Bankruptcy is a legal recourse available to most individuals and businesses faced with financial distress. It is widely used in our country as a means to obtain financial freedom, protect assets, or obtain a fresh start.
It is a misconception that Bankruptcy is the result of bad financial decisions or improper money management. Most people file for bankruptcy because of unforeseen circumstances that arise in life. The majority of our clients faced financially difficult situations resulting from illness, exorbitant medical bills, reduction in work hours, inability to work, loss of work, having to support a family member, or legal actions such as foreclosures or credit card lawsuits. These factors usually lead to creditors taking action to collect on debts which include filing lawsuits, collection efforts, wage garnishments, bank account garnishment, vehicle repossessions, and even seeking to auction your home or property.
Any person residing, domiciled, or having property or a place of business in the United States may file Chapter 7. A business may also file a Chapter 7. The new bankruptcy law includes a “means test” which applies an income vs. expense test in order to file Chapter 7 bankruptcy. There are currently no minimum or maximum income limits or other income requirements or limitations for people whose unsecured debts are primarily non-consumer debts such as investment liability, business losses, taxes, or student loans.
Chapter 13 is reorganization bankruptcy commonly incorrectly referred to as the repayment Bankruptcy. A reorganization may include eliminating a second mortgage, seeking a modification of your home loan through the Mortgage Modification Mediation Program, catching up on missed mortgage payments or association fees, and even reducing the loan amount on investment property. Depending on the debtors income, a Chapter 13 reorganization takes 36 or 60 months.
Chapter 7 bankruptcy is the most common type of bankruptcy and is often referred to as a “liquidation bankruptcy.” Chapter 7 bankruptcy is used to eliminate, or discharge, primarily unsecured debts such as credit cards or medical bills. Chapter 7 does not eliminate secured debts, such as vehicles (unless the secured item is surrendered). Under the new bankruptcy law, only people who pass the “means test” may file a Chapter 7 bankruptcy. An experienced bankruptcy attorney can determine your eligibility and advise if Ch 13 is applicable and of benefit for your particular situation.
Married debtors can file a joint bankruptcy petition for a single filing fee, and Stiberman Law’s attorneys charge the same legal fee for joint cases as they do for individual cases. Married couples who are jointly liable on most debts should file a joint bankruptcy. On the other hand, if only one spouse is liable on most of the debts, the indebted spouse may file an individual bankruptcy, and in most cases, the individual debtor’s bankruptcy will have no adverse effect on the non-filing spouse.
The decision to file for bankruptcy is nothing more than a decision to seek a path forward of financial freedom. Filing your case in a timely fashion can spare you from unnecessary losses or payments on debts that can be discharged in bankruptcy.
The vast majority of debts can be discharged in bankruptcy. These include credit cards, vehicle repossession, wage garnishments, foreclosure deficiencies, and personal loans. Even if you file for bankruptcy, you will still need to pay your child support, back taxes, federal student loans or debts incurred as a result of fraud or theft (writing bad checks, for example).
The new bankruptcy law requires all debtors to fulfill two education requirements: a credit counseling course prior to filing and a financial management course before obtaining a discharge. It’s not difficult but it has to be done. Failure to complete either of these courses and file the appropriate certificates with the court will prevent a successful bankruptcy. Courses van be done over the phone or online. In our experience, online is quicker. You can use one of our computers at Stiberman Law if you do not have a access to a computer or an internet connection.
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