How can bankruptcy attorneys help you discharge your debt?
Bankruptcy is a legal process that promises a fresh financial start to consumers by eliminating their outstanding debt. It is governed by federal law and usually results in either the discharge of most or all of a consumer's unsecured debt or reorganizing the debt into a court-approved payment plan.
Table of Contents
- How can bankruptcy attorneys help you discharge your debt?
- How can our bankruptcy lawyers help you?
- Why is it better to hire a bankruptcy attorney than filing on your own?
- How the bankruptcy laws might change
- What is Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)?
- What other services can my team offer you?
- When can you file bankruptcy?
- How to prepare for bankruptcy
- What should you know before filing bankruptcy?
- What are the two main types of consumer bankruptcy?
- How much will filing bankruptcy cost?
- Chapter 7 and Chapter 13 bankruptcy filing fee
- What if you can’t pay bankruptcy fees
- How long does it take to declare bankruptcy?
- How will bankruptcy affect your credit rating?
- Is your cancellation of debt income taxable?
How can our bankruptcy lawyers help you?
Once you contact us:
- You will work with my assistant. He will gather information on all your debts.
- I will review your file and analyze your financial situation to assess whether you will be eligible for Chapter 7 or Chapter 13 bankruptcy.
- My team will also analyze which of your debts can be dischargeable along with property exemptions if any.
- Once we file your case, your creditors will be notified by the Court. They also come to know when you will attend the meeting of creditors.
- I will have you work with my assistant for a smooth bankruptcy filing process until debts are discharged.
- You will be debt-free in four months to five years, depending on the type of bankruptcy you file and the amount of debt you owe.
Why is it better to hire a bankruptcy attorney than filing on your own?
It is unnecessary to hire an attorney to file bankruptcy. However, it is better to work with an experienced lawyer. Part of the reason for this is simple: bankruptcy can be complicated. When the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) passed in 2005, bankruptcy filing became complicated. A minor mistake during the filing process, or a simple violation of the bankruptcy laws, could delay your bankruptcy. It might also be rejected by the court.
|Filing with an attorney||DIY Bankruptcy|
|Free consultation with a bankruptcy expert|
|Protection from creditor harassment|
|Personalized legal guidance (asset protection, asset valuation, property exemptions, etc.)|
|Protection from mistakes stemming from a misunderstanding of complex bankruptcy laws|
|Peace of mind|
How the bankruptcy laws might change
Under The Consumer Bankruptcy Reform Act of 2020, the proposed legislation would eliminate Chapter 7 and Chapter 13 bankruptcy filings and replace them with a new Chapter 10. It would allow a consumer/debtor to have three types of payment plans - provide for minimal, payback to unsecured creditors, and allow for the discharge of student loan debt and other currently non-dischargeable obligations.
According to The Consolidated Appropriations Act, 2021 ("CAA"), the bankruptcy court can give a debtor extra time, up to 60 days from commencement of the bankruptcy case, to pay rent due for the first 60 days following the petition date. Under this Act, the SBRA debtors can ask for up to 60 additional days to pay if they are experiencing hardships related to the COVID pandemic. Moreover, the time limit for tenants to decide whether to assume or reject a nonresidential lease has been increased to 210 days, from 120 days. These provisions will expire on December 27, 2022.
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What is Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)?
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which became law in 2005, made sweeping changes to the U.S. Bankruptcy Code that made it more complex and unattainable than ever. BAPCPA drastically changed bankruptcy by introducing complex pre-bankruptcy hurdles like credit counseling, financial management, rules on tax returns, and most importantly, a means test.
What other services can my team offer you?Back To Index
When can you file bankruptcy?
Some of the common reasons a debtor files bankruptcy are:
- You are overburdened with enormous debt without the means to pay it off.
- You have tried but failed to solve your debt problems.
- You are at risk of losing assets to your creditors since you owe a debt.
- You are unemployed and without the prospect of employment soon.
How to prepare for bankruptcy
Courts can and do dismiss petitions in one of these following cases. Any of these activities can raise a red flag over your petition.
- If you're actively incurring additional credit card debt or taking out more loans.
- Making loans to friends or family members.
- Selling your valuable assets to others without the advice of a lawyer.
- Opening a joint bank account with someone other than your spouse.
- Allowing others to transfer money into your bank account.
So, what should you do?
Make sure that you disclose all your existing debt, including student loans and payday loans.
Disclose any other loans, as well as any assets you own or earn interest from.
Also, include if you inherit property or cash in the next eight months or property that has been transferred to a trust in the last ten years.Back To Index
What should you know before filing bankruptcy?
Don't spend down your savings until you consult an attorney. You can keep a small amount of savings; the amount varies from one state to another and depends on whether you're single or married.
If you do reduce your savings, you must persuade the Court that your expenses were legitimate. Keep receipts for purchases exceeding $100 if you believe you may file for bankruptcy soon.Back To Index
What are the two main types of consumer bankruptcy?
The two most common forms of consumer bankruptcy are:Chapter 7 Straight Bankruptcy/Liquidation
It is the primary form of bankruptcy for individuals and businesses. It usually involves the discharge of debt and is a relatively simpler process than its alternative. It's usually faster as well.Chapter 13 Debt Reorganization Bankruptcy
The individual declaring bankruptcy proposes a debt restructuring plan to the Court and their creditors. The Court must approve the plan. You can keep most of your assets, but you must have a steady source of income.Back To Index
How much will filing bankruptcy cost?
The term 'affordable bankruptcy' can be misleading since debtors need to pay mandatory court fees. The filing fee for Chapter 7 and Chapter 13 bankruptcies tends to run in the $300 range. The exact numbers may vary by Court. Therefore, check with the United States Bankruptcy Court where you intend to file for the exact number.
In addition to court costs, you will also have to pay attorney fees. However, it is worth paying the fee since bankruptcy is a legal process filled with potential pitfalls, with different requirements for different situations. A simple mistake may be enough to have the Court dismiss your bankruptcy case completely.
The value an experienced attorney brings is well worth the cost, considering how much hiring an attorney may save you.
So what's the takeaway here? When considering bankruptcy, you should expect to spend between a hundred and a few thousand dollars, depending on the approach you take.Back To Index
Chapter 7 and Chapter 13 bankruptcy filing fee
You have to pay bankruptcy filing fees just to let the court acknowledge your case.
|Chapter 7||Chapter 13|
|Credit counseling fee||$50||$50-$100|
|Debtor’s education course||$500 - $3500||$2500-$6000|
|Attorney fees||$500 - $3500||$1500 - $6000|
* These may vary by state or other factors. Check the court and service providers for your area.
For Chapter 7 bankruptcy, you must pay attorney fees up front.
For Chapter 13 bankruptcy, you can usually arrange to pay only a small part of the attorney fee up front, paying the rest on a payment plan of between 3 and 5 years.
A bankruptcy attorney may charge you more if any of this is true:
- You need to file both personal bankruptcy and business bankruptcy.
- You have a large number of creditors.
- You have already filed bankruptcy petition once in the last eight years.
- You earn more than the state median income.
- You have fraud allegations filed against you.
What if you can’t pay bankruptcy feesBack To Index
If you can't afford the bankruptcy fee, here is what you can do:
i Ask for a waiver : You can ask the Court to waive the filing fee for Chapter 7 bankruptcy when your income is lower than the federal poverty line, and you can't even pay the fee in installments.
ii Arrange a repayment plan: You can ask the Court to pay the bankruptcy filing fee in installments. In this case, you must pay the fee within 120 days of submitting the petition.
iii Consult legal aid: Some legal aid offices give low or no-cost legal advice to people who meet specific income requirements. If you're eligible, they may agree to represent you without a fee.
iv Sell your stuff: In Chapter 7 bankruptcy, you're likely to lose non-exempt properties or assets. So, if you don't have money for the filing fee, you can sell some of your stuff to make the payment. Be aware, however, that the Court can ask about assets sold or transferred before you file, and your answers to those questions can affect how they respond to your case.Back To Index
How long does it take to declare bankruptcy?
It depends on the type of bankruptcy that you selected.
Chapter 7 bankruptcies usually take four to six months; that can vary based on the Court's caseload.
According to federal law, the time range for a Chapter 13 bankruptcy is between 36 and 60 months.Back To Index
How will bankruptcy affect your credit rating?
Not only will bankruptcy lower down your credit score, but it will also stay on your report for 7 to 10 years. That means your credit score is likely to remain low for that period as well.
However, after you have successfully discharged your debt, your credit utilization ratio goes down. That's the ratio between the amount of credit available and the amount of debt you owe. If you completely discharge your debt, your credit utilization ratio may go as low as zero.
The net result? Your FICO score may go up if you start managing your finances efficiently after bankruptcy.
Besides, filing bankruptcy doesn't mean that you'll never have credit again, even while the bankruptcy is on your credit report. Also, you can rebuild your credit post-bankruptcy.
Curious how? Here are the ten tips for doing just that.Back To Index
Is your cancellation of debt income taxable?
Usually, it is, but there are exceptions.
The IRS recognizes these exemptions to cancellation of debt income:
- Amounts canceled as gifts, bequests, devices, or inheritances.
- The cancellation of certain qualified student loan debt.
- Certain education loan repayment or loan forgiveness programs.
- Canceled debt that would be deductible if you had paid it.
- A qualified purchase price reduction given by the seller of the property to the buyer.
- Certain payments made under the Home Affordable Modification Program.
- Student loan debt discharged due to death or total and permanent disability of the student.
There are other instances as well. Certain types of canceled debt may be excluded from gross income calculations, such as in a Title 11 bankruptcy case, or if you became insolvent immediately before the debt cancellation. Most consumer bankruptcy cases fall under Title 11.Back To Index
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