Advantages Of Going Bankrupt
When the bankruptcy order is over you can make a fresh start – in most cases this will be after a year. Other advantages of going bankrupt include:
- the pressure is taken off you because you dont have to deal with your creditors
- you’re allowed to keep certain things known as ‘exempt goods’, for example everyday household items, tools you need to do your job, a car if you need it to get to work or you’re a carer and it’s not worth more than £2,000
- you’re allowed to keep some of your income – but you’ll probably have to live on less money than usual
- if you have to make payments from your income, this can only be for 3 years – you wont have to make payments if your only income is from welfare benefits
- you won’t have to pay back the debts that bankruptcy covers
What Is The Minimum Debt To File Bankruptcy
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There isnt a minimum amount of debt you need in order to file a Chapter 7 or a Chapter 13 bankruptcy. If you owe as low as $1, you can still file for bankruptcy. There are, however, many practical reasons why you should seek other alternatives than filing bankruptcy unless your debts are too high.
How Long Does It Take To Rebuild Credit After Chapter 7
Take your time.. . The amount of time it takes to rebuild your credit after bankruptcy varies by borrower, but it can take from two months to two years for your score to improve. Because of this, its important to build responsible credit habits and stick to themeven after your score has increased.
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Chapter 7 Bankruptcy Vs Chapter 13 Bankruptcy
There are two common types of bankruptcy you might consider as an individual consumer: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
With Chapter 7 bankruptcy, many of your assets are liquidated, and the proceeds are used to repay your creditors. After your creditors are paid and your eligible debts are discharged, youre no longer responsible for repaying your debts .
Rather than having eligible debts completely discharged, Chapter 13 bankruptcy is more like an extended repayment plan. You develop a plan to repay your debts over a period of three to five years, giving you an opportunity to retain more of your assets than if you filed for Chapter 7 bankruptcy.
Can all debts be eliminated in a Chapter 7 bankruptcy?
While credit card debt and many other forms of debt can be eligible for discharge when you file Chapter 7, some are not. Examples of ineligible debts include alimony or child support, some taxes, certain student loans and more. If you have nondischargeable debt, youll be responsible for repaying it even if you file for Chapter 7 bankruptcy.
Chapter 7 Bankruptcy: What It Is And How To File
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Chapter 7 bankruptcy can wipe out many forms of overwhelming debt under the protection of a federal court. You may have to give up some assets, like an expensive car or jewelry, but the vast majority of filers do not. Chapter 7 bankruptcy is the fastest and most common form of bankruptcy.
Chapter 7 bankruptcy erases most unsecured debts, that is, debts without collateral, like medical bills, credit card debt and personal loans. However, some forms of debt, such as back taxes, court judgments, alimony and child support, and student loans generally arent eligible. Chapter 7 bankruptcy will leave a serious mark on your credit reports for 10 years. During this time youll likely find it harder to get credit. Even so, youll probably see your credit scores start to recover in the months after you file.
Read on to learn about how you can qualify for Chapter 7 bankruptcy, how to file, whether this debt relief option is right for you, and how to rebuild after bankruptcy.
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Improved Help For People Struggling With Problem Debt
Plans to enable easier access to debt relief for financially vulnerable people have been announced by Business Minister Jo Swinson.
- From:
- 15 January 2015
The changes will allow approximately 3,600 more people a year with problem debt to enter into a Debt Relief Order a low cost alternative to bankruptcy for those with very low assets and income and debt which they are unable to pay. The maximum amount of debt that can be covered by these plans will increase from £15,000 to £20,000.
The government is also increasing the minimum level of debt for which someone owed money can force a person into bankruptcy from £750 to £5,000. The limits were last revised in 1986.
The changes come against a background of falling insolvency numbers since 2010.
Business Minister Jo Swinson said:
Struggling with unresolvable debt can cause immense stress for families. These changes will ensure that our debt relief schemes are updated so that they still meet their original goal of providing access to those who need them. They also ensure that bankruptcy, which has the most significant consequences, is reserved for those with sizeable debts.
As always, it is important for people struggling with their debts to seek early advice from National Debtline or other advisors. The changes announced today give them a better chance of escaping from the spiral of indebtedness so they can rebuild their lives.
Changes announced today include:
Gillian Guy, Chief Executive of Citizens Advice said:
Filing For Bankruptcy Can Cost Anywhere From A Few Hundred To A Few Thousand Dollars Depending On The Type Of Bankruptcy Filed And Whether You Hire An Attorney Or Take A Diy Approach
Filing fees and other miscellaneous costs required to file a bankruptcy petition typically range from $300 to $400. If youre filing on your own, you may not have to pay much more than that.
Working with a bankruptcy lawyer can add to those figures significantly. Their fees can vary widely based on the type of bankruptcy you file for, the market rate where your attorney practices and the complexity of your financial situation.
Coming up with any extra money might seem impossible if youre already struggling to pay for basic expenses and creditors are breathing down your neck. Luckily, assistance may be available if you believe bankruptcy is the right choice for you.
Lets look at the two common types of bankruptcy, the fees you may be responsible for and a few ways you might be able to pay for them.
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Which One Should I Choose
Chapter 7 is, by far, the more popular form because its cheaper, quicker and effective at relieving responsibility for debt if you qualify! And thats a big if. You must pass a means test, meaning your disposable income is under the median income in your state. If you dont qualify for Chapter 7, you can always fall back on Chapter 13.
What Happens To Your Business
If youre self-employed, your business will be closed. Any business assets will be claimed by the trustee.
Your employees may make a claim for unpaid wages and holiday pay, payment in place of notice, and redundancy. Theyll make this claim to the National Insurance Fund, or the money may be claimed in the bankruptcy process.
You can start trading again, but youll have to follow certain rules.
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How Much Debt Do I Need To File For Bankruptcy
Many people think that they must have a ton of debt in order to file for bankruptcy. This is not true. For the majority of individuals and couples filing for bankruptcy, there is no minimum amount of debt that is required in order to file. You can have as little as $1,000 of debt or as much as $100,000 of debt and you will be able to file for bankruptcy. The Bankruptcy Code does not base filing eligibility on your debt amount. Rather, whether you can file for bankruptcy is based on a legal test called the “Means Test,” which is based on your household income and household size. So, as long as you pass the Means Test, you can file for bankruptcy and wipe out all of your debt, no matter how small or how big. This is the general rule for filing a chapter 7 bankruptcy.
Before you decide if you should file for bankruptcy, whether chapter 7 or chapter 13, you should speak with an experienced bankruptcy attorney. The attorney will be able to explain the differences to you and advise which chapter will be more beneficial for you and your family. We are trusted bankruptcy attorneys who have filed hundreds of cases, with every chapter 7 bankruptcy receiving a successful discharge. Atlantis Law has a Rancho Cucamonga office and a Riverside office, and we can meet with you for a free consultation to discuss your options. Contact us today for more information and to schedule your consultation.
What Happens To Your Information
Any previous name included in the bankruptcy petition will appear on the bankruptcy order, and in the:
- notice of your bankruptcy, which is permanently recorded in the Gazette but excluded from search engine results one year and three months after publication
- Individual Insolvency Register which will be removed within three months of your discharge
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Is There A Minimum Amount Of Debt Necessary To Qualify For Bankruptcy Relief
Prospective bankruptcy filers often inquire whether they need to have a certain debt burden or minimum amount of debt to justify a bankruptcy filing. Yet, there is no floor or lower limit to the amount of debts or debt burden a consumer must have to file bankruptcy . That said, common sense dictates that a person should not file for bankruptcy protection if the debt is manageable or can somehow be negotiated to a manageable level for repayment purposes.
In today’s down-turned economy, virtually everyone who experiences severe financial difficulties qualifies for some sort of bankruptcy protection or relief. It is also not surprising in this economic climate to see that some individuals need to file for bankruptcy protection when the reality is that they owe very little to their creditors.
Exceptions To Payment Rules
There are some exceptions to the payment rules. You can make direct payments for:
- secured creditors, like a mortgage lender
- debts which are not included in the bankruptcy , these are called non-provable debts
- money owed after 19 March 2012 to the Department for Work and Pensions for budgeting or crisis loans
You must keep paying rent and any new debts after the bankruptcy. You may not need to pay bills that are unpaid at the date of your bankruptcy order. You may have to pay a deposit for future supplies of gas, electricity or other utilities. Or your utility accounts may be transferred to a spouse or partner.
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What Happens To Your Bank Account
When the bankruptcy order is made, you must:
- make sure you dont use your bank account
- give your cards and cheque books to the trustee
Your bank account will be frozen. Any money in your account will be an asset and claimed by the trustee. The trustee can ask to release some money:
- for your daily living needs
- to the other person in a joint account
The bank is allowed to use money from one of your accounts to pay your debts on another account you hold with them. This is called set off.
Otherwise, money owed to the bank is a bankruptcy debt, so you cant pay this to the bank directly. The exception is if the bank has a charge on your home .
Open a new account
You can open a new bank account after the date of the bankruptcy order but you must tell the bank or building society that youre bankrupt. Some banks will let you use your old account after theyve spoken to the trustee.
Although You Don’t Need To Have A Specific Amount Of Debt To Be Eligible For Bankruptcy Other Issues Will Determine Whether Bankruptcy Is A Good Option For You
By Cara O’Neill, Attorney
Debtors don’t need a certain amount of debt to be eligible for bankruptcy relief. In most cases, whether bankruptcy is the right choice for you will depend on:
- your ability to repay your debts outside of bankruptcy
- whether your creditors are willing to work with you, and
- whether you have the type of debt discharged in bankruptcy.
Learning about the differences between Chapters 7 and 13 is also an important step when deciding whether bankruptcy is right for you.
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Whats The Difference Between Chapter 7 And Chapter 13 Bankruptcy
The major difference is time Chapter 7 takes 4-6 months Chapter 13 takes 3-5 years and money. You can have most, or all your unsecured debt discharged in Chapter 7 bankruptcy. In Chapter 13, some of your debt is forgiven, but only if you meet the conditions approved by the trustee and bankruptcy judge.
Who Qualifies For Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also called straight or liquidation bankruptcy, can wipe out many types of unsecured debt. Not just anyone can file for Chapter 7 bankruptcy, though. Here are some of the requirements to pursue Chapter 7 bankruptcy.
- The average of your monthly income in the previous six months must be lower than the median income for the same-sized household in your state otherwise, you must pass what’s known as a means test. This test determines whether your disposable income is high enough to make partial payments to unsecured creditors. If you fail the means test, don’t despair: You still might qualify for Chapter 13 bankruptcy.
- You can’t have filed for Chapter 7 bankruptcy in the previous eight years.
- You can’t have filed for Chapter 13 bankruptcy in the previous six years.
- If you attempted to file for Chapter 7 or 13 bankruptcy but your case was tossed out, you must wait 181 days or more before refiling.
- You typically must finish an individual or group credit counseling course offered by an approved credit counseling agency within 180 days before you file for bankruptcy.
- Even if you’re eligible to file for bankruptcy, a judge could throw out your case if it’s found you’re attempting to defraud creditors. An example: You run up charges on a credit card with the goal in mind of declaring bankruptcy to steer clear of paying the debt.
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Can You Repay Your Debt Outside Of Bankruptcy
Before making a hasty decision to file for bankruptcy, consider whether you can afford to repay your debts outside of bankruptcy. If you have sufficient income, you might be able to pay off your debts without resorting to bankruptcy.
A credit counseling agency can help you determine whether you might be able to pay off your debts through a debt management program. But don’t go to just any credit counseling agencya shady organization might charge you for questionable services. Instead, try an agency approved by the U.S. Trustee. You can find a list by going to the U.S. Trustee website and clicking on “Credit Counseling and Debtor Education.”
What You Keep When Filing For Bankruptcy
Laws were created to help protect your property during bankruptcy, called bankruptcy exemptions however, exemptions vary depending on the process and the state.
Your state determines whether you must use your states exemptions or if you can choose the federal exemptions. If you live in one of the following states, you can choose the state or the federal bankruptcy exemptions:
- Alaska
- Washington
- Wisconsin
If you do not reside in one of these states, you must follow your states bankruptcy exemptions.
Common federal bankruptcy exemptions are listed below. Married couples filing jointly can double the exemption amount and all amounts are shown for cases filed after April 1, 2016, and cases filed after April 1, 2019. These numbers will be adjusted again on April 1, 2022.
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When To File Chapter 7 And Chapter 13 Bankruptcy
Bankruptcy is a viable option for you no matter how high or low your debts are. Although the bankruptcy court does not have an outline regarding the minimum debt threshold, there are certain requirements that you need to meet in order to qualify.
- Filing history requirements: If you have filed and been discharged from a bankruptcy in the past, you may not be eligible to file for another bankruptcy discharge until a certain amount time has elapsed. The number of years depends on the type of bankruptcy you chose or the circumstances of your previous dismissal.
- Income requirements: To qualify for Chapter 7 bankruptcy, you need to pass the Chapter 7 Means Test wherein your income will be compared to the income of other families of your size within your state. This test allows the bankruptcy court to determine whether you have the capacity to pay off your debts.
- Other acceptable debt requirements: It is important to note that only certain types of debts can be discharged under this type of bankruptcy. Unsecured debts such as payday loans and credit card debts can be discharged in bankruptcy. You can also discharge the debts from a car or home that you dont wish to keep if you are underwater. If you are behind on either a mortgage or car loan, then you can catch up on those payments via a Chapter 13 bankruptcy.
