Explore Your Bankruptcy Options
Get the financial relief you are entitled to by filing for bankruptcy protection. Our team represents individuals and small business owners in Chapter 7 and Chapter 13 bankruptcy cases. We can also provide help filing for Chapter 11 reorganization bankruptcy and Chapter 12 bankruptcy for family farmers and fishermen.
We can help you through the petition and filing process. We can help you retain your assets when you choose Chapter 7 bankruptcy. We can even help you restructure financial debt through other bankruptcy filings with complex financial structures or extremely large debt loads. Call Farmer & Morris Law, PLLC to speak to a member of our client intake team and learn what happens if you declare bankruptcy today.
What Is An Unsecured Debt In Chapter 7 Bankruptcy
Unsecured debt is an obligation that isn’t backed by collateral. For instance, the debt is unsecured if you didn’t agree that the creditor could take the property purchased on credit when you entered the credit contract.
By contrast, if you have a mortgage or car payment, you likely agreed that the creditor could attach a lien to the property and take your house or car if you failed to make the payment, sell it, and use the proceeds to pay the note. This type of debt is a secured debt. Payment of the debt is secured by collateral.
Bankruptcy Provides More Than Debt Relief
Bankruptcy gives you relief from insurmountable debt and the chance to make a new financial start. It also gives you peace of mind by providing relief from relentless and invasive credit collection measures.
Once you declare bankruptcy, you benefit from an automatic stay. It will immediately notify your creditors of your status and bar them from contacting you via email, USPS mail, or telephone.
Your lawyer will explain how and when the automatic stay goes into effect, how your creditors are notified, and what happens if your creditors continue to contact you. You may be asked to attend a meeting of your creditors and answer questions about your debt load. Your attorney may also accompany you to this meeting.
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What Is Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as a straight or liquidation bankruptcy, is a type of bankruptcy that can clear away many types of unsecured debts. If you’re far behind on your bills and don’t have the means to afford monthly payments and living expenses, filing Chapter 7 bankruptcy could be a last resort to help you reset your finances. However, you may have to give up some of your possessions, and it will have a long-lasting negative impact on your creditworthiness.
How Much Debt Do I Need To File Bankruptcy
The minimum amount of debt required by law to file bankruptcy in Canada is $1,000 however, the true test is whether or not you are insolvent.
If you are unable to pay your debts as they come due, then bankruptcy is an option for you. Whether you should file involves weighing the pros and cons of bankruptcy, including eliminating your debts, with the cost of bankruptcy.
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Am I Unsure How Much I Actually Owe
Uncertainty about your total outstanding debts is cause for concern. Whether your balances have grown larger and you’re unaware of the total, or you’ve forgotten creditors that have sent your debt to collections, you should consider alternative repayment options if you can’t tabulate how much you owe.
Find Out What Happens To Irs Collection Of Tax Debts When You File For Chapter 7 Or Chapter 13 Bankruptcy
A bankruptcy case can wipe out older income tax debt that meets qualification guidelines. It can also give you a way to pay back recently assessed taxes at a payment amount lower than what the IRS would offer. In this article, you’ll learn more about how bankruptcy can help with your IRS debt.
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How Does Bankruptcy Affect Assets And Liabilities
Depending on how you choose to declare bankruptcy, your assets and liabilities will be affected in different ways. In a Chapter 7 bankruptcy, many of your assets are up for liquidation to pay your creditors with the proceeds. In Chapter 13, you retain assets while working on a repayment plan for your outstanding debts.
See how bankruptcy affects assets and debts in the following debtee categories.
Small Business Owners
For small business owners with lots of personal debt, bankruptcy may help them continue to stay in business. It’s important to note that business debts aren’t alleviated with Chapter 7 or Chapter 13 unless you’re a sole proprietor and are personally responsible for them.
- Chapter 7: For sole proprietors, business and personal debts can be wiped out in a single bankruptcy case. You’re not obligated to meet income requirements if your business debt exceeds your personal debt.
- Chapter 13: Your business assets aren’t liquidated, but only your personal liability for business debts can be wiped out. The business remains responsible for its debts.
Some business assets can be exempt from Chapter 7 bankruptcy filings. For instance, if your business is service-based and doesn’t maintain equipment or significant inventory, you can likely continue to run your business after discharging business debts through bankruptcy.
Student Loan Holders
Who Files For Bankruptcy
You may feel your financial troubles are unique to you solely. But the truth is, many Americans declare bankruptcy every day. Over 700,000 Americans filed for bankruptcy last year alone, according to LendingTreeAnd knowing youre not alone can help minimize some of the anxiety youre facing.
That previously mentioned Harvard study was co-authored by then Harvard law professor Elizabeth Warren. It revealed the demographics commonly found among bankruptcy filers. Most were well-educated homeowners with middle-income paying jobs.
A 2017 study from Census.gov backs up the findings of middle income earning individuals but gives a little more insight into the typical filer. Theyre more likely to be divorced, black, middle-aged, veterans, and disabled. The age group most frequently noticed in bankruptcy cases is 30-49-year-olds. Census finds that 58 percent of bankruptcy cases are among that age group.
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Which Debts Will Chapter 7 Bankruptcy Discharge
Chapter 7 filers discharge all of the following debts :
- collection agency accounts
- old tax penalties and unpaid taxes
- most attorneys’ fees
- government program overpayments, including welfare, Social Security, and veterans assistance programs.
You can use our list to get a general feel for whether you’re a potential Chapter 7 candidate, but it’s best to review your particular debts with a bankruptcy lawyer. Why? Because you might have dischargeable debts that don’t appear above.
As much as we’d like to, we can’t create a list that includes all dischargeable debts because bankruptcy law doesn’t tell us the debts you can discharge. Instead, the law tells us the debts you can’t erase in bankruptcy, which we cover in “Chapter 7 Bankruptcy Doesn’t Clear All Debts” below.
Note about fraud and utility deposits. Any debt-related misconduct or fraud can turn a dischargeable obligation into a nondischargeable debt. Also, a utility provider can’t refuse to provide service because of a bankruptcy filing but can charge a reasonable deposit to ensure future payment.
Find out about utility shut-offs and Chapter 7 bankruptcy.
Can You File Bankruptcy On Student Loans
Filing bankruptcy on student loans is possible, but youll have to go through a difficult process to do so. To discharge your student loan debt through bankruptcy, you have to prove that you cant pay back your student loans without it having an extremely negative impact on you and your dependents.
Courts are left with some room to interpret your eligibility. Most, but not all, federal courts of appeal evaluate hardship using a set of standards known as the Brunner Test, which was established as the result of a 1987 federal court ruling, Marie Brunner v. New York State Higher Education Services Corp.
Can you file bankruptcy on student loans? First, can you pass the Brunner test?
|The factors of the Brunner test are outlined by the U.S. Department of Educations Federal Student Aid office and include three main points:
Other courts, namely the 1st U.S. Circuit Court of Appeals and the 8th U.S. Circuit Court of Appeals, rely on a different standard, known as the totality of circumstances, which considers your past, present and future financial resources reasonable living expenses and other relevant factors related to bankruptcy proceedings.
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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.
Bankruptcy: How It Works Types & Consequences
Bankruptcy is a legal process overseen by federal bankruptcy courts. It’s designed to help individuals and businesses eliminate all or part of their debt or to help them repay a portion of what they owe.
Bankruptcy may help you get relief from your debt, but it’s important to understand that declaring bankruptcy has a serious, long-term effect on your credit. Bankruptcy will remain on your credit report for 7-10 years, affecting your ability to open credit card accounts and get approved for loans with favorable rates.
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Grounds For Denial Of A Debt Discharge
The grounds for denying an individual debtor a discharge in a Chapter 7 case are narrow. They 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 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 the property of the estate
- Failed to complete an approved instructional course concerning financial management
Find Out Which Debts Can Be Canceled In Chapter 7 Bankruptcy
Filing for bankruptcy is a major life decision that can affect your financial and personal life for many years, and it’s important to understand what Chapter 7 can and cannot do for you. If you’re eligible, Chapter 7 bankruptcy can relieve you from most of your unsecured debt burden, and even get rid of secured debts in certain cases. Here’s a rundown of what can be discharged in Chapter 7 bankruptcy.
For a list of debts that can’t be discharged in Chapter 7, see Debts that Survive Chapter 7 Bankruptcy.
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If You Can Afford To Make Payments By Trimming Expenses
A credit counselor can help you build a budget and may be able to help you lower interest rates on your existing debts. may track your expenses for at least 30 days so they can identify discretionary income.
Additionally, they teach clients to comparison shop and negotiate rates to lower their fixed expenses. These simple actions can help some clients avoid bankruptcy.
Filing Bankruptcy Provides Immediate Protection From Creditors
Once you file a bankruptcy petition for any type of bankruptcy, the automatic stay protects you. The automatic stay bans debt collectors, banks, credit card companies, and anyone else you owe money from contacting you or taking any other collection actions. It âstaysâ or âstopsâ the creditorsâ ability to collect debt from you in any way, including wage garnishments.
This applies to everyone across the board. The only exceptions are domestic support obligations and back taxes. If your child support payments are taken directly out of your paycheck, that will continue to happen. If you owe back taxes, the Internal Revenue Service is allowed to keep your tax refund to pay for it even after you file bankruptcy. The automatic stay is temporary. It ends once the bankruptcy court grants your discharge.
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What If I Owe The Irs And Cant Pay
The first thing you should do is try to come up with a plan to repay your debt. You can set up an installment agreement with the IRS which will allow you to make monthly payments until the owed amount is paid off. If this is not an option for you, other ways to repay your debt are answered above. Speak to a professional if you need more in-depth information or help.
What Does It Mean To Have Debts Discharged
By definition, a bankruptcy discharge is a legal court document that officially and permanently eliminates your unsecured debts. However, and more importantly, discharge of your debts is the beginning of your fresh financial start.
Having your debts discharged means you are legally released from all debts covered under your bankruptcy. This means you no longer have to repay those debts.
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Alternatives To Chapter 7
Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707.
Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.
Debts That Remain After A Chapter 7 Discharge
If you file a bankruptcy case under Chapter 7, not all debts are eliminated once the bankruptcy process is complete.
Generally speaking, in a Chapter 7 proceeding, the following types of debts are not discharged:
- Debts that were not listed at the start of the case . These lists are called “schedules.” They must be filed with the courts.
- Most student loans
- Recent federal, state, and local taxes
- Child support and spousal maintenance
- Government-imposed restitution, fines, and penalties
- Debts resulting from personal injury or wrongful death damages from drunk driving cases
- Debts that were non-dischargeable in a prior bankruptcy
- Debts owed to certain pension plans
- Certain debts owed for condominium dues and fees
- Debts not dischargeable in a previous bankruptcy because of the debtor’s fraud
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If You Earn Too Much To Qualify
Bankruptcy wont always be the right choice. To discharge your debts through bankruptcy which means your debts will be forgiven you must prove that you cant make the payments to your creditors.
As a result, people with high incomes may not get the debt relief they want through bankruptcy. Instead, they may have to file a form of bankruptcy that allows them to restructure their debts, making it easier for them to make payments but not erasing the debts altogether.
Can Student Loans Be Discharged Early
While the seven-year rule applies in the vast majority of cases, a bankruptcy court will consider discharging student loan debt early in extreme cases. You can apply to the court for discharge from student loans in five years.
To qualify for the hardship provision, you must prove that you tried to repay your loans and made use of the assistance programs available. You must also show that even those programs still left behind a severe hardship for you for example, you cant repay your student debt and buy food or pay rent.
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