How Do I Know If I Should File A Chapter 7 Or Chapter 13 Bankruptcy
There is a preliminary step all debtors are required to take before choosing Chapter 7 or Chapter 13. This first step is called the means test. The test limits your choice. If you dont pass the means test, you cant file under Chapter 7.
If you have income or had income in the past 6 months, you should talk to a bankruptcy attorney to figure out whether you can file under chapter 7 or if you will need to choose a different chapter to file under, if you decide to pursue a bankruptcy.
When You Are Eligible To File
Here is the first and most basic technique for how to determine if bankruptcy is right for you. If you have enough money to pay your creditors, you may be ineligible for bankruptcy. The Court will make this determination after you and your attorney complete paperwork including calculation of something called a means test.
After May 1, 2020, if your household income in the State of Texas is more than $49,996.00 per year for a one-person family, more than $65,708.00 per year for a two-person family, more than $72,632.00 per year for a three-person family, more than $84,724.00 per year for a four-person family, and more than $93,724 per year for a five-person family, and you have enough left over after paying your necessary monthly expenses to cover some of your debts , you will most likely not be able to receive a bankruptcy.
Calculations of means test numbers for families larger than five can be found at https://upsolve.org/tx/means-test/.
The Following List Highlights How You Should Approach A Free Consultation:
- Ask questions. This may seem obvious, but it is still important to stress that if you are facing a foreclosure you should do all you can and take a proactive approach to dealing with matters so that you can have a hand in helping to save your home. This really applies to any issue. If you dont understand something that your legal counsel is explaining, ask them to break it down a bit. Getting all you can out of your free consultation is crucial. You need to determine if legal action is the correct avenue.
- Provide enough financial/tax information to give a thorough picture of their financial status. Providing any available financial documents can help save time and subsequent legal fees by helping your lawyer arrive at a reasonable and accurate estimate of circumstances of the case.
- If you are facing bankruptcy, you ought to include list of all creditors, assets and liabilities, your home mortgage balance, federal as well as state tax returns for the last three years, car loan payments, and outstanding credit card debt.
- Honesty is extremely important during a consultation. You must remember that a potential attorney needs all the facts in order to give their opinion on your financial future. Hiding assets or information could be extremely detrimental to the case if they are discovered at a later date. Not only does it hurt your case, it can also lead to fraud charges for you and can possibly jeopardize the attorneys reputation and even their career.
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How Do I Contact The Bankruptcy Court
The Bankruptcy Court Clerks Office is located in Burlington, Vermont. The address is: Federal Building, 11 Elmwood Avenue, Room 240. The public counter in Burlington is open Mondays through Fridays from 8:30 a.m. to 5 p.m. You may call the Clerks Office at 802-657-6400. You may leave a message on the Clerks Office answering machine after business hours. In your message, be sure to include your name, contact number and the best time to call you back. The court also has its own website at www.vtb.uscourts.gov. It contains plenty of helpful information and links.
Remember: The court and the Clerks Office cannot provide you with legal advice!
Adapted from the Vermont Bankruptcy Court website. Revised March 22, 2019.
Will My Credit Card Debts Be Wiped Out
You should figure out if your credit card debt will be wiped out by a bankruptcy proceeding before you file. If you lied on a credit card application or spent well beyond your means, bankruptcy may not be able to forgive your credit card debt.
Chapter 7 is the best way to get credit card debt discharged. Chapter 13 bankruptcy will require you to repay most of the debt.
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Talk To A Bankruptcy Lawyer
Need professional help? Start here.
Can I Keep My Car Or Other Property
What happens to other property during a bankruptcy proceeding will depend on:
- What you’ve done with it
- The property exemption laws that are available to you
For example, if you put up your boat as collateral on a loan, it makes that loan secured. The creditor may still be able to take your property even if you are in bankruptcy.
Also, only certain types of property are protected by exemption laws in Chapter 7 bankruptcies. Many people are able to keep a car because of state exemptions, but whether you can keep yours depends on the amount of debt and equity you have in it.
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Debt That Can’t Be Forgiven
While bankruptcy can eliminate a lot of debt, it can’t wipe the slate completely clean if you have certain types of unforgivable debt. Types of debt that bankruptcy can’t eliminate include:
- Most student loan debt .
- Court-ordered alimony.
- A federal tax lien for taxes owed to the U.S. government.
- Government fines or penalties.
When Chapter 13 Might Meet Your Needs
Chapter 7 bankruptcy isnt the best choice for everyone. Chapter 7 wont help people whose debts wont get wiped out , like certain income tax debt, student loans, and domestic support obligations. High-income filers find it hard to qualify. Its also not a good fit for people who would lose substantial equity in a home or other property if they filed for Chapter 7 bankruptcy, or those facing foreclosure or repossession. For those individuals, Chapter 13 bankruptcy would likely be a better choice.
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Which Type Of Bankruptcy Is Right For Me
There are several different types of bankruptcy available, and each type is typically named for the section of the U.S. Bankruptcy Code that covers it. Each chapter has its own set of rules and qualifications for eligibility that your attorney will understand.
Chapter 7 is sometimes known as a liquidation or straight bankruptcy. This type of bankruptcy allows you to eliminate most of your debts through a forgiveness of your debts by the bankruptcy court. In this type of bankruptcy, some of your assets may be distributed to creditors however, you may be eligible for various exemptions under the law that would protect various items of property. The key benefit of Chapter 7 bankruptcy is that it discharges a persons qualifying debts so he or she can obtain a fresh start.
You Have Debts That Arent Eligible For Dismissal
Above, we discussed how unsecured debts like credit cards and personal loans are prime candidates for bankruptcy discharge. However, if most of your debts are a horse of a different color, such as student loans, back taxes owed to the IRS, or alimony or child support costs resulting from a divorce, you will not be able to have these discharged through a bankruptcy. Discuss with skilled bankruptcy attorneys in Houston the types of debts you have to determine if bankruptcy is right for you.
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What Else Must I Do To Complete My Case
After your case is filed, you must complete an approved course in personal finances . This course is different from the credit counseling session you are required to take before you file bankruptcy. It will take approximately two hours to complete. Your attorney can give you a list of organizations that provide approved courses or you can go to the Bankruptcy Courts website for a link to a list of approved providers .
A Chapter 7 Filing May Be Right For You If:
- You have little to no assets, or no non-exempt assets under Georgia law
- You make less than the median income in Georgia and/or
- You need relief quickly
However, you should note that not all debts can be discharged under a Chapter 7 bankruptcy.
Chapter 7 also cannot be used to catch up on your payments for secured debts, such as your mortgage or car loan. Instead, you may want to consider the benefits of filing for bankruptcy under Chapter 13.
Chapter 13 bankruptcy is sometimes called a reorganization or wage earners plan. This type of bankruptcy is designed for individuals who have a regular source of income. Under this type of bankruptcy, the court approves a debt repayment plan that will span 3-5 years but will keep creditors at bay so long as you make the required payments. Our attorneys will help you develop a reasonable plan that works best for you. This type of bankruptcy does not require you to forfeit any assets in order to pay unsecured debts. Essentially, the Chapter 13 plan allows you to restructure your debts.
The key benefits of Chapter 13 bankruptcy are that you can keep your property and you can catch up on missed mortgage and/or car payments and other debts that would not be dischargeable under Chapter 7.
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The Chapter 7 Discharge
A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and 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 satisfactorily 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 property of the estate or failed to complete an approved instructional course concerning financial management. 11 U.S.C. § 727 Fed. R. Bankr. P. 4005.
I Hear There Are Different Types Of Bankruptcy Which One Is Right For Me
There are several different types of bankruptcies. Each type is referred to under a different Chapter of the bankruptcy law. Each Chapter has its own requirements and limitations on the type of relief it offers. In summary, these Chapters are:
- Chapter 7 is often called straight bankruptcy or liquidation. It requires a debtor to give up property that is not protected from creditors so the property can be sold. The amount of money made on the sale of the property is used to pay off creditors. Usually most or all of a debtors property is protectedor exemptfrom creditors.
- Chapter 11 is also known as reorganization. This Chapter is usually used by businesses to give them a chance to catch-up on late payments while they continue to operate their businesses sometimes, persons with very large debts will also file under this Chapter.
- Chapter 12 is a special chapter for family farmers and fishermen. It lets family farmers and fishermen who have gotten behind on payments reorganize their debts and pay their creditors over time.
- Chapter 13 is also a reorganization Chapter. Cases filed under this Chapter are sometimes called debt adjustment cases. Chapter 13 requires a debtor to file a plan outlining how the debtor will pay debts from current income. The plan will run from three to five years
If filing under a reorganization chapter, that is, chapters 11, 12 or 13, the plan must be approved by the bankruptcy court.
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Personal Bankruptcy Faqs Ii
Is Chapter 7 or Chapter 13 Bankruptcy Right For Me?
Most people choose to file Chapter 7 because their debts will be wiped out and they will receive a fresh start with a clean slate. Unlike Chapter 13, in a Chapter 7 bankruptcy debts are eliminated as discharged. However, not everyone is eligible to file for Chapter 7. For example, if your family income is higher than the median income a similar-sized family in New Jersey, you may not be eligible for Chapter 7 . Likewise, if your unsecured debts are too high, you may not be eligible to file Chapter 7.
Additionally, there may be reasons you would want to file for Chapter 13 instead of Chapter 7. For instance, if you want to keep your home but are behind on your mortgage, Chapter 13 may allow you to keep your home.
What Will Happen To My Credit After Filing for Bankruptcy Protection?What Happens to My Student Loans in Bankruptcy?
While you cannot discharge your old student loans, federal bankruptcy law prevents discrimination in student loan programs because you previously filed for bankruptcy protection.
How Long Do I Have To Wait To File Bankruptcy Again?What is the Means Test, and Why is it Important?Does Bankruptcy Stop Foreclosure?Can My Job Fire Me Because I Filed for bankruptcy?
No, you cannot be fired for filing bankruptcy. This is prohibited by federal law.
Choose Your Debt Amount
Asking someone if you should file bankruptcy is not a simple yes or no question. Just about everyone will say: Only as a last resort!
In other words, only after you have gone over all other debt relief alternatives and still cant find a way out of this mess.
But be careful as you weigh your options. Bankruptcy takes a toll and its not just financial. There is a societal stigma attached to it. For some reason, American consumers view bankruptcy as a financial scar that marks you as a failure the rest of your life.
It is not that.
Bankruptcy is more like a financial scab, something that looks nasty for a while, but with care and attention, eventually clears up and fades away. Its a chance to start all over again. Thats the reason bankruptcy laws were written, to give people a second chance, not to punish them.
But first, weigh both sides of the issue before deciding.
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Your Bank Account Savings And Pension
Your bank account will usually be frozen as soon as youre made bankrupt. Youll need to make sure you have some money set aside to cover day to day costs at the beginning of your bankruptcy. Any savings you have will be taken and used towards paying your creditors.
If you have any pensions, bankruptcy might affect your pension savings. Pensions are a complex area so before you decide to apply its important to get advice.
- More about the impact of bankruptcy on your bank account, savings and pension.
How Do I Know If I Qualify For Chapter 7
To qualify for Chapter 7, the person filing must pass a bankruptcy means test. A means test determines how much disposable income you have available. If your income is lower than the states median income for a family the same size as yours, you automatically pass the means test. If your income is over the state median, youll get another chance to pass by subtracting your expenses.
Dont worry: if you dont qualify for Chapter 7, youre not out of options. You can file for a Chapter 13 bankruptcy to repay your debt over time. An experienced TN Chapter 7 bankruptcy lawyer can help you decide which bankruptcy chapter is best for you.
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What Information Will I Need To Use This Program
1. Your five largest debts, including the type of debt and how much you owe
2. Your source and amount of income
3. Your source and amount of money in checking and savings accounts
4. Your other assets on deposit
5. Property you own free and clear
6. Property you are buying on credit, including how much it is worth and how much you owe on it.
If You’re Thinking About Bankruptcy You’ll Need To Consider Which Type Is Right For You Here Are The Highlights
By Cara O’Neill, Attorney
Once you’ve decided that bankruptcy is the right solution for your financial situation, you will need to decide which type of bankruptcy is most beneficial.
We’ll go over the pros and cons of each, the eligibility rules, and give you some information to help decide which would be best for you in your financial situation.
There are a select few other types of bankruptcies that are available under certain circumstances, and we will touch on those as well.
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