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.
Are You Getting A Refund
Refunds that are issued as a result of returns for years prior to the year of bankruptcy are considered to be the property of the estate in bankruptcy. As a result, these refunds will be sent to the trustee. Any refunds issued in relation to returns for years subsequent to the year of bankruptcy will be sent to you, unless the trustee has obtained a court order.
For the year of bankruptcy, any issued refund related to the pre-bankruptcy return will be sent to the trustee. Issued refunds related to the post-bankruptcy return will also be sent to the trustee if your bankruptcy assignment date is July 7, 2008, or later. Post-bankruptcy refunds that are issued for bankruptcies with an assignment date prior to that will be sent to you, unless the trustee has obtained a court order or has provided us with an Authorization and Direction letter.
What Is Chapter 7 Bankruptcy & Should I File
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In a Nutshell
Chapter 7 bankruptcy is a common legal process to clear your debt, but itâs not right for everyone. Letâs take a look at some bankruptcy basics to help you learn about it and decide whether it’s right for you.
Chapter 7 bankruptcy is a powerful legal tool in the United States that allows you to totally erase many debts, including credit card debt, medical debt, car loans, and payday loans. Experts estimate that over 39 million Americans have filed for bankruptcy. Itâs more common than most people think.
One good question to ask yourself if youâre considering Chapter 7 bankruptcy: Do I have more debt than Iâll ever be able to pay back, given my current income and property? If the answer is “yes,” then Chapter 7 bankruptcy may be the right option.
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Top Five Things To Do Before Filing For Bankruptcy
The bankruptcy process is demanding and emotional. Bankruptcy is designed to provide a new start, but keep in mind that the process is complicated. What follows are the top five things to do before filing for bankruptcy. These guidelines will make the process smoother and less stressful.1. Compile information If you havent already done so make a list with the following information and compile documents including:
- All of your debts including amounts owed.
- List all of your assets.
- Collect all of your deeds and titles to all property.
- Assemble all of your tax returns for the last three years.
- Proof of identity such as social security card.
- Any paperwork pertaining to loans, divorce decrees, or child support orders.
- Statements from brokerage and retirement accounts.
2. Talk to an attorneyWhile it is possible to file for bankruptcy without the help of an attorney, filing alone is confusing and time consuming. An attorney will advise you in the types of bankruptcy and how they will affect your assets, laws in the state in which you live, and help you deal with the courts and bill collectors.An attorney concentrating in bankruptcy law will ask questions about your financial situation and explain all of the benefits and cost involved in the process. The attorney can also talk with you about the required counseling with a government certified counseling agency.
What Is Chapter 7 How Does It Work
In a Chapter 7 bankruptcy, youâll fill out forms about what you earn, spend, own, and owe and submit these forms to the bankruptcy court. Youâll also submit recent tax returns and pay stubs, if youâre employed.
A bankruptcy trustee will review your forms and documents. They’ll also hold your 341 Meeting of Creditors, where theyâll ask you basic questions about your financial situation.
A couple of months later, youâll get a notice in the mail from the court letting you know that the court has granted you a bankruptcy discharge. The vast majority of people who are honest, fully fill out their bankruptcy forms, and complete the required steps get their bankruptcy petition accepted by the court and their eligible debts erased.
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Bankruptcy Wont Wipe Out All Debts
Bankruptcy will wipe out most of your debts, but not all of them. Among the debts that can be discharged through bankruptcy are credit card debts, personal loans, medical bills, etc.
Conversely, certain debts cannot be eliminated through this process, such as alimony, student loans, and certain taxes.
Secured debts such as auto loans can be reorganized through the Chapter 13 bankruptcy repayment plan but cannot be discharged in Chapter 7.
Prepare For The Financial Future And How To Improve Your Credit Rating
One of the easiest ways to start re-establishing credit is with a secured credit card from a bank, which requires that the consumer provides the lending institution with money and the bank will give the consumer a credit line equal to that amount. Also, create long-term goals, such as saving for a home, to help motivate you to save.
ACCC provides both the pre-bankruptcy counseling and the post debtor education course that the government requires before a consumer can file their bankruptcy and discharge debts through bankruptcy. Call 800-769-3571 today! If youre struggling with debt, schedule a free credit counseling session with us today.
ABOUT AUTHOR / Dilini
Dilini is a Marketing Communications & Programs Associate at ACCC. To anyone, managing finances can be a real challenge! Any tips and tricks to help get through this are great! Dilini will share her experiences, tips, and tricks along the way through the Talking Cents blog. Stay tuned!
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What Debt Can’t Be Erased
Chapter 7 bankruptcy cannot erase the following types of debts:
Child support and alimony
Recent tax debts and other debts you owe the government like fines
Student loans can usually not be erased
These debts are known as non-dischargeable debts.
Secured debts are debts that are connected to a specific property, like a mortgage is connected to a house and a car loan is connected to a specific car. If you want to keep your property that secures a debt, you’ll have to continue paying on the debt. Before you file, you must also make sure youâre current on your debt payments. If youâre willing to give up the property, then Chapter 7 bankruptcy can erase the debt.
Important Things You Need To Know Before Filing Bankruptcy
At one time or another, anyone with many bills to pay has probably considered filing for bankruptcy. This is perhaps especially true now that everyone is stuck at home, thanks to the COVID-19 pandemic. The good newsif you can call it thatis you are not alone and you can always apply for an IVA.
Bankruptcy is a legal provision that gives people who cant pay their bills a way to wipe out debt and get a fresh start. It could be considered legal breathing room. Credit card debt problems are a leading cause of these situations, which is the reason for .
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Things To Know Before Filing Chapter 13 Bankruptcy
Filing bankruptcy can be an overwhelming experience, but proper understanding and professional guidance can make the process of filing chapter 13 bankruptcy easier. If you are considering filing chapter 13, use this guide to help you go through the process in a financially savvy and successful manner.
Go To Court To File Your Bankruptcy Forms
Once you enter the doors of your local courthouse, you will be greeted by security guards, who will ask you to pass through a metal detector. Once you pass security, you will go to the clerkâs office and tell the clerk that youâre there to file for bankruptcy. They will take your bankruptcy forms and your filing fee .
Do not submit your bank statements or tax returns to the court. These documents go to the trustee after the case is filed. Check out Step 7 below for more info on that.
While you wait, the clerk will process your case by scanning your forms and uploading them to the courtâs online filing system. This usually takes no more than 15 minutes.
Once done, the clerk will call you back to the front desk and give you:
Your bankruptcy case number
The name of your bankruptcy trustee
The date, time, and location of your meeting with your trustee
At this point, your case has been filed! Congrats! The automatic stay now protects you from all debt collectors. But youâre not home yet – there are other steps you need to complete to get a fresh start under Chapter 7 of the Bankruptcy Code!
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Do I Need To Give Up All That I Own In A Mississippi Chapter 7 Bankruptcy
Wherever you are in the United States, the laws provide for exemptions when filing for bankruptcy. Mississippi laws protect some of your property for you to regain footing and move on after a bankruptcy discharge.
Even in a Chapter 7 bankruptcy, not all of your assets are liquidated to pay off your creditors. These protected assets are called exempt assets, and you get to keep them after the bankruptcy discharge. Liquidated or sold-off assets are called non-exempt assets, and the proceeds are used to pay off your debt.
Couples who file for joint bankruptcy can enjoy double exemptions value for all the Mississippi exemptions except for the homestead exemption. A COVID-19 recovery rebate exemption is also available in Mississippi. Talk to your legal representative about this to get the most of what you can.
On the other hand, you get to keep most if not all of your property in a Chapter 13 bankruptcy as this type of bankruptcy involves payment of your debts using your income through a repayment plan for three to five years. However, the value of your non-exempt assets that you get to keep should be included in the repayment plan.
Spending While In Chapter 13
If you file a Chapter 13 bankruptcy petition and your case is confirmed, you have shown the court and the Trustee that you have sufficient income to pay your ongoing expenses and also repay your creditors in part. The money you make after the filing date should first be used to make your monthly plan payment to the Trustee. After that, your money is yours to do with as you please, up to a point: if you need to make a large purchase such as a car or a house, you might need the courts permission. Consult with your attorney.
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Will Filing Chapter 7 Hurt My Credit
Yes. Your credit score will be negatively affected for a period of ten years, but youll slowly be able to build it back up. There are financial institutions that will quickly begin working with you again, allowing you to restore your credit as quickly as possible, provided you make every payment.
If your bankruptcy was caused by issues such as injury or illness, you might be able to get creditors to consider this when they rate your credit. However, regardless of whether or not you can get credit, you can most assuredly expect to pay much higher interest rates on your credit cards and loans.
Youll also qualify for smaller lines of credit, so your ability to borrow will be significantly limited for some time.
Each year, your Chapter 7 bankruptcy will count for less and less, so that your credit score naturally begins to repair itself. But future creditors can still see the bankruptcy listed for ten years.
Youll also have to wait a few years before you can qualify for a mortgage, generally between two and five depending on the type of loan you want. Because your credit and your life will be affected for years to come, its important to truly weigh the pros and cons before deciding to file for bankruptcy.
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How To File Chapter 7 Bankruptcy
Filing Chapter 7 bankruptcy involves collecting information about yourself and using this information to fill out your bankruptcy forms. Whether you plan on filing now or aren’t sure yet, check out Upsolve’s 10-Step Guide on How to File Bankruptcy for Free to learn more about how to prepare for and file a Chapter 7 bankruptcy case.
Know About All The Chapters Of Bankruptcy
The different types of chapters are available in the bankruptcy, and so this will be the useful one for the debtors to repay the money without any problem. This chapter 7 liquidation process will avoid all the unsecured debt. It may take a little time to solve the case, but this will be a more useful one. Another important option for filing bankruptcy is that chapter 13. But this can be filled when the individual is getting the monthly salary. The process will take more than three years, but this will keep in a safe position to pay all the debts correctly.
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What To Know Before Filing For Bankruptcy
When you are under a huge financial strain and are no longer in a position to repay your debt, filing for bankruptcy is the only way out. However, this option will incur huge dents in your credit score, but you have no other way than to do this.
This also helps you press the reset button and allows you to design your financial journey from the very beginning.
Mistakes To Avoid Before A Chapter 7 Bankruptcy Filing
The bankruptcy court will examine past transactions made within a specified period before you file. The “look back” period is usually one to two years but can be up to ten years. Many mistakes can be avoided simply by delaying the filing of your bankruptcy until these periods have expired. But that’s not always the case, so it’s important to talk with a bankruptcy lawyer to avoid potential allegations of bankruptcy fraud.
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Avoid Transferring Assets Before Filing For Chapter 7 Bankruptcy
Many consumers think that transferring their assets to their mothers’ bank accounts, or putting them in their wive’s names, will protect them. But moving assets out of your name won’t protect them from the reach of the bankruptcy court. Worse, such transfers could lead a bankruptcy court to find that you have committed bankruptcy fraudeven if you transferred the property innocently, without any intention to conceal assets. A few examples of transfers that might get you in trouble include:
- changing title to a child’s or spouse’s car which is in your name, into the name of your child or spouse
- changing the name on bank accounts, or eliminating your name from accounts which are held jointly with others
- taking your name off of a business venture
- depositing funds or moving funds into bank accounts belonging to others, and
- deeding real property in your name to another person, even if it’s a legitimate transaction in which you paid the fair market value.
Many consumers move property or funds out of their name for fear of losing them in bankruptcy. However, having assets does not mean that you cannot file a bankruptcy or will necessarily lose them. An attorney will be able to tell you the best way to deal with assets that you fear may be exposed when you file for bankruptcy, including how to protect property using bankruptcy exemptions.