Who Is Eligible For Chapter 13 Bankruptcy
Anyone with regular income can file for Chapter 13 bankruptcy, as long as the total debt is within the threshold. The individuals income level helps determine the timeline of the repayment plan.
If your income exceeds the median level in your state, youll repay your debts over five years. If your income is below the median, repayment will take place over three years.
Here are some things to consider if you are thinking about filing for Chapter 13.
- Regular income is required.
- You must provide up-to-date tax returns and payments.
- Unsecured debts, like those from unsecured credit cards and personal loans, cant exceed $394,725. Secured debt for example, from a mortgage or car loan cant exceed $1,184,200.
- You may not qualify if youve had a bankruptcy dismissed within 180 days for a failure to appear in or comply with the bankruptcy court.
- To receive a discharge at the end of a Chapter 13 repayment plan, you cant have received a discharge from a Chapter 13 bankruptcy within the previous two years or from a Chapter 7, Chapter 11 and Chapter 12 within the previous four years.
Cons Of Seeking For Debt Relief
- False Advertising:Unfortunately, many companies that advertise debt relief programs do not deliver on their promises. Theyre just offering bankruptcy filing with their fees attached. Get advice from a bankruptcy attorney and make sure youre in the right program.
- Must Be Delinquent:In order for a creditor to offer any kind of debt settlement, they need to see the value in receiving partial payment. They need to believe that its a better to bet to get a portion of what you owe than anything at all. Not every creditor will want to work with you.
Your Debts Are Severely Impacting Your Life
Finally, its important to remember that pursuing debt relief isnt just about moving numbers around on a piece of paper. Understanding debt is about a lot more more than reading spreadsheets and cataloging assets its about people. Behind every bankruptcy case is a life. A person who cannot sleep at night because of worry. A person who may have to give up their home or their most prized possessions because of a debt.
As you consider bankruptcy as a strategy, its also important to consider what would happen if you did not attain debt relief. There are going to be many facets to this, and the answer will be unique from person to person, but its key to ask: What would happen, in the short-term and long-term, if you did not take steps to discharge or restructure your debts?
Many people do not have any disposable income as a result of their personal debts, making it hard to function in day-to-day life. Others face financial situations so troubling that they bleed over into other aspects of their life, such as their health, mental wellbeing, and personal relationships.
Its also important to consider any consequences that you could face due to a failure to act. Could you be subjected to a lawsuit, or a default judgment? Could you face foreclosure or repossession?
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Role Of The Case Trustee
When a chapter 7 petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the debtor’s nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor’s assets are exempt or subject to valid liens, the trustee will normally file a “no asset” report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an “asset” case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002. A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502. In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor’s property should consult an attorney for advice.
Things To Consider Before Filing For Bankruptcy
There are other debt-relief solutions than bankruptcy available for people who are struggling financially, but have enough resources to right the ship.
Calling a counselor from a nonprofit credit counseling agency is a good first step. They offer a free counseling service that looks at your finances and discusses the pros and cons of a debt management program, a debt consolidation loan or even debt settlement, any of which might help guide you back to safe ground.
Another step in the right direction would be to get serious about creating and living within a budget. You could supplement your current income with things like taking a second job or trying to sell some assets to pay bills.
Other things to consider before making a final decision: Did I try to negotiate the debt down to manageable numbers? Is my current status permanent or is the situation expected to improve soon?
A final consideration: Do I have a big bill or series of big bills coming due soon? You might want to hold off on paying that until you decide whether or not to file bankruptcy since those bills could be dismissed through bankruptcy.
Here are some other questions you need to answer before making a decision on whether you want to file bankruptcy.
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How To Determine Whether You Qualify For Chapter 7 Bankruptcy
In these crazy times we currently live in, there have been increasingly more people all over the world struggling financially. This is largely due to a number of factors, such as poor economic performance, and inflation. The largest issue faced by many companies is the coronavirus pandemic, which has resulted in a global slowing of the economy, causing many individuals and businesses to fail fiscally. Sometimes things can get so dire financially that you must file Chapter 7 bankruptcy. This is no small deal and can have a huge impact on your life, so be sure to do some research before you commit. If you have never had to file chapter 7 before, then it can be difficult to know what exactly this entails, and who can and cannot qualify. This article will seek to shed light on a few different details which will help to give you an idea of the different ways that you can qualify for chapter 7, and if going through this process will help you in the long run.
Can I Keep My Property In Bankruptcy
Everyone needs essential belongings to work and live. Although you won’t lose everything in bankruptcy, you don’t get to choose what to keep, either. Your state lists the items bankruptcy filers can protect in its bankruptcy exemption laws, although some states let filers use the federal bankruptcy exemptions if they’d protect more property.
You’ll use the same exemptions in both Chapters 7 and 13. But what will happen to your nonexempt propertythings an exemption doesn’t coveris very different. In Chapter 7, you’d lose the nonexempt property, and the trustee appointed to manage your case would sell it and give the proceeds to your creditors. In Chapter 13, you don’t lose nonexempt property. Instead, you have to pay creditors what it’s worth through the repayment plan.
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Why The Bad Reputation
Filing for bankruptcy has a bad reputation in many circles due to the fact that it damages your credit and involves discharging debts that will likely never be repaid. Sure, Chapter 7 bankruptcy isnt great for your credit score and will appear as a public record for 10 years after filing. However, most consumers who file for bankruptcy have already had their credit damaged by a series of late payments.
Whether your bankruptcy filing can be labeled as bad is really a function of whether you intend to defraud the system or whether you have a moral obligation to pay debts that you plan to discharge in bankruptcy. There are many types of debts that are eliminated by filing for bankruptcy. For example, perhaps your primary debts are a $50,000 credit card balance and a $10,000 personal loan that you owe to your brother that he loaned to you while he was having financial problems of his own. If you file for bankruptcy, both the credit card debt as well as the debt to your brother will be eliminated. Filing bankruptcy to discharge credit card debt at 29% interest would not be considered bad by most people.
Bankruptcy Basics: When Should You File For Bankruptcy
Sometimes, there’s no other option than to file for bankruptcy. But before you do, make sure to assess your situation accurately.
Bankruptcy is a scary proposition. The word “bankruptcy” itself sounds so ominous. The media bombards us with nightmare tales of seemingly solid business giants going from bedrock to bankrupt. Gossip columns never tire of dishing on the latest celebrity inches from bankruptcy. You might even fear that you’re a few steps from going under. But, just how can you tell when it’s time to throw in the towel and declare bankruptcy?
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The Bottom Line: Choose Chapter 7 Or Chapter 13 Bankruptcy Based On Your Needs
The good news is that while bankruptcy is a huge misstep, it doesnt have to dictate your future. Financial health is around the corner if you start exercising wise habits and move forward with a clean slate. As with any major money decision, its best to consult a financial advisor to determine whats right for you and your situation.
Curious what the process of buying a home after a Chapter 7 or Chapter 13 bankruptcy might look like? Read the Rocket Mortgage guide on the subject!
Does Bankruptcy Affect My Credit
Having a bankruptcy on your credit report will have a negative impact on your credit. A bankruptcy will make it harder to get loans or credit in the future, and your rates will be higher. How long a bankruptcy stays on your credit report depends on the type of bankruptcy you file.
Chapter 7 bankruptcy can stay on your credit reports for 10 years, while Chapter 13 bankruptcy only stays on your reports for seven years. However, the impact on your credit score will lessen over time. For example, a bankruptcy filed last year will have a greater impact than a bankruptcy filed five years ago.
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You Can Lose Certain Types Of Property
One of the trade-offs for getting a bankruptcy discharge in a matter of a few months is the requirement to give up certain expensive items. Nonexempt property – the type of property the bankruptcy trustee can sell to pay creditors in a Chapter 7 bankruptcy case – is pretty rare.
If you own expensive property you donât want to lose, itâs best to speak to a bankruptcy lawyer. Then youâll know whether thatâs really a possibility and, if so, whether filing Chapter 13 is a better debt relief option for you.
Is Bankruptcy A Good Idea For You
Many factors should be taken into account when you are considering filing for bankruptcy. Bankruptcy is not for everyone. You may find that you do not need to file bankruptcy because you are judgment proof or you can fix your financial woes with a few simple changes. Or you may find that bankruptcy is the only way you can get true debt relief and start anew.
There are two types of bankruptcy most used by individual filers in the United States. You and your attorney can decide which one is right for you:
- Chapter 7 bankruptcy is a bankruptcy proceeding that can wipe out many of your debts in three to six months. However, you may lose some of your personal property.
- Chapter 13 bankruptcy requires a repayment plan based on your income. You will pay off as many of your debts as possible in the next three to five years, and then the court will discharge other debts.
The bankruptcy process takes time and dedication. Both options will affect your credit report, future interest rates, and lifestyle as you work towards a clean slate.
You should consider your situation carefully before deciding. An attorney is the best person to review your financial situation and advise you on your options.
Consider the points below before deciding on filing for bankruptcy and choosing which chapter is right for you.
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Should I File Chapter 7 Bankruptcy Right Now
Some signs that you may be a good fit for filing bankruptcy now:
You have more than $10,000 of dischargeable debt
Your credit score is already low
You donât own expensive property
Keeping up with payments is making it impossible to make ends meet every month
Youâre worried about wage garnishment or being sued for your debt
You pass the means test because you earn under the median income in your state
You donât see a way of being able to pay back your debt over the next 5 years
If these apply, right now may be the right time to file for bankruptcy.
How To Determine If Filing Bankruptcy Is Right For You
Bankruptcy is a vital financial tool many that Minnesotans turn to each year for debt restructuring and debt elimination. However, it is not right for everyones situation. Because of the complexity surrounding bankruptcy law and the legal process involved, we advise anyone considering bankruptcy to look into the matter with an experienced MN Bankruptcy Lawyer. In the meantime, lets take a closer look at some of the key things you must consider. It is important to understand that not all debts can be eliminated with bankruptcy. Also, not all individuals will qualify for Chapter 7 or liquidation bankruptcy. So lets take a look at what bankruptcy can and cant do in general terms.
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Will Bankruptcy Benefit You
With so many factors involved in the decision-making process, a Yes or No answer isnt possible, but here is a good guideline to use in making a final decision.
If you cant find a way to get out of debt in the next five years and have diligently researched solutions then yes, bankruptcy can benefit you.
But weigh the pros and cons and remember one other thing: You cant go to jail just because you owe someone money.
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Filing For Bankruptcy Does Cost Money
Despite the fact that most people file for bankruptcy because they can’t make good on their debt payments, for many, the process isn’t free. Most consumers will need to pay filing fees and many hire an attorney to help them through filing process .
Chapter 7 and Chapter 13 cases typically cost between $300 and $350 for filing fees, according to the National Bankruptcy Forum. You may be able to pay the filing fees in installments most courts will allow it if you can show it would be a financial hardship to pay all at once.
If you hire an attorney, that’s an additional expense. For a Chapter 7, you can expect to spend between $1,500 and $2,000 in legal fees, depending on the complexity of your case, Tadross says. These fees need to be paid before the Chapter 7 is filed in court to avoid any issues with your attorney becoming another creditor.
For Chapter 13, it’s a bit more expensive, generally around $2,500 to $3,500 for the case. That’s because many Chapter 13 bankruptcies can take up to five years to resolve, and the attorney will need to continue to manage your case. But, in these cases, you usually can pay the attorneys’ fees over time.
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Filing For Chapter 7 Bankruptcy
There are lots of reasons people file for Chapter 7 bankruptcy. You’re probably not the only one, whatever your reason is. Some common reasons for filing for bankruptcy are unemployment, large medical expenses, seriously overextended credit, and marital problems. Chapter 7 is sometimes referred to as a “straight bankruptcy.” A Chapter 7 bankruptcy liquidates your assets to pay off as much of your debt as possible. The cash from your assets is distributed to creditors like banks and credit card companies.
Within four months, you will receive a notice of discharge. The record of your bankruptcy will stay on your credit report for ten years. But even that doesn’t have to mean doom. Lots of Chapter 7 filers have bought homes with recent bankruptcies on their record. For many people, Chapter 7 offers a quick, fresh start.
But Chapter 7 bankruptcies aren’t right for everyone. Almost all assets are taken and sold to repay creditors. If a debtor owns a company, a family home, or any other personal assets which he or she wants to keep, Chapter 7 may not be the best option.