Filing Without An Attorney
Individuals can file bankruptcy without an attorney, which is called filing pro se. However, seeking the advice of a qualified attorney is strongly recommended because bankruptcy has long-term financial and legal outcomes.
Filing personal bankruptcy under Chapter 7 or Chapter 13 takes careful preparation and understanding of legal issues. Misunderstandings of the law or making mistakes in the process can affect your rights. Court employees and bankruptcy judges are prohibited by law from offering legal advice.
The following is a list of ways your lawyer can help you with your case.
- Advise you on whether to file a bankruptcy petition.
- Advise you under which chapter to file.
- Advise you on whether your debts can be discharged.
- Advise you on whether or not you will be able to keep your home, car, or other property after you file.
- Advise you of the tax consequences of filing.
- Advise you on whether you should continue to pay creditors.
- Explain bankruptcy law and procedures to you.
- Help you complete and file forms.
- Assist you with most aspects of your bankruptcy case.
Bankruptcy Forms are available to the public free of charge.
- Use the forms that are numbered in the 100 series to file bankruptcy for individuals or married couples.
- Use the forms that are numbered in the 200 series if you are preparing a bankruptcy on behalf of a nonindividual, such as a corporation, partnership, or limited liability company .
- Sole proprietors must use the forms that are numbered in the 100 series.
Can I Keep My Property If I File Chapter 7 Bankruptcy
In 95% of Chapter 7 bankruptcy cases, people are able to keep all of their property. The Bankruptcy Code has rules in place called exemptions that allow you to keep several types of property, such as cash, clothes, furniture, cars, etc. up to a certain dollar amount, known as âexemption limits.â
The specific exemptions you can use to keep your property depend on your state. Many states have wildcard exemptions that allow you to keep any property as long as itâs worth less than a certain amount. If your state permits it and you choose to use the federal bankruptcy exemptions, you can protect up to $1,475 with the wildcard exemption plus an additional $13,950 if you don’t use the homestead exemption.
If your property value exceeds the exemption limit that applies, the trustee may seize the property and sell it to pay back your creditors. This is why people call Chapter 7 a liquidation bankruptcy, although any liquidation rarely takes place.
Property that isnât protected by exemptions is considered nonexempt property. The most common forms of nonexempt property are expensive cars and homes.
When To Declare Bankruptcy: 8 Questions To Ask Yourself
Most people take their financial obligations seriously and want to pay their debts in full, but knowing when to file bankruptcy and when to negotiate or use another strategy can help put you on the road to financial health.
Here are a list of questions that can help you assess your financial health and give you insight into whether bankruptcy may be right for you. You should also discuss these questions with an attorney.
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Alternatives To Chapter 7 Bankruptcy
Alternatives to bankruptcy may be able to help you get the fresh start you need. The one that’s right for you will depend on your financial situation and the types of debts you owe. Let’s go over each option.
Debt Settlement:You can negotiate with your creditors. If you’ve fallen behind on payments or are about to, you can contact your creditor to discuss the issue. You may be able to work out an affordable payment plan or negotiate a debt settlement for less than the full amount owed. This is especially true with credit card debt. Typically, a settlement needs to be paid in a lump sum.
Repayment Plan: Entering into a debt management plan with an agency is another option. Unlike in debt settlement, a debt management plan involves paying back your debt over time on more doable terms than you have now. Typically only unsecured debts can be included in a debt management plan.
Debt Consolidation: Taking out a debt consolidation loan to pay off your debts is another debt relief option. You would then have only one monthly payment to make to the new creditor. These loans often offer lower interest rates than what you’re already paying.
Another option is selling your valuable property to pay back creditors. But be careful. The money you get for your property may not be enough to pay off or settle all of your debts. You may end up having to file for bankruptcy anyway.
When Bankruptcy Is The Best Option
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Bankruptcy isnt the end of the world. It may even be good for you.
Bankruptcy stops collection calls, lawsuits and wage garnishments. It erases debt. And despite what youve heard, bankruptcy may help your credit scores.
But thats not the whole story. Most people struggle so long with their debt that their credit is already battered by the time they file for bankruptcy. And once they do, their scores typically rise, not fall. If the debt is erased which is known in bankruptcy court as a discharge scores go up even more.
Within a year, youre way better off, says Jaromir Nosal, assistant professor of economics at Boston College, who co-authored a study for the Federal Reserve Bank of New York about the effects of bankruptcy. Its a pretty rapid rate of recovery.
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What About Chapter 13 Bankruptcy
Did you have a temporary lapse in income which caused you to fall behind on your mortgage or car loan, but your income is steady again? Typically, once someone has fallen behind on their secured debt payments, the only way to prevent a foreclosure or repossession is to pay the full amount in a lump sum. That is not a realistic option for most, even if their income is back to normal. Filing Chapter 13 bankruptcy allows you to catch up on the missed payments over 3 – 5 years instead.
Changes In Bankruptcy Law
Before getting started, its important to note the changes that went into effect in 2005 under the Bankruptcy Abuse Prevention and Consumer Protection Act . While the changes dont affect some people applying for bankruptcy, they may affect others.
Federal bankruptcy laws require mandatory credit counseling to make sure you fully understand the consequences of declaring bankruptcy. It also created stricter eligibility requirements for Chapter 7 bankruptcies. For Chapter 13 bankruptcies, the law requires tax returns and proof of income.
An informed decision begins with understanding bankruptcy laws, the bankruptcy process, and what has changed. Its important to better understand these changes before you make any final decisions.
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Can You Keep Your Home After Filing Bankruptcy
The good news about bankruptcy and your home is that you wont lose it as long as you can make the monthly mortgage payments.
Remember that the purpose of bankruptcy is to give you a chance for a fresh start and its a lot easier to start over if youre not homeless. Thats why bankruptcy laws make homes exempt from creditors claims.
If living in a house you cant afford is part of the reason youre filing bankruptcy, then yes, you could lose your home.
In Chapter 7, if you fall behind on payments, you can seek protection for your home by filing Chapter 13 to allow you time to catch up. Or, you may have to throw in the towel and let the bank foreclose.
In Chapter 13, its far more complicated, but you essentially return to the default status you were in before declaring bankruptcy. That means creditors who have claims against you can go after you for payment.
Your Credit Will Be Affected
A Chapter 7 bankruptcy stays on your credit report for 10 years. A Chapter 13 bankruptcy stays on your credit report for seven years. Scores can drop anywhere from 50 to 200 points . You may have trouble getting certain loans or will pay higher interest rates. But people have successfully obtained credit and even purchased homes after declaring bankruptcy. Good money management practices, from here on out, go a long way.
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If Your Debt Is Primarily Student Loan
Income-driven repayment plans involve paying back your federal student loan debt at a rate that is consistent with your income. These plans can last up to 25 years, and lowering your monthly federal student loan payment could help you get through a particular financial hardship you might be experiencing.
What Are The Different Types Of Bankruptcy
In general, bankruptcy is the process of eliminating some or all of your debt, or in some cases, repaying it under different terms from your original agreements with your creditors.
Its a very serious endeavor but can help alleviate your debt if you calculate that its unlikely to youll be able to repay everything throughout the coming years.
The two most common for individuals are Chapter 7 and Chapter 13. Chapter 11 is primarily used for businesses but can apply to individuals in some instances. Lets take a look at some bankruptcy basics and the other details that set them apart from each other.
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Things To Consider Before Filing For Bankruptcy
Before filing for bankruptcy, there are debt relief options that you should consider. There are also some things you should avoid.
If you are struggling financially, you may have enough resources to right the ship, and not even realize it.
Talking to a counselor from a nonprofit credit counseling agency is a good first step, no matter what direction you end up going. A session with a nonprofit debt counselor is free of charge. They will review your finances and discuss the pros and cons of debt management plans, debt consolidation loans and debt settlement, as well as bankruptcy.
A credit counselor will help create a budget with you, but you can take that step on your own. A budget will help you get a realistic picture of what your finances really are. Creating a budget doesnt have to be complicated. Its simply a tool that helps you keep track of how much money you have coming in and how much your monthly bills and other expenses cost you a month. To make it work, review it frequently and find ways to cut expenses, if possible.
You should also consult a bankruptcy attorney, even if you plan to file bankruptcy on your own. The initial consultation is free, and you may learn some valuable information about your bankruptcy case.
You may want to consider taking a second job or selling some assets to help pay down debt.
Also, take a hard look at your debt. Is there a way to negotiate it down, lowering interest or fees? Is it a temporary situation or a longer-term problem?
How Much Does Chapter 7 Bankruptcy Cost
The bankruptcy court is a federal court and requires a $338 filing fee. If you earn below 150% of the Federal Poverty Line, you may qualify for a fee waiver. People who are on social security or unemployed usually qualify for a fee waiver. You can pay the fee in installments if you make a request and the court agrees.
The two online education courses each cost between $10 and $50, depending on the credit counseling agency you choose. You can also qualify for a fee waiver for these courses, based on your income.
If you hire an attorney, the most expensive cost in bankruptcy is your attorney fee. It costs an average of $1,500 to hire a bankruptcy attorney for a Chapter 7 case.
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If Your Recent Income Has Been High
When you file for Chapter 7 bankruptcy, the court will look at your income over the past six months to determine whether you are eligible, using what’s called the “means test.” If your income is too high, you may file only for Chapter 13 bankruptcy, which requires you to repay a portion of your debts.
If your income has dipped recently because of a pay cut or layoff, you can often become eligible for Chapter 7 by simply waiting a few months. Once several months of decreased income are figured into the means test, your average income over the past six months may be low enough to qualify.
For example, assume that your average gross income for the previous six months is $8,000 per month, but that you were just laid off and are now getting $1,500 per month in unemployment. If you wait two months to file, your six-month average gross income will drop from $8,000 to less than $5,900 a month, which will bring you into eligibility for Chapter 7 bankruptcy in most states.
What Laws Will Apply To My Bankruptcy Case
The laws that apply to your bankruptcy case will be determined by your length of residency at your current address. Exemption laws are complex and should be discussed in detail with a competent bankruptcy attorney however, as a general rule, your current states laws will apply if youve lived there for the last 730 days.
If you lived in another location in the last 730 days, that states laws will apply to your bankruptcy case. You can search for your states laws by checking out our Bankruptcy Consumer Laws by State section in this blog.
If You Have An Opportunity To Modify Your Mortgage
These days, many people file for bankruptcy to delay a foreclosure. While bankruptcy can be a good solution in this situation, many people file much earlier than they need to, which makes it more difficult to obtain a mortgage modification. Once you file for bankruptcy, many lenders will refuse to enter into or continue negotiations over your mortgage. Because your bankruptcy will cancel the promissory note part of your mortgage , technically there will be nothing left to negotiate. If you might want to seek a mortgage modification in the future, you probably should avoid bankruptcy — at least until you know which way the modification winds are blowing.
What Can You Do If You Can’t Find A Licensed Insolvency Trustee
If you are unable to get an LIT to accept your file, or if you cannot afford to hire an LIT, the OSB’s Bankruptcy Assistance Program may be able to help, provided that you:
- have contacted at least two LITs and tried to obtain their services
- are not, and have not recently been, involved in commercial activities
- are not required to make surplus income payments and
- are not in jail
A creditor is harassing me daily. What should I do?
Although the regulations differ slightly across Canada, there are limits on what creditors and collection agencies are allowed to do. For example, they cannot make telephone calls of such a nature or frequency that they amount to harassment of you or your family. In addition, there are certain times when they are not allowed to call.
Tips for dealing with collection agencies If you feel you are being harassed, contact either an LIT or a qualified and experienced credit counsellor. They can help you by serving as an intermediary between you and your creditor.
and we will send you some information and a list of LITs who participate in the program.
Should You File Chapter 7 Bankruptcy If You Don’t Have Much Debt
Ultimately, it’s up to you. If you’re on the fenceor even if you’re notconsider the following questions:
- Can you negotiate with creditors to pay less? If you can settle with all of your creditors, it could be a good option. However, keep in mind that you’ll be assessed tax on any forgiven amount over $600. By contrast, debt discharged in bankruptcy isn’t taxed.
- Can you pay back the amount you owe? Many people can pay back $10,000 or less. Even so, exceptions exist. Bankruptcy might offer a quicker way to rehabilitate your credit and fix your finances if you don’t think you’ll ever be able to repay your debt. Plus, the automatic stay stops collectors.
- Do you want to work with a credit counseling agency and pay less over time? This approach lets you pay far less in interest and pay off accounts in about five years. However, debt settlement agencies work primarily with major credit card companies, and after you finish paying, you’ll have to rebuild your credit. You’d likely get to the same place faster through bankruptcy, and it could cost significantly less.
How To Know When To File Bankruptcy: Tips And Considerations
Bankruptcy is an option if you have too much debt. Find out if bankruptcy protection is right for you, the differences between types of bankruptcy, when to file, and what to expect.
It can be confusing to distinguish between the different types of bankruptcy and to know when it’s appropriate to file for it.
In this guide, we’ll cover Chapter 7 and Chapter 13the two most common types of bankruptcyand will explain what happens when you declare bankruptcy, how to do so, and questions you should ask yourself to determine whether bankruptcy is right for you.
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