To Qualify For Chapter 13 Bankruptcy:
Youor you and your spouse, if you file joint bankruptcymust:
- Show adequate income to meet the terms of a court-ordered payment plan
- Demonstrate that your total secured and unsecured debt falls within limits set by the Bankruptcy Code
- Prove that youve filed state and federal income taxes for the past four years
- Have no more than $394,725 in unsecured debts, such as credit cards or personal loans
- Have no more than $1,184,200 in secured debts, such as mortgages and car loans
How Can Our North Carolina Chapter 7 Bankruptcy Lawyers Help You
The compassionate bankruptcy attorneys of the Sasser Law Firm have dedicated our careers to helping individuals, families, and businesses start over financially. We are board-certified bankruptcy lawyers who favor a straightforward approach to evaluating cases, and who will tell you the options that will suit your situation best, including steps you could take to avoid bankruptcy.
The Sasser Law Firm has helped more than 8,500 people and businesses file for bankruptcy in Raleigh. Our North Carolina Bankruptcy attorneys work one-on-one with clients, and we act promptly and with consideration for time-sensitive and complex cases.
Contact us today to discuss your case in a free consultation with our Raleigh bankruptcy lawyers. We work with clients from throughout North Carolina, including in Wake, Harnett, Johnston, Durham, Orange, Granville, Vance, Franklin, Warren, Nash, Lee, Chatham, and Moore counties. Call now.
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.
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When Should You File For Chapter 7 Bankruptcy
Following are the five most important warning signs that you should file for chapter 7 bankruptcy immediately:
1) Your debts are out of control and total more than half of your yearly income.
2) You have very little income.
3) Your monthly income is lower than the median monthly income in your state
4) It would take four years or more to pay off your debts
5) Your debts have serious implications on other aspects of your life, such as relationships and your overall health and well-being.
Qualifying For Chapter 7 Bankruptcy By Passing The Means Test
Bankruptcy debtors must pass a Chapter 7 “means test” to qualify for Chapter 7 bankruptcy. To pass the means test, you must have little or no disposable income. The means test compares your average monthly income for the six months preceding your bankruptcy against the median income of a similar household in your state. If your income is below the median, you automatically qualify.
The median income figures vary from state to state. In most cases, people who are having financial difficulties are making little or no income qualify, so the means test does not pose a problem. You can check whether your gross income qualifies you for Chapter 7 by reviewing the most current figures posted on the U.S. Trustee Program webpage.
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What Happens If You Dont Qualify For Chapter 7 Bankruptcy
- You must qualify for Chapter 7 by passing the means test.
- If you do not qualify, you may need to utilize alternative debt relief programs to address your financial struggles.
- Filing for Chapter 7 when you do not qualify will lead to a case dismissal.
Filing for bankruptcy is supposed to give you a fresh starta financial do-over after facing financial hardship. The challenge is that the law prevents many working people from receiving relief through Chapter 7, allowing for the discharge of most unsecured debts without repaying creditors.
While anyone can file Chapter 7, a judge reviews the petition, and if you do not qualify, dismisses the case.At that point, you lose the filing fee and receive relief from high-interest debt. To prevent that from happening, you must determine if you qualify before you file.
To qualify under Chapter 7, you must pass a means test. The first step is to determine if you earn below the median income in your state based on your household size. The Department of Justice adjusts these numbers several times a year. You can find the latest forms here. Pass that, and you qualify to file.
Your Car Loan If You Want To Keep Your Car
If you are paying off your car, the loan is secured by your car. When you file for bankruptcy, under the new bankruptcy rules, you can reaffirm your car loan.
The good news is that if you agree with your car loan creditor to repay all or part of your loan, the creditor wont take your car.
Of course, you must make payments according to the reaffirmed car loan.
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Chapter 7 Prebankruptcy Credit Counseling
Before you file for Chapter 7 bankruptcy, you must complete a prebankruptcy credit counseling course conducted by an approved agency. You must complete this course within six months before the date you file for bankruptcy. Once the counseling is complete, you will receive a certificate that you must file with the court. You must also complete a debtor’s education course after you file your case.
Learn about the differences between the .
How To File Bankruptcy For Free: A 10
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In a Nutshell
Chapter 7 bankruptcy is a powerful debt relief tool for American consumers and businesses alike. If your case is simple, you may not need a lawyer to file. Heres a 10-Step Guide on how to prepare for and get a fresh start in the form of a bankruptcy discharge.
Filing any type of bankruptcy provides immediate debt relief through the automatic stay. Thatâs the law that prohibits creditors from contacting you as soon as your bankruptcy case has been filed. It also stops a wage garnishment right away.
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Understand The Filing Process For Chapter 7 Bankruptcy
When you are ready to remove the burden of debt from your shoulders, your lawyer will explain the bankruptcy filing process and court procedures. You will start by filing a petition for bankruptcy, which will stop debt collection action against you as soon as your creditors are informed of your filing. Additional paperwork and documentation you must provide will include:
- A complete list of your assets
- A complete list of your debts, creditors, and amounts owed
- A thorough income statement
- Copies of tax records and filings
- Proof of recent and approved credit counseling
After the proper documentation is prepared, your case will be filed with the courts.. Your creditors will be informed that you are filing for Chapter 7 bankruptcy and a case trustee will meet with you and your attorney to evaluate your current financial situation. Once your case is discharged in Chapter 7 bankruptcy, you are legally free from all discharged debts.
Do The Courts Ever Deny A Chapter 7 Bankruptcy
It can happen. Most individual debtors receive a discharge under Chapter 7.
However, if the courts find that an individual concealed money or other assets, fraudulently transferred assets that should have been used to pay off debts, or otherwise broke the law, the entire bankruptcy case may be denied.
How To Qualify For Chapter 7 Bankruptcy Regardless Of Your Income
Chapter 7 Bankruptcy provides nearly one million debtors each year with the relief they need from overwhelming debt. Whether or not Chapter 7 Bankruptcy is the best option for you depends on a number of considerations. During your initial consultation with one of our MN Bankruptcy Attorneys we will get to know you and your situation. We will ask a number of questions to fully understand the situation youre confronted with. After getting to know you and your situation, we will provide you a recommendation on how we think you should move forward. In this blog, well discuss what Chapter 7 is, Chapter 7 filing requirements, and the Business Debt Exception to the Chapter 7 Means Test.
Reasons To Consider Avoiding Chapter 13
Attorneys are paid far more for Chapter 13 than they are for Chapter 7. Because of this, some offices make certain most of their clients are placed in Chapter 13. When you do the means test, you automatically qualify for a Chapter 7 if your income is less than the average income for your family size. Even if your income is above average, you can also qualify if you have no significant excess income after deducting reasonable and necessary expenses. This page has the average amounts for your budget in 2020.
We review your expenses in our office for allowed expenses and include costs people often forget. Some attorneys may disallow 401k retirement expenses but we deduct reasonable deductions for retirement. There are often-overlooked expenses, which may help you qualify for chapter 13. This can include private school expenses for a disabled child and other costs.
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What Property Is Exempt From Liquidation
One of the downsides of bankruptcy may be the loss of some property. However, Texas has a fairly extensive list of property that you can protect. Exempt property includes:
- Homestead of unlimited value, with some size restrictions
- Personal property of up to $50,000 in value including furnishings, food, clothing, life insurance, pensions and a limited amount of jewelry
I will ensure you understand what property and assets you can protect in a Chapter 7 filing.
When To Consider Filing Chapter 7
If youve tried negotiating with your creditors, working with a credit counselor or consolidating your debt, but are still struggling to manage your debt, Chapter 7 bankruptcy might be your last resort.
Chapter 7 bankruptcy can help by acting like a pause button for some of your debts. Once you file your petition, some of your creditors could be temporarily stopped from most collection actions against you or your property.
But filing Chapter 7 can ultimately mean losing some assets. The law varies from state to state, and each state can classify property as exempt or nonexempt . So depending on where you live, your home, stocks, other investments as well as other nonexempt assets you have could be at stake.
If youre concerned about what you may have to forfeit, talk to a lawyer. Some assets, including 401s and pensions, may be exempt.
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Talk To A Bankruptcy Lawyer
Need professional help? Start here.
Before You File For Chapter 7 Speak With A Bankruptcy Lawyer
Stuck in debt? Not sure how or when you will be able to pull yourself out? If this all seems a little overwhelming, it doesn’t have to be. But without a complete and nuanced understanding of the law, you may not get the most desirable results. Get some peace of mind today and contact a local bankruptcy attorney.
Filing With Good Faith
There is another hurdle that has to be cleared when considering the Business Debt Exception. In order to use this exception, a debtor must file their case in accordance with Good Faith requirements. All bankruptcies must be filed with Good Faith. What this means is, a debtor must file their case with honest intentions, and must not have engaged in fraud. As it pertains to the Business Debt Exception, good faith implies honest accounting of business vs. personal debts, and an honest accounting of your monthly income.
When filing your petition, you must account for your income and necessary monthly expenses. If you try and use the Business Debt Exception in a Chapter 7, you must prove you do not have the ability to pay back your debts. So, if you make a lot of money, you will have to prove your necessary monthly expenses offset your income. This is where good faith comes into play. You must accurately disclose your necessary monthly expenses. If we run the numbers for your monthly budget and you have a surplus, we may not be able to file a Chapter 7.
How To Seek Professional Advice
You don’t have to go it alone when you’re weighing whether to file for Chapter 7 or Chapter 13 bankruptcy and, then, if you decide to proceed. Check out these resources.
- Bankruptcy attorney: You can file for bankruptcy without a lawyer, but you might want to visit with a lawyer if you’re unsure how to move forward.
- : A credit counseling agency might be able to work with you on a debt repayment plan so you can avoid bankruptcy. The U.S. Department of Justice maintains a list of federally approved credit counseling agencies.
- Financial advisor: A financial advisor might be able to guide you through establishing a budget and creating a debt repayment plan.
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Who Qualifies For Chapter 7 Bankruptcy Should I File
There is a difference between who is allowed to file and who should file.
Most people who earn under the median income for their state, based on their household size, are able to file. This is because they pass the means test according to bankruptcy laws. The means test takes into account your average monthly income over the last 6 months.
If you donât have a job or earn near the minimum wage, you will likely qualify for Chapter 7 bankruptcy. If you don’t pass the means test, you can file a Chapter 13 bankruptcy but not Chapter 7.
Folks looking for a fresh start typically fall into one of three categories:
Those who should file for Chapter 7 bankruptcy right now
Those who should wait a little bit of time and then file for Chapter 7 bankruptcy
Those who should not file for Chapter 7 bankruptcy.
The Chapter 7 Means Test
To qualify for Chapter 7 bankruptcy, you must first pass a Means Test. The Means Test has two steps. The means test can get very complicated so we at The Wright Firm, L.L.P. recommend you seek the assistance of an experience bankruptcy attorney. An extremely simplified version of the test looks like this:
- Step 1: Median Income Your monthly income is compared to the median income for a Texas family the same size as yours. Median is another way of saying middle, like the median in the middle of a highway. If you make the same or less money than the median income for a family your size, you qualify for Chapter 7 bankruptcy. If make more than the median income, you have to move on to Step 2 of the test.
- Step 2: Calculating Disposable Income If your disposable income over the next five years is:
- Less than $6,000 You Pass
- Greater than $6,000 but less than $10,000 You May Have Passed,
- Greater than $10,000 Sorry!
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