EVERYTHING IN BANKRUPTCY IS INCOME RELATED. THE AMOUNT OF THE DEBTS IS INMATERIAL. FILING A CHAPTER 7 OR 13 IS PRIMARILY DECIDED BY INCOME
Chapter 7-Most common
Most debts are discharged or taken away. Chapter 7 is the easiest, simplest,
and quickest way to get out of debt.
Recent taxes, student loans, child support, and debt incurred while intoxicated
or criminal fines are not discharged. All other debts are normally discharged.
Many people want to retain a vehicle or a home. You can keep the vehicle or
home if you retain the monthly payments. Bankruptcy does not end a mortgage. If
you retain the vehicle or the home, you will need to keep making the regular
All debts owing must be listed. Any person filing bankruptcy is required to
include everyone that they know that they owe. Even though you plan to retain
the home or vehicle, the debt must be listed. The holder of the mortgage on the
home or vehicle is not interested in getting the home or vehicle. All they want
After bankruptcy, you can pay any debt. The creditor can take or make no effort
to collect the debt.
Most property owned is exempt including your home and in most cases, one
vehicle for husband and wife. This means that the court cannot take items like
household goods, clothing, most guns, animals, or tools of trade.
A trustee is appointed in every case. The trustee’s job is to see if you have
any non-exempt property ie a boat of value with no mortgage, some vehicles,
some tax refunds, savings accounts, stocks, bonds and some other assets. You
get to keep all exempt items.
Most debts are discharged or taken away. However, a chapter 13 requires a
payment to the chapter 13 trustee for a period of time. The time period may be
as short as 36 months, or as long as 60 months. The monthly payment varies
depending on the gross monthly income.
If the family or individual income is above the median income, then a chapter
13 may be required. The court uses what is called the “means test” to determine
whether to file a 7 or 13. The means test is a manner in which certain expenses
are allowed, ie taxes, medical insurance, food, clothing, auto expense,
housing, etc., in determining the amount of money left over to pay the trustee.
Chapter 13 can also be used to pay back taxes.
All future interest and penalty by the IRS, or
the OTC is eliminated in the bankruptcy
Chapter 13 is widely used to retain homes. In the event of an arrearage, or a
pending foreclosure, filing chapter 13 will stop the foreclosure. The arrearage
and the house payment are paid to the chapter 13 trustee and the trustee pays
the mortgage company. At the end of the 60 months, the arrearage is paid, and
the mortgage payment returns to normal
Congress has set a median income for filing chapter 7 or 13. The median income
changes from time to time, and varies by the number of persons in the family.
For example, two person family, median annual income is approximately $56,000.00.
This means that a two-person family can have a gross annual income of $56,000.00
or less and do a chapter 7 bankruptcy. If their income is higher, then the
choice of a chapter 7 or 13 is determined by the means test.
DETERMINING WHICH CHAPTER TO FILE
We help with the bankruptcy in providing information
on which chapter will work best for you
Certain documents are required.
Your last tax return, and the last 6 months pay stubs. If your income is
higher, you will not be allowed to file a chapter 7.
Every person filing bankruptcy is required to take two counseling classes.
These classes are simple and easy. It’s not a pass or fail. These classes are done
online or by telephone. The first course is taken before the filing, and the
2nd course after filing. The courses take about 1 ½ hour to complete. The cost
of both courses is $25.00 for both courses for an individual, or a family.
COST OF FILING
Chapter 7-Court cost--$338.00. Legal fee will vary depending on who you choose
to represent you. Most attorneys charge $1,800.00 or more. We charge $1,200.00.
You pay for the courses direct. Attorneys
are required to provide a written contract prior to employment. We allow the
fee to be paid in installments prior to filing. Unfortunately, the courts have
ruled that anything owing to an attorney at the time of filing is discharged,
and the attorney can make no collection effort.
Chapter 13-Court cost--$313.00. Most attorneys charge $3,500.00 plus court
cost. We charge $3,400.00 plus court cost. However, you will not be expected to
pay this prior to the filing. You pay
$710.00 before we file your case and the balance of $3000.00 is included in the
plan payment to the trustee-basically $50.00 per monthl.
When filing bankruptcy, you can keep certain property. These are called
exemptions. The court cannot take your home, (provided you live there) your
household goods, clothing, one vehicle per person with an equity of $7,500.00
or less. Other exempt items are retirement accounts, limited firearms, and
other miscellaneous items. We will verify all exemptions for your property.
Everyone filing a chapter 7 or 13 is required to attend what is called a
meeting of creditors. Creditors are permitted to appear and ask a limited
number of questions that led to the bankruptcy, or questions about retaining
property, ie are you going to keep the vehicle, and are you going to reaffirm
the debt. Currently, this hearing is being conducted via telephone
Creditors seldom appear at the meeting of creditors. The hearing is simply a
matter of answering about 9 routine questions.
SELECTING AN ATTORNEY
An attorney should be selected that you feel comfortable with, one that answers
your questions, and is available for consultation. You should be able to
contact the attorney via telephone or e-mail and get a response within 24 hours.