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.
Before You File For Chapter 7 Speak With A Bankruptcy Lawyer
Stuck in debt? Not sure how or when you will be able to pull yourself out? If this all seems a little overwhelming, it doesn’t have to be. But without a complete and nuanced understanding of the law, you may not get the most desirable results. Get some peace of mind today and contact a local bankruptcy attorney.
Reasons To File For Chapter 7 Bankruptcy
A big benefit of filing Chapter 7 is that indebted people receive an automatic stay on their financial obligations. Under the stay, a court order is issued, one that prevents lenders from attempting to collect a payment from the borrower. The stay occurs right after the individual files for bankruptcy.
It takes approximately three months to complete a Chapter 7 bankruptcy. Once a person completes the process and receives a discharge, he or she is no longer personally responsible for the incurred debt.
Those who file for Chapter 7 bankruptcy are permitted to keep their homes and vehicles as long as they are not behind on making payments for them. However, Chapter 7 does not eliminate:
- Student loans
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Drawbacks Of Chapter 13 Bankruptcy
Although you can keep your property, Chapter 13 bankruptcy is no picnic.
- Discharging your debts can take three to five years.
- Because a lot can happen in three to five years sickness, divorce, getting laid off Chapter 13 bankruptcy has a high failure rate.
- The repayment will tighten your budget.
- Its more complicated than Chapter 7, so youll need to hire a bankruptcy attorney, which will cost somewhere between $3,500 and $5,000.
- If you dont keep up your repayment plan, your bankruptcy case could be dismissed or converted to Chapter 7, which means you could again be in jeopardy of losing assets like your home or car.
- Failing to file required taxes during your case or failing to pay child support and alimony could also send you into Chapter 7 bankruptcy.
- Youll have to send a copy of your income tax return to the Chapter 13 bankruptcy trustee every year during your bankruptcy case. If you get a tax refund, that money will go to your unsecured creditors on top of your regular monthly plan payments.
Requirement : Insufficient Income
The third requirement is where some people may start failing to meet the eligibility requirements. The Licensed Insolvency Trustee will look closely at your budget. If you cant afford to meet the monthly obligations on your debt, then the trustee will rule that you have insufficient income.
However, just because youre living paycheque-to-paycheque, it doesnt necessarily mean that the trustee will agree that you cant afford to pay your bills. If you have a range of discretionary expenses in your budget that you could cut, then you may not meet this requirement.
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Who Decides If I Am Eligible To File
Bankruptcy eligibility is determined by a Licensed Insolvency Trustee . This is the same individual that oversees a consumer proposal filing.
When you contact a Licensed Insolvency Trustee, they provide a free consultation to make sure you meet the minimum indebtedness and other basic requirements. Both consumer proposal and bankruptcy filings require you to owe at least $1,000.
If you meet that requirement, then they will conduct a full review of your liabilities , assets, and budget. They will look at your budget to determine if you can afford to meet the payment requirements on your bills. They also compare your total debt amount to the total value of your assets.
If you cant pay your bills and owe more than your assets are worth, you are officially declared insolvent. This means you are eligible to file.
If so, the Licensed Insolvency Trustee will oversee the bankruptcy process for you. They set up a trust and oversee the sale of any assets that dont qualify for an exemption. The proceeds will be used to pay your creditors. Once all your assets are sold, the remaining balances.
Essentially, the LIT is both the gatekeeper and the overseer of your filing. If youre thinking of filing, then your first step is to find and contact a Licensed Insolvency Trustee.
Filing Chapter 7 Bankruptcy In Florida
Chapter 7 Bankruptcy is the legal procedure where the debtors unsecured debt is discharged after the debtors non-exempt assets have been liquidated. To file a Chapter 7 bankruptcy in Florida, a person must be a permanent Florida resident or own property in the state. Florida has three bankruptcy districts , and each of Floridas counties is assigned to one of the three bankruptcy districts. People must file bankruptcy in the district and local division where they reside.
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Debts That Can And Cant Be Discharged In Chapter 7 Bankruptcy
Chapter 7 should dismiss most of the debts you owe, but there are some hard-and-fast debts that cant be discharged in Chapter 7.
The list of non-dischargeable debts includes:
- Child support
- Student loans must prove undue hardship
- HOA fees if you surrender your home or condo
- Any other form of unsecured debt.
Speak With A Professional
The U.S. Bankruptcy Court strongly suggests that those filing get an attorney. Court officials, including judges, are barred by law from offering advice to people whove filed for bankruptcy. The court does have information and documents available for those doing it themselves, legally called pro se.
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Your Proposed Plan Repays All Required Debts
Under Chapter 13, bankruptcy law requires the repayment of some debts in full. Debts in this category include:
- Priority debts: Unsecured debts, such as child support, alimony or support payments, and nondischargeable taxes.
- Secured debts that survive the repayment plan: Secured debts, such as a mortgage or a vehicle loan, must remain current during the repayment plan.
- Other secured debts: Secured debts, like judicial and tax liens, must be paid in full during the repayment time.
Things To Consider Before Filing For Bankruptcy
Before declaring bankruptcy, there are some things you need to consider. Here are some:
All debts may not be forgiven.
Be aware that bankruptcy filings will not erase all your debts.
Some obligations that cannot be cancelled include:
- student loans
- alimony
- court fines or penalties.
All credit card and loan debt and loans and lease or contract obligations are eligible for discharge.
Your credit score will be affected if you file for bankruptcy
In return for your debt being discharged, filing bankruptcy signals to others that you are a credit risk. This will reflect in your credit score. It may prove challenging to obtain a loan, mortgage or credit card after bankruptcy filings.
Remember that a Chapter 7 bankruptcy will remain on your record for ten years.
It will be visible on your credit report for seven years if you file Chapter 13 bankruptcy. It is then deleted.
You may have to pay your co-signers
If you are unable to make your payment, co-signers will promise to pay it. If you file Chapter 7, your creditors can pursue the cosigner even if your bankruptcy case is successful.
Your creditors cant pursue your cosigner under Chapter 13 if you keep your monthly payments in line with your agreement.
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Chapter 13 Vs Chapter 7 Bankruptcy
If you are considering filing for Chapter 13 bankruptcy and have determined that you are eligible, recognize that Chapter 13 is different than Chapter 7. Chapter 13 is referred to as a wage earners bankruptcy as opposed to a total liquidation bankruptcy .
Chapter 13 requires the debtor to repay some portion of the debts that are included in the bankruptcy as opposed to just having those debts forgiven after an asset sale. Under Chapter 13, you will not be required to sell your assets and you will not have to turn over income up front. But you will need to get your creditors to agree to a plan whereby you pay back a certain amount each month for three to five years.
If You Don’t Pass The Chapter 7 Means Test
If you don’t pass the means test, you’re limited to using Chapter 13 bankruptcy, which requires you to make monthly payments over a three- to five-year period according to a strict budget monitored by the court. Most people who file for bankruptcy prefer Chapter 7, which requires no repayment. However, Chapter 13 bankruptcy is still the best way to handle specific problems, like curing a default on a mortgage and repaying debts that won’t go away in bankruptcy, such as most taxes and support arrearages.
But before you settle on Chapter 13 bankruptcy, be sure to talk to a lawyer. With expert legal advice, you might find that you’re able to pass the means test after all.
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Summary Of Bankruptcy Steps
Overall, the process to file bankruptcy in Orlando includes the following steps:
Do I Qualify For Bankruptcy If I Have No Or Low Income
The bankruptcy means test compares your family income to the to the median household income for your household size. The means test calculation determines your average income based on the past six months to arrive at an current monthly income.
Your average annual income is compared to the median annual income of a household of your size in your area. If your income is below the average income level, you meet the income qualification to file Chapter 7.
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What Happens When I File A Chapter 7 Case
A bankruptcy proceeding is initiated by filing a petition with the bankruptcy court. When you file for Chapter 7 liquidation, the petition operates as an automatic stay, which generally prevents creditors from pursuing debt collection actions against you unless the bankruptcy judge approves it first. The automatic stay goes into effect immediately upon filing the petition no court hearing or approval by a judge is necessary. When the case is filed, the United States trustee for your judicial district appoints a trustee to review your financial affairs and administer your case. The appointed trustee has the power to liquidate any asset you own that is not by law exempt from collection or subject to a lien in order to pay your creditors.
Rules For Filing A Second Bankruptcy Petition
A prior bankruptcy petition can make you ineligible to file for a period of time. Generally, an individual is ineligible to file a new petition if they have received a discharge under Chapter 7 within the past eight years, as measured from the date that the previous petition was filed. Dismissal of a bankruptcy petition within the past 180 days will also bar a new filing until the appropriate amount of time has passed.
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Role Of The Case Trustee
When a chapter 7 petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the debtor’s nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor’s assets are exempt or subject to valid liens, the trustee will normally file a “no asset” report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an “asset” case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002. A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502. In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor’s property should consult an attorney for advice.
Filing For Chapter 7 Bankruptcy Yourself
Pro se litigants are expected to follow the rules and procedures in federal courts and should be familiar with the United States Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the local rules of the court in which the case is filed, the U.S. Bankruptcy court says on its website.
Those filing pro se can hire a non-attorney petition preparer, but the prepares can only enter information into forms, they cant offer legal advice or assist in other ways.
Cibik and Solomon both say that while hiring a bankruptcy lawyer isnt necessary, hiring one can be a huge help. The process will end up costing between $1,500 and $2,500.
The Bankruptcy Code is complex almost as complex as the Tax Code, said Cibik.. He served as a bankruptcy trustee under Chief Bankruptcy Judge Emil Goldhaber. My favorite quote from was, if you DIY, its almost like performing brain surgery on yourself.
Solomon said that hes had people come to him for help after trying for months to do it themselves.
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To Qualify For Chapter 7 Bankruptcy Your Disposable Income Must Be Low Enough To Pass The Means Test
By Baran Bulkat, Attorney
Chapter 7 bankruptcy provides relief from debt bywiping out most unsecured debtand giving the debtor a fresh start. But not everyone qualifies for Chapter 7 bankruptcy. To prevent consumers from abusing the system, filers must meet eligibility requirements before receiving a debt discharge in a Chapter 7 case. In this article, you’ll learn about the main requirements you’ll need to meet before qualifying for Chapter 7 Bankruptcy relief.
How Does The Chapter 7 Process Differ From Others
There are several different types of bankruptcy, though the two most used by individuals are Chapter 7 and Chapter 13. About 70% of those who filed for bankruptcy in 2020 filed Chapter 7, with almost all remaining filing Chapter 13. A small fraction filed Chapter 11, which is a reorganization bankruptcy most commonly used by businesses.
Chapter 7 is a much faster process than Chapter 13. Once Chapter 7t is discharged, the court process is finished. The rest maintaining a budget and living within your means is up to you. With Chapter 13, the court, you, your trustee and your creditors agree to a repayment plan that takes 3-5 years. The plan is based on what the court determines your ability to pay is, and if you stick with it, the rest of your unsecured debt is discharged once its completed. If you dont, the bankruptcy is dismissed and youre back in the situation you were in before filing.
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Straight Bankruptcy: Chapter 7
Am I eligible to file for bankruptcy under Chapter 7?
It used to be possible for anyone to file for bankruptcy under Chapter 7. However, a new bankruptcy lawthe Bankruptcy Abuse Prevention and Consumer Protection Act of 2005came into effect on October 17, 2005. Under the new bankruptcy law, you are eligible to file for bankruptcy under Chapter 7 if you earn less than the median income in your state. If you earn more than the median income in your state, then you will only be eligible to file for bankruptcy if you pass a to determine whether you are eligible.
Discharge under Chapter 7 is not available if you filed for bankruptcy and were granted a discharge under Chapter 7 within the past eight years.
How does the means test work?
If you earn more than the median income in your state, the state applies a means test to determine whether you are eligible to file for bankruptcy under Chapter 7. In the means test, the court applies a complex formula to determine whether your monthly income is less than $100.
- If your income is less than $100 per month, you can file under Chapter 7.
- If your income is between $100-$166 per month, the court will determine what percentage of your unsecured debt they could pay off using disposable income over a 5-year period and decide whether you should file under Chapter 7 or 13
- If your income is more than $166 per month, you must file under Chapter 13.
