The Totality Of Circumstances Test
A few states use the “totality of the circumstances” test. It might seem that this is an easier standard to meet because it doesn’t consider whether youve made a good-faith effort to repay your loans, such as consistent attempts to obtain employment, maximize income, and minimize expenses. However, the totality of the circumstances test also includes an any other relevant facts and circumstances component that could be broadly interpreted.
Under either standard, the bar to clear is high, especially for federal student loans, for which the government specifically states that the burden of proof is on the debtor to prove undue hardship.
Who Pays The Bankruptcy Trustee
The trustees pay depends on which type of bankruptcy is filed.
The trustee in a Chapter 7 bankruptcy can earn a commission. When the trustee sells your assets and distributes cash to your creditors, the trustee keeps a percentage ranging from 3% to 25%. But if there are no assets to sell, the trustee doesnt earn commission.
In a Chapter 13 bankruptcy, the trustees fee is typically built into the monthly payment plan. The amount a trustee withholds for services can vary, but legally it cant exceed 5% of the total payment amount.
Before Filing A Bankruptcy Petition
Though bankruptcy filings are sometimes the best way to resolve debts, they are not the only alternative. Before deciding if you should file for bankruptcy, consider steps to resolve your debt. Then speak with an attorney to determine if bankruptcy is right for you. Each of these alternatives has its own set of pros and cons and only an attorney can advise you as to the best course of action in your particular case.
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Your Credit Will Take A Hit
Bankruptcy can have a more severe negative affect on your credit than mere missed payments. A Chapter 13 bankruptcy will appear on your credit reports as a derogatory mark for seven years from the date you filed the petition. The number of points your will drop will vary depending on your current scores and other factors relating to your financial situation. For more on this, check out our article on how to build credit after a bankruptcy.
The Chapter 13 Process
The Chapter 13 filing process generally takes 95 days from the filing of the petition to the approval of the repayment plan. But the bankruptcy wont actually be discharged until the three- to five-year plan is completed.
Heres what to expect over a typical Chapter 13 bankruptcy proceeding.
- A list of creditors and how much is owed to each
- Evidence of income
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Chapter 7 Or Chapter 11 Bankruptcy May Be Right For You
If Chapter 13 doesnt seem to be the right fit for your situation, you may have other options available.
For instance, if you meet the income requirements for Chapter 7, you may want to consider this option. A type of liquidation bankruptcy, your assets will be assessed and potentially sold as a means of paying your creditors. As noted, the process of Chapter 7 typically takes months rather than years.
If you are filing as a business or as an individual who needs to restructure their finances, Chapter 11 is another type of reorganization bankruptcy to consider.
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What If The Court Does Not Approve My Chapter 13 Plan
If the court does not approve your plan, your plan can be amended to correct any issues that caused the court to not approve it. However, normally, the court will approve the plan if the Chapter 13 trustee approves it. An experienced Chapter 13 lawyer will know how to work with the Chapter 13 trustee to obtain the trustees approval of the plan.
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How Long Must I Repay Debts Under Chapter 13 Bankruptcy
If your household income is above your state’s median you will be required to follow a repayment plan for five years. If you follow the repayment for five years some of your remaining debts will be “discharged” or forgiven.
If your median household income is below the state median you will be required to make payments for three years, after which some of your debts will be eligible for discharge.
How Long Does It Take To Repair Credit After Bankruptcy
Some have reported obtaining a credit score in the high 600s to low 700s within two years after filing for bankruptcy. The best way to repair your credit after filing for bankruptcy is to open a secured credit card and establish a good payment history. Within a year apply for another credit card and maybe take out an auto loan. Make all of your payments on time and you should have a fair credit score within 24 months of filing for bankruptcy.
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Can I File Chapter 7 Bankruptcy Without An Attorney
Bankruptcy attorneys help individuals who need debt relief file a bankruptcy case. But the average attorney fee for a Chapter 7 bankruptcy lawyer is $1,200 to $1,500. In addition to the attorney fee, you must also pay the filing fee to the bankruptcy court and the fees for your required bankruptcy courses. If you can afford to hire a bankruptcy attorney, it is usually best to do so. Bankruptcy law can be confusing.
That said, you can file a bankruptcy case without an attorney. Although itâs great to have an attorney, itâs not always necessary. If you canât afford to hire a lawyer, check if you’re eligible to use Upsolve’s free web app to prepare your bankruptcy forms.
Get Help Filing a Chapter 7 Case Without Paying an Attorney Fee
Although it can seem complicated, many people who file for Chapter 7 have pretty straightforward cases. In these easier cases, it usually makes sense to file on your own and just get help with the paperwork.
Donât know where to start? A nonprofit like Upsolve might be all you need. We can help you do your own paperwork and guide you through the process. Donât forget â Upsolve is free! The only costs you have to cover are the ones required by the court. Our unique bankruptcy software walks you through the process of filing a Chapter 7 case step-by-step. You can confidently complete your bankruptcy forms, file the forms with the bankruptcy court, and attend your bankruptcy hearing without an attorney.
Do I Qualify To File A Chapter 7 Case
You must meet income requirements to qualify to file a Chapter 7 bankruptcy case. If your average income is below the median income for your state, you should qualify to file a Chapter 7 case. But if your income exceeds the state median income, you may want to talk to a bankruptcy attorney.
If your average income falls below the state median income, it means you pass whatâs called the Chapter 7 Means Test. If you pass the Means Test, you are typically eligible for a bankruptcy discharge under Chapter 7. But even if you fail the first section of the Means Test, you may still qualify to file a Chapter 7 case.
The second section of the Chapter 7 Means Test subtracts allowable expenses from your monthly income. The amount of money remaining after you subtract all allowable expenses is your disposable income. Individuals who don’t have disposable income or who have very low disposable income may still qualify to file a Chapter 7 bankruptcy case.
What happens if I donât pass the Chapter 7 Means Test?
If you don’t qualify for debt relief under Chapter 7, there are a couple of things to consider. You can try talking to a lawyer to make sure you donât qualify. If not, you might consider filing for Chapter 13.
In very few cases does a Chapter 13 debtor repay all their credit card debt. In most cases, the debtor pays a small percentage of their credit card debt to their creditors. Once the debtor completes the Chapter 13 plan, the remaining credit card debt is discharged.
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Chapter 13 Allows People To Fix Credit Quicker Than Other Debt Management Options
Debt management options are often used to avoid filing bankruptcy. However, they won’t fix credit as quick as chapter 13 may. Let’s take debt consolidation, for example. When people file bankruptcy they can immediately start trying to fix their credit. However, debt consolidation can require people to wait 6 to 8 years to complete the program and fix credit, according to Molleur Law.
When Will My Debts Be Discharged
Because Chapter 13 bankruptcies involve repayment plans that can take 3-5 years to complete, it takes four years on average to discharge remaining debts.
In a situation in which you lose your job, you can try to have your plan modified. You need to inform your trustee of your financial situation before you miss payments, otherwise you risk having your case dismissed.
If a serious injury or illness occurs while enrolled in Chapter 13, you may qualify for a hardship discharge. Thats only the case if the hardship was beyond the debtors control, creditors received at least as much as they would under Chapter 7 and modifying the plan isnt possible.
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Notice Of Bankruptcy Case Filing
Your Notice of Bankruptcy Case Filing is a vital and useful document that the court issues after we have filed your bankruptcy petition. In it, you will find your case number, district information as well as the date the petition was filed and often, your Trustees information. You can use this document to prove to anyone that you have filed bankruptcy and are under the protection of the Automatic Stay, which prohibits any creditors from contacting you or continuing with any collection actions.
Your case number will be important when you go to register for the second online credit course as well as when you register for the online payment program, which we discuss in more detail below.
When To File An Adversary Proceeding: Chapter 13
In a Chapter 13 bankruptcy, when you can file an adversary proceeding also depends on the bankruptcy court rules where you live. Regardless of when you file, your student loan nightmare will not be complete if you win the adversary proceeding. That’s because you have to wait until you’ve completed the necessary Chapter 13 plan payments and earned your discharge order for your other debts before your student loans will be discharged.
If you are allowed to file the AP early in your case, you might get the proceeding over with sooner and obtain a decision on your student loans. The table below compares Chapter 7 and Chapter 13 bankruptcy.
|Comparing Bankruptcy Options|
|Varies by state|
Getting Started With Our Office
Our office is always ready and able to help. Never hesitate to reach out. Whether you are already our client or you would like to be our client, contact our law offices today at Dont forget, we do provide free bankruptcy consultations.
We are a debt relief agency. We help people for relief under the U.S. Bankruptcy Code.
Who Should File Chapter 13 Bankruptcy
Many people think of bankruptcy court as the final stop on a path to financial ruin, the only option left when repaying debts seems impossible. But theres hope even in bankruptcy, and Chapter 13 of the federal bankruptcy code offers the closest thing to a soft landing.
Sometimes called the Wage Earners Bankruptcy, Chapter 13 allows those with enough income to repay all or part of their debts as an alternative to liquidation. Its bankruptcy for those whose biggest problem is dealing with creditors demands for immediate payment, not lack of income.
One of its most attractive features is the chance to keep your home after Chapter 13 bankruptcy as long as you can pay the mortgage and any amount required by your Chapter 13 repayment plan.
Under Chapter 13, people have three to five years to resolve their debts while applying all their disposable income to debt reduction. The option allows applicants to eliminate unsecured debts while catching up on missed mortgage payments. Short-circuiting home foreclosure is one of the options most attractive features. Though keeping your home can be a major relief, youre required to spend years living under the supervision of a court-appointed trustee who will collect and distribute your payments.
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Use Caution When Shopping For Debt Relief Services
Avoid any debt relief organization whether its credit counseling, debt settlement, or any other service that:
- charges any fees before it settles your debts or enters you into a DMP plan
- pressures you to make “voluntary contributions,” which is really another name for fees
- touts a “new government program” to bail out personal credit card debt
- guarantees it can make your unsecured debt go away
- tells you to stop communicating with your creditors, but doesnt explain the serious consequences
- tells you it can stop all debt collection calls and lawsuits
- guarantees that your unsecured debts can be paid off for pennies on the dollar
- wont send you free information about the services it provides without requiring you to provide personal financial information, like your credit card account numbers, and balances
- tries to enroll you in a debt relief program without reviewing your financial situation with you
- offers to enroll you in a DMP without teaching you budgeting and money management skills
- demands that you make payments into a DMP before your creditors have accepted you into the program
What Documents Does The Trustee Need For My Meeting Of Creditors
Each Trustee has different required documents they will request in advance of your 341 Meeting. No matter your Trustee, they all will require your most recently filed Federal Tax Returns. Our office should already have a copy, but if not, we will need them as soon as possible so we can get the documents to the Trustee prior to the meeting. If you do not submit the documents at least 7 days before the scheduled meeting, the Trustee will reschedule. Our office will let you know what specific documents your Trustee requires in that initial email or letter you receive after filing.
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How Do Creditors And Others View A Chapter 13 Bankruptcy Wersus A Chapter 7 Bankruptcy On My Credit Report
Most individuals look at Chapter 13, as the âbetterâ bankruptcy process for their credit report. People think by paying back their debts in Chapter 13, it will allow their creditors to see that they are making good-faith payments on their debt which creditors will like that better. While that may be true, being in a Chapter 13 repayment plan also shows creditors that you can maintain a budget and make regular payments to creditors. All types of bankruptcy may leave negative information on your credit report however, most negative impacts are usually minor. In a Chapter 7 bankruptcy, your debts are wiped away, creditors realize that you have no debt and are likely to extend credit. Some lenders will view you as less of a risk and be willing to extend credit to you rather than someone who has other debts. Creditors also know that individuals who file Chapter 7 bankruptcy, canât file Chapter 7 again for another eight years. So, creditors may be more likely to extend credit to you because you are less of a risk than someone who can decide tomorrow they want to file bankruptcy. Either way, once you get your discharge in a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, you will get credit again and be able to increase your score.
Myth #: I Will Have To Pay All Of My Creditors In Full In A Chapter 13
This simply isnt true, unless your income is so high that you can afford to pay back all of your creditors in full. In most cases, youd pay just pennies for every dollar you owe to credit cards and medical debts. Chapter 13 filers can save money on secured creditors too. Chapter 13 lets you pay just what the car is worth, not what you actually owe, on loans older than 2 ½ years.
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More Questions About Chapter 13 Bankruptcy In Nebraska Contact Us Today
At Steffens Law Office, our bankruptcy attorneys have over 50 years of experience filing bankruptcies and we know that we can help you too. Call Steffens Law Office today at 308-872-8327 to determine if filing a Chapter 13 Bankruptcy would be the right fit for you.
Dedicated to helping you achieve a fresh financial start.
WILLIAM V. STEFFENS