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CONSUMER BANKRUPTCY

CONSUMER BANKRUPTCY

CONSUMER BANKRUPTCY

We Stop Your Foreclosure Sale (Trustee Sale)

The news is full of stories of banks wrongfully foreclosing on homeowners. Mortgage Lenders and Trustees have laws and procedures they must follow to validly foreclose and take someone’s home. Yet everyday homes are improperly and illegally foreclosed upon. That is where we come in. WE STOP FORECLOSURE SALES!

Lenders use “trustees” to assist them in a foreclosure. Called a Trustee Sale, trustees, acting for the lender, sends out a Notice of Default and later a Notice of Trustee Sale and eventually sells the home at auction. Either the bank takes the home back in their inventory or the home is sold to the highest bidder at the auction. The homeowner just lost their home.

However, trustees can be held liable for improperly foreclosing upon a home. Our law firm, using Federal Law, contacts the trustee and DEMANDS the trustee to verify a comprehensive list of issues related to the legal nature of the foreclosure proceedings enacted by the lender and the trustee. Trustees do not want to be held liable for wrongful foreclosure. Trustees will not foreclose on the property if there is a potential violation pointed out to them prior to the Foreclosure Auction Sale Date. Trustees are incredibly busy and generating huge profits so they will continually postpone the sale date with adequate time to research and respond to the issues raised by your law firm on law firm letterhead to protect themselves.

Our demands postpone your Trustee Sale date, stop the auction and keep you in your home.

You do not pay our fees until after we postpone the Sale.

Our clients are those denied a loan modification, denied a short sale or are simply those who have a Trustee Sale tomorrow and would rather stay in their home longer.

Often our clients go on to negotiate a loan modification or a short sale with the extra time we provide.

You do not have to occupy the home

You do not have to file bankruptcy.

We stop sales. Call us at 301.364.3101 and we will Stop Your Sale.

MARYLAND AND DC FORECLOSURE POSTPONEMENT

In Maryland and DC, foreclosure sales (auctions) can be postponed for up to one year per MD Civil Code 2924 g (c)(2) and DC Civil Code 2924 g (c)(2). The postponement reasons are outlined in 2924 g (c) (1), but the following names are commonly used at the Trustee Sale.

  1. Mutual Agreement
  2. Bankruptcy
  3. Beneficiary’s Request
  4. Operation of Law (Court Order)

WORRIED ABOUT YOUR CREDIT

BECAUSE YOU FILED FOR BANKRUPTCY?

We can help you reestablish credit after your bankruptcy is over. You can have a 700 credit score within 1 to 2 years.

schedule a free consultation

Filing Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the only type of bankruptcy that liquidates or gets rid of all of your debts without requiring you to pay anything back. In order to file under Chapter 7, debtors need to meet certain income requirements depending on their family size. In most cases, debtors are able to keep all of their property. Careful planning with your attorney will ensure that you retain most, if not all, your personal property.

Consulting With a Chapter 7 Bankruptcy Attorney

Chapter 7 bankruptcy is the most common bankruptcy filed. Our bankruptcy attorney will prepare a bankruptcy petition for the bankruptcy court to eliminate your debts. With Chapter 7, debtors will be able to keep most of their personal property. Personal loans, credit cards, medical bills, and other unpaid expenses may be discharged through a Chapter 7 bankruptcy filing.

What Happens After I File Chapter 7 Bankruptcy?

Immediately after you file bankruptcy papers, the federal “automatic stay” will take effect. The automatic stay will provide the debtor protection from all collection activities, including car repossessions, wage garnishment, and home foreclosure sales.

Preparing to File Chapter 7 Bankruptcy

When you file Chapter 7 bankruptcy, debtors need to make an inventory of personal property. We will help you determine which property is exempt (debtors can keep) and non-exempt (debtors will surrender).

How Long Will a Bankruptcy Case Take?

Once you file a petition for Chapter 7 bankruptcy, it normally takes about four to six months for your case to be completed. There are several situations that can delay a bankruptcy case including:

  • Trustee needs more information. Creditors can ask for more information of documentation, which can delay a case until you acquire the documentation.
  • Delays in personal financial management courses. You are required to attend financial management courses to help prevent you from future bankruptcies and financial struggles. If you delay attending financial management courses, it will delay your debt discharge.
  • Creditors challenge dischargeability of debt. Creditors can challenge your bankruptcy case if they feel your debt should be wiped out. The court will hold a hearing to discuss the matter, which includes witness testimonies and review of documents.
  • Student loan debt discharge. You need to prove to the court that your student loan debt is causing undue hardship if you want to discharge it.

Filing Chapter 13 Bankruptcy

Are you dealing with serious delinquencies and debt? We are here to help you regain control over your finances. Chapter 13 bankruptcy allows many individuals to find financial relief through a repayment bankruptcy plan.

The primary difference between a Chapter 13 bankruptcy and a Chapter 7 is that under Chapter 13, debtors pay some of their debt back to their creditors over a 3-5 year period depending on their circumstances. A person normally files under Chapter 13 to save their home or because they do not qualify to file under Chapter 7.

Do I Need a Lawyer to File Chapter 13 Bankruptcy?

Some people try filing for Chapter 13 Bankruptcy without the help of an attorney, but they almost always end up in a worse situation than they were in beforehand. Even more stress and confusion is the last thing someone needs during an already overwhelming and painful period of their life. Don’t make your burden worse than it has to be. Take advantage of the guidance and experience of our team of Chapter 13 Bankruptcy attorneys and get your life back on track.

When you work with us, we will guide you through the entire process of filing for Chapter 13 bankruptcy. We will begin by filing for bankruptcy protection, which stops all collection activities, including wage garnishments, home foreclosure sales, vehicle repossession, harassing collection calls, and more.

What Else do I Need to Know About Filing for Chapter 13 Bankruptcy?

Under Chapter 13 Bankruptcy Filings, debtors will repay their creditors all or part of their debts, based on what the debtor can afford. Normally the amount they can afford is based on their disposable income after making monthly expenditures. Once a bankruptcy plan is completed, all unsecured debts are discharged.

Some bankruptcy Chapter 13 cases will allow for a vehicle “cram down”, which helps to reduce the principal amount the debtor owes on a vehicle. The debtor will only repay the auto loan based on the current market value of the vehicle. Chapter 13 also allows homeowners to file a “Chapter 13 lien strip”, which will eliminate the second mortgage.

Chapter 13 is more commonly used for homeowners than Chapter 7 bankruptcy. If you are upside-down in your home and you have a second mortgage, a Chapter 13 lien strip is a great way to find financial relief. Chapter 13 does impact your credit, but not as significantly as you are paying back part of the debt.

I’ve heard of several different types of bankruptcy. What’s the difference?

The three most common types of bankruptcy are Chapter 7 bankruptcy, Chapter 13 bankruptcy, and Chapter 11 bankruptcy. Each Chapter number relates to a Chapter in the US Bankruptcy Code.

Chapter 7 bankruptcy allows for legal clemency for individual debt and will result in the discharge of the debt. Allowances are provided under bankruptcy law that generally permit the individual who is filing to keep most of their possessions, including their cars, homes, and retirement savings.

Should the Chapter 7 codes not allow for the retention of those possessions or the reported income level is too high to qualify for Chapter 7 bankruptcy, then a Chapter 13 bankruptcy may prove more feasible. If monthly payments are made via a three-to-five-year plan, then a Chapter 13 bankruptcy will prevent the loss of any possessions or assets that would be forfeited under a Chapter 7 bankruptcy. The Chapter 13 codes may also allow for the prevention of foreclosure by allowing the debtor to catch up on overdue mortgage payments. Furthermore, it contains provisions for the “stripping” of a home equity line of credit or a second mortgage.

Chapter 11 bankruptcy, which is less common than Chapter 7 and Chapter 13, is filed by companies, cooperations, business partners, or those who have secured debt that totals more than $1,150,000. This process involves a proposal of a reorganization that will eventually reimburse creditors.

In essence, Chapter 7 bankruptcy results in the forgiveness of all unsecured debt, but may result in the loss of assets. Chapter 13 is the systematic repayment of unsecured debt according to the debtor’s ability to repay, and allows for the retention of more assets. Chapter 11 is a reorganization plan used by businesses and large debtors.

Should I file for bankruptcy? If so, under what Chapter of bankruptcy should I file?

Consideration of bankruptcy usually is initiated by serious financial or legal situations like lawsuits, bank levys, foreclosure, wage garnishments, car repossessions, or unrepayable debt. However, each situation is unique and should be individually evaluated by legal professionals to see whether or not there are other options. If there are other options, then bankruptcy may not be the best decision. If it is, however, then a legal professional should advise which chapter of bankruptcy is most feasible and what the ramifications of that chapter will entail. Bankruptcy provides a clean slate for many people. Instead of seeing it as a disaster, look at bankruptcy as an opportunity to take charge of life.

Will all my debts be forgiven if I file for Bankruptcy?

Even filing bankruptcy, regardless of Chapter filed, cannot eliminate certain debts. These include, but are not limited to: alimony, child support, guaranteed student loans, restitution, fines, debts for injuries due to driving while intoxicated, debts accumulated because of a debtor’s fraudulent actions, excessive credit card debt incurred immediately before filing should the creditor file an objection, and some forms of taxes, though income taxes more than three years old may be discharged. Certain actions, such as transferring assets to prevent their being seized by creditors, may also result in the denial of a bankruptcy discharge.

Would filing for bankruptcy stop a foreclosure?

Filing for Chapter 7 bankruptcy will postpone a trustee sale for at least thirty days, though the postponement sometimes lasts for sixty days or more.

The structured payments made under Chapter 13 bankruptcy force banks to recognize and accept mortgage payments and payments for the amount still due over the course of thirty-five to sixty months.

If I file for bankruptcy, will I be able to keep my home?

Provided that regular payments on the mortgage are maintained, many homeowners have filed for Chapter 7 bankruptcy, retained their homes, and had their debts discharged. Each situation carries its own unique, distinct factors, and the rules and codes of bankruptcy are intricate, so every situation should be evaluated by trained legal counsel, to determine whether or not the house may be retained.

Chapter 13 bankruptcy, with its structured plan of payments, allows the debtor to retain their home as long as they make both their regular mortgage payments and the designated payments included in their plan.

Is there a certain amount of money that I can have in the bank or in the foreother assets when I file for bankruptcy?

Should the debtor not have any equity in their home, they may retain roughly $25,000 in assets. Assets include, but are not limited to: cash, personal possessions, and the equity in their vehicles. If the debtor has, but elects to save, the equity in their home, then the bankruptcy codes dictate what can be kept, contingent on the type of other assets are available. Generally, cash assets that can be retained are limited to roughly twenty-five percent of the monthly income. Each chapter of bankruptcy contains different strategies, so it is essential to consider each before filing for bankruptcy so that as many personal possessions as possible can be protected and retained.

If I file for bankruptcy, will I be able to keep my car?

After filing for bankruptcy, roughly $25,000 in assets can be retained by the debtor, which includes the financial equity in a vehicle. In many cases, this allows for debtors to keep their vehicles after they file for bankruptcy.

If I file for bankruptcy, is my spouse required to file?

Married couples are given a choice between filing for bankruptcy separately or filing a joint case. Although, should the spouse not wish to join the case, they are not required to join a case, and the combined household income must be divulged on the bankruptcy paperwork.

Does the median household income influence a bankruptcy case? If so, how?

Before filing for bankruptcy as a consumer case, each individual in the household with an income must compare their earnings to the median income for households of the same size. Should that income exceed the median, under the dictates of the “Means Test,” the amount of debt to be repaid are calculated using IRS expense standards applied to the debtor’s various expenses.

What do you mean when you talk about dischargeable and non-dischargeable debt? What is the difference between the two?

Debts fall under two basic distinctions: dischargeable and non-dischargeable debt. Dischargeable debt is forgivable debt while non-dischargeable debt is non-forgivable debt. Each chapter of bankruptcy has some variation of dischargeable and non-dischargeable debt, but what specifically falls into each category varies depending on which chapter of bankruptcy is filed. The discharge of debt is the most common reason for filing for bankruptcy, and debt discharge gives the debtor an opportunity for a new start.

Creditors are garnishing my wages. Will they stop after I file for bankruptcy?

Once bankruptcy is filed, many creditor collection efforts are automatically ceased, including wage garnishments. This cessation is referred to as a “stay.” Some who file for bankruptcy are even able to regain some of the wages lost due to garnishment.

For the duration of the stay, creditors included in the bankruptcy case are unable to garnish wages, including those ordered prior to the debtor’s filing for bankruptcy, or enact any collection efforts not approved by the court.

Because it takes time for creditors to receive notification that the debtor has filed bankruptcy, bankruptcy stays and cessations of wage garnishments are not in effect instantaneously. In order to cease wage garnishments as quickly as possible, it is best if the debtor informs their place of employment’s payroll department of the bankruptcy case as soon as the case is filed.

In order to regain garnished wages, often referred to as “clawing back,” there are a couple of criteria that must be met. First, the recoverable wages are those garnished in the 90 days immediately before the bankruptcy was filed. Second, the debtor must have enough exemptions, particularly when filing under Chapter 7 bankruptcy, to cover the regained funds. Finally, the amount of money that was garnished from the debtor’s wages must be more than $600.

What happens to credit card debt during bankruptcy?

Credit card companies are among the last repaid when the debtor liquidates their estate because courts do not view credit card debt as a priority debt. Because there is generally no property during the liquidation of the estate that the debtor can sell to repay the creditor, credit card debt is classified as no-asset unsecured debt, and the credit card companies usually do not recoup anything when the estate is liquidated in the bankruptcy process. Whatever credit card debt is left after the estate is liquidated is generally discharged, though there are some exceptions to this.

However, if the charges to the credit card were made under false pretenses, then the credit card debt will likely not be discharged after the estate liquidation. False pretenses, or “not acting in good faith” is automatically presumed when:

  • The debtor charges the purchase of “luxury goods or services” to the card within ninety days of filing. “Goods or services reasonably necessary for the support or maintenance” of the debtor’s household, like gas and food, are not “luxury goods or services.”
  • There are charges of $925 or more due to cash advances within seventy days of filing for bankruptcy. This policy is in effect regardless of what the money is spent on, and charges of the aforementioned nature can decrease the likelihood of the credit card debt being discharged.

What happens to my medical debt during bankruptcy?

Although it is one of the most common reasons for bankruptcy, medical debt is considered to be a nonpriority unsecured debt, much like credit card debt. There is, however, no established limit on how much medical debt can be discharged during bankruptcy.

How does bankruptcy influence student loan debt?

In general, courts are reluctant to discharge student loan debt, but there are options depending on what Chapter of bankruptcy is filed.

Chapter 7 bankruptcy may allow for a discharge of student loan debt provided that the debtor can prove to the court that the debt creates an undue hardship on their finances. The test to determine “undue hardship,” however, varies depending on the court or the judge, so it is hard to establish an exact standard. Those who have been recently been granted relief under Chapter 7 include some debtors with very low incomes and some who took out loans in order to attend for-profit institutions.

Those who file bankruptcy under Chapter 13 will likely never be able to get their student loans discharged, but the structured payment plans they establish will often allow for reduced payments.

How does bankruptcy deal with tax debt and other debts owed to the government?

The only government debt that is generally dischargeable is income tax debt, but this may not eliminate all of the ramifications related to income tax debt.

If each of the following conditions met, then a court may discharge income tax debt:

  • The debt must be older than three years of age.
  • All past and necessary tax returns must have been filed.
  • The IRS assessed the tax 240 days or more before the bankruptcy was filed.
  • No fraud was committed, nor was there an attempt to avoid paying the income tax debt.

Even if all of conditions for discharge are met and the debt discharged, the government may still demand that the debtor repay the full debt due at some point in the future. This often happens when the government places a tax lien on a debtor’s property. When the property is sold, the government is able to recoup the full amount of the tax money owed. Should the lien be filed prior to the bankruptcy, even if the debt is discharged, the full amount of the lien must be paid when the property is sold.

Can a personal loan be discharged?

In general, personal loans, such as loans from a friend or relative, can be discharged by a court. If paying back the personal loans has taken precedence over the repayment of other debts, however, the court may decide that this prioritization was an instance of showing favoritism or even committing fraud.

How are car loans treated in bankruptcy?

Under Chapter 7, the debtor has a few options. They can continue to pay the loan and keep the car as if the bankruptcy was never filed. The car could be relinquished so that the debt can be discharged. There are other miscellaneous options where the debtor can retain the car and pay its value. In these cases, however, the full value of the car must be paid in one payment soon after the bankruptcy is filed.

In a Chapter 13 bankruptcy, the structured payment plan allows for a reduction in the amount to be repaid. In addition, the interest rate is generally much lower than that specified in the original ownership contract, and, should the value of the car be less than what is owed and the car has been owned for more than two-and-a-half years before the bankruptcy, only the actual value of the car must be repaid.

What happens to my parking tickets in bankruptcies?

Chapter 7 bankruptcy does not allow for the discharge of parking tickets.

With Chapter 13 bankruptcy, however, the debtor is able to only pay a fraction of the ticket’s debt, according to their ability to pay.

If I file for bankruptcy, will I still have to pay child support?

In general, filing for bankruptcy does not affect the repayment of child support; it cannot be discharged in bankruptcy. The only exception to this is a repayment plan used to fulfill back child support in a Chapter 13 bankruptcy case.

What happens to payday loans when I file for bankruptcy?

Generally, a payday loan can be discharged, and filing for bankruptcy will protect paychecks and bank accounts from wage garnishment. However, if the payday loan was acquired shortly before the bankruptcy was filed, then there may be legal complications. Make sure to seek legal advice if this is the case.

What happens to co-signed loans if I file for bankruptcy?

Bankruptcy is designed to protect the individual who files for bankruptcy, not those who co-sign their loans, so, unless the co-signer also files for bankruptcy, the cosigner will still be held legally responsible for the debt. However, the debtor can elect to pay the debt in order to keep the co-signer from bearing the weight of the debt.

What happens to a 401(K) debt if I file bankruptcy?

Under a Chapter 7 bankruptcy, there are tighter parameters that apply to the payment of the debt. The debt can be discharged, but tax consequences can arise.

Chapter 13 allows the loan to be treated like any normal debt, which allows it to be either repaid or discharged.

What does it mean if a creditor puts a lien on a debtor’s house?

A lien functions like an additional mortgage, and it is only able to be paid if the value of the house is enough to pay off all of the previous unpaid mortgages. In many bankruptcy cases, the liens can be avoided or discharged by the court because the house is often not worth enough to pay the mortgages in full.

If I file for bankruptcy, will I ever be able to get a mortgage?

Bankruptcies show up on credit reports for a period of ten years, but the credit report is only one factor lenders consider when evaluating whether or not an individual should be able to get a mortgage. Other factors include, but are not limited to: income, total quantity of debt, and how well the individual has repaid their debt following their filing for bankruptcy. Each individual lender devises the terms they are willing to offer on a loan agreement, and they may have differing evaluations on the importance of bankruptcy in deciding whether or not to offer a loan. However, with the passage of time, the importance of the bankruptcy diminishes on the credit report, and loan terms become more favorable.

I’m considering filing for a Chapter 7 bankruptcy. Does that mean that I’m going to lose my house?

Every bankruptcy case is different, but filing for Chapter 7 bankruptcy does not immediately cost the debtor their home. The value of all of the debtor’s possessions is calculated and compared against the debt owed. If the sale of the house would not result in a great profit, then the house is not sold.

What happens if I have transferred real estate prior to filing a bankruptcy?

Unless a property transfer took place more than four years prior to the bankruptcy, the transfer can be reversed in a bankruptcy court. If the transfer happens immediately prior to filing bankruptcy, then it can damage the debtor’s chances of successfully filing for bankruptcy.

Will I have a choice as to whether or not I include certain debts when I file for bankruptcy?

Regardless of whether or not the debt is listed when the case for bankruptcy is filed, every debt is a part of the case. The debtor, however, can opt to retain certain debts, should the court approve, and can continue making payments on them. This generally does, however, require the debtor to sign a document known as a “reaffirmation agreement” that indicates that the court will not discharge the selected debts in the bankruptcy case.

What happens if I do not sign a reaffirmation agreement?

If the debtor does not sign a reaffirmation agreement, then their debt will be discharged, provided that the debts are dischargeable. The creditor reserves the right to repossession of any property still connected to a loan, so the debtor must continue to pay for vehicles or homes if they are to be retained.

What will happen if I fall behind on my payments for my Chapter 13 plan?

If a debtor working on a payment plan under a Chapter 13 bankruptcy falls behind on their payments and cannot catch up on their own, then they may file a motion with the court to modify their plan. Should they completely lose the ability to make payments, then the court can take actions to alleviate the burden of the payments such as reducing the payments, suspending the payments for a period of two or three months, or granting the debtor a hardship discharge.

What do I do if I forget to list a creditor on the bankruptcy papers?

All of an individual’s debts are included in the provisions of the bankruptcy, and the listing of debts can be updated to include a debt or creditor that was neglected when the case was originally filed on the condition that the debt to that newly-listed creditor was owed when the case was actually filed. There is a fee for adding the debt or creditor, but payments can be made on the debt after the conclusion of the bankruptcy case.

Can a creditor try to collect directly from me after I file for bankruptcy?

Filing for bankruptcy provides immediate legal protection from creditors. Once bankruptcy is filed, creditors cannot legally contact a debtor, continue their suit, garnish wages, or make any other attempt to collect money from the debtor.

What is a bankruptcy meeting of creditors with the trustee?

At the meeting of creditors, the debtor appears before the bankruptcy trustee to evaluate whether or not the total value of the debtor’s assets surpasses the number of exemptions they are permitted. Should the trustee rule that the value of the assets does in fact surpass the exemptions, then the trustee can opt to seize and sell some of the excess assets and use the profits to repay some of the creditors. It is recommended to seek legal counsel in a bankruptcy case to, among other things, evaluate the assets and determine the likelihood of a meeting of creditors with the bankruptcy trustee and to decide how best to negotiate in the event that the meeting takes place.

At the meeting, the debtor is identified by their driver’s license and social security card. The meeting will take place under oath, so the debtor will be sworn in before the meeting is continued. Then, the bankruptcy trustee will proceed to ask the debtor questions such as, “Did you read and sign your bankruptcy petition?”; “Have you sold or transferred any forms of property within the last four years?”; “Did you list all of your assets and debts?”; “Is the last tax return filed correct?”

At the conclusion of this meeting, the trustee excuses the debtor, and information regarding the discharge of debt is generally received within ninety days.

Chapter 7 Bankruptcy

Filing Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the only type of bankruptcy that liquidates or gets rid of all of your debts without requiring you to pay anything back. In order to file under Chapter 7, debtors need to meet certain income requirements depending on their family size. In most cases, debtors are able to keep all of their property. Careful planning with your attorney will ensure that you retain most, if not all, your personal property.

Consulting With a Chapter 7 Bankruptcy Attorney

Chapter 7 bankruptcy is the most common bankruptcy filed. Our bankruptcy attorney will prepare a bankruptcy petition for the bankruptcy court to eliminate your debts. With Chapter 7, debtors will be able to keep most of their personal property. Personal loans, credit cards, medical bills, and other unpaid expenses may be discharged through a Chapter 7 bankruptcy filing.

What Happens After I File Chapter 7 Bankruptcy?

Immediately after you file bankruptcy papers, the federal “automatic stay” will take effect. The automatic stay will provide the debtor protection from all collection activities, including car repossessions, wage garnishment, and home foreclosure sales.

Preparing to File Chapter 7 Bankruptcy

When you file Chapter 7 bankruptcy, debtors need to make an inventory of personal property. We will help you determine which property is exempt (debtors can keep) and non-exempt (debtors will surrender).

How Long Will a Bankruptcy Case Take?

Once you file a petition for Chapter 7 bankruptcy, it normally takes about four to six months for your case to be completed. There are several situations that can delay a bankruptcy case including:

  • Trustee needs more information. Creditors can ask for more information of documentation, which can delay a case until you acquire the documentation.
  • Delays in personal financial management courses. You are required to attend financial management courses to help prevent you from future bankruptcies and financial struggles. If you delay attending financial management courses, it will delay your debt discharge.
  • Creditors challenge dischargeability of debt. Creditors can challenge your bankruptcy case if they feel your debt should be wiped out. The court will hold a hearing to discuss the matter, which includes witness testimonies and review of documents.
  • Student loan debt discharge. You need to prove to the court that your student loan debt is causing undue hardship if you want to discharge it.
Chapter 13 Bankruptcy

Filing Chapter 13 Bankruptcy

Are you dealing with serious delinquencies and debt? We are here to help you regain control over your finances. Chapter 13 bankruptcy allows many individuals to find financial relief through a repayment bankruptcy plan.

The primary difference between a Chapter 13 bankruptcy and a Chapter 7 is that under Chapter 13, debtors pay some of their debt back to their creditors over a 3-5 year period depending on their circumstances. A person normally files under Chapter 13 to save their home or because they do not qualify to file under Chapter 7.

Do I Need a Lawyer to File Chapter 13 Bankruptcy?

Some people try filing for Chapter 13 Bankruptcy without the help of an attorney, but they almost always end up in a worse situation than they were in beforehand. Even more stress and confusion is the last thing someone needs during an already overwhelming and painful period of their life. Don’t make your burden worse than it has to be. Take advantage of the guidance and experience of our team of Chapter 13 Bankruptcy attorneys and get your life back on track.

When you work with us, we will guide you through the entire process of filing for Chapter 13 bankruptcy. We will begin by filing for bankruptcy protection, which stops all collection activities, including wage garnishments, home foreclosure sales, vehicle repossession, harassing collection calls, and more.

What Else do I Need to Know About Filing for Chapter 13 Bankruptcy?

Under Chapter 13 Bankruptcy Filings, debtors will repay their creditors all or part of their debts, based on what the debtor can afford. Normally the amount they can afford is based on their disposable income after making monthly expenditures. Once a bankruptcy plan is completed, all unsecured debts are discharged.

Some bankruptcy Chapter 13 cases will allow for a vehicle “cram down”, which helps to reduce the principal amount the debtor owes on a vehicle. The debtor will only repay the auto loan based on the current market value of the vehicle. Chapter 13 also allows homeowners to file a “Chapter 13 lien strip”, which will eliminate the second mortgage.

Chapter 13 is more commonly used for homeowners than Chapter 7 bankruptcy. If you are upside-down in your home and you have a second mortgage, a Chapter 13 lien strip is a great way to find financial relief. Chapter 13 does impact your credit, but not as significantly as you are paying back part of the debt.

FAQ's

I’ve heard of several different types of bankruptcy. What’s the difference?

The three most common types of bankruptcy are Chapter 7 bankruptcy, Chapter 13 bankruptcy, and Chapter 11 bankruptcy. Each Chapter number relates to a Chapter in the US Bankruptcy Code.

Chapter 7 bankruptcy allows for legal clemency for individual debt and will result in the discharge of the debt. Allowances are provided under bankruptcy law that generally permit the individual who is filing to keep most of their possessions, including their cars, homes, and retirement savings.

Should the Chapter 7 codes not allow for the retention of those possessions or the reported income level is too high to qualify for Chapter 7 bankruptcy, then a Chapter 13 bankruptcy may prove more feasible. If monthly payments are made via a three-to-five-year plan, then a Chapter 13 bankruptcy will prevent the loss of any possessions or assets that would be forfeited under a Chapter 7 bankruptcy. The Chapter 13 codes may also allow for the prevention of foreclosure by allowing the debtor to catch up on overdue mortgage payments. Furthermore, it contains provisions for the “stripping” of a home equity line of credit or a second mortgage.

Chapter 11 bankruptcy, which is less common than Chapter 7 and Chapter 13, is filed by companies, cooperations, business partners, or those who have secured debt that totals more than $1,150,000. This process involves a proposal of a reorganization that will eventually reimburse creditors.

In essence, Chapter 7 bankruptcy results in the forgiveness of all unsecured debt, but may result in the loss of assets. Chapter 13 is the systematic repayment of unsecured debt according to the debtor’s ability to repay, and allows for the retention of more assets. Chapter 11 is a reorganization plan used by businesses and large debtors.

Should I file for bankruptcy? If so, under what Chapter of bankruptcy should I file?

Consideration of bankruptcy usually is initiated by serious financial or legal situations like lawsuits, bank levys, foreclosure, wage garnishments, car repossessions, or unrepayable debt. However, each situation is unique and should be individually evaluated by legal professionals to see whether or not there are other options. If there are other options, then bankruptcy may not be the best decision. If it is, however, then a legal professional should advise which chapter of bankruptcy is most feasible and what the ramifications of that chapter will entail. Bankruptcy provides a clean slate for many people. Instead of seeing it as a disaster, look at bankruptcy as an opportunity to take charge of life.

Will all my debts be forgiven if I file for Bankruptcy?

Even filing bankruptcy, regardless of Chapter filed, cannot eliminate certain debts. These include, but are not limited to: alimony, child support, guaranteed student loans, restitution, fines, debts for injuries due to driving while intoxicated, debts accumulated because of a debtor’s fraudulent actions, excessive credit card debt incurred immediately before filing should the creditor file an objection, and some forms of taxes, though income taxes more than three years old may be discharged. Certain actions, such as transferring assets to prevent their being seized by creditors, may also result in the denial of a bankruptcy discharge.

Would filing for bankruptcy stop a foreclosure?

Filing for Chapter 7 bankruptcy will postpone a trustee sale for at least thirty days, though the postponement sometimes lasts for sixty days or more.

The structured payments made under Chapter 13 bankruptcy force banks to recognize and accept mortgage payments and payments for the amount still due over the course of thirty-five to sixty months.

If I file for bankruptcy, will I be able to keep my home?

Provided that regular payments on the mortgage are maintained, many homeowners have filed for Chapter 7 bankruptcy, retained their homes, and had their debts discharged. Each situation carries its own unique, distinct factors, and the rules and codes of bankruptcy are intricate, so every situation should be evaluated by trained legal counsel, to determine whether or not the house may be retained.

Chapter 13 bankruptcy, with its structured plan of payments, allows the debtor to retain their home as long as they make both their regular mortgage payments and the designated payments included in their plan.

Is there a certain amount of money that I can have in the bank or in the foreother assets when I file for bankruptcy?

Should the debtor not have any equity in their home, they may retain roughly $25,000 in assets. Assets include, but are not limited to: cash, personal possessions, and the equity in their vehicles. If the debtor has, but elects to save, the equity in their home, then the bankruptcy codes dictate what can be kept, contingent on the type of other assets are available. Generally, cash assets that can be retained are limited to roughly twenty-five percent of the monthly income. Each chapter of bankruptcy contains different strategies, so it is essential to consider each before filing for bankruptcy so that as many personal possessions as possible can be protected and retained.

If I file for bankruptcy, will I be able to keep my car?

After filing for bankruptcy, roughly $25,000 in assets can be retained by the debtor, which includes the financial equity in a vehicle. In many cases, this allows for debtors to keep their vehicles after they file for bankruptcy.

If I file for bankruptcy, is my spouse required to file?

Married couples are given a choice between filing for bankruptcy separately or filing a joint case. Although, should the spouse not wish to join the case, they are not required to join a case, and the combined household income must be divulged on the bankruptcy paperwork.

Does the median household income influence a bankruptcy case? If so, how?

Before filing for bankruptcy as a consumer case, each individual in the household with an income must compare their earnings to the median income for households of the same size. Should that income exceed the median, under the dictates of the “Means Test,” the amount of debt to be repaid are calculated using IRS expense standards applied to the debtor’s various expenses.

What do you mean when you talk about dischargeable and non-dischargeable debt? What is the difference between the two?

Debts fall under two basic distinctions: dischargeable and non-dischargeable debt. Dischargeable debt is forgivable debt while non-dischargeable debt is non-forgivable debt. Each chapter of bankruptcy has some variation of dischargeable and non-dischargeable debt, but what specifically falls into each category varies depending on which chapter of bankruptcy is filed. The discharge of debt is the most common reason for filing for bankruptcy, and debt discharge gives the debtor an opportunity for a new start.

Creditors are garnishing my wages. Will they stop after I file for bankruptcy?

Once bankruptcy is filed, many creditor collection efforts are automatically ceased, including wage garnishments. This cessation is referred to as a “stay.” Some who file for bankruptcy are even able to regain some of the wages lost due to garnishment.

For the duration of the stay, creditors included in the bankruptcy case are unable to garnish wages, including those ordered prior to the debtor’s filing for bankruptcy, or enact any collection efforts not approved by the court.

Because it takes time for creditors to receive notification that the debtor has filed bankruptcy, bankruptcy stays and cessations of wage garnishments are not in effect instantaneously. In order to cease wage garnishments as quickly as possible, it is best if the debtor informs their place of employment’s payroll department of the bankruptcy case as soon as the case is filed.

In order to regain garnished wages, often referred to as “clawing back,” there are a couple of criteria that must be met. First, the recoverable wages are those garnished in the 90 days immediately before the bankruptcy was filed. Second, the debtor must have enough exemptions, particularly when filing under Chapter 7 bankruptcy, to cover the regained funds. Finally, the amount of money that was garnished from the debtor’s wages must be more than $600.

What happens to credit card debt during bankruptcy?

Credit card companies are among the last repaid when the debtor liquidates their estate because courts do not view credit card debt as a priority debt. Because there is generally no property during the liquidation of the estate that the debtor can sell to repay the creditor, credit card debt is classified as no-asset unsecured debt, and the credit card companies usually do not recoup anything when the estate is liquidated in the bankruptcy process. Whatever credit card debt is left after the estate is liquidated is generally discharged, though there are some exceptions to this.

However, if the charges to the credit card were made under false pretenses, then the credit card debt will likely not be discharged after the estate liquidation. False pretenses, or “not acting in good faith” is automatically presumed when:

  • The debtor charges the purchase of “luxury goods or services” to the card within ninety days of filing. “Goods or services reasonably necessary for the support or maintenance” of the debtor’s household, like gas and food, are not “luxury goods or services.”
  • There are charges of $925 or more due to cash advances within seventy days of filing for bankruptcy. This policy is in effect regardless of what the money is spent on, and charges of the aforementioned nature can decrease the likelihood of the credit card debt being discharged.

What happens to my medical debt during bankruptcy?

Although it is one of the most common reasons for bankruptcy, medical debt is considered to be a nonpriority unsecured debt, much like credit card debt. There is, however, no established limit on how much medical debt can be discharged during bankruptcy.

How does bankruptcy influence student loan debt?

In general, courts are reluctant to discharge student loan debt, but there are options depending on what Chapter of bankruptcy is filed.

Chapter 7 bankruptcy may allow for a discharge of student loan debt provided that the debtor can prove to the court that the debt creates an undue hardship on their finances. The test to determine “undue hardship,” however, varies depending on the court or the judge, so it is hard to establish an exact standard. Those who have been recently been granted relief under Chapter 7 include some debtors with very low incomes and some who took out loans in order to attend for-profit institutions.

Those who file bankruptcy under Chapter 13 will likely never be able to get their student loans discharged, but the structured payment plans they establish will often allow for reduced payments.

How does bankruptcy deal with tax debt and other debts owed to the government?

The only government debt that is generally dischargeable is income tax debt, but this may not eliminate all of the ramifications related to income tax debt.

If each of the following conditions met, then a court may discharge income tax debt:

  • The debt must be older than three years of age.
  • All past and necessary tax returns must have been filed.
  • The IRS assessed the tax 240 days or more before the bankruptcy was filed.
  • No fraud was committed, nor was there an attempt to avoid paying the income tax debt.

Even if all of conditions for discharge are met and the debt discharged, the government may still demand that the debtor repay the full debt due at some point in the future. This often happens when the government places a tax lien on a debtor’s property. When the property is sold, the government is able to recoup the full amount of the tax money owed. Should the lien be filed prior to the bankruptcy, even if the debt is discharged, the full amount of the lien must be paid when the property is sold.

Can a personal loan be discharged?

In general, personal loans, such as loans from a friend or relative, can be discharged by a court. If paying back the personal loans has taken precedence over the repayment of other debts, however, the court may decide that this prioritization was an instance of showing favoritism or even committing fraud.

How are car loans treated in bankruptcy?

Under Chapter 7, the debtor has a few options. They can continue to pay the loan and keep the car as if the bankruptcy was never filed. The car could be relinquished so that the debt can be discharged. There are other miscellaneous options where the debtor can retain the car and pay its value. In these cases, however, the full value of the car must be paid in one payment soon after the bankruptcy is filed.

In a Chapter 13 bankruptcy, the structured payment plan allows for a reduction in the amount to be repaid. In addition, the interest rate is generally much lower than that specified in the original ownership contract, and, should the value of the car be less than what is owed and the car has been owned for more than two-and-a-half years before the bankruptcy, only the actual value of the car must be repaid.

What happens to my parking tickets in bankruptcies?

Chapter 7 bankruptcy does not allow for the discharge of parking tickets.

With Chapter 13 bankruptcy, however, the debtor is able to only pay a fraction of the ticket’s debt, according to their ability to pay.

If I file for bankruptcy, will I still have to pay child support?

In general, filing for bankruptcy does not affect the repayment of child support; it cannot be discharged in bankruptcy. The only exception to this is a repayment plan used to fulfill back child support in a Chapter 13 bankruptcy case.

What happens to payday loans when I file for bankruptcy?

Generally, a payday loan can be discharged, and filing for bankruptcy will protect paychecks and bank accounts from wage garnishment. However, if the payday loan was acquired shortly before the bankruptcy was filed, then there may be legal complications. Make sure to seek legal advice if this is the case.

What happens to co-signed loans if I file for bankruptcy?

Bankruptcy is designed to protect the individual who files for bankruptcy, not those who co-sign their loans, so, unless the co-signer also files for bankruptcy, the cosigner will still be held legally responsible for the debt. However, the debtor can elect to pay the debt in order to keep the co-signer from bearing the weight of the debt.

What happens to a 401(K) debt if I file bankruptcy?

Under a Chapter 7 bankruptcy, there are tighter parameters that apply to the payment of the debt. The debt can be discharged, but tax consequences can arise.

Chapter 13 allows the loan to be treated like any normal debt, which allows it to be either repaid or discharged.

What does it mean if a creditor puts a lien on a debtor’s house?

A lien functions like an additional mortgage, and it is only able to be paid if the value of the house is enough to pay off all of the previous unpaid mortgages. In many bankruptcy cases, the liens can be avoided or discharged by the court because the house is often not worth enough to pay the mortgages in full.

If I file for bankruptcy, will I ever be able to get a mortgage?

Bankruptcies show up on credit reports for a period of ten years, but the credit report is only one factor lenders consider when evaluating whether or not an individual should be able to get a mortgage. Other factors include, but are not limited to: income, total quantity of debt, and how well the individual has repaid their debt following their filing for bankruptcy. Each individual lender devises the terms they are willing to offer on a loan agreement, and they may have differing evaluations on the importance of bankruptcy in deciding whether or not to offer a loan. However, with the passage of time, the importance of the bankruptcy diminishes on the credit report, and loan terms become more favorable.

I’m considering filing for a Chapter 7 bankruptcy. Does that mean that I’m going to lose my house?

Every bankruptcy case is different, but filing for Chapter 7 bankruptcy does not immediately cost the debtor their home. The value of all of the debtor’s possessions is calculated and compared against the debt owed. If the sale of the house would not result in a great profit, then the house is not sold.

What happens if I have transferred real estate prior to filing a bankruptcy?

Unless a property transfer took place more than four years prior to the bankruptcy, the transfer can be reversed in a bankruptcy court. If the transfer happens immediately prior to filing bankruptcy, then it can damage the debtor’s chances of successfully filing for bankruptcy.

Will I have a choice as to whether or not I include certain debts when I file for bankruptcy?

Regardless of whether or not the debt is listed when the case for bankruptcy is filed, every debt is a part of the case. The debtor, however, can opt to retain certain debts, should the court approve, and can continue making payments on them. This generally does, however, require the debtor to sign a document known as a “reaffirmation agreement” that indicates that the court will not discharge the selected debts in the bankruptcy case.

What happens if I do not sign a reaffirmation agreement?

If the debtor does not sign a reaffirmation agreement, then their debt will be discharged, provided that the debts are dischargeable. The creditor reserves the right to repossession of any property still connected to a loan, so the debtor must continue to pay for vehicles or homes if they are to be retained.

What will happen if I fall behind on my payments for my Chapter 13 plan?

If a debtor working on a payment plan under a Chapter 13 bankruptcy falls behind on their payments and cannot catch up on their own, then they may file a motion with the court to modify their plan. Should they completely lose the ability to make payments, then the court can take actions to alleviate the burden of the payments such as reducing the payments, suspending the payments for a period of two or three months, or granting the debtor a hardship discharge.

What do I do if I forget to list a creditor on the bankruptcy papers?

All of an individual’s debts are included in the provisions of the bankruptcy, and the listing of debts can be updated to include a debt or creditor that was neglected when the case was originally filed on the condition that the debt to that newly-listed creditor was owed when the case was actually filed. There is a fee for adding the debt or creditor, but payments can be made on the debt after the conclusion of the bankruptcy case.

Can a creditor try to collect directly from me after I file for bankruptcy?

Filing for bankruptcy provides immediate legal protection from creditors. Once bankruptcy is filed, creditors cannot legally contact a debtor, continue their suit, garnish wages, or make any other attempt to collect money from the debtor.

What is a bankruptcy meeting of creditors with the trustee?

At the meeting of creditors, the debtor appears before the bankruptcy trustee to evaluate whether or not the total value of the debtor’s assets surpasses the number of exemptions they are permitted. Should the trustee rule that the value of the assets does in fact surpass the exemptions, then the trustee can opt to seize and sell some of the excess assets and use the profits to repay some of the creditors. It is recommended to seek legal counsel in a bankruptcy case to, among other things, evaluate the assets and determine the likelihood of a meeting of creditors with the bankruptcy trustee and to decide how best to negotiate in the event that the meeting takes place.

At the meeting, the debtor is identified by their driver’s license and social security card. The meeting will take place under oath, so the debtor will be sworn in before the meeting is continued. Then, the bankruptcy trustee will proceed to ask the debtor questions such as, “Did you read and sign your bankruptcy petition?”; “Have you sold or transferred any forms of property within the last four years?”; “Did you list all of your assets and debts?”; “Is the last tax return filed correct?”

At the conclusion of this meeting, the trustee excuses the debtor, and information regarding the discharge of debt is generally received within ninety days.

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BANKRUPTCY PROCESS

Get mandatory credit counseling.

You must receive credit counseling during the six-month period prior to filing for Chapter 7 bankruptcy. This requirement was added when the bankruptcy laws were overhauled in 2005. You must get the counseling from an agency that has been approved by the United States Trustee’s Office; you can find a list of approved counselors on their website. If you don’t get credit counseling and file a certificate of completion with the court, your case will be dismissed. (To learn more about this requirement, see What Happens During Prebankruptcy Credit Counseling.)

File your petition and other forms.

To start your bankruptcy case, you must file a packet of forms in court. This includes the bankruptcy petition, a number of schedules listing financial information, and a form on which you list your income and expenses, to show that you can pass the Chapter 7 means test (a prerequisite for using Chapter 7). On your forms, you will also claim your property exemptions, under state and federal laws that allow you to keep certain property in bankruptcy. Once you have completed this part of the process, an automatic staygoes into place and stops most creditor collection actions against you for the duration of your case.

The trustee takes over.

After you file your paperwork, the court will appoint a trustee to handle your bankruptcy case. The trustee’s job is to review your paperwork and take your nonexempt property (if you have any) to distribute to your creditors. You have to submit a copy of your most recent tax return to the trustee.

The meeting of creditors takes place.

You’ll receive a notice from the court, telling you when your meeting of creditors (also called a “341 meeting,” after its place in the bankruptcy code) will be held. At the meeting, you will have to answer questions about your finances and bankruptcy forms, under oath, from the trustee and any creditors who show up (often, none attends the meeting). This meeting is typically very short.

Your eligibility to file for is confirmed.

At this point, the trustee has gathered and reviewed all of your information and the court makes a decision on whether or not you are eligible for Chapter 7 protection. You might not be eligible if you can’t pass the means test (a comparison of your income to expenses to determine whether you could afford a Chapter 13 repayment plan). If the court denies eligibility, you still may have the option to file for Chapter 13 bankruptcy.

Nonexempt property is handled.

If you have any nonexempt property, the trustee will decide whether it’s worth seizing and selling, to distribute to your creditors. You may be able to negotiate with the trustee to keep certain nonexempt property if you can come up with enough cash or are willing to give up exempt property instead.

Secured debts are dealt with.

If you have secured debts — debts that are backed by collateral, which the creditor has the right to take if you default — you must give the property back, redeem it (by paying the creditor what it’s worth), or reaffirm the debt (agree that you will still owe it after your bankruptcy case is over). If you reaffirm any debts and are not represented by a lawyer, you will have to attend a reaffirmation hearing before the judge.  (To learn more, see the articles on secured debts in Your Debts in Chapter 7 Bankruptcy.)

Take a financial management course.

After you file and before you get your discharge, you have to complete a debtor’s education course, another requirement added in the 2005 amendments to the bankruptcy law. When you complete the class, you must file Form 423 Certification About a Financial Management Course, with the court.

You receive your discharge.

From three to six months after you file, you’ll receive your bankruptcy discharge in the mail. At this point, the automatic stay is lifted.

Case closed.

A few days or weeks after your discharge is granted, your bankruptcy case will be officially closed, you will no longer be liable to most or all of your creditors, and you can move on with your life.

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