When To File Bankruptcy Chapter 7

The Importance Of Hiring A Bankruptcy Attorney In Chicago Illinois

Doing things by yourself may be possible in this day and age since information is easy to obtain. Nevertheless, you should not discount that asking for legal help from a professional is always the best way to deal with bankruptcy. Our team of competent bankruptcy attorneys at Cutler & Associates will not only guide you through the process. They will also help find a solution to your financial difficulties.

How Does Chapter 7 Bankruptcy Affect My Credit Score

Weve covered this topic in more detail in our article what does bankruptcy do to my credit score?. More often than not, debtors report an INCREASE in their credit score after filing for bankruptcy. How can this be possible? At ARM Lawyers, we do more than simply help you eliminate your debt. We will work with you to rebuild your credit score after bankruptcy! After your Chapter 13 Plan is confirmed, we will enroll you in the 7 Steps to a 720 Credit Score program FOR FREE. This $1,000 program is available to my clients FOR FREE just for being my client.

Complete A Debtor Education Course

After you file your paperwork, you’ll need to complete the second course, called a debtor education course, before you’ll receive a discharge . If you fail to submit your certificate on time, the court will close your matter without a discharge. Fixing this problem can be expensive because you’ll likely have to file a motion and another filing fee to reopen the case.

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Not Sure Whether To File Chapter 7 Or Chapter 13

The decision to file for bankruptcy is complicated enough in itself. Choosing the appropriate form of bankruptcy and preparing to file will involve many considerations that you might not be aware of until it’s too late.

Learn how an experienced bankruptcy lawyer can help guide you through the process and ensure that your bankruptcy solves your financial problems.

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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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Converting Chapter 7 Bankruptcy Into Chapter 13 Bankruptcy

If youre in a Chapter 7 bankruptcy and behind on your car payments and home mortgage you could face a vehicle repossession and foreclosure. For those Chapter 7 bankruptcy debtors facing vehicle repossession and/or foreclosure converting their Chapter 7 bankruptcy into a Chapter 13 bankruptcy may be the right choice.

Alternatives To Chapter 7 Bankruptcy

Alternatives to bankruptcy may be able to help you get the fresh start you need. The one that’s right for you will depend on your financial situation and the types of debts you owe. Let’s go over each option.

Debt Settlement:You can negotiate with your creditors. If you’ve fallen behind on payments or are about to, you can contact your creditor to discuss the issue. You may be able to work out an affordable payment plan or negotiate a debt settlement for less than the full amount owed. This is especially true with credit card debt. Typically, a settlement needs to be paid in a lump sum.

Repayment Plan: Entering into a debt management plan with an agency is another option. Unlike in debt settlement, a debt management plan involves paying back your debt over time on more doable terms than you have now. Typically only unsecured debts can be included in a debt management plan.

Debt Consolidation: Taking out a debt consolidation loan to pay off your debts is another debt relief option. You would then have only one monthly payment to make to the new creditor. These loans often offer lower interest rates than what you’re already paying.

Another option is selling your valuable property to pay back creditors. But be careful. The money you get for your property may not be enough to pay off or settle all of your debts. You may end up having to file for bankruptcy anyway.

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Make Sure You Are Eligible

Most people must take and pass the means test before qualifying for a discharge in Chapter 7 bankruptcy . If your average gross income during the six months before you file is more than the median income for a family of your size in your state, you qualify. If not, you’ll subtract allowed expenses from your income to determine whether you’ll be allowed to use Chapter 7 bankruptcy.

Should I File For Chapter 7 Bankruptcy

Read this in:

Learn about the pros and cons of filing for bankruptcy and what types of debts you can discharge. #0103EN

Contents

What is bankruptcy?

It is a legal process to help people who are unable to pay their outstanding debts.

How are Chapter 7 and Chapter 13 bankruptcies different?

Chapter 7: the court cancels your debt. Your bills vanish. You are no longer responsible for them. You get a clean slate and a chance to start over with no debt.

Chapter 13: the court puts you on a 3- to 5-year payment plan to repay your debts. This can help you try to avoid foreclosure of your home or to pay off other debts, such as traffic tickets or legal financial obligations , that you cannot discharge.

My wages are being garnished. Can a bankruptcy help?

Probably. The day you file for bankruptcy, the court issues a stay. This means all collection action, including garnishment, must stop immediately.

Which bills can I discharge in a Chapter 7?

You can discharge most bills, including credit card debt, hospital and medical debt, debt owed to a former landlord, and debt owed due to the repossession of a vehicle.

You cannot discharge:

• Traffic tickets and fines . Read My Drivers License was Suspended. Can I Get it Back? to learn more.

When should I think about Chapter 7 bankruptcy?

You can only file for bankruptcy once every 8 years. Before filing for Chapter 7, at least 1 of these should be true:

If you are a homeowner:

When do I not need bankruptcy?

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How Do You File Chapter 7 Bankruptcy

You can probably complete the process within six months. You’ll have to follow several steps.

Four: Send Tax Return And Wage Information To The Trustee

After your case is successfully filed, the court clerk will assign a trustee to your case and set a meeting of creditors. At least 7 days before this initial meeting, you must send to the trustee:

• a copy of your most recent federal tax return or transcript
• evidence of all payments from employers, if any, received 60 days before filing

At the same time send a notice to the Bankruptcy Court clerk, verifying that you have provided this information to the Trustee.

If you fail to complete these steps, your case can be dismissed.

Tips:

• To protect your privacy, you may black out all but the last four digits of your Social Security number and private account numbers, as well as names and birthdates of children , that may appear on these documents.
• Any creditor may also request a copy of your tax return before you send it to the Trustee. So you will help yourself by sending this to the Trustee as soon as you can, before you get any creditor requests.

If you complete another tax return while your case is pending, you must file that with the trustee, as well.

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What Happens To Your Credit Score After Filing Bankruptcy

Chapter 7 bankruptcy and Chapter 13 bankruptcy filings show up on your credit report. How long it shows up depends on which type of bankruptcy you file. Chapter 7 bankruptcy stays on your credit report for 10 years after the filing date. A completed Chapter 13 bankruptcy stays on your credit report for 7 years after the filing date, or 10 years if the case was not completed to discharge.

As a result, filing bankruptcy will initially lower your credit score. How much your credit score will drop depends on how high or low it was before bankruptcy. Generally, a decrease between 100 to 200 points can be expected.

The good news is that you can begin rebuilding your credit as soon as your bankruptcy discharge is entered. It’s possible to have a better score within 1â2 years of filing. The credit scores of most bankruptcy filers are already lower because of missed payments. After the court grants a discharge, most unsecured debts are erased. Credit scores improve because there are no more missed payments and discharged accounts show a zero balance.

After Chapter 7 and Chapter 13 bankruptcy is filed, you will get credit card offers in the mail. These offers can be for secured credit cards, sometimes called prepaid cards, which require a cash deposit. Or, offers can be for unsecured credit cards, but will likely have high interest rates or annual fees.

Important Things To Note During And After Chapter 7 Bankruptcy Filing

Check with your bankruptcy attorney whether you have filed the correct bankruptcy forms. You dont need to lose everything after bankruptcy. Every state has a set of bankruptcy exemptions that can help you protect your property.

The trustee in bankruptcy will determine whether your nonexempt property is worth selling to help you get out of debt. If you want to keep a specific non-exempt property, you can negotiate with the trustee on ways to keep it.

You need to declare all debts when you file a bankruptcy. In most cases, you can have a discharged debt even if you forget to list it when you filed for bankruptcy, only when your bankruptcy case is a no-asset case.

Not all debts can be wiped out or eligible for discharge. Under the U.S. Bankruptcy Code, different types of debt cannot be discharged. Most common are alimony, child support, unpaid taxes, and student loans.

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Take Bankruptcy Course 2

After filing your bankruptcy forms, you will need to complete a Debtor Education Course from an approved credit counseling agency. It can be completed online or by phone and typically takes at least 2 hours and costs between $10 $50, unless youâre eligible for a waiver.

The purpose of the course is to educate you on making smart financial decisions going forward but does not provide legal advice about the bankruptcy process. Youâll learn how to prepare a budget and avoid incurring debt with high interest rates.

Youâre not eligible to receive your bankruptcy discharge and obtain a fresh start if you donât complete the course and file your certificate of completion from the credit counseling agency with the court.

What Debt Can And Cant Be Erased

Chapter 7 bankruptcy can erase the following common debts:

• Personal loans and payday loans

• Judgments from credit cards and debt collection agencies

• Utility bills

These debts are known as âdischargeableâ debts.

The moment someone files bankruptcy, a rule called the âautomatic stayâ goes into effect. This temporarily stops anyone from collecting any debts you owe them.

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 backed by property, such as a mortgage backed by a house or a car loan backed by a car. If you want to keep your property that secures a debt, you cannot erase the debt in Chapter 7 bankruptcy. 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 secured debts.

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Filing For Chapter 7 Bankruptcy In Maine: Getting Started

Important! This information is for individuals who need to file for bankruptcy and who cannot get help from a lawyer. Important steps you need to take before trying to file for bankruptcy on your own:

If you have taken all of the above steps and have no other options left but to file on your own, then you may want to use this information to help you get started.

This information will not help you if you need to file under Chapter 11, 12 or 13 of the Bankruptcy Code. This information is for Chapter 7 filers. If you are not filing under Chapter 7, we recommend again that you get a lawyer.

Thanks to William Sandstead, an experienced bankruptcy attorney with offices in Portland, for his help in developing this information.

Do You Have Wages Or Valuable Property

A creditor will take the time to determine whether you have assets before taking steps to collect from you. If you don’t have an income stream or property other than basic household items and a modest carand you the situation isn’t likely to changeyou’re judgment proof. A creditor will be unable to collect from you, so it’s unlikely that filing for bankruptcy will be necessary.

The same is true if all of your income comes from Social Security , and all of your property is exempt .

If you do have valuable assets, you can expect your creditors to take action. You can count on collections for taxes, child support, and student loans occurring quite quickly because the law allows creditors special collection rights. Other unsecured creditorssuch as those with credit card balances, medical debt, utility balances, and the likemust first sue you in court and obtain a court judgment before they can start collection procedures, such as a wage garnishment or seizure of personal property.

If a creditor serves you with a lawsuit, you’ll want to speak with a bankruptcy attorney as soon as possible. Filing a bankruptcy case before the creditor receives a judgment will help avoid liens being placed on your property . Even if the creditor already has a judgment against you, however, filing for bankruptcy can often provide needed relief.

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Four Reasons Chapter 7 Bankruptcy May Be Right For You