How Do I File For Chapter 7 – There is an area of the Personal Bankruptcy Code called the means test that is used to determine if an individual is using the Personal Bankruptcy Act. Basically, if your family income is greater than the median income for a family of your size, then it is assumed that you will not qualify for Chapter 7 bankruptcy. If it’s above, you’ll need to file for stage 13 and also pay your financial obligations through the interim plan.
First of all, don’t assume you can’t pass the methods exam. The test is not black and white. The law allows a deduction from your income to determine your eligibility.
How Do I File For Chapter 7
The examination of the means does not impose a financial obligation on the company. Special circumstances (such as remaining in the armed forces) may change your position. If you can’t file for Chapter 7, you can probably file for Chapter 13.
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Chapter 7 bankruptcy allows you to discharge unprotected financial obligations, such as credit card expenses and clinical bills. In phase 7, fasting is as good as fast; However, you do not need to file if you own substantial residential property, have past transactions that may cause concern, or if you have non-attestation due to income. However, if you certify and meet other criteria as well, it can be a very easy method to get a clean slate.
Phase 13 bankruptcy allows you to restructure your financial debts to make repayments based on what you can afford. You could repay all of your financial debts monthly over 5 years, or you could repay just a number of them. It can help you keep up with your mortgage payments and keep your house, catch up on truck payments and avoid foreclosure, or otherwise allow you to meet or restructure your financial obligations.
Whether it’s a Chapter 7 or Chapter 13 personal bankruptcy, you can still get a clean slate. Speaking with a Montgomery bankruptcy attorney can often be best because they can tell you which filing is best for your scenario. If your debts have become unmanageable and you can’t pay them off, you may want to consider filing for bankruptcy to give yourself new financial resources. to begin. But bankruptcy has serious consequences that you should be aware of before making any decisions.
For example, a bankruptcy stays on your credit report for seven or ten years, depending on the type of bankruptcy. This can make it harder to get a credit card, car loan or mortgage in the future.
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Here’s what happens when you file for bankruptcy and some alternatives you might want to consider first.
Bankruptcy is generally considered a last resort for people who are deeply in debt and can’t see a way to pay their bills. However, there are some alternatives worth considering before filing for bankruptcy. They are less expensive than bankruptcy and less likely to damage your credit report.
For example, your creditors may be willing to negotiate. Rather than wait for a bankruptcy settlement—and risk getting nothing—some creditors agree to accept reduced payments over a longer period of time.
For home loans, call your loan servicer to see what options are available to you. Some lenders offer alternatives such as:
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Even the Internal Revenue Service (IRS) is often willing to negotiate. If you owe taxes, you may receive an Offer in Compromise in which the IRS agrees to accept a lower amount. The IRS also offers payment plans that allow eligible taxpayers to pay off their debts over time.
You can seek help from a financial advisor for guidance on options for your particular situation. Many states have financial counseling or debt relief offices that help residents for free or for a small fee.
When you decide to file for personal bankruptcy, you have two types to choose from: Chapter 7 or Chapter 13. They differ mainly in what happens to your assets and how your debts are paid.
Chapter 7 bankruptcy essentially liquidates your assets to pay your creditors. Some assets are tax exempt so you can keep them. Exempt assets typically include:
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Your remaining tax-exempt property will be sold by a trustee appointed by the bankruptcy court. The proceeds are then distributed to your creditors. Unexempted assets may include:
At the end of the process, most of your debts will be cleared and you will no longer have to pay them back. However, certain debts, such as student loans, child support and taxes, cannot be discharged. Chapter 7 is generally chosen by people with lower incomes and few assets. Your eligibility also depends on your income.
Chapter 13 bankruptcy allows you to keep your assets, but you must agree to a plan to repay your debts within three to five years. The trustee collects your payments and distributes them to your creditors. Chapter 13 bankruptcy is usually chosen by people who want to keep their tax-exempt assets intact or buy time against foreclosure or foreclosure.
Whether to file for Chapter 7 or Chapter 13 is not your decision alone. Courts also set an income test to determine if you qualify for Chapter 7.
What Is Chapter 7 Bankruptcy?
The means test begins by comparing your average income for the past six months to the median income for a household of your size in your state. If you earn less than the median, you should qualify for Chapter 7.
Even if your income is above the median, you may be eligible after deducting certain allowable expenses. However, if the calculation shows that you have enough disposable income left over to repay your debts—instead of simply wiping the slate clean—the court may decide that Chapter 13 is your only option. You must complete Form 122A-2 to determine your eligibility.
Filing and going through bankruptcy can be a long process with several steps. Knowing about the subject beforehand can help you prepare.
If you have decided to file for bankruptcy, the first step you should take is to consult with an attorney. Although it is possible to file without one, a qualified attorney is often important because of the long-term financial and legal consequences of bankruptcy. Your attorney can advise you on which type of bankruptcy is right for your situation.
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Before you can apply, you must attend a counseling session at a credit counseling organization approved by the U.S. Department of Justice’s U.S. Trustee Program. An advisor should assess your personal financial situation, describe your bankruptcy alternatives, and help you create a budget plan.
Advice is free if you can’t pay. Otherwise, it should cost about $50, according to the Justice Department.
Bankruptcy is governed by federal law and cases are heard by federal bankruptcy courts, although some rules vary from state to state.
You will be asked to provide the court with a list of all the money you owe. Your debts fall into two categories:
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The bankruptcy court considers the secured debt as a higher priority, since failure to pay it may allow the creditor to file a claim against the collateral.
Once all the relevant information has been submitted to the court, the court will appoint a trustee to ensure that your secured debt is paid within a certain period. At that point, the court issues an automatic stay, which prevents creditors from seizing the property through foreclosure or garnishment.
If the bankruptcy court issues a discharge, you will be released from the obligation to repay the listed debts. This means that creditors no longer have a legal claim on the debt, so they cannot collect, take legal action or even communicate with you.
The court will send a debt payment notice to your creditors. A copy will also be sent to your attorney and the Department of Justice’s US Trustee Program. Any creditor who tries to collect the debt after receiving a discharge notice can be fined.
What Is The Chapter 7 Bankruptcy Process?
In a Chapter Seven bankruptcy, the bankruptcy petition is usually issued within four to six months of the bankruptcy filing. A Chapter 13 bankruptcy discharge is issued after you follow a payment plan, usually three to five years after you file for bankruptcy.
Once the court discharges your debts, these creditors can no longer try to collect them or take other legal action against you.
Bankruptcy stays on your credit report for up to seven years (for a Chapter 13) or 10 years (for a Chapter 7). This can make it difficult to get additional credit, such as a bank loan or a regular credit card.
However, the impact of bankruptcy on your credit score will diminish over time, and your score will gradually improve as you demonstrate that you are using credit responsibly.
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One way to do this is with a secured credit card, where you make a deposit to the issuing bank, which then becomes your credit limit. Using this card wisely and
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