Bankruptcy Is A Source Of Hope, Not Shame
When it rains, it pours…
Nobody plans to be overwhelmed with debt, but it can happen to anyone. Even the most disciplined person can struggle when faced with job loss, divorce or unexpected medical bills – heck, it’s often more than one crappy thing! Have you ever said if you didn’t have bad luck, you’d have no luck at all?
There is no shame in filing for bankruptcy. It simply shows that you had the courage to face your financial challenges head on. You figured out the best path forward. You took action.
The point of bankruptcy is to give you a fresh start so you can move on with your life.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also known as the “full” bankruptcy. This type of bankruptcy is designed for people who make less than a certain income based on their household size and don’t have the means to pay back their debt.
Chapter 7 is best for people who have few assets or little equity in their assets. You can have assets up to a certain value and still file a Chapter 7 bankruptcy without risking liquidation by the bankruptcy trustee. “Liquidation” means selling off assets to pay off creditors. An “exemption” is the legal term for the law that protects your assets. For example, you can protect up to $161,375 of equity in your residence for a single person by using your homestead exemption in your bankruptcy.
Types Of Debt That Can Be Discharged Through Chapter 7
Chapter 7 is designed to free you of unsecured debt – like credit card debt, medical bills and personal loans. People going through Chapter 7 are usually able to keep their home and their vehicle if they are current on the loans and don’t have too much equity in those assets.
The most common types of non-dischargeable debt are:
- Surprise garnishments
- Repossessions
- Lawsuits
- Foreclosure
- Phone calls demanding payment that you can’t afford
How Chapter 7 Bankruptcy Works
The Chapter 7 bankruptcy trustee’s job is to see whether you have assets that can be sold to pay back some of your debts. Many cases do not. An experienced bankruptcy attorney can advise you and maximize how much you get to keep in your Chapter 7 bankruptcy case through careful planning. That’s one of the important reasons to hire an experienced bankruptcy lawyer.
If you have too many assets, the Trustee can sell them to pay off your creditors. The money from the sale of these items is distributed to your creditors and any remaining debt is “discharged” or eliminated.
If you have too much equity in your assets, a Chapter 13 would protect that equity. See the Chapter 13 section below for more information.
The Chapter 7 bankruptcy process typically takes about four months to complete.
Determining Whether You Qualify For Chapter 7 Bankruptcy
To qualify for Chapter 7 bankruptcy, you must take a means test. If your average monthly income for the six-months prior to filing is less than the median income of a household the same size in Ohio, you pass the means test. When your income is above Ohio’s median income, you must complete the long-form means test. If your income is still too high, you may qualify for Chapter 13 bankruptcy.
What does this mean in human words? The means test is a formula that shows the court whether you have the “means” to pay back your debt. Your income must be less than a certain amount based on your household size to qualify for a Chapter 7. If you pass the means test, then you may be eligible to file a chapter 7 bankruptcy.
Chapter 7 Bankruptcy
Chapter 13 is a reorganization plan. Your debt is consolidated and restructured into an affordable monthly payment. Chapter 13 repayment plans typically last three to five years. You are protected from your creditors during this time. At the end of a successful plan, you receive a discharge. Unlike Chapter 7 bankruptcy, Chapter 13 can be used to protect your assets.
The main requirement for Chapter 13 bankruptcy protection is having the means to make monthly payments. You propose a plan to your creditors at the beginning of your case. The plan tells the Chapter 13 trustee how to pay your creditors from the money you send to the trustee.
Once the plan is approved by the court, it becomes a Federal court order. You will make payments to a court-appointed trustee who will then distribute payments to your creditors. Your monthly payment will be made through a deduction from your paycheck if you are employed.
Benefits Of Filing For Chapter 13 Bankruptcy
- Chapter 13 allows you to keep your assets.
- Stops foreclosure on your home
- Allows you to catch up your mortgage a little bit at a time instead of in a lump-sum payment
- Stops repossession of your vehicle
- Reduces your interest rate on your vehicle
- Reorganizes and reduces your vehicle payment
- Protects co-signers on your debt from collection activity
- Usually reduces the total amount you owe
- Allows you to consolidate student loans. Student loans are typically not dischargeable
3 Simple Steps Toward Debt Relief
We’ll create a personalized plan that’ll stop your creditors in their tracks. So, why wait? Let’s move toward your future in just three simple steps. Abracadabra, debt be gone!
Step 1:
Book a free initial call with me, a lawyer who loves to demolish debt for lovely people like you. We'll schedule a time to chat and work our magic.
Step 2:
Share your financial struggles and dreams with us. Don't worry, we promise to keep it under lock and key.
Step 3:
Sit back, relax, and let us build your path toward debt relief.
Filing For Bankruptcy
Frequently Asked Questions
Listed below are the questions I get most often from my clients. The information is divided into two sections; questions we get from people deciding whether to file and questions from people who have already started the bankruptcy process.
What Is Bankruptcy?
Bankruptcy is a form of relief from debts you owe. You can either work out a repayment plan or eliminate the debts completely. Your individual circumstances will determine which type of bankruptcy is best for you.
What Is Chapter 7?
Chapter 7 bankruptcy is also known as “full” or “liquidation” bankruptcy because it wipes out most of your debt such as credit cards, medical bills and repossessions. Chapter 7 gives you a fresh start. However, certain debts, like student loans are not usually dischargeable. An experienced bankruptcy attorney can help you determine which type of bankruptcy makes sense for you.
What Is Chapter 13?
Chapter 13 bankruptcy reorganizes your debts into an affordable repayment plan. This type of bankruptcy can help protect assets, catch up home mortgage and car payments, pay taxes, and in some instances, remove a second mortgage.
How Do I Know If I Should File?
You should talk to an experienced bankruptcy attorney before you do anything else. Often, people will borrow more money or cash out their retirement accounts. These temporary solutions usually hurt you more than they help you – and then you may need to file bankruptcy anyway.
Why Should I File For Bankruptcy?
Filing a bankruptcy triggers the automatic stay which prohibits creditors from using various collection efforts against you. Bankruptcy can protect you from:
- Foreclosure
- Wage garnishment
- Bank garnishment
- Creditor calls
- Lawsuits
- Utility shut-offs
How Long Does A Bankruptcy Last?
Chapter 7 usually takes four months from filing to discharge. Chapter 13 lasts from three to five years.
Will I Lose My House If I File Bankruptcy?
It depends on your individual situation. There are many ways to protect your home, even in bankruptcy. An experienced bankruptcy attorney can review your case and help you figure out options related to your home.
Will I Lose My Car If I File Bankruptcy?
Just like your home, it depends on your individual situation. There are ways to protect your car, even in bankruptcy. Talk to an experienced bankruptcy attorney about your specific circumstances.
Do I Have To File Bankruptcy With My Spouse?
No, you can file for bankruptcy alone but it may be in your best interest to file together.
What Happens To My Credit After I File Bankruptcy?
A bankruptcy remains on your credit for 10 years. However, your credit may be bad now. If you don’t have a way to pay back your debt, your credit is already being damaged. Bankruptcy is a way to help get a grip on your debt so your credit can improve in the long run.
Should I Transfer My Car Or House Into Someone Else’s Name Before I File Bankruptcy?
NO! Transferring an asset is a very bad idea. PLEASE do not do this. It causes big problems. A bankruptcy trustee can undo transfers.
Am I A Bad Person For Filing Bankruptcy?
Not at all. Life has a funny way of throwing curveballs. People file for many reasons.
- They get sick.
- They lose jobs.
- They get a divorce.
- They start businesses that don’t go as well as planned.
- They make mistakes.
Should I Use A Debt Consolidation Company Instead Of Filing Bankruptcy?
Probably not. Their advertisements sound great but in reality, these programs don’t work so well. One problem is that each of your creditors can choose whether they agree to the consolidation and on what terms. If they do not agree to participate, they can continue collection efforts. You don’t know something is wrong until you receive a lawsuit. Meanwhile, you think you are doing the right thing by paying your debts only to discover that you now have bigger problems. Not only do the consolidation companies not offer real protection, but they also often charge high fees. Occasionally, debt consolidation may be a good fit. An experienced bankruptcy attorney can help you assess whether this is a good route for you.
How Much Does A Bankruptcy Cost?
It depends on the type of bankruptcy and how much work is needed for your case. I offer a free consultation where I review your case and set the fee. There is no obligation and no pressure – really. This is an opportunity for you to gather information, for us to get to know each other, and decide whether bankruptcy makes sense for you. If you do decide to move forward, just let me know, and we’ll get started. I do accept payment plans and can defer most of my fees in Chapter 13.
How Can I Afford An Attorney? I Have No Money!
The money part is the second hardest part of the bankruptcy process. You may have things you’re paying that you don’t need to pay. Also, I offer payment arrangements to make the fees easier to handle. We will go over all these details in your free consultation.
What Happens At The Initial Consultation?
We sit down together and figure out what is causing financial stress. Then, we go through some questions so I can figure out whether a bankruptcy makes sense for you. If it does, I’ll explain the specific benefits for you. I will also explain the process. Finally, we’ll set up a plan for filing your case.
I’m Not Behind On My Bills. Can I Still File Bankruptcy?
Yes. You can be current on your debts but you may still need bankruptcy relief.
Creditors Are Still Harassing Me. What Should I Do?
Please let me know immediately. It is helpful to know who the creditor is, their mailing address, fax number, and phone number.
When Will My Case Be Filed?
We can file your case when we have the necessary fees, all the documents and have a signing appointment together.
Which Documents Do I Need To File My Bankruptcy?
- Proof of income
- previous six months before filing
- Official tax returns or tax transcripts
- previous four years
- Credit report
- Recent mortgage statement if applicable
- Land contract agreements if applicable
- Memorandum title for any vehicles with liens
- Clear titles for any vehicles owned free and clear
- Security agreements and financing statements for any secured loans
- Recent bill for vehicle loans
- Life insurance policies
- Divorce and separation agreements
- Retirement account statements
- Stocks or bonds
- Bills/collection letters that are not on the credit report
- Checking and savings account statements
- last six months
- Pre-filing certificate
- www.moneysharp.org
- Business documents if applicable
- Accounts receivable information
Things That Go Into Preparing A Case
- Paystub review
- Paystub analysis for the means test
- Advise which type of bankruptcy is right for you
- Tax return review
- Credit report review
- Listing all creditors
- Real estate search
- Reviewing mortgages for defects
- Lien search
- Reviewing that vehicle liens are properly noted on the title
- Life insurance review and assessment of equity
- Divorce decree analysis
- Retirement account review
- Other bills
- Checking and savings account audit
- Review any previous bankruptcy cases
- Exemption planning and analysis
- In-depth budget review
- Suit search
- Suggestions of stay for any suits
- Listing prior addresses
- Business analysis
- Preparing and serving the statement of intention
- Lien removal if applicable
- Providing necessary documents to the trustee
- Attending your Trustee meeting with you
- Filing your financial management course
- Providing final discharge papers to you
What Happens At My Signing Appointment?
We will prepare your petition based on the documents you’ve provided from the final checklist. After that, we go over the paperwork to confirm that everything on your petition is accurate and complete. This takes about two hours together. When you arrive, please have your bank balances for all accounts.
What Happens At My Trustee Meeting?
The bankruptcy trustees have many responsibilities. They confirm that you are who you say you are by looking at your ID and Social Security card. Then, I enter my appearance on record as representing you at the trustee meeting. They ask a series of yes or no questions such as:
- Did you sign your bankruptcy papers before they were filed with the court?
- Is that your signature?
- Are you familiar with the information contained in your papers?
- Is it accurate and complete to the best of your knowledge?
- Are there any changes or omissions to bring to my attention?
- Did you list everything that you own?
- Did you list everyone that you owe?
The trustee is not trying to trick you or scare you. All they want to do is confirm that the written information on the paperwork matches with your verbal testimony. The whole meeting takes between 5-10 minutes.
Do I Have To Go In Front Of The Judge?
Not in most cases.