You Cant File Chapter 7 If You Make Too Much Money
If youâre making less than the median income, youâre probably wondering how thatâs even possible. Donât fret this is not about you. This is about folks who have money they can put into savings after paying their main living expenses.
Thatâs called having disposable income and itâs calculated by the means test. Having too much disposable income means youâre not eligible to simply walk away from your debt. But, while you canât file Chapter 7, you can still get a bankruptcy discharge after completing a Chapter 13 repayment plan.
Should You Declare Bankruptcy
It is true that there is a cost to declaring personal bankruptcy however if you are receiving harassing , facing a potential wage garnishment or unable to pay your debts in full, bankruptcy may be a good choice for you.
When to Declare Bankruptcy
- Cant meet your financial obligations
- Lawsuits for unpaid debts
Making The Final Decision To File
Carefully consider the pros and cons of filing a Chapter 7 Bankruptcy. Having an attorney like W. Ron Adams to help you through the process can be very beneficial. When it comes to the meeting of creditors and the plethora of paperwork, you are in good hands and can rest assured that you have experienced and dedicated representation.
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What Are The Chapter 7 Bankruptcy Income Limits In 2021
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In a Nutshell
Learn about the Chapter 7 bankruptcy income limits including how you may still be eligible for Chapter 7 relief under the bankruptcy means test even if your average income exceeds the median income.
Written by Attorney Andrea Wimmer.
The Chapter 7 income limits were added in 2005 when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act . Since Chapter 7 bankruptcy doesnât involve a repayment plan of any kind, Congress worried about an abuse of the bankruptcy process by filers who could afford to pay their debts. To prevent this, Congress added a requirement for anyone filing any type of bankruptcy and set income limits for Chapter 7 relief. The bankruptcy means test calculation determines whether someone can afford to pay a portion of their consumer debts as part of a Chapter 13 bankruptcy.
Who Can File Bankruptcy
To go into personal bankruptcy in Canada, a person must have lived or done business in Canada within the last year or, have the majority of their property in Canada, and must be insolvent.
To be insolvent essentially means:
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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.
You Cannot Get Another Bankruptcy Discharge For A While
In most cases, if you complete a Chapter 7 bankruptcy, you cannot get another Chapter 7 bankruptcy discharge for eight years and you can’t get a Chapter 13 discharge for four years. If you complete a Chapter 13 bankruptcy, you cannot get a Chapter 7 discharge for six years and a Chapter 13 discharge for two years.
This can cause problems if you anticipate financial problems in the future. For example, say you lose your job, file for bankruptcy right away, and receive a Chapter 7 discharge. If you can’t find a job for some time and your bills begin to mount again, you are barred from filing for bankruptcy again until you meet the above time frames.
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How Creditors Are Paid In A Chapter 7 Bankruptcy
Unsecured creditors only receive money if the filer has nonexempt property, which is rare. Taking away a filerâs property does not match up with the Bankruptcy Codeâs intended purpose: To give the honest but unfortunate debtor a fresh start. Thatâs why bankruptcy laws allow debtors to protect their property using exemptions.
These exemptions are based either on state law or federal law, including the U.S. Bankruptcy Code. Some states require their residents to use state law to protect exempt property. Others allow filers to choose the federal bankruptcy exemptions instead.
Most exemptions protect your typical âstuffâ usually up to a certain amount. Things like furniture, clothing, tools of the trade, and cars are generally protected by an exemption. The same is true in most states for equity in real estate that is used as a home.
Some states and the federal bankruptcy laws include a wildcard exemption. This type of exemption can be used to protect property of any kind.
Filing For Bankruptcy Has Its Advantages And Disadvantages
Many people who could be eligible for bankruptcy dont take advantage of their potential benefits. While bankruptcy filings can have a long-lasting impact on ones finances, many people feel filing is the best option.
Each persons financial situation will be unique. It can be hard to know when, how, and why you should file bankruptcy. Filing incorrectly can have severe consequences. A qualified bankruptcy attorney can help you determine whether bankruptcy is right for you.
We invite you to contactus BankruptcyHQ offers a complimentary consultation to discuss your particular situation and how bankruptcy might affect your financial situation.
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What You Can Expect From Your Initial Free Consultation With A Trustee
If you want to learn more about how filing for a bankruptcy would affect you, and whether there are other alternatives that are available to you, booking a free personal consultation with a local Licensed Insolvency Trustee is an easy next step.
The Trustee will discuss your personal situation with you, answer your questions, and advise you on whether a bankruptcy is the right solution in your case, or if a different insolvency solution an alternative to bankruptcy might be more suitable for you.
The consultation is confidential, and also risk-free as you have no obligation to continue to work with the same Trustee in the future, nor can the Trustee make any decisions on your behalf. You will leave the Trustees office with lightened emotional load, knowing you have gotten trusted professional advice.
Find a local trustee you can trust. We have trustees from coast to coast in Canada including Toronto and Ottawa. Talk to one today!
How Does Chapter 13 Bankruptcy Work
Chapter 13 bankruptcy is a repayment plan which proposes to the court to pay back some or all your outstanding debt to creditors. In most cases, you will only pay back a portion of your total outstanding debt to creditors. Note that a 36-month plan is proposed to the court if your gross income is below the median income for your state, and a 60-month plan will be proposed if your gross income is above the median income for your state.
A Chapter 13 Bankruptcy plan will propose an amount a person will pay back to creditors and will establish the timeline in which the person will pay back the amount. Once the bankruptcy case is filed, the first plan payment is due 30 days after the filing date. Once you complete your repayment plan term, the remaining dischargeable debt that was not paid back during the term of your plan will be discharged, and you will no longer be personally liable for the payment on these debts.
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Youll Probably Get To Keep All Of Your Stuff
Folks in more than 95% of all Chapter 7 bankruptcies filed in the United States keep all of their belongings. Thatâs because the law protects certain property – called exempt property – from your creditors. Whether thatâs your monthly social security check, your watch, or your kitchen table, if itâs protected by an exemption, you get to keep it.
Impaired Credit And Loss Of Credit
The major disadvantage of filing bankruptcy is its effect on a debtors credit rating. Bankruptcy can remain on a for 10 years. In some cases, a debtor is allowed to obtain credit but at a very high interest rate. For a period, a debtor is deprived of access to loans and credit cards. He or she is also unable to obtain a mortgage for some time. Bankruptcy is likely to impair a debtors credit for at least seven to 10 years.
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Filing For Bankruptcy Is Not Always The Answer
Anyone can go through financial trouble and slip into debt. When that happens, filing for bankruptcy seems like the best option to get a fresh start. But, as you can see, this option comes with numerous drawbacks that you should consider before signing any papers.
Are you going through financial difficulty and considering filing for bankruptcy? Contact us at today for the expert legal advice youll need to avoid the pitfalls that come with bankruptcy filing.
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Negotiating With The Trustee
Most Chapter 7 bankruptcy cases are what is called “no-asset” cases, which means everything the filer owns is protected through bankruptcy exemptions. Exemptions are specific to where cases are filed and vary by state law. Exempt property can’t be taken from the filer.
Nonexempt property is not protected through Chapter 7 bankruptcy and can be taken by the trustee and sold to pay back your unsecured debt. If a bankruptcy filer wants to keep otherwise nonexempt property, they can usually pay the trustee the value of the property. This is generally an option because the creditors will ultimately get the same amount whether the nonexempt asset is sold by the trustee or is bought by the filer.
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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 There Anybody In Particular I Should Contact About These Options
Yes. If you are behind on your payments, the collectors for each of your creditors may already be calling or writing you. You might be more successful if you phone each creditor, ask for the collection department, ask and note the name of the person you talk to, and explain your intent to repay the account and your need to stretch out the number of monthly payments and reduce their size. You might offer to come to the collection department office to discuss your situation. Ask each creditor to agree to a voluntary plan for the repayment of your debts.
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Is It A Good Idea To File Bankruptcy
Filing bankruptcy is a personal choice, and entirely dependent on the unique financial circumstances of each and every individual. Ultimately, the best thing to do is assess the advantages and disadvantages of filing bankruptcy, and to weigh up the option against alternatives including consumer proposal and debt consolidation. It is also advisable to speak to a reputable bankruptcy trustee firm to make an informed decision on your best financial pathway.
If You Have Good Credit It Will Likely Take A Temporary Hit
Those that are able to maintain their monthly payments and keep their credit score high before filing their bankruptcy petition will see their score drop initially. But, a bankruptcy filing often does more good than harm to the filerâs credit score. Plus, once their bankruptcy discharge is granted, they can begin increasing that pesky credit score immediately.
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What Happens After Filing For Bankruptcy In 2021
Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we’ll never ask you for a credit card. Explore our free tool
In a Nutshell
Knowing what happens after you file bankruptcy can make it seem less intimidating. Read on to learn about filing Chapter 7 bankruptcy, the meeting of creditors, keeping your car, and why creditors must stop contacting you after filing.
Knowing what happens after you file bankruptcy can make it seem less scary. Read on to learn about filing Chapter 7 bankruptcy, the meeting of creditors, keeping your car, and why creditors must stop contacting you after filing.
Advantages And Disadvantages To Filing For Bankruptcy
When consulting with a potential client initially, it is important to determine the pros and cons of filing bankruptcy for a given client, as well as their estimated cost of filing bankruptcy, too. Having a decentunderstanding of the advantages and disadvantages of filing for bankruptcy willassist clients in making part of these decisions beforehand on their own.
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The Pros And Cons Of Filing Bankruptcy Dont Start Without Reading This First
Are you considering filing for bankruptcy? If youre heavily in debt and you feel that you cannot manage to pay your creditors back, bankruptcy can be an option for you to have a fresh start. Filing for bankruptcy can help individuals and businesses survive an economic crisis such as Covid-19.
You have to recognize, however, that there are pros and cons of filing for bankruptcy. While bankruptcy can give you debt relief, you also have to know that there are also associated downsides. The advantages and disadvantages of bankruptcy will depend on your current financial situation and the type of bankruptcy youre filing for.
There are two types of bankruptcy that individuals commonly go for: Chapter 7 and Chapter 13. The majority of the bankruptcies filed in the United States are Chapter 7 bankruptcies. However, you would have to meet the income eligibility to be able to file for Chapter 7.
Individuals who do not meet the income requirement, meaning they are making a larger sum of money, are often forced to file for Chapter 13 as an alternative. However, some people prefer Chapter 13 over a Chapter 7 because of certain factors.
Pros And Cons Of Chapter 11 Bankruptcy
As a business owner, juggling mounting debt, calls from creditors, the threat of losing your business and more can be overwhelming. Whether your business is a sole proprietorship, partnership, LLC, corporation or more, you may question what the best route forward is when finances dwindle and your options seem scarce.
When your company faces seemingly insurmountable financial woes, filing for bankruptcy may provide both the relief and decisive action you need. Many businesses can benefit from Chapter 11 bankruptcy, particularly if you wish to recover your company and move forward, rather than shut the doors. However, Chapter 11 has both pros and cons for any company:
Advantages to filing for Chapter 11 bankruptcy
Chapter 11 bankruptcy is commonly referred to as reorganization bankruptcy. Essentially, it allows your company to reorganize its debts after the bank issues an automatic stay. Benefits to Chapter 11 bankruptcy include:
The opportunity to continue operating your business while working through repaying your debts can provide several more advantages, including the ability to retain your workforce and potentially avoid layoffs.
Disadvantages to filing for Chapter 11 bankruptcy
While Chapter 11 can be beneficial to many companies, it also has several cons to consider. Chapter 11 bankruptcy can be both expensive and lengthy. Because of this, many small businesses tend to seriously consider whether Chapter 11 is right for them over Chapter 7 or Chapter 13.
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It Stays On Your Credit Report For Up To 10 Years
Your bankruptcy will remain on your credit report for up to 10 years from the date of discharge. While the impact it will lessen over time, it will undoubtedly be a factor in any financial or career move that requires checking your credit.
Its not all roses after you file bankruptcy, McClary told LendingTree. There are some limitations that youre going to have to face.
