Resolve emergency issues such as home foreclosure, car repossession, wage garnishments, etc. Filing for bankruptcy offers court protection from creditors as soon as the case is filed. We offer same day legal protection.
Create a stable financial future through debt elimination, debt consolidation or debt settlement.
Minimize and eliminate the stress that comes with financial difficulties
We have been in practice for over 18 years and have over 120 years of combined legal experience in debt resolution law to offer our clients. We have six convenient offices located in Detroit, Southfield, Ann Arbor, Warren, Dearborn and Flint, Michigan.
Call today to speak to a qualified bankruptcy attorney at 866-261-8282 or schedule an appointment online.
Sawin & Shea Is Here To Help
No situation is completely straightforward, so dont try to maneuver the intricacies of Indianas bankruptcy codes on your own. At Sawin & Shea, LLC, we understand that hiring an attorney to help you file bankruptcy is scary. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve. We are here to help.
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