Understanding Bankruptcy

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What is Bankruptcy, exactly?

When you owe someone money, they are called a debtor. Creditors are those people or companies that you owe money. “Bankruptcy”, a federal law, provides a process that ensures creditors are treated fairly and debtors are protected. While bankruptcy proceedings may not be right for everyone it can help solve financial problems.
There are five kinds of bankruptcy proceedings. The Chapter 7 or Chapter 13 bankruptcies are the most common. When people refer to bankruptcy filings, they often mean Chapter 7. Chapter 7 bankruptcy allows you to “discharge” or avoid all your debts. No further payments are required. “Discharge” refers to the fact that you no longer have a legal obligation of repaying a debt. This process takes approximately 90-days after the bankruptcy petition is filed. Chapter 7 bankruptcy may result in the loss of some of your property and/or the inability to discharge some of your debts. Additionally, you can reverse some property transfers that were made before your bankruptcy filings.

Chapter 13 bankruptcy can be a three-to five-year-long proceeding that creates a payment program. COVID-19 was passed by Congress, which extended the payment schedule to seven years. However, there are some exceptions. Chapter 13 bankruptcy protects your property. It allows you to repay debts like child support, taxes, car payment, and mortgage money over a 3- to 5-year period. In some cases, it can be extended to seven years. Instead of losing your wages to garnishment or foreclosure, you will have your wages garnished. For this added benefit, you’ll need to agree that you’ll make a monthly payment from your disposable income to repay a part (or all) your debts. Chapter 13 can be an option if consumer credit counseling or Chapter 7 is not available. Read more at https://bankruptcyhq.com/.

How can bankruptcy help me?

Bankruptcy may be a great option for those with high-interest debts. It can also give you a fresh start. But, it is not for everyone. You only get rid of those debts you owe as of when you file your bankruptcy. No debts you are liable for after filing your bankruptcy can be discharged. This is why it is so important to timing your bankruptcy filing. Filing bankruptcy may have serious consequences, such as a negative impact on your credit rating for several years.

It is possible to speak with a lawyer about the pros and cons to filing. A debt repayment plan may be possible on your terms. A consumer credit counseling service may be best for your situation. Or bankruptcy may be your best option in the long-term, but not always at this moment. No matter which path you choose, you’ll need to gather basic information before you proceed. Many lawyers will provide a consultation for free to discuss the advantages and risks of bankruptcy as well as the other options.

There are several factors to be aware of

What are you total living expenses?
Calculate the monthly expenses of you and your dependents. These include food, housing costs, utilities, transportation and insurance. A list of all your monthly expenses will be necessary, along with a list of income.

Do You Have Medical and Automobile Liability Insurance?
Although you may believe that bankruptcy will not result in any additional debts, medical bills and liability arising from an automobile accident are sometimes unexpected and out of your control. These new debts, if not covered by insurance, could negate any benefits you may get from the bankruptcy proceeding.

To who do you owe any money?
Take down a list with all of the names and addresses you owe to creditors. Identify all creditors to whom you have pledged your property. You can get a car loan, a mortgage or a home equity line credit, an installment loan for furniture, appliances or any other property) and the actual value of the property in your creditors’ interest. Credit reports provide details about many of your creditors. Equifax and TransUnion offer a free copy each 12 months of your credit report. You can print the report. Save each report and print it. It is not necessary to obtain all three credit scores at once.

Without a security interests in an item of property, like your car or other property, a creditor cannot take your property or income without obtaining a judgment against you.

Are YOU “judgment-proof?”
If a creditor sues, they are seeking a judgement. A judgment is usually not a court order that requires you to pay a debt but rather a court ruling that you owe certain amounts of money. The judgment can be used by the creditor as a guideline to collect the judgment-related debt. A creditor who has a judgment against you can garnish your wages or bank accounts. They can also file a lien against your property (such as your home) or ask the court if it is possible to seize and sell your personal property. Oregon law permits you to protect income and property from creditors who are judgment creditors. This is called exempt properties. Exempt property refers to income or property that is exempt from tax. It all depends on what type of property you own and the value they have. Your judgment creditors are unable to collect anything if your entire income and property is exempt. This situation is known as “the Default Situation”.Evidence of judgment. Creditors cannot seize any property or garnish the wages of someone who is truly judgement-proof. So creditors should not sue if they aren’t able to collect any money. Even those who are not judgment-proof may file for bankruptcy relief. This is often to stop harassing phone calls.

Could your financial woes be solved if you paid off all of your current debts?
Bankruptcy will give you a fresh start financially. However, it is best to have sufficient income after bankruptcy to support your family. Bankruptcy is not a permanent solution if you get into new debt and have no means of repaying them. Only once in eight years can you get a Chapter 7 discharge. You may want to wait until you have dealt with your financial problems before filing bankruptcy. Even if your previous bankruptcy was filed, the court may allow a Chapter 13 bankruptcy. This will deal with any new debts that you might have incurred. But, it all depends on your specific circumstances.

Bankruptcy Does Not Discharge all Debts

It is important that you realize that bankruptcy does NOT automatically allow you not to repay all your debts. A bankruptcy discharge does not allow you to discharge certain types of debts. The most common debts that are not dischargeable include child support obligations and spousal maintenance.

There are other types of debt that can be discharged in certain situations. Delinquent personal income taxes, for instance, might be forgiven. This is dependent on whether a return filed and the time period that has passed. Recourse to bad checks and fraudulent credit card use may be able to prevent you from being discharged. It can be difficult for student loans to be discharged. Any debts that you incurred after your bankruptcy filing cannot be discharged. Before you file bankruptcy proceedings.

What happens if I lose all my property and have to sell it?

The short answer is that you probably don’t. Your bankruptcy estate will include all your assets as of the date that you file. Any income you earned after that date and any property you may have, including your right of an inheritance. You may also have the right to receive tax refunds for the previous year or current year in certain situations.

The law recognizes the necessity of certain items for survival. Accordingly, you are allowed to “exempt”, (keep) certain belongings. Exempt means you can keep the property provided the property’s value does not exceed certain levels and that you have taken the appropriate steps to obtain bankruptcy relief.

You’ll usually be able to choose from one of the two types of exemptions available: the federal or state exemptions. Your working tools, cash surrender insurance value, household furnishings, federal earned income tax credit and some checking and savings accounts will be exempt depending on which set you choose.

In Oregon, the exemptions allow a debtor to keep an automobile, as long as his interest is less than $3,000. Household goods can be exempt up until $3,000. Clothes, jewelry and household goods are exempt up until $3,000. A single debtor could exempt up $40,000 of their home. Members of the same household can exempt up $50,000 of their homes from two or more creditors. The federal exemptions allow a debtor to exempt upto $4,000. The exemptions for household goods, clothes, jewelry, and musical instruments is up to $13,400 A single debtor could exempt $25,150 from the debtor’s residence. Members of the same household can exempt up 50,300 of their homes from two or more creditors. Any portion of an exemption on a house that is not used can be used for cash or property. Maximum amount allowed: $12,575.

A Chapter 13 bankruptcy is different from a Chapter 7 bankruptcy. This allows you to keep all of your nonexempt assets and pay to the court over a three-to five-year period or possibly seven years the value of these assets for distribution.

There may be issues with transactions that you made before filing for bankruptcy. If you have transferred, given away, or sold any property (including cash) within the past two years (and sometimes even four years), the trustee may be able take back the money or property from the recipient. If you have paid $600 to a creditor or less within the last 90 days, the trustee may be able take the money back from the creditor. If you have paid $600 to a relative, and possibly to another person, within one year of filing bankruptcy the trustee may be able to take the money back from that relative or other person.

Do I have to appear in Court?

In most cases, the answer is yes. Both Chapter 7 and Chapter 13 require that you attend a meeting, also known as the section 33(a) hearing. This hearing usually takes about 30 days from the date you file your case. This hearing will be held by the bankruptcy trustee. The hearing is recorded. Most questions relate to information found in the bankruptcy papers filed with the court. The hearing lasts between 5-10 minutes. Most creditors do not attend or ask questions. These hearings are held via telephone as of this writing. On the website for bankruptcy court, you will find a video of an average 341(a).

How long does the Bankruptcy Process take?

Before you can file bankruptcy, you must take a credit counseling class. For a small fee, you can take this course online. After completion, you will be issued a certificate that is valid 180 days. You will also need to gather all relevant information in order to complete your petition for bankruptcy. This can take time. It usually takes 90 days to complete a Chapter 7 petition. The bankruptcy filing will protect you from creditors. They can’t repossess you car, foreclose your house, garnish accounts, continue sending letters to you, make collection phone calls or take any other collection action.

You will receive your order discharging your debts 60 days after your meeting of creditors hearing if all your assets have been exempt. This will indicate that all your dischargeable creditors have been discharged. This will also reflect the closing of the case, provided the trustee does not pursue any property and no creditor objects to a discharge.

Different timeframes apply to Chapter 13. The average time it takes to file a Chapter 13 case is three to five years. Depending on the circumstances, it could take up seven years.

What is the cost to file bankruptcy?

The current fee to file Chapter 7 bankruptcy proceedings is $335. You can pay the fee in three payments over a 90-day period. No fee is required at the time that you file bankruptcy. In some cases, you may be allowed to extend the payment deadline for up to 180-days. A full waiver of the filing fee may be available if your income exceeds $20,000

What Happens to My Credit Score?

Credit reporting agencies can report Chapter 7 bankruptcy cases for 10 years beginning from the date they are filed. Credit reporting agencies can report Chapter 13 bankruptcy cases for seven years. Sometimes creditors will grant credit approvals after bankruptcy. Creditors recognize that bankruptcy has lifted a financial burden, and they may allow you to make regular payments for any new debt. A Chapter 7 proceeding will prevent you from obtaining a discharge in Chapter 7 bankruptcy for at least eight additional years. So, in some ways, bankruptcy is a better option than filing Chapter 7. After you have completed the Chapter 13 plan, you have proven your ability to make regular payments on debt obligations. Some creditors may require you to stay in bankruptcy for a longer time before they will extend any credit.

Do I need to hire a lawyer in order to file bankruptcy?

Individuals and sole proprietors do not have to hire lawyers. It is possible to speak with a lawyer to confirm that bankruptcy is the best choice for you. If so, the steps you need to file. It can be difficult for you to complete all of the necessary documents. A packet of information can be obtained by contacting the bankruptcy judge if you decide to file for bankruptcy. The bankruptcy court is currently preparing Chapter 7 & 13 electronic online bankruptcy packs for individuals to complete.

Are There Alternatives to Bankruptcy

Yes. There are many credit counselor agencies that can help people with money issues. Non-profit agencies offer free advice and guidance on how to reduce debt and how to best use credit. Consultation with a counselor is free and will help you to understand your financial situation. The service may request a small monthly payment if you have to make payments to creditors as part of a debt-management program. If the counselor feels it is not possible due to a very restricted program, this fee could be waived. If you are unable to make any payments to your creditors, most counseling services won’t be able help you. In this case, bankruptcy may be recommended.

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