Who Can File Chapter 7 Bankruptcy

You Can Repay Some Debt

If a filer’s income is more than their state’s median income, it is necessary to look at how much disposable income the filer has left after paying “allowed” monthly expenses, such as rent and food, to determine whether the filer has enough money to pay some of their unsecured creditors through a Chapter 13 repayment plan.

If the filer has a certain amount of income left over to pay some unsecured creditors, the court will dismiss the Chapter 7 filing.

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How Chapter 7 Bankruptcy Works

Once you file for Chapter 7 bankruptcy, the court selects a trustee for your case. Part of the trustees responsibilities include selling off certain types of your assets. That money will be used to pay your creditors.

Property that could be liquidated under Chapter 7 includes:

• Cash.
• A second home.
• A second vehicle.

Some of your assets may escape the chopping block, though. Exempt assets may include your primary home, the car you use for work, equipment you use just for work, Social Security checks, pensions, veterans benefits, welfare and retirement savings accounts.

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What Happens To The Property I Own That Is Subject To A Lien

In some cases, the Bankruptcy Court can set aside or reduce a lien on your property. Additionally, individuals who want to keep the property secured by a lien can enter into reaffirmation agreements with the secured creditors. Under a reaffirmation agreement, the debtor promises in writing to continue to pay the amount owed to the creditor despite the bankruptcy and in return, the creditor agrees to not seize the secured property so long as the debtor continues to make the necessary payments. All reaffirmation agreements must be filed with the bankruptcy court. If you default on your payments under a reaffirmation agreement, the creditor can hold you liable on any deficiency and repossess the secured property accordingly.

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.

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If You Have Good Credit It Will Likely Take A Temporary Hit

Those that are able to maintain their monthly payments and keep their credit score high before filing their bankruptcy petition will see their score drop initially. But, a bankruptcy filing often does more good than harm to the filerâs credit score. Plus, once their bankruptcy discharge is granted, they can begin increasing that pesky credit score immediately.

Youve Exhausted All Other Options

Even though bankruptcy can be good for some people, it should still be a last resort because your credit will take a major hit. Look into these options first.

Debt consolidation loans

You can use a personal loan to pay off all your debts, consolidating your bills into one monthly payment. Depending on your credit score, a debt consolidation loan could save you money in interest charges. The loans interest rate could be significantly lower than the rates of your credit cards.

Before signing on the loan, make sure you can afford the monthly payments. Otherwise, you will fall behind on this, too.

Debt management program

When you call a credit counselor, they help you find the best debt solution for you. This could be a debt management program that you enroll in through the counseling agency.

A DMP can lower your interest rates and consolidate your payments, making it easier for you to pay off your debt quicker. This is the best option if you want to maintain a good credit score.

Debt settlement

Settling your debtmeans paying less than what you owe which means your credit will take a hit. The effect wont be as bad as after bankruptcy, but if you want to maintain your score, this may not be the best option.

You can either settle your debts on your own by speaking with your different creditors or work with a settlement agency that will consolidate your payments.

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What Is Pro Se Bankruptcy Filing In North Carolina

In North Carolina, or anywhere else in the country, individuals dont have to hire a lawyer in order to declare and file for bankruptcy. A registered entity such as a corporation or LLC would need a lawyer. Individuals can choose pro se.

You are allowed to fill out the appropriate bankruptcy forms on your own. You then file those forms with the court by yourself. And you defend any challenges to your filing yourself.

The government provides the paperwork online for anyone to use for free. Some of the forms are quite straightforward. Youll list your personal details and disclose your financial situation. Many of the forms, however, are much more intricate.

To maximize the relief available, it may require knowledge of the United States Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the local rules of the District the case is being filed in, precedential caselaw, and North Carolina statutes.

That seems simple enough. Youve probably filled out plenty of government forms, from your taxes to the census to a voter registration card. Once you look at the full extent of the digital files youll need to download, answer accurately, and submit correctly, you may reconsider.

You should think carefully before you file bankruptcy without a lawyer. Namely, there are numerous risks to pro se bankruptcy filing and many advantages to hiring a bankruptcy attorney.

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Who Qualifies For Chapter 7 Bankruptcy Should I File

There is a difference between who is allowed to file and who should file. Most people who earn under the median income for their state, based on their household size, are able to file. This is because they pass the âmeans test,” according to bankruptcy laws. The means test takes into account your average monthly income over the last 6 months.

If you donât have a job or earn near the minimum wage, you will likely qualify for Chapter 7 bankruptcy. If you don’t pass the means test, you can file a Chapter 13 bankruptcy but not Chapter 7.

Folks looking for a fresh start typically fall into one of three categories:

• Those who should file for Chapter 7 bankruptcy right now;

• Those who should wait a little bit of time and then file for Chapter 7 bankruptcy;

• Those who should not file for Chapter 7 bankruptcy.

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Other Actions A Creditor May Take After Obtaining A Judgment

State laws determine the legal steps a credit card company may take to collect a judgment debt. In some states, creditors are allowed to garnish your wages for judgments. Some states allow judgment holders to apply for supplemental proceedings to identify any personal property the judgment holder may seize to satisfy the debt.

The actions the credit card company takes to collect a judgment debt depends on the company. Some credit card companies and debt collectors pursue judgment debts aggressively. Thatâs because they can afford to have full-time attorneys working on their behalf. In some cases, a person could lose a substantial portion of his or her income in wage garnishments or lose property to satisfy a judgment debt.

Refiling Bankruptcy After A Dismissal

Dismissal may sound like discharge, but theres a huge difference.

A discharge means youve met all the requirements set by the bankruptcy court. Youre no longer on the hook for the applicable debts and your case is closed.

Dismissal means your case has been closed without your debts being eliminated. Its as if you never filed for bankruptcy. Youre back to Square One and your creditors can start hounding you again.

You can refile after a dismissal, but how soon depends on why your case was dismissed. For instance, you must complete a credit counseling course from an approved agency within 180 days before filing for bankruptcy.

The counselor gives you an idea whether theres a better alternative to bankruptcy, like enrolling in a DMP. If you decide to go ahead with bankruptcy, you must have a certificate showing you completed the counseling course.

Failure to comply will result in the court automatically dismissing your case. But if you scramble and take the course, you would likely be permitted to refile right away.

If it looks like youre trying to game the system, you will have to wait 180 days to refile. The bankruptcy code defines that as willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case.

Examples would be:

• Lying to the court.
• Concealing or transferring property in an attempt to defraud creditors.

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Federal Loans And Hardship

Your student loan holder may choose not to oppose your petition to have your loans discharged in bankruptcy court if it believes your circumstances constitute undue hardship. Even if your loan holder doesn’t, it may still choose not to oppose your petition after evaluating the cost of undue hardship litigation.

For federal loans, the Department of Education allows a loan holder to accept an undue hardship claim if the costs to pursue the litigation exceed one-third of the total amount owed on the loan . Private student lenders are likely to apply similar logic.

The Bottom Line: Choose Chapter 7 Or Chapter 13 Bankruptcy Based On Your Needs

The good news is that while bankruptcy is a huge misstep, it doesnt have to dictate your future. Financial health is around the corner if you start exercising wise habits and move forward with a clean slate. As with any major money decision, its best to consult a financial advisor to determine whats right for you and your situation.

Curious what the process of buying a home after a Chapter 7 or Chapter 13 bankruptcy might look like? Read the Rocket Mortgage guide on the subject!

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Alternatives To Chapter 7

Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.

In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. §;707.

Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.

Can You File For Bankruptcy Without An Attorney

The simple answer is yes. You are not required to have a lawyer to file for bankruptcy. In fact, in some simple Chapter 7 cases, you can easily file for bankruptcy on your own if you are willing to dedicate some of your time to research.

Representing yourself is usually referred to as pro se, which is a Latin phrase meaning for oneself or for ones own behalf.

Typically, the importance of a bankruptcy attorney largely depends on the complexity of your case and whether you are filing for Chapter 7 or Chapter 13 bankruptcy.

If you decide to file without the help of an attorney, you will be expected to follow these steps:

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How Property Complicates Bankruptcy

Your debt may initially seem like the biggest complication, and it can be a serious issue if your creditor challenges the discharge, but it isnât always the biggest concern. The real issue may have more to do with the type and the value of assets.

No debtor in bankruptcy is left with nothing at the end of a case. In every state, a debtor is allowed to keep a certain amount and value of assets needed to get a fresh start. These are called exemptions, and the amounts differ from state to state.

These are called exemptions because the property is exempt from the reach of the court, the trustee, and your creditors.

Exemptions work differently in Chapter 7 than in Chapter 13. If you file a Chapter 7 bankruptcy case while you own property that is not exempt, your trustee can take that property, sell it, and use the money to pay your creditors some of what you owe them. If you have non-exempt property when you file a Chapter 13 bankruptcy, you can keep it, but the value of the assets could be considered when establishing your payment plan.

If you dont have much more than the furniture in your house and a car or two, it might not be too difficult to keep your propertythe key is to carefully list everything you own at a reasonable value. These exemptions vary by state, so this is another area in which your ability to research legal issues will be vital.

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Advantages Of Filing For Bankruptcy In Texas

If you have accumulated too much debt and cannot pay your creditors, it may be time to consider bankruptcy as an option. There are many benefits of filing for bankruptcy in Texas. Some of the benefits are:

• Your credit score may increase.
• You can eliminate or reduce your debts and get a fresh start on managing your finances.
• Your stress level will decrease as you are no longer worried about paying off debt that continues to accumulate interest charges.
• Many creditors cannot take any further action against you once bankruptcy has been filed, for example garnishing wages/bank accounts, adding late fees, etc. This means they must leave you alone.
• Your creditors may stop calling you or sending letters.
• You can get rid of any second mortgages, home equity loans, and liens against your house that were not included in the original bankruptcy filing. If you bought a new car after filing for bankruptcy protection, the chances are good that it will be gone too if there is still a lien on it from an old loan or credit card debt.

These are just some of the advantages of filing for bankruptcy in Texas. If you are considering bankruptcy, please make sure to do your research and consult with an experienced attorney for advice before filing.

Filling out the required paperwork can be complicated for someone who has never done it before without help from a qualified attorney.

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Getting Your Bankruptcy Discharge Is Virtually Guaranteed

If youâve never filed bankruptcy before, pass the means test, and are honest in your dealings with the bankruptcy court and the bankruptcy trustee, you can get your bankruptcy discharge in as little as 3 months. As long as you make sure you meet all requirements before and after filing your bankruptcy case, itâs basically automatic.

Time Limits Apply To Discharges Not Bankruptcy Filings

Bankruptcy law doesn’t set a minimum period that you must wait before filing for bankruptcy a second time. However, there’s a catch. If you file too soon after wiping out debt in a previous case, you won’t be eligible for another debt discharge .

Although there are times that it makes sense to file for bankruptcy even though you won’t receive a discharge, these situations are rare . Because a bankruptcy filed too soon will end up being a waste of time and money in most cases, it’s essential to know how to time your bankruptcy filing.

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