More than 1.5 million Americans declare bankruptcy each year, and it is easy to see that many people are in financial turmoil. Some say that it is caused by overspending or a lavish lifestyle, but according to CNN, sixty percent of those people file due to debt from excessive medical bills. Many wonder how to file for bankruptcy and if they will lose their assets. The laws are complex when asking for the court’s protection, but it is a necessary step for many.
Bankruptcy is a legal proceeding where you ask the court for help. You can eliminate all or some of your bills through this process. Those who are threatened with garnishments and liens will experience relief when the petition is filed. An automatic stay goes into place that protects the debtor from continued collection activities. Lenders can ask for the stay to be lifted if the debt is secured. For instance, if a car payment is six months behind, the lender may ask the bank to relieve the stay so they can repossess the car.
Once you receive a discharge notice, you are no longer required to pay any of your debts. Keep in mind there are some debts that are not dischargeable. These debts include student loans, taxes, and any debt incurred through fraudulent means. Most people file on unsecured debts like credit cards, medical bills, and past due accounts that are in collections.
Limits And Amounts
Wondering how to file for bankruptcy can be overwhelming. Still, you may also wonder what chapter to file and if your assets align with limitations. Do you qualify to file under federal law? Certain debt burden is the least amount of debt you must have to justify filing for bankruptcy. Surprisingly, in today’s down-turned economy, almost everyone could qualify for the court’s protection. To dictate the chapter that an individual should file, the Means Test is given.
Taking the Means Test allows the debtor to see if they have any disposable income. Those who have disposable income will be required to file for a Chapter 13. Stipulations apply to those who have previously filed. You can only file for the chapter 7 once every eight years. If you need to file again, you must file a chapter 13. Filing for chapter 7 and chapter 13 requires a person to have no more than $1,149,525 in secured debts, and you can have no more than $383,175 in unsecured debts. Figuring out a payment plan on a chapter 13 is easy with the help of a bankruptcy calculator.
What Types of Bankruptcy Are There?
You may wonder how to file for bankruptcy and what chapter you need to file. The most common petitions filed by the average consumer is a chapter 7 and a chapter 13.
Chapter 7 bankruptcy is a complete and total liquidation. Individuals who file for the court’s protection under this chapter have no means to pay back their debts. These are people who have lost their jobs, have major medical issues, and many times they are at or below the poverty level.
Chapter 13 filers have the means to pay back some or all their debts. Consequently, these people need the court to help them reorganize their financial responsibilities. Repayment plans in a chapter 13 are designed to allow a person to repay their debts over a three to five-year period of time. A discharge won’t occur until the end of the repayment period.
How To File For Bankruptcy
Are you wondering how to file for bankruptcy when you cannot afford an attorney? You have the option to file Pro Se. In some simple chapter 7 cases, many people choose to avoid legal fees and file as their own attorney. However, it is not advisable to file without an attorney in a chapter 13. Once you have made your decision, you must fill in the petition.
Bankrupts petitions have many schedules. It is imperative that the information is correct. Any omissions on the schedules can appear to be fraudulent to the court. Additionally, any debts that are not on the schedules will not be discharged. Filing fees are required to register your case. As of June 2014, filing fees increased. A chapter 7’s filing fee is $335. Chapter 13 filing fees are $310.
Both chapter 7 and chapter 13 filers need to attend the Meeting of Creditors. Six to eight weeks after filing the petition, you will have the official 341 meeting. This informal session puts the debtor in front of their trustee.
Trustees are officials the court appoints that can ask any questions they might have about the petition. They will ask about income, assets, total financial obligations, and any previous bankruptcy filings. Any lender, that disputes the discharge of their debt, can appear against you. Usually, no debtors attend these meetings.
Before the court will issue a discharge, you must attend a credit counseling class. Thankfully, these classes can be done online. Average costs for these classes are around $50, though some companies will waive the fee for low-income filers. A certificate of completion is issued, and this document must end up in court to obtain a discharge. Chapter 7 filers must file this certificate to the court within 45 days of the Meeting of Creditors. Chapter 13 filers must file this certificate no later than the date of their last payment in the repayment plan.
Expect a discharge in a chapter 7 case about six months after filing. For a chapter 13, the discharge will come about after the last payment is complete.
How Does The Repayment Plan Work?
A bankruptcy attorney will figure a repayment plan to accompany your bankruptcy petition. Although, the trustee must approve it. Payment plans start on the first day of the next month, following the filing of your petition. You have the option to pay your plan bi-weekly or monthly.
Most people do not repay all of their debts, but rather, they pay back a portion. It all depends on the amount of disposable income versus the amount of debt. Money is distributed to the creditors by the trustee. You probably have all kinds of questions on how to file for bankruptcy when filing a chapter 13. It is a complicated process that requires legal expertise.
FAQs We Know You Have
What if I cannot afford to pay the filing fee?
You can petition the court to pay the filing fee in four installments. Additionally, if your income is at the 150 percent of poverty level, the court will waive the fee.
Do I need an attorney to file?
Many contemplate how to file for bankruptcy without an attorney. Though it can be done, it is not advisable. The process is very complex.
How many times can I file for the court’s protection?
You can file a chapter 7 every eight years. However, you can file a chapter 13 every five years.
Do I need to include my spouse on my petition?
No! If you are married, you do not need to include your spouse on your petition. However, if there are any joint debts, then they will be responsible for repayment.
What happens if I am in foreclosure when I file?
Foreclosures are automatically stayed or halted when a petition is filed. An attorney may be able to work out an arrangement to allow you to keep your home. Oftentimes, the lender will ask for the stay to be lifted to continue with the foreclosure.
Making The First Step
How to file for bankruptcy is probably just the first question that you have. Getting the court’s help with your bills is a big step that brings much anxiety for many. Before making such a big step, make sure that you have exhausted all other options. Remember, you are not alone in this journey. There are thousands of other people filing every day in this country. Be sure to leave your comments and thoughts below.