Get Out Of Debt

Chapter 13 bankruptcy is a form of debt relief put into place by the federal government that allows you to pay your debts back to your creditors over a period of no more than five years. How long you have to pay back your debts after you enter chapter 13 bankruptcy depends on a number of things, including factors such as your income and the amount of debt you owe. It is there for people who do not want a chapter 7 bankruptcy or those who do not qualify for a chapter 7 bankruptcy, and looks a bit better on your credit report.

Who qualifies for a chapter 13 bankruptcy? Anybody whose debts are under a certain amount can file, even those who work for themselves. The only time a person cannot file is if they have already filed a bankruptcy within the past 180 days and it was dismissed for any reason. This means that anyone who wants to seek relief from their creditors in the form of a payment plan may do so by using chapter 13.

During a chapter 13, a debtor has certain responsibilities to uphold. When filing a bankruptcy petition, a person has to submit a list of all of his or her creditors, as well as all income, assets, and expenses. Those few things are what will determine how much and over what time frame the debtor must pay back their debts. Additionally, before a debtor files, they must submit proof that they went through approved credit counseling classes, and the last six months of pay stubs from his or her employer. A debtor must submit prior years tax returns, and any interest that has been accrued on student loan accounts.

Chapter 13 can help you get out of debt in an organized way, in equal installments over a period of time. If you are in over your head in debt, and you do not want to go the route of a chapter 7 bankruptcy, you may want to consider a chapter 13 bankruptcy. It looks better on your credit report and you will be able to pay off the debts that you owe. Depending on the creditor, you may still be able to keep your accounts open with them.

For many people, chapter 13 is a very good form of debt relief. There are many reasons a person would want to file a chapter 13 instead of a chapter 7. Some of those reasons include having a more positive credit report, and the feeling that they are paying back the debts they owe. They feel more responsible doing this instead of taking an easy way out.

When you file chapter 13 bankruptcy, you do not have to worry about your creditors harassing you with their phone calls and letters any more. By law, once you file bankruptcy, creditors are legally prohibited from contacting you. They may not try to collect on your accounts anymore. Best of all, they cannot garnish your wages.

If you have reached a point in your life where your debt has piled up and you are considering filing bankruptcy, then odds are that life hasn’t been too pleasant for you lately. One of the worst issues you will have at this time is the harassment by creditors, fear of repossessions, and utilities being turned off.

While these issues shouldn’t be the reason for filing bankruptcy one “benefit” (if it can be called that), is the automatic stay. The automatic stay is “automatically” put in place and accomplishes several things including protection against bill collectors, foreclosure, utility disconnections, and being evicted. There are some cases where it isn’t automatic such as when people have recently filed other bankruptcies. Here are some points of relief that the automatic stay can give you during this stressful time:

Foreclosure – An automatic stay will temporarily stop foreclosure. The creditor will probably be able to foreclose eventually if you file Chapter 7, but this will buy you some valuable time to make decisions. Chapter 13 bankruptcy is a better option if you want to keep your house and you can usually file a bankruptcy petition any time before the sale of your house. Utilities – If the utility company is threatening to cut off your water, electricity or gas, the automatic stay could give you up to 20 days of extra time. Once you file bankruptcy the automatic stay will force the utility company to reconnect your service if your utilities have already been disconnected. Wage Garnishments – Garnishments as in the case of child support and alimony will be completely stopped when bankruptcy is filed. Your paycheck will be protected and you will be able to take home a full salary and can also discharge the debt in bankruptcy. Eviction – Some help will be provided, but the new bankruptcy law makes it easier for landlords to evict you. If your landlord already has a judgment of possession against you when you file, the automatic stay won’t affect these eviction proceedings; the landlord can continue just as if you hadn’t filed for bankruptcy. Also if the landlord alleges that you’ve been endangering the property or using controlled substances there, the automatic stay won’t any good. In some cases, the automatic stay might give you a few days or weeks but the landlord can ask the court to lift the stay and the court will probably do so. Repossession – Your car cannot be repossessed while you have an automatic stay but this does not prevent you from having to handle the issue by reaffirming your car loan of returning it. You may be able to save your car with a Chapter 13 Bankruptcy but will have to make your trustee payments. Also, you need to be aware that a creditor can ask a judge to lift the stay so they can repossess.

As you can clearly see, an automatic stay won’t solve all your problems but it does give some temporary relief. It will stay in effect until you complete the bankruptcy and receive a discharge, the judge lifts the stay when a creditor requests it, and the property you want to protect is no longer a part of the estate. Be sure to read further information before you make any decisions about filing bankruptcy so you can be well-informed.

A Chapter 7 bankruptcy petition is a liquidation (sale/disposition) of a debtor’s nonexempt property to generate cash for creditors in exchange for a discharge of all dischargeable debts.

A debtor has a “no asset” estate if the scheduled or recoverable assets, less encumbrances (balance of loan(s), judgment lien(s), etc.) and exemptions, equals no funds for creditors.

Such a debtor will be discharged from dischargeable debts, after filing of a “no asset” report by the trustee and issuance of a discharge order by the Bankruptcy Court. The case is subsequently closed as a matter of ministerial act.

Eligibility for Chapter 7 Petition:

Unlike a Chapter 13 petition which has limits on the amounts of unsecured and secured claims for eligibility, a Chapter 7 petition has no such limitations. But a Chapter 7 individual debtor must have a domicile (residence), a place of business, or property in the United States, under 11 USC § 109(a).

Moreover, U.S. citizenship and financial distress are not required for Chapter 7 eligibility. But a Chapter 7 debtor is not eligible to receive another discharge in a Chapter 7 bankruptcy case during the eight-year period after the filing date of the prior Chapter 7 petition, under 11 USC § 727(a)(8).

An individual debtor is required to receive credit counseling briefing from an approved credit counseling agency during the 180-day period before filing the Chapter 7 petition. The briefing may be delayed for 30-days, (and even up to 45-days, if approved by the Bankruptcy Court), after the Chapter 7 filing date, if there are “exigent circumstances” that merit waiver of the briefing and the debtor was unable to obtain a briefing within 5 days from request.

It has been held that emergency filing to stop foreclosure sale is not “exigent circumstance,” excusing compliance with the credit counseling requirement. After filing a Chapter 7 petition, the debtor is required to attend a financial management course, after the section 341(a) meeting of creditors.

The filing fee for a Chapter 7 petition is $299.00, payable to the U.S. Bankruptcy Court.

Means Test To Determine Abuse:

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) instituted the “means testing” for individual Chapter 7 debtors to determine dismissal for abuse, in 11 USC § 707(b)(2). It is also used to determine “disposable income” in Chapter 13 petition for repayment to creditors and the length of the period of the plan.

The basic “means test” formula triggers the presumption of abuse in a Chapter 7 individual debtor whose debts are primarily consumer debts, if the debtor’s current monthly income, reduced by allowable monthly expenses (IRS’ National and Standards: http://www.irs.gov ) and multiplied by 60, is not less than the lesser of: (a) the greater of (1) 25 percent of the debtor’s nonpriority unsecured claims in the case; or (2) $6,000.00; or (b) $10,000.00.

If the means test applies and the presumption of abuse arises, the Bankruptcy Court may dismiss or convert the Chapter 13, unless the debtor can rebut the presumption by establishing special circumstances, such as call to Armed Forces active duty or serious medical conditions, justifying additional expenses or adjustments of current monthly income.

But if the debtor’s and spouse’s current monthly income multiplied by 12 as of the Chapter 7 filing date is equal to or less than the state median family income ($46,814.00 for 1 earner, $61, 742.00 for 2 people, $66,611.00 for 3 people, $76,931 for 4 or more people in California) based on the debtor’s household size, then the means test does not apply. And there is no standing to bring a motion to dismiss/convert, under 11 USC § 707(b)(2).

California Exemption Law:

With the California Legislature opting out of the federal exemptions in 11 USC § 522(d), individual debtors residing in California may choose between the so-called “703-series” or the “704-series” exemptions, the amounts of which are adjusted effective April 1 every three (3) years by the Judicial Council.

Some of the amounts of exemptions under the “703-series” are: real or personal property homestead – $20,725.00, motor vehicle – $3,300.00, clothing/household goods/appliances – $525.00 per item, jewelry – $1,350.00, personal injury recovery – $20,725.00, tools/books of trade – $2,075.00, and unmatured life insurance – $11,075.00.

And some of the amounts of exemptions under the “704-series” are: real or personal property homestead – $50,000.00, if single, $75,000.00 for family, $150,000.00 if 65 or older, motor vehicle – $2,500.00, jewelry – $6,750.00, personal injury recovery – amount needed for support, tools/materials – $6,750.00, and matured life insurance – $10,775.00.

The series most advantageous to the debtor depending on his or her circumstances should be used in the Chapter 7 petition.

Automatic Stay And Relief Therefrom:

The filing of a Chapter 7 petition results in stopping all collection efforts, all harassment, and all repossession and foreclosure actions by creditors against the debtor and the debtor’s property, until: (1) the stay is lifted by a Bankruptcy Court order, (2) the stay terminates or is ineffective, and (3) the case is closed or dismissed.

Creditors may seek relief form automatic stay to: (1) foreclosure or real estate collateral/ security interest, (2) repossess personal property as security for delinquent loan(s), or (3) continue litigation in another case stayed by the filing of the Chapter 7 petition.

Common grounds for relief from automatic stay are: lack of adequate protection of an interest in property, debtor has no equity in the property, or the property is not necessary for an effective reorganization.

Thus, Chapter 7 petition cannot prevent the foreclosure of the principal residence of the debtor, which is the collateral/security interest for a purchase money loan, as stated in the recorded deed of trust.

Discharged And Undischarged Debts:

A Chapter 7 discharge order by the Bankruptcy Court eliminates a debtor’s legal obligation to pay a debt that is discharged.

Some debts are, however, not discharged in a Chapter 7 bankruptcy case, to wit: most taxes, domestic support obligations, most student loans, most fines, penalties, or criminal restitution obligations, debts for personal injuries, death caused by driving under the influence, debts not properly listed in the schedules, debts decided as not discharged by the Bankruptcy Court, debts that are properly reaffirmed, and debts owed to certain pension, profit sharing, other retirement plans.

Bankruptcy FAQ

How much will Bellevue bankruptcy cost me?
Bankruptcy cases generally cost about $1000 and $2000 for a Chapter 7. While this is a good estimate, prices will differ depending on your situation and the type of bankruptcy that you file. A Chapter 13 is much more expensive because it take much more time and work.

Will I lose everything?
No you will not. Depending on the type of bankruptcy you file under, you may not lose anything at all. If you file Chapter 13 the bankruptcy court does not require you to give up any assets. In a Chapter 7 the bankruptcy court will require you to give up any non-exempt assets, but with the help of a bankruptcy attorney most people who file bankruptcy must not give up any assets.

Will my creditors leave me alone?
They certainly will. Once you submit your bankruptcy petition, your creditors will no longer be allowed to try to get money from you. This happens because the bankruptcy court will send an automatic stay to all your creditor on your behalf. This automatic stay legally prohibits them from trying to contact you at all.

How will bankruptcy affect my credit score?
A bankruptcy can remain on your credit report for 10 years after you file bankruptcy. Most people are not approved for a mortgage loan for 2 – 3 years after they file bankruptcy. However, most people find that after 3 years the major effects of bankruptcy have greatly decreased.

What happens during bankruptcy?
Before filing bankruptcy, all debtors are required to complete a credit counseling course. This course can be completed in person, over the phone or online. Your attorney will help you sign up for it.

Your bankruptcy attorney will then help you get the necessary paperwork together so that your request is filed correctly with the bankruptcy court. Once you have filed, an automatic stay is put into place. This prohibits your creditors from contacting you anymore.

You will then prepare a list of all your assets and debts. Your assets will be divided into two groups, exempt and non-exempt. You will keep all your exempt assets and your attorney will protect your possessions by making them exempt. You will bring this list to a meeting with your creditors and a trustee appointed by the bankruptcy court. The trustee will take your non-exempt assets and sell them. The money raised will be payed to your creditors. The rest of your debt will be discharged.

All you have left to do is take a personal financial management course that can also be completed in person, by phone or online. After that you are living your new debt-free life!

Bankruptcy is a legally declared inability of an individual or organization to pay creditors. During the course of a bankruptcy, a debtor may ask a court to dismiss the case. If the court finds that dismissal will not harm the creditors, ordinarily a court will grant a petition to dismiss a Chapter 7 or a Chapter 13 bankruptcy.

There are several reasons a debtor may prefer to file a Chapter 13 bankruptcy petition. The reasons include the debtor wishes to resolve certain debts that may not be discharged in a Chapter 7 bankruptcy. The debtor may also wish to protect certain cosigners on personal loans from being pursued by creditors for repayment or feels obligated to repay certain debts. The debtor may believe that future creditors will look more favorably on Chapter 13 reorganization than a Chapter 7 discharge. A debtor may be required to file a Chapter 13 bankruptcy if he or she has received a Chapter 7 bankruptcy discharge within the prior six years, or obtained a Chapter 13 bankruptcy discharge within the prior six years and has not paid off at least 70% of the unsecured debts and was subject to the discharge of a prior Chapter 7 or Chapter 13 bankruptcy filing within the prior 180 days, because the debtor violated a court order, or requested dismissal after a creditor sought relief from the automatic stay.

After filing a Chapter 7 bankruptcy petition, some debtors discover that they are better served by pursuing relief under Chapter 13. By filing an appropriate motion with the bankruptcy court, the debtor has an absolute right to convert the petition to a Chapter 13 filing, if the debtor has not previously converted a Chapter 7 bankruptcy to a Chapter 13 bankruptcy, and the debtor’s estate qualifies for Chapter 13 relief.