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Requirements to File Chapter 7 Bankruptcy

Jul 4, 2009 Bankruptcy

There are barriers to filing for Chapter 7 bankruptcy protection and receiving the benefits of a financial fresh start and putting an end to harassing creditors, and wage garnishments. Requirements for filing a Chapter 7 bankruptcy include:

- Within the last 180 days you completed a credit counseling course on the internet, on the phone, or in person from a counseling agency approved by the Court;

- The state in which you are filing must have been your place of residence for the previous 90 days. If you have not resided in the state for 90 days then you may file in the state where the majority of your assets have been located for the last 180 days or where your principal of business is located;

- You filed a bankruptcy that was dismissed within the last 180 days for (1) a failure to obey orders of the court or a failure to make an appearance before the court, or (2) requesting a voluntary dismissal after a creditor asked the Court for relief from the automatic stay;

- Not having filed a Chapter 7 within the last 8 years where a discharge was received;

- Either not have filed a Chapter 13 in the last 6 years where you received a discharge, or have received a discharge in a Chapter 13 but paid 70% or more to your unsecured creditors;

- Average monthly income over the last 6 months is less than the median for your county OR the average monthly income over the last 6 months minus allowable expenses is not enough to pay one quarter of your debt over the next 5 years;

- Not be an insurance company, financial institution, nor a railroad.

These requirements are found in the federal bankruptcy code. If you fail to meet one of the requirements, you may still be able to receive bankruptcy protection by filing in another Chapter.

Tags: attorney, Bankruptcy, Bankruptcy Attorney, bankruptcy information, Bankruptcy Lawyer, chapter 7, Chapter 7 Bankruptcy, credit repair, Creditors, Debt, Debt Relief, Debts, Finance, Lawyer

Chapter 7 And Chapter 13 Bankruptcy-What’s The Difference

Jul 1, 2009 Bankruptcy

What are the different types of bankruptcy that apply to individuals? There are two, Chapter 7 and Chapter 13. You may have heard of Chapter 11 but that is for businesses not individuals.

Prior to October of 2005, going through a personal bankruptcy was a fairly simple and painless process. It did ruin your credit but it also allowed for a more liberal discharging of debt. In 2005, the law changed and is designed to provide an incentive to people to file under Chapter 13 rather than Chapter 7. For people with a steady income, Chapter 13 allows them to keep some property like a house or a car that they would otherwise lose in a Chapter 7 filing. Chapter 13 is a court approved “pay back” plan that can run for as long as five years.

If a person opts for Chapter 7 they are essentially agreeing to liquidate all of their belongings and property, with the exception of work related tools and some basic household goods, to pay back the debtors. This is called a straight bankruptcy. To insure that the debtor does not profit from this discharge of debt, the law puts a restriction on how much the debtor can earn while the bankruptcy proceeds.

Once you have filed for Chapter 7, you will not be able to file again for eight years. Chapter 13 on the other hand, has a waiting period of only two years between filings.

While there are some similarities in the types of debt that can be discharged through either Chapter 7 or 13, there will be some differences as well depending on the state where you file. Most unsecred debt, garnishments, foreclosure notices and collection calls can be discharged through bankruptcy. However, child support, alimony, fines, certain taxes and student loans cannot.

Chapter 7 is a straight liquidation. Chapter 13 is a pay back plan. However, unless your plan satisfies all of your debt over the term of the bankruptcy, the Court usually will not allow the debtor to keep property like a boat, time share, recreational vehicles and the like. These items must be sold to meet the requirement to pay all the debt within the scheduled time.

Bankruptcy is no longer the slam dunk procedure that it was. The new law now requires that persons wanting to file either Chapter 7 or 13 attend an approved credit counseling course sometime within the six months before filing. This is another effort to solve the credit crisis without further clogging up the courts with another bankruptcy. In addition, there is now a “means test” for persons wanting to go the liquidation route. If the court believes that you make too much income to just walk away from the debt via liquidation, they will only allow you to file Chapter 13 which is the pay back plan.

Bankruptcy is an emotional time but a necessary step for those who absolutely need the relief.

Tags: Bankruptcy, chapter 13, chapter 7, credit, Debt, Finance, law, Liquidation, personal finance

Filing a Bankruptcy in Arizona? Know Which of Your Assets Are Protected

Jun 28, 2009 Bankruptcy

Even if you are faced with a bankruptcy, it may be comforting to know that some of your assets may be protected by bankruptcy “exemption” laws. If some of your assets fall into these exempted categories, then you as the debtor will be allowed to keep these assets after filing for bankruptcy. The asset, however, can only be protected if the court determines that the asset is within the allowable values as per state regulation. Some states follow the federal government’s list of bankruptcy exemptions. Arizona is a state that has its own exemptions, and the list of exemptions and maximum value limits is much friendlier to debtors in Arizona that in states that follow federal guidelines. Arizona allows more assets with a greater allowable value than many other states.

Even if you file for bankruptcy, your home may still be protected. The homestead exemption can be used to protect the primary resident of the single or married debtor. The debtor will be allowed to keep up to $150,000 in home equity, as well. If the debtor has more equity, the debtor might be ordered to pay the excess equity to the bankruptcy court. If this excess is not paid, it is more likely that the bankruptcy could be dismissed. A bankruptcy trustee might decide the best course of action is to force a sale of the home. If this happens, the debtor is still allowed to keep the $150,000 in equity. Any excess will be used to pay creditors. This helpful exemption may be used only once when filing for bankruptcy.

The vehicle exemption allows a bankruptcy filer to keep his vehicle as long as it has less than $5,000 in equity. A married couple who files for bankruptcy protection can use two, $5,000 exemptions toward two vehicles. Any vehicle equity over those amounts will be treated as it would with the homestead exemption.

Personal property exemptions include items such as appliances, household furniture and furnishings. Married couples can protect up to $8,000 in assets, while single debtors may protect up to $4,000 of assets. These items are assessed at their used value, rather than if they were new items. A detailed list of all of these personal assets must be given to the court.

Bankruptcy laws also protect some miscellaneous assets. Among these items is equipment, such as tools, that can be used for commercial activities. Other items include clothing, wedding jewelry, weapons, books, musical instruments, hobby-related items and certain life insurance earnings. Specific values for each of these items have been set by bankruptcy codes.

For those who worry about retirement, it will be some comfort to note that several retirement-based assets are protected by bankruptcy laws with no value restrictions. However, these must be qualified types of assets, including 401k, state retirement funds, IRAs and other similar assets.

If an asset does not have a present, vested value at the time of filing, then typically it is protected under the bankruptcy code. Such assets include annuities that are not yet vested, future interest in a business as established by the corporate bylaws, and employee stock purchase plans that are not yet vested.

Tags: arizona bankruptcy, attorney, bankrupt, Bankruptcy, chapter 7, law, Lawyer, legal, Tucson, tucson bankruptcy

Examining the Chapter 7 Means Test

Jun 13, 2009 Bankruptcy

According to Chapter 7 Bankruptcy rules, the Court empowers a Trustee to liquidate the debtor’s personal assets in order to repay the debt, at least partially. In most cases, filing for Chapter 7 results in the loss of assets so that your outstanding debt can be repaid.

Whenever someone files for Bankruptcy, he or she is subjected to a Means Test to determine whether the filer can indeed qualify under Chapter 7 or Chapter 13 bankruptcy rules. Here, we examine points that are specific to the Chapter 7 means test.

In terms of the Courts, the Chapter 7 Means Tests encompasses calculating the following:

1. Your average income over the last half year. 2. Whether your average income exceeds or falls short of the particular State’s median income. In other words, if your average income over the past six months is less than your State’s median income, then you qualify for Chapter 7. If, however, your income exceed the median, then the Court will take further steps to determine whether you qualify.

In the event that your average personal income exceeds the State’s Median income, the Chapter 7 Means Test evolves to include the following processes:

1. Calculations are made where the Courts will subtract allowable expenses from your actual income figure. This should produce more of a disposable income figure. With this more-accurate figure, the Courts will multiply it by 60 to get a total income value for the next 5 years. 2. Another comparison is made where the Courts will stack your 5-year income against the State’s median income. If your amount exceeds the median’s by $10,000, then you do not qualify for Chapter 7 (although you would most likely qualify for Chapter 13). In the event, however, that your 5-year figure exceeds the median, but your monthly income falls short, then you still qualify.

As well, your disposable income should not exceed 25% of your unsecured debt. If it does, then you will not qualify for Chapter 7 Bankruptcy (Chapter 13 might still be an option).

In short, while applying for Chapter 7, calculate the average personal finance income and determine if you are above or below the state median. If you are unable to complete this on your own, no worries; a bankruptcy trustee or attorney will need to complete them anyway. Likewise, if you find your are close, it will still be worthwhile to speak with a professional if this is the route you choose.

Of course, Chapter 7 and Chapter 13 bankruptcy should only be a last resort given the short- and long-term damage it causes to your credit score, finances, and emotional state. If you have the ability to repay your debt on a fixed schedule, you should explore such options before resorting to bankruptcy.

Tags: Bankruptcy, chapter 7, Chapter 7 Bankruptcy Means Test, Chapter 7 Means Test, credit, personal finances

What You Need To Know About Personal Bankruptcy

May 2, 2009 Bankruptcy

It maybe the worst thing ever to do, but sometimes you just have to file a personal bankruptcy. It is not easy but when your situation calls for it, there is nothing much you can do about it.

So early on, you should know the telltale signs of personal bankruptcy so you can get yourself out of it before the whole thing blows up. Usually, a person that experiences loss of income, job loss, or personal business failure is headed for personal bankruptcy.

Others have excessive student loan debt that they need to pay back using their income while some need to pay up the debts resulting from accidents or serious illness that happened in the family or to themselves.

Sometimes all these are too much for other people leading them to ultimately file for personal bankruptcy. Everyone needs to make their own decision and check the alternatives.

But sometimes, just sometimes, there are ways to avoid being in this situation. People sometimes file for debt consolidation loans. Some go for credit counseling and have a debt management plan made for them while some send consumer proposals to creditors.

But if these options would just not work for you, then perhaps knowing the advantages and disadvantages of being in this financial situation might lessen your load even a bit. Some of its advantages would be protection from collection action, legal action, and wage garnishes.

Filing for personal bankruptcy also gives you the privilege of having your unsecured debts eliminated. Also, it is quicker than any other option and is not that expensive, too. On the other hand, being in this financial fiasco makes your credit history look bad.

Moreover, you might be obliged to turn over to your trustee some of your possessions and you also will be required to keep track of all your expenses while you are at it.

Tags: 13, bankrupt, Bankruptcy, Bankruptcy Alternatives, chapter 7, Consolidation, Consolidation Loan, Debt, Debt Relief, Foreclosure

Are You Eligible for a Chapter 7 Bankruptcy?

Apr 17, 2009 Bankruptcy

A debtor must qualify for two different assessments in order to file for a chapter 7 bankruptcy. The bankruptcy trustee first applies the median/means test, averaging the debtor’s income over the previous six months. Under the requirements of Schedule J of the bankruptcy petition, the trustee also will analyze the debtor’s current income and compare it to the current expenditures. If the trustee determines that the debtor qualifies under both of these analyses, then filing for a chapter 7 bankruptcy is allowed.

The first part of this analysis, the median/means test, is a very straightforward look at the debtor’s income. Bankruptcy rules take several factors into consideration, including the county where the debtor resides and the size of his or her family. From here, the trustee determines the amount that the debtor’s gross income must be under in order to qualify for chapter 7 bankruptcy. If this income is under the allowable amount, the result of the means test is fulfilled. However, even if the income exceeds the allowed amount, the debtor may still be eligible via the means section of the test. The means test compares six months of the debtor’s expenses to six months of his income. If the latter is less than the former, this test is satisfied.

The other income analysis that the bankruptcy trustee will consider involves Schedule I and J of the bankruptcy petition, which address the debtor’s current monthly income and current monthly expenses. He or she will be looking to ensure that a debtor does not have much disposable income with which to make monthly payments toward debts. If the debtor has disposable income that is sufficient enough to make significant monthly payments toward creditors, the debtor’s case will likely be dismissed if filed with the court. This is a judgment call by the trustee and does not involve a black-and-white analysis as the median test does.

Much of this analysis is common sense. For example, if a debtor has an overall unsecured debt of $40,000, but the disposable income is $100 per month, the trustee probably would determine that this small amount of disposable income will be insufficient as a monthly payment to eliminate unsecured debt in a reasonable amount of time.

However, if this same debtor had $500 or $600 of disposable income each month after expenses have been deducted, the results could be different. The trustee might well determine that this amount of disposable income is sufficient to make payments and eliminate the unsecured debt in a reasonable amount of time. If this is the trustee’s determination, the case probably will be dismissed.

It is also important to note that bankruptcy rules only allow for certain expenses to be included on the Schedule J calculation. The trustee determines what, if any, other expenses can be included in the bankruptcy petition. If the trustee chooses not to include some of the expenses, it can increase the debtor’s monthly amount of disposable income. If this amount increases significantly, then typically you’ll find that the debtor’s case will be dismissed by the court.

Tags: arizona bankruptcy, arizona chapter 7, attorney, bankrupt, Bankruptcy, chapter 7, law, Lawyer, legal, Tucson, tucson bankruptcy, tucson chapter 7

Is Bankruptcy the Correct Choice for You?

Jan 19, 2009 Bankruptcy

Current economic conditions are making a lot of individuals who have never before considered filing bankruptcy to now consider it as a feasible answer to their financial troubles. The problem is that not everyone can be assisted by filing bankruptcy. So, if you’re one of those people who has never, until lately, given thought to filing bankruptcy, you need to know whether bankruptcy will assist you or not.

Should You Even Be Thinking About Filing Bankruptcy?

As unusual as it sounds, there’s no common test you can take to see whether bankruptcy is proper for you. You don’t need a particular level of debt. You don’t need to earn less than a particular sum of money. And, you don’t even need to be in arrears in payments to your creditors.

Bankruptcy isn’t a decision you make by marking off boxes on a flow chart. Bankruptcy is an individual decision. But, it’s a individual decision that’s founded on specific factors in your life. They are some of the things you need to look at before deciding one way or the other about bankruptcy.

1. Are you in financial trouble? You may be in financial distress if you’re having difficulty paying the minimum payments on your credit cards. And, if you’re scarcely able to keep necessaries like food, clothing and shelter you’re likely in financial distress.

2. Do you live paycheck to paycheck? If you had even a moderate health problem, would it place you in a financial crisis?

3. Are you judgment proof? Put differently, do you have no assets that can be seized and sold to pay off your indebtednesses? You may not need to file bankruptcy if you’re judgment proof. Then again, judgments do stick around for a while. Each state’s judgment rules vary on exactly how long a judgment can hang around. But, what you need to consider is that your current bad situation may, and in all likelihood will, improve in the future. If it does, those judgments that were of no interest during your financial crisis will interest you because you could be looking at the seizure of your future assets. Most lawyers will give you a free bankruptcy consultation. You should use it to talk about this particular issue.

4. Are creditors and collection agents harassing you? Bankruptcy is one choice to halt that harassment. But, you can also stop it with a letter writing campaign under the federal Fair Debt Collection Practices Act and assorted state law fair debt collection laws. But, bankruptcy is likely the best choice if you’re being harassed and you’re in financial trouble (see #1).

5. Are you looking at foreclosure? You’ll be able to stop a foreclosure by filing a Chapter 13 bankruptcy. Chapter 13 lets you to restructure your debts and pay your mortgage arrearage over time.

Will Bankruptcy Help You?

Bankruptcy won’t give you more income. So, if you don’t make enough money to support your lifestyle, bankruptcy isn’t your solution. You either need to lower your expenses or increase your income. You may even need to do both. But, you don’t need to file personal bankruptcy.

Bankruptcy also won’t help if your primary debts are non-dischargeable debts. Bankruptcy law defines those debts that are dischargeable and those that are not. The following is a compact listing of some non-dischargeable debts in a Chapter 7 Bankruptcy under current bankruptcy laws.

* Recent taxes and penalties imposed by the government

* Child support

* Criminal files or restitution ordered by a court

* Personal injury awards where the debtor was drunk at the time of the incident

* Debts that aren’t listed in the bankruptcy filing schedule

* Student loans (exceptions exist but it’s almost impossible to meet the requirements for them. So, it’s advisable to consider student loans as non-dischargeable)

* Debts that were part of a prior bankruptcy case and that weren’t discharged

Closing Considerations for Personal Bankruptcy

Deciding whether to file bankruptcy isn’t an uncomplicated decision. But, it’s a decision you’ll be able to make if you adopt a logical and balanced approach to it. As part of your consideration, you’ll need to weigh your emotions, your background, your spiritual beliefs and your values. So, consider the following:

1. Do your own research. Discover everything you can about bankruptcy.

2. Keep your future in mind. Think of how you’ll feel when the case is all over and you’re out from under a mass of debt. How will you feel about yourself in 6 months or a year? Will you be delighted with your choice to either file bankruptcy or not file bankruptcy?

3. Find the right bankruptcy attorney for you. Nearly all bankruptcy attorneys will give you a free consultation. Use that free consultation to interview the lawyer. But, when you begin interviewing bankruptcy attorneys, don’t base your ultimate hiring decision totally on price. It will be tempting to engage the most inexpensive. After all, you’re in a financial crisis so the more inexpensive the better, right? That’s not always the case. Interview the lawyer first. Be sure you’re a good match with that attorney. Your bankruptcy lawyer will be working for you so you need to be comfortable with the comprehensive approach to your case. You need to feel good about the interactions you have with the lawyer and staff. You want a bankruptcy lawyer who will assist you through this crisis in a positive way. You don’t want to feel judgment or disfavor from either the lawyer or the staff.

4. Filing bankruptcy is a moral decision. Don’t kid yourself into believing it’s not. But, you do have to make the decision that’s best for you and your household. So ask yourself: “Is it more respectable to fight a losing financial battle that places your family’s future at risk in an attempt to pay back old debt?” Or, is it more respectable to admit you did your best, you couldn’t make it work and you need a fresh start that will permit you to devote your personal time and effort into activities that will more positively impact your family’s future?”

Only you can answer that question. Take your time. Make the proper decision for you and your household. Once you’ve come to that decision, have faith in your ability to make the appropriate choice. Then, go forward knowing that your financial crisis will shortly give way.

Tags: Bankruptcy, chapter 13, chapter 7, Debt, Finance, law, legal

Is Bankruptcy the Right Choice for You?

Jan 12, 2009 Bankruptcy

Current economic conditions are making a lot of individuals who have never before considered filing bankruptcy to now consider it as a feasible answer to their financial troubles. The problem is that not everyone can be assisted by filing bankruptcy. So, if you’re one of those people who has never, until lately, given thought to filing bankruptcy, you need to know whether bankruptcy will assist you or not.

Should You Even Be Entertaining Filing Bankruptcy?

As funny as it sounds, there’s no comprehensive test you can take to discover whether bankruptcy is right for you. You don’t need a specific level of debt. You don’t need to make less than a specific amount of money. And, you don’t even need to be in arrears in payments to your creditors.

Bankruptcy isn’t a decision you make by marking off boxes on a flow chart. Bankruptcy is a individual decision. But, it’s a personal decision that’s based on certain factors in your life. They are some of the things you need to consider before deciding one way or the other about bankruptcy.

1. Are you in financial trouble? You may be in financial distress if you’re having difficulty paying the minimum payments on your credit cards. And, if you’re scarcely able to keep necessaries like food, clothing and shelter you’re likely in financial distress.

2. Do you live paycheck to paycheck? If you had even a moderate health issue, would it put you in a financial crisis?

3. Are you judgment proof? Put differently, do you have no assets that can be seized and sold to pay off your indebtednesses? You may not need to file bankruptcy if you’re judgment proof. Then again, judgments do stick around for a while. Each state’s judgment rules vary on exactly how long a judgment can hang around. But, what you need to consider is that your current bad situation may, and in all likelihood will, improve in the future. If it does, those judgments that were of no interest during your financial crisis will interest you because you could be looking at the seizure of your future assets. Most lawyers will give you a free bankruptcy consultation. You should use it to talk about this particular issue.

4. Are creditors and collection agents harassing you? Bankruptcy is one choice to halt that harassment. But, you can also stop it with a letter writing campaign under the federal Fair Debt Collection Practices Act and assorted state law fair debt collection laws. But, bankruptcy is likely the best choice if you’re being harassed and you’re in financial trouble (see #1).

5. Are you facing foreclosure? You’ll be able to block a foreclosure by filing a Chapter 13 bankruptcy. Chapter 13 lets you to restructure your debts and pay your mortgage arrears over time.

Will Bankruptcy Assist You?

Bankruptcy won’t give you more income. So, if you don’t earn enough money to support your lifestyle, bankruptcy isn’t your solution. You either need to lower your expenses or increase your income. You may even need to do both. But, you don’t need to file personal bankruptcy.

Bankruptcy also won’t help if your main debts are non-dischargeable debts. Bankruptcy law defines those debts that are dischargeable and those that are not. The following is a short list of such non-dischargeable debts in a Chapter 7 Bankruptcy under current bankruptcy laws.

* Recent taxes and government penalties

* Child support

* Fines for criminal charges or restitution ordered by a court

* Personal injury awards where the debtor was intoxicated at the time of the incident

* Debts that aren’t listed in the bankruptcy filing schedule

* Student loans (there are exceptions but it’s nearly impossible to meet the prerequisites for them. So, it’s advisable to consider student loans as non-dischargeable)

* Debts that were part of a prior bankruptcy case and that weren’t discharged

Closing Considerations for Personal Bankruptcy

Deciding whether to file bankruptcy isn’t an uncomplicated decision. But, it’s a decision you’ll be able to make if you adopt a logical and balanced approach to it. As part of your consideration, you’ll need to weigh your emotions, your background, your spiritual beliefs and your values. So, consider the following:

1. Do your own research. Read everything you can about bankruptcy.

2. Keep your future in mind. Think of how you’ll feel when the case is all over and you’re out from under a mountain of debt. How will you feel about yourself in 6 months or a year? Will you be delighted with your choice to either file bankruptcy or not file bankruptcy?

3. Find the correct bankruptcy attorney for you. Nearly all attorneys will give you a free bankruptcy consultation. Use that free consultation to interview the lawyer. But, when you start questioning bankruptcy lawyers, don’t base your final hiring decision totally on price. It will be enticing to employ the most low-priced. After all, you’re in a financial crisis so the more inexpensive the better, right? That’s not always the case. Question the lawyer first. Be sure you’re a good match with that attorney. Your bankruptcy lawyer will be working for you so you need to be comfortable with the whole approach to your case. You need to feel good about the fundamental interactions you have with the lawyer and staff. You want a bankruptcy lawyer who will help you through this crisis in a positive way. You don’t want to feel judgment or disapproval from either the lawyer or the staff.

4. Filing bankruptcy is a moral decision. Don’t kid yourself into believing it’s not. But, you do have to make the decision that’s best for you and your household. So ask yourself: “Is it more respectable to fight a losing financial battle that places your family’s future at risk in an attempt to pay back old debt?” Or, is it more respectable to admit you did your best, you couldn’t make it work and you need a fresh start that will permit you to devote your personal time and effort into activities that will more positively impact your family’s future?”

Only you can answer that question. Take your time. Make the proper decision for you and your household. Once you’ve come to that decision, have faith in your ability to make the appropriate choice. Then, go forward knowing that your financial crisis will shortly give way.

Tags: Bankruptcy, chapter 13, chapter 7, Debt, Finance, law, legal