COMMON BANKRUPTCY MYTHS
You can file Chapter 7 bankruptcy once every eight years. If it has been less than eight years than your Chapter 7 bankruptcy but you need the protections of bankruptcy again, you may still be able to file a Chapter 13 bankruptcy. The time restrictions are looser on a Chapter 13 because while a Chapter 7 simply liquidates and discharges most of your unsecured debts, a Chapter 13 is a 3-5 year repayment plan.
You may see a slight decrease in your credit score immediately after filing your bankruptcy if you have a decent credit score. If you already had a poor credit score, you may see no change or a slight increase after filing your bankruptcy.
It is common knowledge in the bankruptcy industry that the number one reason people file is because of medical issues. Expensive doctors’ bills, combined with time off of work and possibly living off of creditors, can create a fast-track to bankruptcy for those living paycheck-to-paycheck. Such circumstances are usually unavoidable and NOT a sign of personal failure.
You can file bankruptcy singly even if you are married- but you should probably check with an attorney to make sure it is a good option for you. Nevada is a community property state, so even if you opened credit cards and incurred other debts in your name alone, your spouse could still be held liable for them. If you incurred most of your debts before the marriage, single filing bankruptcy may still work for you.
You will probably receive offers for new credit cards once your case is discharged. Once you have wiped your slate clean, creditors know you may have more funds available to open a new line of credit. Opening a new credit card and making timely payments is also a good way to rebuild your credit after the bankruptcy.
If you are interested in filing Chapter 7, there are two ways you can qualify: by making less than the median income level for your family size in your state, or by passing the Means Test. If you are using the first method to qualify, you will need to determine your family size. For the purposes of bankruptcy, only spouses and minor children count as family members, with some exceptions. Adult children and live-in partners won’t count towards your family size (but they won’t count towards your income either).
If you make above the median income level, you may still be able to qualify for a Chapter 7 bankruptcy through the Means Test. This will take mandatory deductions and expenses deemed reasonable by the bankruptcy court out of your income. If the number you have left, or your disposable monthly income, isn’t high enough to pay your debts, you can qualify for a Chapter 7. If you are unable to qualify for a Chapter 7 bankruptcy, Chapter 13 may still be available to you.
You absolutely need to file and pay your taxes if you file bankruptcy (unless you otherwise aren’t required to file taxes). You will need to submit at least 2 years of tax returns just to draft your bankruptcy petition. However, some of your tax debts may be dischargeable. For tax debts to be dischargeable, they must have been due for 3 years, filed for 2, assessed for 240 days, and the filing can’t have been fraudulent.
You will also need to time your bankruptcy filing if you want to make sure that your trustee won’t be able to take your tax return. Filing your taxes, receiving and spending your refund, and then filing your bankruptcy is usually your best bet.
Filing bankruptcy on your own will likely be difficult unless you have an extensive legal background. Filing bankruptcy with an attorney should be a relatively simple process as far as legal procedures go. You should have a good understanding of your financial situation when you have a consultation with an attorney. Your attorney will likely require you to fill out a client information packet so they have basic information for your petition and so they know which documents will be required for your case. You must fill out this packet to the best of your ability, with as accurate names, dates, and addresses as possible.
The attorney will draft your petition, review and sign it with you, and they will file it for you. You will need to attend a 341 Meeting of Creditors, which your attorney will attend for you. As long as you have taken your online credit counseling courses, at that point in a Chapter 7 you are just waiting to be discharged. You will simply continue making your payments in a Chapter 13.
This isn’t even true for Chapter 7. There are two ways to qualify for Chapter 7- by making less than your state’s median income or by passing the means test. The means test deducts mandatory costs from your monthly budget to see if there is enough remaining to pay your debts. Qualifying through income already makes about half of filers eligible, and the means test allows even more to file. Those who don’t qualify for Chapter 7 will likely qualify for Chapter 13. Chapter 13 requires income to make the monthly payments and limits on debt. These limits are $419,275 for unsecured debt and $1,257,850 for secured debt.
Hopefully you will only need to file once, but you can file again if the need arises. There are some restrictions that you must follow. You must wait 8 years between Chapter 7 bankruptcies. If you absolutely need the protections of bankruptcy again sooner than that, you can file Chapter 13 after 4 years. The waiting periods after a Chapter 13 aren’t as long. You must wait 2 years after discharge to file Chapter 13 again. If you want to file Chapter 7, you will need to wait 6 years from your Chapter 13 filing date.
You will have to list all of your debts in your bankruptcy, including personal loans from family and friends. Paying these debts in favor of the rest of your creditors is referred to preferential or insider payments. You should list all your debts in the interest of transparency to avoid negative consequences in your case.
Some debts need to be fully repaid in Chapter 13, like arrearages on child support and your mortgage. The balance on financed vehicles will also need to be paid in full in Chapter 13. You may end up paying your monthly mortgage in your payment plan, but you won’t have to pay the full balance over the 3-5 years. There will be a minimum amount you need to pay, but you may only end up paying a portion of unsecured debts like credit cards and medical bills.
FREQUENTLY ASKED BANKRUPTCY QUESTIONS
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