As to Chapter 7 filings, a majority of the cases receive a discharge. Actually, a “majority” doesn’t quite get the point across. More than 99% of cases, based on current data, have the filer’s debt discharged. This means that if you file, you have a very good chance of emerging debt free, with the exception of car payments, mortgages, child support, certain taxes, and student loans.
In a Chapter 13 Bankruptcy, you must make your payment to the trustee each month. This will be a set amount that will be determined by your attorney based on current bankruptcy law and then confirmed by the judge. If you lose your job or lose significant income, you may be able to convert your case to a Chapter 7 and still receive a discharge.
If you file for Chapter 7 bankruptcy on the advice of a qualified bankruptcy attorney, you will most likely be allowed to keep ALL of your possessions. Part of the job of the attorney is to ensure that all of your property is protected by one of the legal exemptions provided by the Bankruptcy Code, advising you to proceed with Chapter 7 only if exemptions are available for all of your assets. If not, you may be advised to choose Chapter 13, so that you can protect your assets by making payments under a Chapter 13 plan.
If you file for Chapter 13 bankruptcy, you are entitled to keep possession of all of your assets, including your home and its contents, your vehicles, your bank accounts, etc. In exchange for being allowed to keep your stuff, you agree to make payments under a Chapter 13 plan for a period of three to five years. The value of your assets can be a factor in determining how much the creditors are entitled to receive in your Chapter 13 bankruptcy. Usually, the plan payments are made from your future earnings, but some people choose to voluntarily sell property to provide plan funding, in order to limit how much of their future income they will need to pay into the plan.
The federal Bankruptcy Code contains a list of exemptions which may be used in either Chapter 7 or Chapter 13 bankruptcy. The law does allow each state to enact limitations on exempt assets, and some states limit the types and value of assets its residents may protect in bankruptcy to exemptions provided by those states’ laws. Other states, such as Pennsylvania, allow their residents to choose between the federal exemptions set forth in Section 522 of the Bankruptcy Code, or to elect to use state exemptions, the exemptions available to their residents to protect assets from creditor collection under state law. Your bankruptcy attorney will explain the pros and cons of selecting the federal exemptions, where available (as in Pennsylvania).
When a bankruptcy case is filed, an “estate” is created, similar to an estate resulting from a person’s death, i.e. the debtor’s assets form an “estate,” like a deceased person’s assets form an estate. As illustrated below, there are very few limits to the types of assets that become part of the bankruptcy estate. Exemptions allow you to keep assets which are otherwise included in the estate.
Retirement accounts are treated with special care and are completely protected in most situations. So, you can keep your pension, your IRA, your 401K, your tax deferred annuity plan, your government retirement plan, and still discharge all of that negative unsecured debt. Don’t worry if you do not know what kind of retirement plan you receive through your workplace. Your employee administrator will be very familiar with the section of the IRS code associated with your plan.
Understand that the bankruptcy laws recognize that you will need to be able to pay your day to day bills while keeping some savings for any emergency that may arise. For this reason, the federal Bankruptcy Code allows you to have up to 12,000 US dollars as a wildcard exemption, if you do not have equity in a house, car or other items that exceeds the exemption amounts for those items. Depending on what you own, you may be able to use the entire wildcard exemption to keep cash. What you need to know is that the Bankruptcy Code has exemptions for different items such as equity in your home, equity in your car, household goods, and jewelry, just to name a few.
At Seelinger Law we are adept at maximizing your exemptions with the goal of getting you a fresh start without having to give up anything.
A “Notice of Discharge” will come to you from the court approximately two months after your Chapter 7 meeting of the creditors. It will not list which specific debts have been discharged in your case, but instead will give you basic information on the types of debts that are discharged, and the types that are not. Your attorney will be able to explain in further detail. Your creditors will also receive this discharge order. In most Chapter 7 bankruptcy cases, all of your debt is discharged with the exception of taxes, student loans, and domestic support obligations. In a Chapter 13 case, success is measured by obtaining court approval of your payment plan, followed by your making the payments required by your plan over the term of 3 to 5 years.
Most of my clients do not ever set foot in a courtroom. You will attend a meeting with me and a trustee assigned to your case, but that is held in a meeting or conference room, not in a courtroom. Your creditors are invited to come to the trustee meeting, but they seldom do.
Seelinger Law is adept at making this process as painless as possible. Your attorney will fill out all of the paperwork. The only thing you have to do is provide your attorney with some background information about your income, expenses and personal belongings and your attorney will do the rest. You will need a short list of documents to prove to the trustee that you are who you say you are, to show that you do not live too extravagantly, and proof of your income. Your attorney will help you every step of the way.
There is a common myth that your credit is paralyzed after filing for bankruptcy. This really is just a myth. In most cases people’s credit scores will actually go up after filing for bankruptcy. People who have been struggling with low credit scores and high interest rates have even seen their scores go up by over 100 plus points after a discharge. There is a reason for this: you will be cleared of your prior obligations making you a more desirable candidate for credit in the future. At Seelinger Law we have the software to show you how your credit score would be affected from the bankruptcy even before you file.
So, if you are curious about the benefits of bankruptcy but have not made a decision yet, come in for your FREE CONSULTATION and let Seelinger Law show you how your credit score would be affected.
You may have a high credit score as you may have been spending $400$800 a month (basically another mortgage payment) toward your credit cards for a period of years only to survive paycheck to paycheck with no disposable income and no ability to start saving for retirement. Seelinger Law will also counsel you on maximizing your credit after the bankruptcy. Repairing your credit can be easy if you follow good credit principles after your debts are cleared. On time payments, and the practice of not overextending yourself, can go a long way towards giving new creditors confidence in lending. If your credit score was high from making on time but exorbitant payments, your credit score may be lower after filing. However, credit can be rebuilt by following responsible credit practices. Seelinger Law clients do not have any problem getting credit cards, vehicle loans or even mortgages after some time. Each bank has its own protocol for considering loan candidates, and if you are a person with a stable job and family support, you may qualify for large item credit such as a home loan. The key to improving your credit is simply to use new credit responsibly so that the creditors can report positive activity each month.
The bankruptcy filing will generally remain on your credit report for 7 to 10 years, but you can begin rebuilding your credit immediately, and having your debt eliminated will make it much easier to dig yourself out of the hole that you are in.
You can think of it like this: your credit score is suffering under a large load of debt right now, and in order to improve the score, you need to make on time payments and your debt to income ratio needs to be lowered. So to make your credit score go up, you need to have less debt and a better record of paying off the debt. And right now, with too much debt, that scenario is nearly impossible to accomplish quickly. However, once your debts are discharged in a bankruptcy case, you no longer have the debt to work with, so all you have to do is make ontime payments and don’t overextend yourself with new debt. Rebuilding your credit after a bankruptcy can actually be much easier than repairing your credit without a bankruptcy.
An important step in preparing to file is to discontinue your use of credit cards. If the court determines that you were running up charges on a credit card on the eve of bankruptcy, the court will not allow that particular debt to be discharged. This does not mean that you cannot file for bankruptcy, just that you may need to wait some time before filing and engage in some prefiling preparations as you will be advised by your attorney. This is just another reason to meet with our attorneys even before you are ready to file.
It is not a good idea to transfer your possessions to a friend or relative in an attempt to “hide” assets. Most people, in fact 97% of the people filing for bankruptcy, get to keep absolutely all of their possessions. Related to this, it is not a good idea to pay back loans from friends or family members before you file, as the trustee will see this as paying back insiders at the expense of your other creditors. In other words, the trustee wants to see that you have tried to pay all of your creditors equally, not just Mom or Uncle Bob, and that you didn’t pay your relatives while you were not paying your other creditors.
It is also not a good idea to pay one credit card and not the other credit cards. Sometimes one particular bank will be more aggressive than others. The bank may have hired an attorney or even started a collection lawsuit against you. Note that the trustee is also concerned about something called a creditor preference, where you pay one bank at the expense of the other banks who are not paid.
The bottom line is that the absolute best way to prepare for a bankruptcy is to contact an attorney and closely follow the advice given.
Every person or couple filing for a chapter under the Bankruptcy Code is required to complete two counseling sessions. One session must be completed before filing and the second session is to be completed after filing. Your attorney will apprise you of the timelines for the two sessions. There are many approved online courses, as well as certified counselors one on one telephonic conferences, or even classroom settings. These options vary in price. Your lawyer will help you choose the option that will best suit your personality and financial needs. Even if you decide not to take your lawyer’s advice on which credit counseling agency you use, you should at the very least check with your lawyer to make sure that the agency you choose is actually approved by the United States Trustee.
Many parents help their kids buy their first car by signing on the loan as a coborrower. If the parent files for bankruptcy but the child would like to continue making the car payments, the parent’s bankruptcy does not prevent the child from continuing to pay. The bank will not take the car unless the child stops paying. You, as the coborrower, will be discharged from any liability associated with the car loan by filing for personal bankruptcy. If your child stops paying for the vehicle, your bankruptcy filing prevents the bank from demanding payments from you.
This is not an unusual situation. Child has a low credit score and would like a car loan so parent helps out and cosigns on the loan. Now child has made some bad decisions and racked up a lot of credit card debt. The child wants to discharge the credit card debt but still drive and pay for the vehicle. Also, the child does not want his or her parents’ credit score to be affected. There are some things that your Seelinger Law attorney can do to ensure that the child’s car loan and the parents’ credit score continue virtually unaffected by the bankruptcy filing.
It is a violation of federal law to fire an employee because he or she filed for bankruptcy. Under the same law, your employer is not allowed to discriminate against you in any way due to a filing. They can’t do things like lower your pay, or give you a new position with less responsibility. In most cases, though, your employer won’t even find out about your Chapter 7 bankruptcy case unless you tell them. Your employer may actually look at the filing as a positive step as you will be under less stress and able to be a more productive employee.
Although the law protects you from being fired due to filing, it doesn’t necessarily protect you if your employer has other reasons to terminate you, such as tardiness or absence, or work performance. However, if you were to be fired shortly after you filed, and you suspect that your bankruptcy case is the reason, you may have a case for being illegally discriminated against due to your bankruptcy situation.
There is nothing in bankruptcy law that requires a certain amount of time to pass before you can apply for credit. Each creditor operates under its own set of rules and regulations, so, hypothetically, you could be granted credit immediately after your discharge is granted. In fact, some companies will be more willing to grant the credit because they know that you won’t be able to file bankruptcy again for a number of years.
Credit reporting agencies must follow the Fair Credit Reporting Act (FCRA). Under federal law you are entitled to a copy of your credit report every twelve months. There are many free sites out there such as annualcreditreport.com. At Seelinger Law our clients are given an extensive credit report history using specially licensed bankruptcy software.
There are three major credit reporting agencies, with their contact information listed below. You are also entitled to a report when you have been denied credit, as long as you contact the agencies within 60 days of your denial. Credit reporting agencies are monitored by the federal government and specifically the Federal Trade Commission (FTC). For more information you can go to www.ftc.gov/credit.
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 303485281
Equifax Information Services, LLC
P.O. Box 740241
Atlanta, GA 30374
901 West Bond
Lincoln, NE 68521
A bankruptcy can be listed on your credit report from 710 years. However, this does not mean that you will not be able to get credit in the future. In fact, most of my clients find that their credit score increases after filing for bankruptcy and they become more attractive to potential credit establishments. The reason is that you will have less debts or obligations to pay back in the future. My clients have no trouble getting car loans or new credit cards after filing for bankruptcy.
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