When To File For Bankruptcy
Bankruptcy law exists to help people who have taken on an unmanageable amount of debtoften as a result of large medical bills or other unexpected expenses that are no fault of their ownto make a fresh start. But it isnt a simple process and doesnt always lead to a happy ending.
So before filing for bankruptcy, be sure to explore all your alternatives and be prepared for some of the negative consequences described above. If you decide that bankruptcy is your only viable optionas hundreds of thousands of Americans do every yearremember that the blot on your record will not be permanent. By using credit carefully in the future and paying your bills on time, you can begin to rebuild your credit and gradually put bankruptcy behind you.
Are There Any Options Other Than Filing For Bankruptcy
Bankruptcy should be your last resort and last resort only; there are other less drastic options to consider. Debt settlement is one of them. This is a negotiation between debtor and creditor where they agree on a reduced balance to be paid off, after which the account is closed, Gonzalez says.
Another option is a debt management plan. This is an agreement between the debtor and the creditor to modify the terms of the outstanding debt, such as fees or interest reduction for a certain period of time. This should allow you to pay back the amount owed, and help you regain control of their finances, Gonzalez says.
You can also try consolidating your debts or even asking a family member for help. While improving your finances may seem hopeless, it can be done. Get inspired by the story of this couple who paid off $78,000 in debt in two years.
How Much Cash Is Exempt In Chapter 7
If you are concerned about any of your assets, you need to speak to an experienced bankruptcy attorney in your area.;But what happens if you have a non-exempt asset?
Many people have questions and concerns about how much cash they can have in the bank when filing for bankruptcy.
If you declare bankruptcy, will you lose literally every dollar that you have in your savings?;The answer is no: some cash can be exempted in a Chapter 7 case.
For example, typically under Federal exemptions,;you can have approximately $20,000.00 cash on hand or in the bank on the day you file bankruptcy.
The vast majority of my clients have considerable less than $20,000.00 in the bank the day I file their bankruptcy. However, for the sake of my example, lets say, you had $23,000.00 in the bank the day I filed your bankruptcy. The Chapter 7 Trustee could technically take the amount over the exemption amount and pay that amount to your creditors.
So, you would keep $20,000.00 and the trustee would take $3,000.00 and give that to your creditors.
You would not owe your discharged creditors any more money and you still have a successful bankruptcy. While this example may seem extreme, I have worked on a bankruptcy where the individuals had more than $20,000.00 in the bank the day we filed their bankruptcy.
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So Does It Mean You Are Off The Hook To Pay Down Your Debt
Whether you get freed up from your debt or have to pay it back depends on what type of bankruptcy you fill. If you file for Chapter 7 bankruptcy youre not required to pay off your debt, as it will be paid by liquidating your assets. This is a swift process, lasting up to six months, explains Gonzalez.
Chapter 13, on the other hand, is actually a restructuring of your debt. Under this option, you are required to create a three- to five-year repayment plan for all your debts, she explains. This arrangement allows you to extend your payment periods while keeping all your assets.
Q3 Will I Get A Fair Value For My House
The trustee will hire a real estate broker upon the courts approval, list the property for sale, and find a buyer. It will be sold based on fair market value. You can hire a licensed real estate appraiser to do a full house appraisal, which can be expensive. Alternatively, your appraiser can do a comparative market analysis to determine the value of your home.
The trustee will also appraise your house, and if theres a disconnect, the court will weigh in both assessments and decide on the final value. The court will also need to authorize the sale of your house to the chosen buyer. Then, the creditors will be notified of the sale and given a chance to object.
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How Does Bankruptcy Affect Your Credit Score
An important consequence of filing for bankruptcy is the negative impact on your .
However, this does not mean that you will never be able to borrow again.
A bankruptcy filing results in an R9 credit rating on your credit report. This will remain on your report for six years after youve been discharged from bankruptcy.
An important part of your financial recovery during the bankruptcy process is devoted to credit counselling and money management. You will learn how to budget, set financial goals and manage credit so that you avoid debt problems in the future. These important tools will help you improve your credit.
Talk To A Financial Coach
You dont have to walk this alone. Read that again: You dont have to walk this alone. Get with a financial coach and talk about your situation. They arent here to judgetheyre here to help.
A financial coach can help you figure out a personalized plan of action for your specific situation. And yes, talking about money can be terrifying, but if you declare bankruptcy, your financial privacy will be out the window immediately. Opening up to a trustworthy financial coach now can help you avoid having to open up to a whole courtroom of people in bankruptcy.
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Gifts Transfers Of Property Or Special Treatment
Any gifts or transfers of property youve made in the year prior to filing for bankruptcy will need to be reviewed by your LITand could be reversed by the court. You will also need to advise your LIT of any payments or preferential treatment to your creditors in the three months prior to declaring bankruptcy .
For more information about bankruptcy exemptions, you can click the button below to book a free initial consultation with a Licensed Insolvency Trustee.
Should You File Bankruptcy Before Or After Divorce
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If your marriage is soon to be over and you are struggling with debt, you may be looking to build a new start by dealing with both your legal separation and options to deal with your debt. In this situation, I am often asked, Should I file a bankruptcy or consumer proposal before or after divorce?; Financially, the answer depends on which spouse has the debts and how the timing of a bankruptcy or proposal can affect your marital assets.
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Bankruptcy Law Firm In Tampa
If you are struggling with debt Florida law advisers may be able to help get a fresh start. Regardless if you need help with Chapter 13 or Chapter 7, we provide legal advice you can trust. We are dedicated to providing effective representation, individualized attention, and affordable fees to our clients. All of our initial consultations are free and convenient payment plans are always available. Call us now at 800 990 7763 to speak with a Tampa bankruptcy lawyer.
How Long Will Bankruptcy Take
Once youâve filed for Chapter 7 bankruptcy, it will take approximately 3 – 4 months for your discharge to be entered. If your Trustee tells the Court that there are no funds to distribute to your creditors, the case will be closed shortly thereafter. If your case is an asset case, because the Trustee is planning to sell a non-exempt asset, the case can stay open for more than a year while the Trustee completes the administration of your case.
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What About My Wages In Bankruptcy
Your wages will not be affected by your bankruptcy, although your income can increase your cost of bankruptcy and the time you will be in bankruptcy.
If you have surplus income payment requirements based on your wages you will be required to pay a certain amount of your surplus income to the trustee, who will distribute the funds to your creditors.
A bankrupt is required to inform his LIT of his or her income during each month of the bankruptcy.
Need Help Reviewing Your Financial Situation?Contact a Licensed Trustee for a Free Debt Relief Evaluation
Joint Property In Common Law Property States
If you’re filing a joint bankruptcy with your spouse in a common-law state, both spouses’ separate and joint property will be included in the bankruptcy estate. If you file alone, only your separate property and your portion of any joint propertyâtypically halfâis part of your bankruptcy estate. Learn more in What Happens to Joint Property in Bankruptcy?
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How Long Does A Bankruptcy Stay On Your Credit Report
Unfortunately, when you file for bankruptcy, it damages your credit severely. The notation that you filed for bankruptcy and your debts were discharged by the courts stays on your credit report for seven to ten years!
You may also have to sell personal assets like artwork, jewelry, and real estate to liquidate the assets to pay off some of your debt.
A poor credit rating and bankruptcy can affect your ability to get financing, buy a home, acquire insurance, and even get a job with some companies.
Ten years is a long time to suffer the consequences of poor financial decisions and mountains of debt. If there is any other way to handle your overwhelming financial situation, try and find one.;
Personal Items And Household Goods Exemptions
Besides real estate and your vehicle, personal property may qualify for bankruptcy exemption. Here are some commonly claimed federal personal property exemptions:
- $1,700 for jewelry
- $2,525 for tools of the trade
- $$13,400 in aggregate for household goods and furnishings, appliances, clothing, animals, books, crops or musical instruments
- $13,400 in accrued interest, dividend or loan value of a life insurance contract
- Professionally prescribed health aids
Bank May Freeze Account For Setoff
Many people owe money to the same institution where they have a checking, savings, or investment account. In other words, they have accounts at the same institutions they took out loans from, a fairly common practice with both Main Street and Wall Street size banking institutions.
In such cases, when you signed the loan contract for the credit card or vehicle loan, you likely agreed to a set offa contract provision that allows the bank to withdraw funds from your deposit account and apply the money to your loan balance. It is thus within the banks right to freeze your account for setoff when it becomes notified of your bankruptcy and is therefore not an advisable practice to take out loans with banks where you keep your money, particularly if your financial future is uncertain.
How Much Does It Cost To File For Bankruptcy
When filing for bankruptcy, you may have to pay filing fees along with attorneys fees. If you cannot afford an attorney, check with your local Bar Association, they can sometimes provide legal access and resources for free.;
According to Debt.org, the average person who files for bankruptcy will pay between $1,500 – $4,000 in filing and legal fees.
Some fee breakdowns from Debt.org are:
Chapter 7 Total Filing Fees: $338
Filing fee: $245.
Re-opening a Chapter 7 filing: $260.
Chapter 13 Total Filing Fees: $310
Filing fee: $235.
Re-opening a Chapter 13 filing: $235.
Average Attorney Fee for Chapter 7 Bankruptcy: $1,450
A 2016 Martindale-Nolo study revealed that the average national average cost was $1,450 for Chapter 7 cases. The cost depends on where the case is filed. Chapter 7 fees generally range from a low of $1,000 to a high of $1,750. Of course, every case is different, and a number of factors can affect the cost of your case.
Average Attorney Fee for Chapter 13 Bankruptcy: $3,000
The Martindale-Nolo study showed an average of $3,000 for Chapter 13 cases, with ranges from $2,500 to $5,000. Chapter 13 fees are often governed by the bankruptcy court in the particular district, so fees vary widely from district to district.
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Income Support Payments And Surplus Income
When you file bankruptcy, any income over a certain limit will trigger what is a called a surplus income payment into your bankruptcy to compensate your creditors. If you file bankruptcy before your divorce, your spouses income can affect this calculation and increase the cost of your bankruptcy or consumer proposal.
If you file bankruptcy after your divorce, any alimony or child support payments you make can be deducted from your income before surplus is calculated, so in some cases it can be worth waiting until after the divorce for support to be determined.
If you are receiving alimony or child support payments, these payments will be added to your income for bankruptcy purposes.
Bankruptcy Exemptions In Manitoba
- Furniture and household appliances up to $4,500
- No limit on clothing for you and your family
- Food and fuel necessary for you and your family for six months, or the cash equivalent
- Tools of your trade up to $7,500
- One motor vehicle up to $3,000 when used for business or transportation to work
- Articles and furniture necessary to perform religious services
- No limit on health aids for you or your family
- If you are the sole owner of your home, up to $2,500 in equity is protected; if you co-own your home, the limit is $1,500
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Property You Own That’s Not In Your Possession
With a few exceptions, such as Social Security payments and ERISA-qualified retirement accounts, all of the property you own will be part of the bankruptcy estate. Possessing the property isn’t a requirement. For instance, if you loaned a car to a friend or gave a security deposit to your landlord, it’s still your property. You must disclose it in your bankruptcy paperwork.
Protect Assets With Exemptions
An exemption is special form of protection from liquidation in bankruptcy.; See 11 U.S.C. § 522. ;The exemption removes an asset or part of an asset from the possibility of liquidation. There are both federal and state bankruptcy exemptions. The state exemptions will vary from state to state.; Most often, the difference in federal and state exemptions is the amount of coverage the exemption provides.
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If My Spouse Files Bankruptcy Will I Be Bankrupt Too
Simply put NO! One person filing for personal bankruptcy does not automatically assign their spouse into a bankruptcy, full stop.
If both you and your spouse share the same joint debts or each have your own separate debts that youre unable to repay, you may both decide to start a bankruptcy at the same time, but this is your decision not a requirement in the law.
Sometimes one spouse may be in a position to repay a portion of their debt, but the other spouse is unable to afford any repayment in this situation one spouse may decide to file a Consumer Proposal and the other a personal bankruptcy.
What is a Consumer Proposal?
A Consumer Proposal isnt the same process as bankruptcy. A Consumer Proposal is a specialized debt consolidation tool you can access by working with a Licensed Insolvency Trustee. Essentially your consolidated debts are reduced down to what you can afford to repay , with the unpaid balance being forgiven by your creditors. Learn more about Consumer Proposals here.
What Creditors Can Take In A Bankruptcy
Your bankruptcy estate is made up of all your income and property that creditors could potentially get hold of. This includes all the property that you own at the time of the bankruptcy filing, as well as any income that you have earned, even if you havent received it yet.
Even some property that you dont own at the time of filing, such as an inheritance you are expecting, the proceeds of a divorce settlement or decree that you won within 180 days of filing for bankruptcy, could be parceled into your bankruptcy estate. If you are owed a tax refund, that could also go into the pool.
If you have transferred, sold or given away some property two to four years before filing for bankruptcy, and did not receive a reasonably equivalent value in payment, your creditor could lay claim to such property as well.
If you paid $600 or more in debt to a creditor within 90 days before your bankruptcy filing, or paid off $600 or more to a relative or friend in the one-year period before your filing, your creditor could also lay claim to that amount.
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How Does Bankruptcy Work In Canada
If you looking to learn how bankruptcies work in Canada, youve found the right page.
Bankruptcy is a legal procedure in which you assign your property to a Licensed Insolvency Trustee as part of a process that relieves your debts. You are allowed to keep certain assets, depending on where you reside. Laws dealing with personal bankruptcy are meant to allow the honest but unfortunate debtor a chance to re-start their financial life.
Learn more about what is exempt from Bankruptcy here: Bankruptcy Exemptions.
Lets continue and cover more information on bankruptcy.