How To Get Out Of Debt Keep The House Car Retirement Savings And Finally Get A Fresh Start
Filing Bankruptcy Cases Under Different Chapters
If youre filing under a different chapter the second time around, the following rules apply:
- Chapter 7 after Chapter 13 According to Title 11 Section §727 of the U.S. Code, if your first filing was under Chapter 13, you will not be granted a discharge under a Chapter 7 until at least six years has passed from the date you filed your Chapter 13.
- Chapter 13 after Chapter 7 According to Title 11 Section §1328 of the U.S. Code, if your first case was a Chapter 7, you only have to wait four years before filing a Chapter 13.
Filing for Bankruptcy for Reasons other than Discharge
Keep in mind that the time limits discussed only pertain to discharges, not to filings. There is no limit to amount of times you can actually file. While seeking a discharge of debts is the most common reason to file for bankruptcy, its not the only reason.
Some file for the automatic stay which prevents creditors from collecting on debts. Depending on your circumstances, this could help you stop collection efforts and catch up on your payments.
Running into Difficulties with Repeat Bankruptcy Filings
There may be no legal limit on how many times you can file for bankruptcy in Texas but the courts will take a good look at why the debtor is filing for a subsequent bankruptcy. First, lets review why bankruptcies were written into American law.
Discuss Your Options with a Bankruptcy Attorney
Who Qualifies For Chapter 13 Bankruptcy
The requirements for Chapter 13 bankruptcy differ from the requirements for Chapter 7 bankruptcy. Here are some of them.
- You must have sufficient income to make the monthly debt payments outlined in your bankruptcy plan.
- Your unsecured debts must be less than $419,275, and your secured debts must be less than $1,257,850. These dollar amounts are in effect until April 2022. Debt limits change every three years.
- If you attempted to file for Chapter 7 or 13 bankruptcy but your case was tossed out, you must wait 181 days or more before refiling.
- You must provide proof that you filed federal and state income tax returns for the past four years.
- You typically must finish an individual or group credit counseling course offered by an approved credit counseling agency within 180 days before you file for bankruptcy.
Have I Exhausted All Other Options
There are a lot of things you can do to avoid bankruptcy. Make sure you consider these steps:
- Contact your lenders to see if they can work out a payment plan. Most lenders would much rather do this than have to forgive your debt completely when you file for bankruptcy.
- Sell some of your assets. You may be surprised at how much cash you can raise to pay off your debts.
- Eliminate all unnecessary expenses. Take a good, hard look at your spending. Are you spending a lot of money eating out? Do you really need that large cable tv package? Put together a budget and stick with it. Anything you dont absolutely need may have to be cut at least temporarily so you can put more money toward your debt.
- Sign up for credit counseling. Before you file for any kind of bankruptcy, you have to undergo counseling from a government-approved agency. It must include a two-hour financial management course. All of this has to be completed no more than 180 days before your bankruptcy discharge.. Its a worthwhile process sometimes credit counseling services can help people avoid bankruptcy altogether.
Recommended Reading: How Many Bankruptcies Has Donald Trump Filed
What Bankruptcy Can Do
Bankruptcy allows people struggling with debt to wipe out certain obligations and get a fresh start. The two primary bankruptcy types filedChapter 7 and Chapter 13 bankruptcyeach offer different benefits and, in some cases, treat debt and property differently, too. You’ll choose the chapter that’s right for you depending on your income, property, and goals.
Here are some of the things you can expect regardless of whether you file for Chapter 7 or 13.
It Depends On How Much Money You Have
In a nutshell: If you’re rich, or you have nice things that could be sold, you probably don’t qualify for Chapter 7 bankruptcy.
You have to pass what’s called a means test. If your income is less than your state’s median income, then you pass, and you can file.
The U.S. added income limits to Chapter 7 bankruptcy eligibility in 2005 under the Bankruptcy Abuse Prevention and Consumer Protection Act . Because Chapter 7 bankruptcy was made for people who legitimately can’t pay their debts, Congress wanted to discourage high-income earners from abusing the bankruptcy process.
The test will make a calculation using your income from the last six months. It’ll take the total and divide it by six to get your average monthly income. Multiply that by 12, and you get your annual income, which can be compared to the state median income.
Don’t let the form intimidate you. There are a lot of questions, but they’re pretty straightforward. Answer each question honestly, and you should be fine.
There are some exceptions to the income limit.
If more than 50% of your debt is business debt rather than personal debt, you might not have to pass the means test. Here’s an example of business debt: If you rack up debt on the credit card that you use specifically for your business or LLC, that’s business debt. So if you’re in debt primarily because your business has been struggling, the income limit may not apply to you.
If you answered yes to these questions, Chapter 7 may be your answer.
Recommended Reading: Do It Yourself Bankruptcy Chapter 7 Software
Exactly How Much Debt Must You File For Bankruptcy
Exactly how much Debt Must You File for Bankruptcy?
Many people query alike matter when theyre considering filing for bankruptcy proceeding. The debt is actually mounting up, and theyre feeling growing pressure because of they. It may not end up being that huge of a sum, however their power to repay is starting to become many not likely.
The answer is clearly very simple, but there are many subtleties: personal bankruptcy statutes dont need debtors for a minimum debt total in order to file for bankruptcy. When you should submit bankruptcy proceeding and identifying in case it is the best selection available in the long run is dependent upon your own situation.
On this page, we are going to manage these scenarios in more detail and give you a better notion of if the amount of the debt in addition to pressure of situations show that you should seek bankruptcy relief .
When To File Chapter 7 Bankruptcy
There are several warning signs that you should be considering Chapter 7 bankruptcy. Five strong signs that indicate filing for Chapter 7 may be the right solution include:
Read Also: How Many Times Did Trump File For Bankruptcy
Make It A Habit To Monitor Your Credit
Whether you opt for bankruptcy, debt consolidation or any other of the above options, it’s important to keep track of your credit score during the process.
With Experian’s free credit monitoring service, you’ll get free access to your FICO® Score powered by Experian data. You’ll also be able to view your Experian credit report, which is updated every 30 days. Other features include real-time alerts when changes are made to your credit report, including hard inquiries, new accounts and changes to your personal information.
As you stay on top of your credit, you’ll be able to spot potential issues quickly and address them before they damage your credit score too much. You’ll also be able to keep track of what your creditors are reporting to the credit bureaus and make sure it’s accurate.
As you come out the other side of your debt repayment plan, maintaining the habit of checking your credit regularly and developing good credit habits can help you achieve your goals of rebuilding your credit history more quickly.
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.
Also Check: How Many Bankruptcies Has Donald Trump Filed
Debts That Can And Cant Be Discharged In Chapter 7 Bankruptcy
Chapter 7 should dismiss most of the debts you owe, but there are some hard-and-fast debts that cant be discharged in Chapter 7.
The list of non-dischargeable debts includes:
- Child support
- Student loans must prove undue hardship
- HOA fees if you surrender your home or condo
- Any other form of unsecured debt.
How To File Chapter 7 Bankruptcy
The most important factor in filing Chapter 7 bankruptcy is finding an experienced bankruptcy attorney. Once you decide on an attorney, you can refer creditors to your lawyers office. Filing the petition will trigger an automatic stay, which means creditors cant pursue lawsuits, garnish your wages or contact you about your debts. Heres a potential timetable:
If youre qualified, it will take 4-6 months to complete the bankruptcy process.
Here are the steps you must take when filing for bankruptcy:
You May Like: Get Personal Loan After Bankruptcy
Chapter 7 Bankruptcy Vs Chapter 13 Bankruptcy
There are two common types of bankruptcy you might consider as an individual consumer: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
With Chapter 7 bankruptcy, many of your assets are liquidated, and the proceeds are used to repay your creditors. After your creditors are paid and your eligible debts are discharged, youre no longer responsible for repaying your debts .
Rather than having eligible debts completely discharged, Chapter 13 bankruptcy is more like an extended repayment plan. You develop a plan to repay your debts over a period of three to five years, giving you an opportunity to retain more of your assets than if you filed for Chapter 7 bankruptcy.
Can all debts be eliminated in a Chapter 7 bankruptcy?
While credit card debt and many other forms of debt can be eligible for discharge when you file Chapter 7, some are not. Examples of ineligible debts include alimony or child support, some taxes, certain student loans and more. If you have nondischargeable debt, youll be responsible for repaying it even if you file for Chapter 7 bankruptcy.
Different Types Of Bankruptcy
For individuals, there are two main types of bankruptcy cases. Most individual debtors file for Chapter 7, which can also be described as âstraightâ bankruptcy or âliquidation.â Under this plan all non-exempt assets are converted to cash , and secured creditors may have the item they financed turned over to them , unless the debtor reaffirms the debt with the courtâs approval prior to obtaining a discharge. Chapter 13, also called âreorganization,â is an option for people with regular income and debts that are less than the limits allowed by law. When you complete a Chapter 13 plan, you have the satisfaction of keeping your assets, paying your creditors, and possibly discharging some of your debts.
Bankruptcy is a serious step. If you choose to file Chapter 7 or Chapter 13, you will probably need to hire an attorney. Be sure to find an attorney who has experience handling the type of bankruptcy case you plan to file. The following overview of Chapter 7 and Chapter 13 will give you some idea of whatâs involved.
Read Also: Has Trump Declared Bankruptcy
How Chapter 7 Works
A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets. In addition to the petition, the debtor must also file with the court: schedules of assets and liabilities a schedule of current income and expenditures a statement of financial affairs and a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007. Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case . 11 U.S.C. § 521. Individual debtors with primarily consumer debts have additional document filing requirements. They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling evidence of payment from employers, if any, received 60 days before filing a statement of monthly net income and any anticipated increase in income or expenses after filing and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.
Filing Bankruptcy: How Much Debt Do I Need To File
One of my readers recently asked about how much debt he needed to file bankruptcy. Thats a good question, and Im asked that frequently.
Theres no set amount of debt you must have to file bankruptcy. As Ive said before, each case is unique. What might be too much debt to one person might be easily manageable for another. The issue is how much debt is too much debt for you.
However, if you:
- Are robbing Peter to pay Paul
- Feel like all you think about is how you can make your payments
- Are living on credit cards
- Constantly worry about how youll pay your debts
- Cant see how youll ever pay off all your debt or
- Fight with your spouse about debt
then theres a good chance you need to talk to a bankruptcy lawyer about your situation. Know the warning signs. This doesnt mean you should fileonly that you should get professional help from someone who can explain all your options, bankruptcy or otherwise.
If you do file, theres no magic amount of debt you must have for the court to grant your discharge. Theres no ratio or number you must hit to qualify for bankruptcy. Of course, filing bankruptcy costs money, so you would certainly not want to file to discharge only a few thousand dollars of debt. Filing bankruptcy must be cost-effective. The whole point, after all, is that you do something that will benefit you financially.
Don’t Miss: How Many Bankruptcies Has Donald Trump Filed
What Type Of Debt Can You Include In Bankruptcy
When thinking about whether you owe enough for bankruptcy to be a sensible option remember to distinguish between secured and unsecured debts. Only unsecured debts can be included in the process.
Debts secured against property or goods such as a mortgage or car finance agreement cannot be added. You would still need to maintain the payments towards these or the things they are secured against could be repossessed.
If you are struggling to pay your mortgage bankruptcy could still help. It will reduce the payments required towards your unsecured debt and thus free up cash so you can pay your mortgage on time.
If you are a home owner with equity in your property it could be at risk if you go bankrupt. Speak to us about your options before taking any further action.
How Much Debt Do I Need To Have To File Bankruptcy
Contrary to popular belief, there is no minimum amount of debt required to file for bankruptcy. You dont need to wait until you have an overwhelming amount of debt to act on your unpaid bills and expenses. Before you make any major decisions, here are some things to consider before filing for bankruptcy:
Also Check: Getting A Personal Loan After Bankruptcy
Are Your Creditors Willing To Work With You
You may not have to resort to bankruptcy if your creditors are willing to work with you. If you can settle your debts outside of bankruptcy, you may not need to file. But if your creditors are suing you, garnishing your wages, or trying to foreclose on or repossess your property, filing for bankruptcy may be your best option to stop the collection activities.
To learn more about ways to deal with your debts outside of bankruptcy, see our Bankruptcy Alternatives topic.