Set Up A Free Consultation With A Licensed Insolvency Trustee
The first step is to sit down with an LIT. A consultation is free of charge and;without any obligation on your behalf.;The initial consultation is the chance to go over your debts with a federally licensed debt professional who will listen carefully to your financial situation and explain all;available;debt relief solutions.;In many cases,;an LIT can find an alternative to filing for bankruptcy.
Too Much Debt Can Impact Your Credit Scores
There are many types of credit scores, including FICO and Vantage. A credit score is a three-digit number between 300 and 850 based on your credit reports. Lenders use different formulas but consider similar factors in calculating your credit score. Hereâs a common breakdown:
35% payment history
30% amounts owed/credit utilization rate
15% credit history length
10% new creditÂ;
10% mix of credit typesÂ;
If you fall behind on paying your bills, this will have a negative impact on your payment history. If you use too much of your available credit, which means youâd have a high credit utilization rate, this will also affect your credit score. Together, your payment history and utilization make up 65% of your credit score, so focus on paying on time and not using too much of your credit limit if you want to boost your credit score.
FICO considers your credit utilization in weighing your score. The total credit you have available is known as revolving credit. Your credit utilization ratio is the percent of revolving credit that youâre using at any given time. To find your utilization ratio, divide the balances of all your credit cards by all their credit lines or limits. Take the following example:
$5,000 balance with $10,000 limit
$2,500 balance with $8,000 limit
$2,500 balance with $7,000 limit
What Chapter Bankruptcy Are You Filing
The rules are a little different depending on which chapter you are filing. People who dont qualify for a Chapter 7 may qualify for a Chapter 13. Thats because, with a Chapter 13, youll be paying your creditors back over time. With a chapter 7, your debts are wiped away. So, it makes sense that the courts would be stricter about approving a Chapter 7 bankruptcy. When you meet with your Arizona bankruptcy lawyer for the first time, let them know what your goal is. Theyll let you know whether they think its possible.
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When It Makes Sense To File For Bankruptcy
Colwell says your individual situation and the amount of financial stress you have is a key indicator of whether filing for bankruptcy is in your best interest.
There are certain trigger points that indicate that youd better slow down and start asking questions, says Colwell. These include taking out regular payday and title loans against your car, making 0% balance transfers on credit cards and only making minimum payments, or even thinking about liquidating or taking loans against retirement funds.
Can I Be Made Bankrupt
The minimum level of debt for which someone who you owe money can force you into bankruptcy is £5,000.
The process of being made bankrupt is different.
But high street lenders rarely use this option and will prefer to work with you to find another way to pay off your debts.
You can find out more about what happens if someone tires to make you bankrupt on the;GOV.UK website
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What Is An Automatic Stay
After you file for bankruptcy, you have the protection of an immediate, but temporary, automatic stay. The automatic stay can, for example, immediately stop a foreclosure, an eviction, car repossession, or wage garnishment. It can also stop debt collection, harassment, and disconnection of utilities.
The automatic stay may provide a powerful reason for filing for bankruptcy. In most of the situations listed above, the automatic stay can buy you a few days or weeks in which to figure out your next move. If your primary motivation in filing bankruptcy is to gain the benefits of the automatic stay, you donât need to file all of your papers at once. You just need to file the three-page petition, a signature declaration, and a listing of your creditors. In addition, within 180 days prior to filing, you will have to visit an approved credit counseling agency for advice and budget analysis. You will have to file a certification of such counseling when you file your petition. You have 15 days in which to file the rest of your papers. If you donât, your case will be dismissed.
You May Make Surplus Income Payments
When you file for bankruptcy, you must do the following:
- disclose to the LIT information about all of your assets and liabilities ;
- advise the LIT of any property that was sold or transferred in the past few years;
- surrender all your credit cards to the LIT;
- attend the first meeting of creditors ;
- attend two counselling sessions;
- advise the LIT in writing of any address changes;
- if required, attend an examination at the Office of the Superintendent of Bankruptcy; and
- assist the LIT as needed in administering your estate.
You may be required to make additional payments to your LIT for distribution to your creditors.
In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.
Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.
Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep; the more you earn, the more you are required to contribute.
In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.
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What Debts Can Be Included
Bankruptcy includes most debts that are unsecured or without collateral. Examples of unsecured debts are:
- Potential loss of non-exempt assets
- Note on credit report for up to 7 years
- Monthly payments based on income
- Monthly budgeting statements
- Some debts are excluded
There are consequences to filing for bankruptcy, but many are misunderstood and can actually hinder someone from exploring their debt relief options. Lets;take a look;at;some of;these;consequences in more detail.
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.
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What Happens After I Go Bankrupt
After you go bankrupt, an Official Receiver will be appointed within two weeks of receiving your bankruptcy order.
They will assess your:
In order to decide how they can be used to meet your debts.
You might also be asked to attend an interview with the official receiver.
Your creditors have to make a formal claim to the trustee for the money they are owed.
You cant make direct payments to them and they cant ask you for payments.
After a period of time , most of your outstanding debts are written off and you can make a fresh start.
Until you are discharged from bankruptcy you will remain under bankruptcy restrictions.
For example, you wont be able to apply for credit of £500 or more without telling the lender about the bankruptcy.
You can check your discharge date online using the Individual Insolvency Register on the GOV.UK website
Any credit you do get is likely to be expensive both now and in the future.
Bankruptcy affects your credit rating and credit reference agencies will keep your details on file for a minimum of six years.
How Will You Know If You Owe Surplus Income
The income that is required to maintain a reasonable standard of living;for your family;during the period of your bankruptcy;is determined by the;Office of the Superintendent of Bankruptcy Canada;.;Surplus income;is the amount of income you make that exceeds these OSB guidelines. If your income;exceeds;the OSB guidelines;by $200 or more, youll be required to pay 50 per cent of that surplus to your LIT;to reimburse your creditors.;;
For example,;if your income is;$500;higher than the OSB guidelines for your family size, you would;be required to;pay;half, or;$250,;towards your debts;each month.;One of your obligations when you file for bankruptcy is to report your monthly income;and expenses;to your LIT so they can determine your net income;and calculate if you have surplus income.;
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Doesnt Filing For Bankruptcy Ruin My Reputation And My Life
Not if it gets you out of debt. You might be able to run from creditors for a while, but eventually the stress of that overwhelms people. Bankruptcy lets you stop running and start over again. It may take a few years for you to get loans and obtain credit again, but at least youll have that opportunity. Bankruptcy is meant to give people who made financial mistakes a second chance. In todays turbulent economy, that is a good thing.
How Much Debt Do You Need To Go Bankrupt
There are no limits on the amount of debt you need before you can apply for bankruptcy. In addition there is no ideal amount. You just have to owe at least £750.
Whether or not it is suitable for you will largely depend on your wider financial circumstances. Important factors to consider are how much you can afford to pay to your creditors each month and the assets you own.
Having said that it is extremely unlikely that bankruptcy will be suitable if your debt is only a few thousand. One of the main reasons for this is the up front cost.
Since October 2016 an individual creditor must be owed at least £5000 before they can try to force you to go bankrupt.
Factors That Will Help You Decide When To File Bankruptcy
When to file bankruptcy is one of the most important decisions that you have to make in your financial life. Remember, when you should file for bankruptcy largely depends on your circumstances aside from the types of debt that you have incurred.
Below is a discussion of the factors to consider when filing for bankruptcy:
There are times when no matter how much debt you have, it is still worthwhile to consider bankruptcy, especially if there is no way for you to pay your debts and that your creditors are taking actions against you. These actions can be going to court, garnishing your wages, or trying to repossess your properties.
What Types Of Property Can I Keep If I File Bankruptcy
Each individual who files a bankruptcy is entitled to keep any property that qualifies for an exemption under either federal or Illinois law. For some types of property, such as family pictures, necessary wearing apparel, worker compensation benefits, qualified retirement plans, IRAs, and life insurance, the value and amount of property an individual can claim as exempt is unlimited. In other cases, however, the equity an individual can claim as exempt is limited by a fixed dollar amount. Common examples of such exemptions include:
- Your personal residence ;
- Compensation for personal injury claims ;
- Motor vehicle ;
- Tools or books used in your occupation .
Illinois law also gives each individual the right to exempt up to $4,000 in equity for any other personal property, including cash or money in the bank. If a husband and wife file jointly for bankruptcy, each spouse is entitled to claim these exemptions as well.
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Private Loan Modification Or Settlement
Your options to reduce private loan payments or get out of default vary greatly based on the lender. Communicate directly with your private lender or servicer to explore loan modification programs if you cant afford your payments long-term.
If youre behind on your loans, you could consider reaching a settlement agreement with the lender or collection agency. At which point, you would pay a lump sum settlement thats less than your total outstanding balance. But you may have to pay taxes on this amount, and it could be unaffordable.
If you can, consult a tax professional or lawyer with student loan expertise if youre in communication with a collection agency about a settlement.
How Do I Know Whether To File Chapter 7 Or Chapter 13 Bankruptcy
Although bankruptcy can be a viable option regardless of how little debt you have, there are certain requirements you need to meet in order to be eligible.
- Filing history requirements: If you filed and were discharged through bankruptcy in the past, you may not qualify for another discharge for several moreyears. The exact number of years will depend on the type of bankruptcy and your specific circumstances.
- Income requirements: To be eligible for Chapter 7 bankruptcy, you will have to pass the Chapter 7 Means Test, in which your income is compared to the incomesof other Ohio families of your size. This helps the court decide whether you have the ability to pay off your debts.
- Other acceptable debt requirements: Only certain types of debts, like credit card debt and payday loans, can be discharged. Debts you can discharge underChapter 13 bankruptcy include a home or car for which you are behind on the loan.
Our Northeast Ohio Bankruptcy Attorneys proudly serve the Akron, Canton, Wooster, and New Philadelphia communities. Give us a call at 234-678-0626 or fill out our online contact form to schedule a free consultation to see if filing for bankruptcy is right foryour individual situation.
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Talk To A Bankruptcy Lawyer
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Chapter 7 Vs Chapter 13
Chapter 7 and Chapter 13 are the two most common types of personal bankruptcy.
In a Chapter 7 bankruptcy, a trustee appointed by the bankruptcy court will liquidate many of your assets and use the proceeds to pay your creditors some portion of what you owe them. Certain assets are exempt from liquidation. Those typically include part of the equity in your home and automobile, clothing, any tools you need for your work, pensions, and Social Security benefits.
Your nonexempt assets that can be sold off by the trustee include property , a second car or truck, recreational vehicles, boats, collections or other valuable items, and bank and investment accounts.
In Chapter 7, your debts are typically discharged about four months after you file your bankruptcy petition, according to the Administrative Office of the U.S. Courts.
In a Chapter 13 bankruptcy, by contrast, you commit to repaying an agreed-upon portion of your debts over a period of three to five years. As long as you meet the terms of the agreement, you are allowed to keep your otherwise-nonexempt assets. At the end of the period, your remaining debts are discharged.
In general, people with fewer financial resources choose Chapter 7. In fact, to be eligible for Chapter 7, you must submit to a means test, proving that you would be unable to repay your debts. Otherwise, the court may determine that Chapter 13 is your only option.
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Make Monthly Payments To Your Lit
When you file for bankruptcy, you;will;make minimum monthly payments to;your;LIT for the professional services they provide you during the bankruptcy process. You may also need to make surplus income payments according to guidelines set by the federal government if your;monthly;income exceeds a certain amount.Find out more about the costs of bankruptcy.
What To Do If You Have Too Much Debt
If you have more debt than you can afford, filing for bankruptcy may be a good option. This is especially true if you have a lot of unsecured debt like credit card bills or medical debt. In fact, Chapter 7 bankruptcy caters to unsecured debts, discharging them within 3-4 months. Most property may be exempted from sale to creditors by state law, but youâll first need to pass a means test to see if you qualify for Chapter 7.
Chapter 13 is better for non-dischargeable debts like student loans and child support. Itâs also more helpful if you have a car with a high interest rate or want to catch up on your home mortgage. Unlike credit cards, these are debts secured by property like vehicles and real estate. But to qualify for Chapter 13, youâll have to have enough disposable income to commit to a 3â5-year repayment plan.Â;
Donât rely on these oversimplifications. Read more about Chapter 7 versus Chapter 13 bankruptcy in Upsolveâs free library. Also, remember that bankruptcy is not for everyone. Although debtors benefit from an automatic stay on collection and discharge from debts, this process comes at a price. Chapter 7 can stay on your credit report for 10 years and Chapter 13 for 7 years. Compare other debt-relief options with bankruptcy and weigh the pros and cons of all debt management plans before deciding on a plan of action.
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