Considering Bankruptcy For many individuals, filing for bankruptcy relief can provide a way out of debt and a fresh financial start. Alternatives to Bankruptcy Explore alternatives to Chapter 7 or Chapter 13 bankruptcy before you file. Bankruptcy Basics More Bankruptcy Basics. Chapter 13 Bankruptcy Check out our handy table listing the differences between Chapter 7 and Chapter 13 bankruptcy. Filing for Bankruptcy More Filing for Bankruptcy.
How to Get and File the Bankruptcy Forms Learn where to find the official bankruptcy forms, how to find out about local forms and requirements, and where to file your forms. Filing an Emergency Bankruptcy If you need to file for bankruptcy in a hurry to stop creditors harassing you, prevent a foreclosure, or stop a car repossession, you can file several forms to start, and the rest within 14 days.
Bankruptcy Procedures More Bankruptcy Procedures. How Bankruptcy Stops Your Creditors: The Automatic Stay The automatic stay in bankruptcy protects you from creditor actions like foreclosure, wage garnishment, and repossession. Bankruptcy Exemptions More Bankruptcy Exemptions.
Bankruptcy Exemptions: An Overview Bankruptcy exemptions protect important property - like your home, your car, and your retirement accounts. The Homestead Exemption in Bankruptcy The homestead exemption in bankruptcy protects your home equity from creditors in a Chapter 7 bankruptcy and helps reduce your payments in a Chapter 13 bankruptcy.
Chapter 7 Bankruptcy More Chapter 7 Bankruptcy. Chapter 13 Bankruptcy More Chapter 13 Bankruptcy. An Overview of Chapter 13 Bankruptcy In exchange for debt relief, chapter 13 filers pay their discretionary income to their creditors over the course of a three- to five-year repayment plan.
Should You File for Bankruptcy? Chapter 7 Bankruptcy. Working With a Bankruptcy Lawyer. State Bankruptcy Information. Filing for Bankruptcy. How to File for Chapter 7 Bankruptcy. The New Bankruptcy. See All Bankruptcy Articles. See All Bankruptcy Products from Nolo. How to Value Personal Property in Bankruptcy.
When valuing your personal property in bankruptcy, use the current value. Here's how. Here's a list of the forms you must file in Chapter 7 bankruptcy, and where to find them. How to Get and File the Bankruptcy Forms. Learn where to find the official bankruptcy forms, how to find out about local forms and requirements, and where to file your forms. Here's a list of the forms you must file in Chapter 13 bankruptcy, and where to find them.
Plan for bankruptcy by moving funds in bank accounts, terminating automatic payments, and preparing for a utility deposit set off. It's often advantageous to file for Chapter 7 bankruptcy before you lose your home to foreclosure. Should you buy a car before or after filing for bankruptcy?
Learn the pros and cons of each option. Application for Waiver of Chapter 7 Filing Fee. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising.
In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Talk to a Lawyer. But the process is significantly different and even more complicated. Find out more about individual and business Chapter 11 bankruptcies. Retaining a professional to help you with your case is well worth the cost.
Not only will you have peace of mind that you've filed a correctly prepared case, but you'll also receive guidance throughout the entire process. Most importantly, a bankruptcy lawyer will ensure that you don't lose important property unexpectedly and that you don't find yourself facing bankruptcy fraud charges.
Keep in mind that a Chapter 7 bankruptcy lawyer will require you to pay the fees in full before filing your matter. Because the bankruptcy case would wipe out any unpaid amount. You'll likely be able to pay the remainder through the repayment plan. Learn about your options if you can't afford a bankruptcy lawyer.
While most people hire a bankruptcy lawyer to prepare their bankruptcy paperwork and guide them through the process, it's possible to do your bankruptcy yourself if it's simple enough.
You can get a feel for your case's complexity using our bankruptcy quiz —we'll alert you to issues you might want to run by a bankruptcy lawyer. Your bankruptcy case will begin when you file the bankruptcy paperwork with the bankruptcy court. Go to your state's bankruptcy article for specifics on where and how to file. The court will issue an automatic stay that will prevent most of your creditors from continuing to collect from you. Even court cases and trials related to debt collection will have to stop.
Keep in mind that bankruptcy won't stop all lawsuits —for instance, you'll still have to make support payments, and criminal actions can go forward, too. Don't assume that what you say in your paperwork will be accepted at face value. The court will assign a professional called the bankruptcy trustee to check out your filing thoroughly. When reviewing your paperwork, the trustee will compare the figures in the petition and schedules to your tax returns, bank statements, paycheck stubs, profit and loss statements, and the other financial documents you'll be required to provide.
The trustee will also look for signs of bankruptcy fraud. If the trustee spots an issue, the trustee might do any number of things. For instance, it isn't unusual for a trustee to ask for additional documents or photos or inspect an item of property, storage space, or real estate. A trustee will usually attempt to work out a problem informally before or at the meeting of creditors.
If you can't resolve it, the trustee will file a motion or adversary proceeding although these actions are relatively unusual. Every filer must attend at least one bankruptcy hearing—the meeting of creditors.
It isn't a court appearance, but you'll still need to take it seriously. The trustee—not the judge—holds the meeting in a conference room at the courthouse or elsewhere, and about ten filers are assigned to appear during the same hour.
When it starts, the trustee will take attendance and provide initial instructions. Here's what you'll do next:.
A trustee who is satisfied with your responses will conclude the meeting. Otherwise, the trustee will continue the case until another day—something that often happens when one of the following applies:. At this point, Chapter 7 filers will be in the final stretch with one more responsibility to complete—filing a financial management course certificate.
By contrast, Chapter 13 filers will just be getting started. They'll need to do:. After completing each step, the debtor will receive a debt discharge wiping out qualifying debt. To make the most of your discharge and ensure sure life after bankruptcy goes smoothly, you'll want to do a bit of planning.
Some areas of your life will be more challenging to negotiate for a year or two after filing for bankruptcy, specifically, renting or leasing housing, financing a car, and establishing a bank account. So it's essential to have these things in place before filing. And don't plan on making changes soon.
If you'll be letting go of a house and you're worried about moving your children's schools, rent something in the area, if possible—before filing, of course. You can start rebuilding credit soon after completing a bankruptcy. Most filers are surprised by how quickly they receive credit offers. But it makes sense. Creditors know you won't be able to file again for quite a few years, so if you're employed, you'll be a reasonable credit risk. Take the opportunity to find out about credit-building strategies.
Many filers are relieved to learn that they don't need to push aside a dream of buying a home. You could be eligible as soon as two to four years after your bankruptcy case. Find out more about post-bankruptcy homebuying requirements so you can plan accordingly. After filing for bankruptcy, it's common to want to secure your future.
The first step is following a sound financial plan, of course. But you'll also want to safeguard yourself against unexpected financial hardships. Putting money aside in a savings account is always a good idea. Bankruptcy puts a stop to all this. So, at least temporarily, most creditors cannot call you, write dunning letters, legally take garnish your wages, empty your bank account, go after your car, house, or other property, or cut off your utility service or welfare benefits. As explained in Ch.
Some creditors are not affected by the automatic stay. You might have other eviction protections as a result of the coronavirus pandemic. However, you can do what you wish with property acquired and income earned after filing for bankruptcy, with a few exceptions. You are also allowed to borrow money after you file. The trustee will be primarily interested in what you own and claim as exempt and financial transactions made during the previous years.
In some cases, past transactions can be unwound, and the recaptured assets can be distributed to your creditors. Also, because the trustee receives a percentage of the recovered assets, the more the trustee finds for creditors, the more the trustee gets paid. Either way, the trustees have the same responsibilities.
But these fee rules give trustees a financial incentive to look closely at bankruptcy filings, especially if debtors appear to have some valuable property. The U. Trustee Program is a division of the U. Department of Justice. Each U. Trustee oversees several bankruptcy courts. Individual cases within those courts are assigned to assistant U.
Trustees, who also employ attorneys, auditors, and investigators. Trustees work closely with their Department of Justice colleagues from the FBI and other federal agencies to ferret out fraud and abuse in the bankruptcy system. Trustees and the assistant U. Trustees also supervise the work of the panel or standing trustees, who are appointed by the courts.
Trustee Program also investigates creditor violations, fraud against seniors, mortgage rescue fraud, and more. As explained above, you will receive notice of the date of your meeting of creditors also called the hearing shortly after you file your bankruptcy papers. This meeting is typically held somewhere in a conference room in the courthouse or federal building rarely in a courtroom. After checking your identification and swearing you in, the trustee will ask you standard questions all debtors must answer.
For instance, you can expect to be asked if everything in your petition is accurate and whether anything has changed. The trustee might ask you additional questions about your particular bankruptcy and the documents you filed, too—for instance, how you arrived at the value for an item of property.
This questioning usually takes about five minutes. Creditors can attend this meeting but rarely do. Creditors who appear can also question you under oath. You might be asked where property serving as loan collateral is located or about the information given to obtain a loan.
Some creditors might want to know more about the nature and location of your assets in general. The good news? While many bankruptcy filers dread the hearing, the concern is unnecessary. Most filers breeze through the process with no problem. So what causes a trustee to become suspicious?
The trustee might look for other undisclosed property by taking an inventory of your home, business, storage facility, or safety deposit box. The easiest way to prevent this type of problem? Be transparent. Your past can indeed come back to haunt you.
Each state allows debtors to keep certain property types or equity amounts in property. The exemptions available to you depend on where you lived before filing for bankruptcy. For more information, see Ch. Plus, the court can dismiss your bankruptcy petition if you fail to cooperate with the trustee. If you are behind on your payments, a creditor can ask to have the automatic stay lifted so it can repossess the property or foreclose on the mortgage. However, if you are current on your payments, you can keep the property and continue making payments as before—unless you have built up enough nonexempt equity in the property to make it worthwhile for the trustee to sell it for the benefit of your unsecured creditors.
If a creditor has recorded a lien against your property without your consent for example, because the creditor obtained a money judgment against you in court , that debt is also secured. However, in some cases and with certain types of property, you might be able to wipe out the debt and keep the property free of the lien. For example, suppose you have a valuable five-year commercial lease at a below-market rate in an up-and-coming part of town. The trustee could hold an auction, assign the lease to the highest bidder, and use the profit to pay unsecured creditors.
You can keep leases on personal property, such as a car or business equipment, rather than have the trustee assume them. However, you can do this only if you can cure any defaults on the lease, as required by the creditor.
All debtors must attend a course on managing finances to receive a bankruptcy discharge, sometimes referred to as budget counseling, debtor education, or predischarge counseling.
You must take this course from an agency approved by the U. Trustee Program. Once you complete your counseling, you must file a certification form with the court. For a list of approved agencies, go to the U. About 60 days after the hearing—the one hearing all filers must attend—you will receive an Order of Discharge from the court. Instead, it provides general information about the types of debts affected by the discharge order. In most cases, all debts are discharged except:.
Instead, you must ask the court to dismiss your case. For example, suppose you have substantial nonexempt equity in your house.
The court will probably deny your dismissal request so the trustee can sell the house to make some money for your unsecured creditors.
Once you receive your bankruptcy discharge, you are free to resume your economic life without reporting your activities to the bankruptcy court. However, a few exceptions exist. Suppose you receive or become eligible to receive an inheritance, insurance or lottery proceeds, or proceeds from a divorce settlement within days after your filing date.
In that case, you must report the assets to the trustee. You can start rebuilding your credit almost immediately, but it might take several years to get decent interest rates on a credit card, mortgage, or car note.
Even so, sometimes filing for Chapter 13 is beneficial without a discharge. For instance, filing a Chapter 13 can help stop a wage garnishment or spread out payments on support arrearages.
You might not be able to use Chapter 7 to discharge debt if one of these situations exists. Under the bankruptcy rules, filers with higher incomes must pay back some of their debts over time under Chapter 13 rather than discharging their obligations outright in Chapter 7. If the U. Trustee decides that your income, debts, and expenses indicate that you can afford a Chapter 13 plan under the rules, it will file a motion to have your case dismissed.
The court is likely to grant that motion and throw out your case unless you convert to a Chapter 13 bankruptcy. However, even if you meet this test, if your actual income is significantly higher than your expenses, you might still be forced into Chapter 13 explained in Ch.
If your income exceeds the state median income, you will have to do some calculations to determine whether you can afford to pay off at least some of your unsecured debts in a Chapter 13 plan. This qualification process is known as the means test. You can find step-by-step means test instructions in Ch. Over the past several years, some states have legalized the personal or medical use of marijuana. Under these laws, an individual or business might possess a relatively small amount of marijuana for personal use or have significant inventory in a dispensary.
Either way, filers with marijuana assets might think that they can turn to bankruptcy, believing that the industry is legal in their home state. Marijuana remains illegal under federal law. For instance, in , an Oregon bankruptcy court dismissed a Chapter 11 case involving two marijuana-growing tenants. Because marijuana possession is a violation of the Controlled Substances Act, a filer could also be subject to criminal penalties. If you are unsure about whether you are eligible, talk to a bankruptcy attorney in your area.
Legally, your income for the means test is your average income over the six months preceding the month in which you filed for bankruptcy. You must include almost all types of income with a few exceptions such as benefits received under the Social Security Act , taxable or not.
The calculations are based on your gross earnings, not the net income you actually take home after taxes and other deductions for the first portion of the test. For filers who lost jobs or other income during the six months before filing, this income figure could be significantly more than what they are actually earning currently. They fell quickly into debt after John lost his job because of a work-related injury on April 1, Three months later, on July 1, , John and Emma decide to file for bankruptcy.
The size of your household is also significant. The more members you have, the less likely it will be that your income will exceed the state median for a family of the same size. Being able to count that additional person means you will pass the means test without further calculations. Unfortunately, neither Congress nor the courts have given clear guidance on how to calculate household size.
Many courts adopt the census test for a household.
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