What Happens After You Declare Chapter 7 Bankruptcy?

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One of the most daunting, stressful, and for some people, terrifying aspects of filing for chapter 7 bankruptcy is not based on what they know about the process. On the contrary, it is rooted in what they do not know — because for most people it is a new experience, and unfortunately, the world (both the online and offline versions) is full of chapter 7 bankruptcy myths.

If you are considering filing for chapter 7 bankruptcy, then your bankruptcy attorney will provide you with a clear understanding of what the road ahead will look like. Generally speaking, here is what you can expect:

  • Your bankruptcy attorney will file your case electronically, and remit all required filing fees on your behalf. You do not have to go court.

  • The court will send a letter to all the creditors listed in your filing, informing them that they must cease all collection-related activity and communication. You and your bankruptcy attorney will also receive a copy of this letter. If creditors have questions or objections, they will not be allowed to contact you directly. They must only contact the court-appointed trustee, who may in turn communicate with your bankruptcy attorney.

  • You will continue paying debts on assets that you wish to keep, such as your car loan and mortgage, along with ongoing living expenses such as utilities. It is very important that you do not stop paying these specific debts, or assume that your creditors will grant you a temporary moratorium or an extended grace period due to the filing.

  • The above-noted letter will also include the date and time for a meeting of creditors. This date is usually set for a month or so after the filing. About a week before the meeting, your bankruptcy attorney will send the trustee a copy of your most recently-filed tax return.

  • The meeting of creditors — which is also called a debtor’s exam or 341 hearing — is an opportunity for any authorized creditor, along with the trustee, to ask you questions under oath. Although the meeting is likely to take place in a courthouse, there is no judge present, and it typically does not last longer than 15 minutes. It is also typically not a confrontational or adversarial exchange, but instead an opportunity to seek administrative clarity. With this being said, be assured that your bankruptcy attorney will attend the meeting with you to ensure that your rights are fully protected, and that you are treated with respect at all times.

  • If you are unable to attend the scheduled meeting of creditors, then you may request (through your bankruptcy attorney) a reset date. It is extremely important that you do not miss both the original and reset date. If your absence is not due to dire unforeseen circumstances (e.g. serious car accident), then your filing may be dismissed. You must also bring picture ID and proof of a Social Security Number in order to be granted entry to the meeting.

  • After the meeting of creditors, the trustee may request additional documents. This request will be made through your bankruptcy attorney. You do not have to worry about receiving complex or confusing legal documents.

  • Within 45 days of the originally scheduled (not the reset) meeting of creditors, you will need to submit a certificate of completion for a court required financial management course. Your bankruptcy attorney will submit this on your behalf before the deadline.

  • During the bankruptcy proceeding, you may wish to petition the court to make adjustments to your filing. For example, you may want to avoid a lien. Your bankruptcy attorney will handle all such filings, and seek to convince the trustee to accept your request.

  • The timing of a chapter 7 bankruptcy discharge varies from case to case. Typically, it occurs about four months after the date that your bankruptcy attorney filed the petition with the court clerk. Along with you and your bankruptcy attorney, the trustee and all creditors will receive a copy of the discharge order. This order also warns creditors that they must not attempt any further collection of discharged debts, and that doing so could subject them to punishment for contempt.

Learn More

To learn more, contact the Law Office of Charles H. Huber. We will give you the facts you need to make a smart, safe decision on whether filing for bankruptcy chapter 7 is in your best long-term interest. We will also be your knowledgeable and fearless “sword and shield” every step of the way, from initial filing through to successful discharge. We have over 30 years of experience filing consumer bankruptcy cases. Our experience is your advantage!

The Pros and Cons of Declaring Chapter 13 Bankruptcy

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Before we discuss the merits and drawbacks of declaring Chapter 13 bankruptcy, we should first take an in-depth look at it. Chapter 13 bankruptcy (which is sometimes called a “wage-earners plan”) allows individuals who earn a regular income to repay their debts, in whole or in part, to creditors over a period of three-to-five years. During this period, creditors are legally forbidden from commencing or continuing collection activities such as wage garnishments, lawsuits, foreclosure proceedings, and so on.

Any individual — including those who are self-employed or who operate an unincorporated business — may file for chapter 13 bankruptcy, provided that their unsecured debts are less than $394,725, and their secured debts are less than $1,184,200 (these figures are periodically revised based on inflation).

Chapter 13 Bankruptcy: Pros

Chapter 13 bankruptcy protection offers significant advantages, including:

  • Provided the person filing makes all payments per the court-approved repayment plan, individuals can stop foreclosure proceedings on their home, and may also remedy overdue mortgage payments over time.
  • Individuals can seek to reschedule their secured debts (except for the mortgage on their primary residence) over the life of their repayment plan, which typically lowers the amount of each payment and makes them more affordable.
  • Third-parties (e.g. co-signers) may be protected on some consumer debts.
  • Individuals do not have to engage in direct contact with creditors at any time. All communication and payments are managed by the court-appointed trustee.

Chapter 13 Bankruptcy: Cons

Naturally, there are some disadvantages of filing for chapter 13 bankruptcy as well. These include:

  • The repayment plan must be supported by disposable income. This means that while the next few years will be lean rather than luxurious.
  • A chapter 13 filing will remain on an individual’s credit score for 10 years (however, contrary to popular belief, this is not a financial catastrophe — click here to learn more).
  • Not all debts can be restructured, such as alimony, child support and student loans (this limitation also applies to a chapter 7 filing).
  • Some debts may survive the filing after the case is closed (e.g. mortgage liens).
  • A chapter 13 filing is more complex than a chapter 7 filing, and as such legal fees are relatively higher.

Learn More

To learn more about the pros and cons of chapter 13 bankruptcy, and for a confidential consultation on whether filing is in your best long-term financial interest, contact the Law Office of Charles H. Huber today. We have been filing consumer bankruptcy cases for more than 30 years. Our experience is your advantage!

When is the Right Time to Declare Bankruptcy?

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Filing for bankruptcy is a major decision, and one that should not be done without careful analysis of your specific situation and possible options. Indeed, what may be beneficial for someone else may not optimal for you.

With this being said, there are some general signs that filing for bankruptcy is likely in your best long-term financial interest. Here are some indications that it is now — or very soon will be — the right time for you to declare bankruptcy:

You are Being Harassed or Sued by Debt Collectors

Filing for bankruptcy will place an automatic stay on all debt collection activity, including any wage garnishment action or lawsuits. What’s more, creditors will be unable to contact you directly by phone, email or letter. They will be legally obligated to communicate only with the court-appointed bankruptcy trustee.

You are Facing a Foreclosure

If you have debts that are secured by your home (e.g. mortgage, car loan, home equity line of credit, etc.), then creditors can seek to foreclose in the event of a default. As we have discussed previously, filing for bankruptcy will either stop or delay the foreclosure process.

You Cannot Repay your Debts

Everyone wants to repay their debts. However, if you find yourself unable to cover what you owe — despite your best efforts to reduce expenses, increase income, and negotiate with creditors — then filing for bankruptcy is likely something you’ll need to do in the very near future. Otherwise, the financial hole that you’re in will only get larger, deeper, and more difficult to climb out of in the future.

You Cannot Cover Your Basic Living Expenses

Regardless of what has happened in the past, if you simply cannot meet your basic living expenses now — e.g. keeping a roof over your head, buying groceries, paying for car insurance and gas so that you can drive to work, and so on — then filing for bankruptcy now instead of later is likely the right decision.

The Bottom Line

The idea of “going bankrupt” has a shameful and embarrassing stigma attached to it, which is why many people avoid filing — even when it is clearly in their best financial interest to do so. If you feel this way, then what you need to know is that bankruptcy is NOT a moral judgement that declares you “guilty of mismanaging your money.” Bankruptcy is a legal protection that is fundamentally designed to help individuals (and businesses) reset their financial picture, and create a stable, strong and sustainable financial future.

Learn More

If you are facing unsustainable and constantly growing debt, then contact the Law Office of Charles H. Huber today. We will give you the facts you need to make a smart, safe decision on whether filing for bankruptcy is in your best long-term interest. Our experience is your advantage!

Chapter 7 Bankruptcy Myths Debunked: Part 2

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One of our most popular blogs is entitled “The Top Chapter 7 Bankruptcy Myths: Debunked!” And as you might expect, we have mixed feelings about this.

On the one hand, we are pleased that more people are getting the FACTS they need to ultimately make a safe, informed decision on whether pursuing chapter 7 bankruptcy is in their best long-term financial interest. Obviously, we are not suggesting that people should make this major decision based solely on our (or any) blog post! However, we are gratified and inspired to see that people are relying on it as part of their research process.

Yet on the other hand, the popularity reveals a problem that we have seen get much worse over the decades due to the ease at which information is shared via the web: many people, including those who are well-meaning and legitimately trying to help, are either partly or wholly misinformed about how chapter 7 bankruptcy works — and how it does not. Sometimes, this ignorance is the result of not staying updated on changes to bankruptcy laws. But other times, this ignorance is, well, just plain ignorant! That is, the so-called facts being shared were wrong in the past, are wrong today, and will be wrong in the future.

Of course, while we are disappointed — and sometimes dismayed — by the sheer volume of bad chapter 7 bankruptcy-related “advice” floating on the web (or in workplaces around water coolers, chatting with neighbors over the backyard fence, and so on), our drive to educate and empower people is far stronger. To that end, here is part 2 of our series on debunking chapter 7 bankruptcy myths:

Myth 5: All states have the same bankruptcy laws and processes.

Fact: Different states have various rules, and assuming what applies in one state is automatically going to apply in another can be — and often is — a catastrophic error. For example, people in Florida who file for bankruptcy cannot lose their house. However, this is not necessarily the case in Pennsylvania.

Furthermore, some people are unaware that there are two sets of bankruptcy laws: federal and state. There are critical differences between them, and they do not focus on the same issues.

Myth 6: You should “strategically plan” your bankruptcy by maxing out your credit cards just prior to filing.

Fact: This is such an astonishingly massive mistake, that it is difficult to know where to begin!

If you follow this horrifically bad advice, then the first thing that will happen is your bankruptcy filing will be dismissed — which means the financial hole that you expected to start getting out of will only get deeper, and you will not be able to file again for at least 180 days. And if you think this is the worst of it, think again.

This is because borrowing money (which is essentially what using a credit card entails) with the intention to avoid paying the lender is not just unethical: it is fraudulent. This means there is a very good chance — assume 100% here — that your case will be handed over to for criminal prosecution.

Now, does this mean that filling up your car with a tank of gas a few days before you file for bankruptcy will be used as evidence of your intention to defraud the credit card company? No. As long as the expense is valid, reasonable, justifiable and passes the “common sense test,” then you will be fine. After all, gas is not a luxury, and neither are groceries. But buying a brand new iPhone or heading out for a weekend excursion to Las Vegas prior to a bankruptcy filing is sure to raise some suspicion, and warrant closer examination.

Myth 7: If you file for bankruptcy, you might as well put up a billboard because everyone will find out.

Fact: This myth is largely driven by companies and consultants that do not want people to file for chapter 7 bankruptcy, because it means they will lose a customer.

The truth is that unless you are famous or have a high-profile job, most people are not going to find out that you have filed for bankruptcy, and frankly, they have no interest in finding out. Bankruptcy is not a criminal matter — it is an administrative one. Close to a million people and businesses in the U.S. file for bankruptcy each year. It is hardly “breaking news.”

As we have described previously, those will definitely know about the filing (because they will be specifically notified) include:

  • Each creditor listed in your filing.
  • The three main credit bureaus: Equifax, TransUnion and Experian.
  • Anyone who is jointly liable for debts per your filing.
  • Plaintiffs in any current or future civil lawsuit.

In addition, the following people might (or might not) know:

  • Defendants in a civil lawsuit — unlike plaintiffs they will not automatically be informed about the bankruptcy filing, but they could find out on their own.
  • Your current employer if wage garnishment activity had started, and would therefore cease per the filing.
  • Any future employers, landlords or lenders if you are asked questions about a past bankruptcy, or if you give them permission to access your credit score (a chapter 7 filing will remain on your score for 7 years.)

Learn More

Filing for bankruptcy is a major decision that you should only make based on FACTS — not MYTHS. To learn more, contact the Law Office of Charles H. Huber today. We have been helping individuals file consumer bankruptcy cases for more than three decades. Our experience is your advantage!

Consumer Chapter 7 Bankruptcy: 5 Requirements to Meet

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Each year, hundreds of thousands of people (i.e. consumers) file for chapter 7 bankruptcy. However, not everyone who files — or who wants to file — will have their application accepted. This is because there are five requirements that must be met:

#1: Filer Eligibility

Only the following categories of people can apply for consumer chapter 7 bankruptcy:

  • individuals
  • married couples who wish to make a joint filing
  • sole proprietors who have personal liability on some business debts
  • 50% owners of a business partnership with someone other than their spouse, and who have personal liability on some business debts

Corporations, partnerships (except the kind noted above), and LLCs cannot file for consumer chapter 7 bankruptcy. Instead, they must file as a business, which is a different process.

#2: Recent Bankruptcy Discharge

Individuals cannot file for consumer chapter 7 bankruptcy if they have been discharged from chapter 7 bankruptcy protection within the last 8 years. Note that the clock starts ticking when the previous chapter 7 filing was made — not when the bankruptcy was eventually discharged.

#3: Bankruptcy Dismissal

Contrary to what some people have been led — or rather misled — to believe, having a bankruptcy dismissed within the last 180 days does not automatically render a new filing inadmissible, unless it was due to any of the following reasons:

  • violating a court order
  • abusing of the bankruptcy system (as determined by the court)
  • making a fraudulent bankruptcy filing (e.g. maxing out credit cards just prior to a filing in order to wipe out the debt)
  • requesting a dismissal because a creditor asked for the automatic stay to be lifted

#4: Means Test

This process involves comparing an individual’s monthly income vs. the median family income for their respective state (each state differs). If their monthly income is below the state median, then they have passed the means test. If their monthly income exceeds the state median, then they must further determine if they pass or fail the means test.

This further determination involves calculating all sources of income and qualifying expenses, and establishing the amount of disposable income. If this amount is below a threshold, then they have passed the means test. If it exceeds the threshold, then they fail the means test. In this situation, if the individual still wishes to file for bankruptcy, then they can only do so through a chapter 13 filing.

#5: Credit Counseling

Everyone who files for consumer chapter 7 bankruptcy must receive credit counseling from an agency that is approved by the government (the course is available in-class and online). It is not necessary to take this counseling prior to a filing. However, it must be taken at least 180 days prior to discharge.

Learn More

To learn more about the different tests and requirements involved in filing for consumer chapter 7 bankruptcy, contact the Law Office of Charles H. Huber today. We have more than 30 years of experience filing consumer bankruptcy cases. Our experience is your advantage!