Have you fallen into financial problems? When financial affairs become too overwhelming, you may be considering filing bankruptcy. There are some things you should know before filing for bankruptcy. An experienced bankruptcy attorney can help you understand all of these things. It is a good idea to get a consultation before making any decisions. In the United States Bankruptcy Court, there are different types of debts. Unsecured creditors are credit card debts or consumer debts not related to real property. Secured debts are real property debts. Tax debts, child support, or domestic support obligations are priority claims and cannot be discharged.
When making a bankruptcy plan, it is important to understand the difference between chapter 13 and chapter 7 bankruptcy. Each type of bankruptcy has factors that will determine which is the right option for you. Simply put, in chapter 7, you need to qualify for the means test. The means test is basically a measure of your disposable income to debt ratio to make sure you fall into a median income. If you file a single or a joint petition will affect this amount. The next step is to go in front of a bankruptcy U.S. trustee in a meeting of creditors. This impartial trustee uses the bankruptcy code to evaluate your petition for things like income, debts, and assets with the intent of getting all of your debt discharged. This is a court-appointed trustee who looks at your personal property which falls into the categories of exempt and nonexempt property. A bankruptcy exemption protects your assets in your bankruptcy proceedings. This bankruptcy protection allows you to keep the property. In a chapter 13, you make a repayment plan with the trustee to repay your debts over a period of 3 or 5 years. As we all know, even when making our best efforts, a lot can happen in that amount of time, so what if you find yourself unable to make your plan in your bankruptcy case? The best option is to make every effort to make your required payments. But thankfully, there are options in place for these circumstances.
One option is to petition the court to skip a couple of monthly payments. This is a great option if your situation is temporary and you have a particular problem. The court will usually allow this for 1 to 2 months and then you must resume payments. The amount will then be added to the remaining months. One important thing about this: This can only be done ONCE!
For more permanent changes, a second option is to ask the court for a Chapter 13 plan modification. Again, you will need a permanent reason that substantiates the need for the modification of the monthly plan payment. These include things like a loss of income or large unexpected expenses. You will need to show your updated budget to the court as well.
If the permanent reason is a big loss of income, it is also possible to convert your case to a Chapter 7. Let’s say you become injured and have to stop work completely, you are only earning disability and you can no longer make payments, you then convert to a Chapter 7 and unsecured debts get discharged. You must still qualify for a Chapter 7 to do this and if you have filed for a Chapter 7 in the previous 8 years prior to filing the 13, this is not an option for you. In this scenario, there is also the possibility of a hardship discharge.
As a last resort, if none of these things are possible, the court can dismiss your case and you can attempt to refile a bankruptcy petition at a later date assuming you have not filed in the last 8 years.
As with any bankruptcy-related actions, it is best to consult an attorney to be sure you are making the best decision and that there are no other, more suitable options available. The courts offer many options to help complete the process of bankruptcy and help get you back on your feet. You are doing yourself a great service by researching and talking to someone who is an expert in the field.
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