Bankruptcy provides legal means of discharging debt and ending creditor harassment. Most filers can use Chapter 7 bankruptcy to discharge qualifying debts after completing a three- to five-year debt repayment plan, although certain debts such as child support, alimony, or restitution must still be repaid as public policy considerations require.
Individuals whose income exceeds what is eligible for Chapter 7 liquidation can seek relief under Chapter 13, commonly known as wage earner’s plan bankruptcy. This allows individuals with steady incomes to create manageable debt repayment plans through installment payments over three to five years.
There are six forms of bankruptcy – Chapter 7, Chapter 13, Chapter 11-12-13-14-15-16
In order to file for Chapter 7 and discharge your unsecured debts, you will first have to pass Part 1 of your state’s means test. This evaluates your household income by documenting all allowable expenses and subtracting them from disposable income.
Filing for bankruptcy will have long-term repercussions, yet it can offer you a fresh financial start by wiping away unsecured debt and setting up payment plans for mortgages, car loans, and other secured debts. Therefore, it’s crucial that you start rebuilding your credit immediately by budgeting wisely and managing loans and credit cards responsibly.
Credit counseling sessions are required as a condition of filing bankruptcy. Make sure you consult with an approved credit counseling agency. Sessions usually last less than an hour and can take place either face-to-face, via telephone, or online. A certificate will then be given to prove the course was completed successfully.
Filers must complete a post-filing debtor education course to equip them with financial tools to avoid future debt. Once complete, their provider will send them an authenticated certificate that must be presented to the bankruptcy court to discharge consumer debts successfully. It is, therefore, imperative that filers complete these classes on schedule.
Before filing for bankruptcy, you must gather all required documentation. These include tax returns and transcripts from the last two or four years (for Chapter 7 bankruptcy filing or Chapter 13 filing, respectively) to prove your income; additionally, you will need evidence of less typical sources of income such as property rentals, nontaxable disability payments, or annuities.
As part of your application for bankruptcy relief, you will also be required to present documentation from any credit counseling courses taken and any ongoing litigation affecting your case. Finally, the court may order you to take an online debtor education class (typically completed within an hour online). Finally, documents related to any legal background or ongoing litigation issues affecting your case should also be provided for review and submission.
Accurately calculating your household income and expenses to pass the bankruptcy Means Test is key. A mistake could cause you to file Chapter 7 when, in fact, it should have been Chapter 13.
The initial portion of the Means Test assesses your average monthly income compared to your state’s median household income for households of your size. If it falls below this benchmark, Chapter 7 bankruptcy could be right for you.
The second part of the Means Test compares your actual expenses against allowable ones (like mortgage, car payment, insurance premiums, tithing, and taxes) to determine if your disposable income is low enough for filing Chapter 7 bankruptcy successfully.
Filing for bankruptcy involves filling out official court forms that must be signed and submitted under penalty of perjury, according to the type of debt you wish to discharge. While certain debts like child support or alimony cannot be discharged through bankruptcy proceedings, most student loan debt typically cannot be released from your obligations either.
Within one month after filing, your trustee will convene a 341 meeting – also known as a creditors meeting or creditors court meeting – which must be attended by you and all your creditors under oath. It generally lasts up to five minutes. Depending on your circumstances, a fee waiver may allow for installment payment plans of the bankruptcy filing fee.
A bankruptcy trustee will organize what’s known as a 341 hearing to verify that you are who you claim to be, answer any queries from unsecured creditors, and address any concerns they might have about you and the bankruptcy filing process in general.
Creditors rarely attend bankruptcy hearings; when they do, however, they usually ask whether you plan to return collateral such as a financed car, enter into a reaffirmation agreement to continue your debt, find any unreported assets or property, and look out for signs of fraud.
At a 341 meeting, it’s wise to bring all your bankruptcy forms. A trustee may ask you to review or verify certain information from them; having them handy makes this task simpler.
Many individuals know they must complete a credit counseling course before filing bankruptcy; however, many don’t realize they also must attend an additional financial management class after filing.
This course, the Debtor Education Course, helps individuals make wise financial decisions in the future. Please complete it to ensure you receive your discharge.
Under bankruptcy laws, certain assets and accounts that qualify as exempt property can be kept. These may include prescribed health aids, tools for your trade, and specific savings accounts. Furthermore, maintaining a steady income source will simplify qualifying for future loans.
Qualifying for bankruptcy involves navigating a series of steps designed to ensure that only those genuinely in need can access this form of debt relief. While the path to filing for bankruptcy may seem daunting, it ultimately provides a structured opportunity to regain control over your financial future and start anew.
Deciding to file for bankruptcy is a significant decision that benefits from experienced legal counsel. Charles Pope at The Pope Firm is ready to examine your financial situation and explain available protections. Contact The Pope Firm at 423-929-7673 or 404 East Watauga Ave. Johnson City, TN 37601. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
A: In Chapter 7, there are no monthly plan payments—only upfront court and legal fees. In Chapter 13, monthly payments are mandatory for 3 to 5 years and equal your remaining disposable monthly income after allowable living expenses are deducted, ranging anywhere from a few hundred to a couple thousand dollars.
