Get Out Of Debt

If you have bankruptcy questions, you certainly aren’t alone. Filing for bankruptcy can be a very confusing process, particularly at first, so here is some important information you need to know to get you through the process as quickly as possible.

First of all, keep in mind that the three most popular forms of bankruptcy filings are chapter seven, chapter eleven, and chapter thirteen. Without understanding the difference between this, it’s virtually impossible to get as good a deal as possible.

Chapter seven is where you have to give up all your unprotected assets, and is probably the worst kind to have. With this method, you basically give up all your things in order to pay off your creditors, and your business is shut down.

The good news is, you start over without any debt-the bad news is, of course, you are left without many personal belongings left, and of course, you have no business anymore.

Chapter eleven is usually a more desirable option, but again, is more expensive to file for, and of course, has higher requirements you need to meet. In this case, you give the court a detailed plan you will follow in order to pay off your debts, and if approved, you don’t lose any of your personal assets. Instead, you simply use the income you generate in the future to pay off your creditors.

Typically one month after you file, you will meet with your creditors in order to outline your income and expenses, and explain the plan in more detail. What should this plan entail? Here is a brief summary of the main points you need to cover.

First of all, you need to explain why you are filing, how you got to this situation, your assets and liabilities, how much money is coming in and going out, how you plan on paying off your debts (ie where the money will come from) etc.

The main point you need to remember here is that you are making the plan as opposed to the court laying one out for you, as is the case in chapter 13. This makes chapter 11 the desired option for most people, but again, can be hard to get, because if you can’t clearly demonstrate your financial situation will improve in the near future, you will be out of luck.

These are the answers to some of your bankruptcy questions, but to find out exactly how to get the best deal possible, keep reading.

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 credit

Information regarding bankruptcy credit is necessary prior to having filed for the Chapter 13 that must be last resort of yours. The imperative action taken by you prior to having filed for bankruptcy would that be of acquiring credit report with regards to financial situation of yours. From here onwards, there’re several strategies regarding debt reduction which can be enacted by you well before the hitting the fatal button of Chapter 13. If you, however, wish of filing for bankruptcy, be sure about knowing the finest way of going about it.

Bankruptcy credit report

The 3 major sources relating to obtaining the credit report are Trans Union, Equifax, and Experian, i.e. TRW. They would be providing information regarding the credit inclusive of all the loans, like car and house loans. They would also be having information regarding credit card debts of yours, along with the other small loans. If you do not ask for the credit score, these reports can be obtained for free.

Debt Reduction bankruptcy Credit Report

There’s lots of avenues which you could pressure or finding out ways regarding filing for the bankruptcy. Do not forget that if filing for the bankruptcy comes in to picture, record of yours would be staying on the public records, that too, for around 10 years. 7 years would be contained with credit reports. A good point for noting is that credit can be still accessed from monetary institutions during such time period. As past debts of yours have already been paid by now, and no money is owned by you on them, till you prove of yourself to be making good income, along with having built up some sort of savings history, particularly in last 6 months, you are likely of finding yourself somewhat lucky.

There are a number of ways of reducing debts of yours. They are inclusive of lots of things. For instance- you can try to call your creditors, thereby asking them for an offer to settle today. Such a method is reported to have worked out and can also help in reduction of amount of loan repayment to around 85% of total. You are also likely of going lower, just like any process of negation. All you need to do is try to go for lesser amount, that too, without being offensive-anywhere from fifty percent and upwards. Capacity of repayment and repayment history way in the form of factors. If you’re to go in to bankruptcy, and the same is thought from the opposite party, getting something, i.e. some amount in comparison with nothing. You can then go up on offer.

Facts pertaining to bankruptcy credit reports

The most astonishing fact about bankruptcy credit reports is that every thirty seconds, someone goes on to file for bankruptcy in the US.

Kinds of bankruptcy

Bankruptcy consists of two kinds. Chapter 7 bankruptcy can be referred to as the bankruptcy declared upon appointment of a trustee by the court. Chapter 13 bankruptcy can be referred to as the one occurring upon consolidation of debt in to single payment on the month-to-month basis.

Chapter 7 bankruptcy is one you file for liquidation. During this bankruptcy proceeding your assets will be sold as directed by the judge to pay off your creditors. It is essentially a bankruptcy proceeding for consumers who don’t have enough money to pay off their creditors.

In order to buy this some time to recover financially and satisfy creditors, consumers may file for Chapter 7 bankruptcy. A Chapter 7 bankruptcy claim relinquishes your nonexempt property to the bankruptcy trustee. At this point the trustee will proceed to liquidate the property (convert to cash), and subsequently distributed to your creditors.

Not all people can qualify for Chapter 7. A few of them that do qualify are those who own real property, working people, and people who live or have a residence in the USA. You can file for Chapter 7 insolvency provided you haven’t filed for either chapter seven or Chapter 13 in the last 6 years.

After deciding to declare bankruptcy, your lawyer must verify your qualifications to do so. Your lawyer will conduct a financial audit to determine if in fact you are in a financial bind significant enough for a Chapter 7 bankruptcy declaration. During this period your monthly earnings will be scrutinized, and will have to be equal to or less than the median income for your particular state in order to qualify for Chapter 7 bankruptcy. And of course your monthly expenses such as, your rent or mortgage payment, food, other monthly bills will be deducted from your monthly income.

If your earnings are at least $100 under the state’s median income than you’ll have the right to file Chapter seven insolvency. During Chapter 7 insolvency, which is different than Chapter 13 insolvency, your obligations will be wiped out and you’ll be given a new start financially.

The largest flaw to chapter seven insolvency is naturally the total eradication of your credit for at least ten years, an incapability to borrow for no less than 2 or 3 years, dependent on when your insolvency is discharged. This is the reason why most credible debt control or legal firms will counsel you not to file a Chapter seven claim apart from as a final resort.

In future articles we will go into much more depth on Chapter 7 bankruptcy, including qualifications to make a claim, as well as, the short and long-term ramifications Chapter 7 bankruptcy will impose on you.

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!