What Happens To Your Possessions.

If you decided to file a Chapter 7 we will review all of your possessions and compare their value against the exemption laws to see if your assets can be fully protected in Chapter 7. Otherwise the Chapter 7 trustee may try to liquidate (sell) your assets. Most people filing for Chapter 7 can fully protect all of their assets from liquidation.

If you file a Chapter 13, none of your assets are subject to being sold to pay your debts, however if your possessions are not fully exempt or protected under the exemption laws, then this can effect your Chapter 13 repayment plan. The result could require you to make higher repayments through your plan. As an example, if your property is valued at $30,000.00 and your bankruptcy can only protect $21,800.00 of the total value, then in Chapter 13 you might have to pay unsecured creditors $8200.00 over your 5 year payment plan. If, instead of owning $30,000.00, you owe $50,000.00 in unsecured debt, then your plan would still pay only $8200.00, and the rest could be forgiven.

Keeping Your Car.

Most people filing for Bankruptcy keep their car. If you have a loan on your car - and you are current on the payments - then you can continue to make payments and file under Chapter 7.

If you are filing under Chapter 13 your car payments become part of your Chapter 13 repayment plan. If your car loan is over 2.5 years old you may be able to reduce the amount you repay on your car loan by filing under Chapter 13.

If you have a car, but no car loan, then depending on the value of your car, it might be claimed exempt under Chapter 7. If the value of your car is over the exemptions allowed, then you may choose not to file for Chapter 7, and instead file under Chapter 13 to protect your car.

Keeping Your Home.

If you intend to keep your home, but are looking for help making payments or reducing the amount you owe on the property, then you might be looking to file for Chapter 13. There is a lot of good advice out there about  avoiding foreclosure, but if you are in limbo waiting for a mortgage modification, or once you are in foreclosure, time may not be on your side. The faster you act, the more options you may have to choose from. If you owe more on your home than it is worth, or if your financial situation has changed such that you do not foresee being able to afford your home, then a Chapter 7 might be an avenue to consider. The court will liquidate the property on your behalf to meet your debts and thereby remove the burden from you. Bankruptcy will give you a clean start.

Bankruptcy Laws Changed In 2005.

Chapter 7 Means Test.

One of the most significant changes in the 2005 bankruptcy legislation is the Means Test. The means test is a two-part examination used to determine whether a you have enough future income, on top of the income you need to survive, to pay back a percentage of your debt. If you make enough money to pay off a percentage of your debts, you will not be allowed to file for Chapter 7 bankruptcy. Prior to October 2005, under the old bankruptcy law, judges had the ability to use discretion in allowing people to file for Chapter 7 bankruptcy.

A formula will be applied to your financial situation that exempts some living expenses, such as rent and food, to determine whether you may be able to afford to pay 25 percent of your non-priority unsecured debt (such as credit card debts.) If you can afford to pay 25 percent of your non-priority unsecured debt, then you will not be permitted to file for Chapter 7 bankruptcy.

In the second half of the means test, your income is compared against your State's median income. If your family's combined gross income is greater than the median family income in your State, then you may be required to file for Chapter 13 bankruptcy with a repayment plan, as opposed to filing for Chapter 7 bankruptcy to erase your debts. You can find the Median Income for Your State  on the U.S. Trustee's website.

In short, the means test will prevent you from filing for Chapter 7 bankruptcy if your income is above your state's median or if you can afford to pay 25 percent of your non-priority unsecured debt. There are exceptions for special circumstances. In qualifying cases of special circumstances, the bankruptcy judge may allow you to file for Chapter 7 bankruptcy, even if you do not qualify under the means test.

Mandatory Credit Counseling.

Chapter 7 and Chapter 13 bankruptcies require you to attend a credit counseling course. The course may be done online. Our offices can direct you to such an approved course. The course must be completed before you can file for bankruptcy. It will not take you very long, and you may learn some useful things about how credit can affect your life.

Qualifying for Bankruptcy.

In order to qualify to file Chapter 7, you must reside, have a domicile, a place of business, or own some property in the United States. You should not have received a bankruptcy discharge within the last 8 years, or had a bankruptcy case dismissed for cause within the last 180 days.

If you would like to file Chapter 13, you should not have received a bankruptcy discharge within the last 4 years. If you file a Chapter 13 with the 4 years after a discharge, you will not receive a discharge in the new Chapter 13. Since it is likely that you will be making payments to the trustee's office for several years, you should be able to show that you have a steady source of income. Finally, you cannot have secured debts that exceed $1,010,650.00 or unsecured debts that exceed $336,900.00. If you do, then you might be a candidate for Chapter 11.

Filing Again.

In addition to the Means Test and Mandatory Credit Counseling, Congress also enacted changes intended to reduce or eliminate the effect of a bankruptcy for serial filers. If you have filed for bankruptcy before, however, do not fear filing again. The usefulness of another bankruptcy may be affected by the time between bankruptcy filings. In your free consultation, you will be advised about how to best situate yourself for a second bankruptcy.

Although the rules are complicated, in short, your Bankruptcy Stay would last for just 30 days if your previous bankruptcy case was pending within the preceding year but was dismissed.

The stay from your current bankruptcy will simply not come into existence at all if two or more of your bankruptcy cases were pending within the preceding year but were dismissed. If your Chapter 7 case was dismissed for abuse and you file under a new chapter (such as Chapter 13,) you are not penalized, and your bankruptcy stay will have its normal duration.