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The Chapter 13 Confirmation Hearing

Chapter 13 Bankruptcy Confirmation Hearing

You must propose a plan to repay part or all of your debts when filing Chapter 13 bankruptcy. The bankruptcy judge decides whether your plan can be approved at the confirmation hearing. Continue reading to learn more about the confirmation hearing, including when it takes place, who is invited, and what happens if your Chapter 13 plan is not approved.

The Repayment Plan for Chapter 13

In Chapter 13, you propose a three- to five-year payment plan. The month after you file your case, you’ll make your first payment. The funds are held by the Chapter 13 bankruptcy trustee until the judge approves your Chapter 13 plan, after which they are distributed to creditors.

Hearing on Confirmation

The bankruptcy judge must approve (confirm) your Chapter 13 plan. The bankruptcy court judge will use the confirmation hearing to determine the following:

  • whether your plan is feasible and you’ll be able to make the payments on time, and
  • whether you filed your plan in good faith or not, your unsecured creditors will receive the same amount of money or more than they would have received if you had filed for Chapter 7 bankruptcy.

Timing of Confirmation

Within 45 days of the 341 meeting of creditors, the court will schedule the confirmation hearing. The hearing will be announced to your creditors at least 28 days in advance.

Attendance

You are not required to attend the confirmation hearing if you are represented by an attorney, but you may do so if you wish. You must appear if you are not represented by counsel, or your Chapter 13 case will be dismissed.

What Takes Place During the Hearing?

You will report to the assigned judge’s courtroom when you appear for the confirmation hearing. Any plan objections that were not resolved before the hearing will be argued by the trustee or creditor when they are called. The judge will consider the arguments and determine whether your plan meets the requirements for confirmation. Both you and your creditors are bound by the plan once it is confirmed.

Objections at the Confirmation Hearing should be planned ahead of time.

The confirmation of your plan may be challenged by your creditors or the Chapter 13 bankruptcy trustee. Among the most common objections are:

  • The plan does not commit all available funds for the three or five-year plan period, or it does not commit all available funds for the three or five-year plan period.
  • Under the plan, you haven’t adequately provided for creditors.

For example, if you want to keep the property that serves as collateral in Chapter 13, you must pay all past due amounts owed to secured creditors, which are usually the holders of a mortgage or car loan. In addition, you must pay off all of your unsecured debts, such as credit card balances, medical bills, and personal loans, with your disposable income. Furthermore, these creditors cannot receive less than they would have received if you had filed for Chapter 7. The “best interests of creditors” test is what it’s called.

In many cases, an objection can be resolved prior to the hearing. If the trustee or a creditor claims that the expenses listed in Schedule J are excessive, you can resolve the issue by providing proof of your expenses. Similarly, if a creditor claims you aren’t paying enough, you can settle the dispute by changing your payment schedule to increase the amount you pay.

If the Court Approves Your Plan During Your Hearing

Following confirmation, the trustee will use the monthly payments you send in to pay the creditors listed in your Chapter 13 plan. Making timely and regular payments to the trustee is critical to the success of your case. If you are unable to make your Chapter 13 plan payments, contact the trustee’s office right away. They can assist you in modifying your plan payments.

If Your Plan Isn’t Confirmed by the Court

If the court rejects your proposed plan, the trustee will refund your money, minus any adequate protection payments made to ensure that a secured creditor—usually the holder of your car payment—is not financially harmed during the confirmation process (a bankruptcy requirement).

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What Does The Chapter 7 And 13 Bankruptcy Trustee Do?

What Does The Chapter 13 Bankruptcy Trustee Do?

Learn more about Chapter 13 bankruptcy trustees, including what they do, how they are compensated, and how they manage your repayment plan.

When you file for Chapter 13 bankruptcy, the court will appoint a trustee to manage your case. You’ll learn about the Chapter 13 trustee’s responsibilities, how the trustee is compensated, and the role the trustee will play in your case in this article.

The Chapter 13 Bankruptcy Trustee’s Responsibilities

The trustee’s job in a Chapter 13 bankruptcy is to:

  • Make sure your proposed Chapter 13 repayment plan complies with all legal requirements.
  • Before you file, make sure you’ve filed your tax returns for the previous four years.
  • take advantage of the plan’s payments
  • Distribute plan payments to your creditors according to the law.
  • keep track of the required monthly income and expense reports in a Chapter 13 case, and
  • If you owe back child support, you must provide certain information to the payee and your state’s child support enforcement agency.

How are Chapter 13 Trustees compensated?

Trustees in Chapter 13 keep about 7%–10% of the payments they make to creditors. When deciding whether Chapter 13 is right for you, keep this fee in mind.

The Function of the Chapter 13 Trustee in Your Case

Many Chapter 13 trustees are involved in the cases they oversee. This is particularly true in small suburban or rural judicial districts, as well as in districts with a high number of Chapter 13 bankruptcy cases. A trustee might, for example:

  • provide you with financial advice, such as assisting you in the creation of a realistic budget (the trustee cannot, however, give you legal advice)
  • assist you in making any necessary changes to your plan
  • if you miss a payment or two, give you a temporary reprieve or take other steps to help you get back on track, or
  • Participate in any hearing about the value of a piece of property, and consider hiring an appraiser if necessary.
  • Your financial relationship with the trustee has its limits, despite the trustee’s interest in your finances.
  • You will have control over any money or property you obtain after filing, as long as you follow your repayment plan’s instructions and make all regular payments on your secured debts.

However, if your income or property rises during the course of your plan (for example, if you get a big promotion or win the lottery), the trustee can seek to amend your plan to pay your creditors a higher percentage of what you owe them rather than the lower percentage originally specified. If your income drops and you have to convert from Chapter 13 to Chapter 7, the trustee may become involved.

When you file for Chapter 7 bankruptcy, the court appoints a bankruptcy trustee to oversee the administration of your case. You’ll learn about the specific responsibilities of the Chapter 7 bankruptcy trustee in this article, so you’ll know what to expect before, during, and after the 341 meeting of creditors—the mandatory hearing for almost all filers.

What Does a Chapter 7 Trustee Do?

The Chapter 7 trustee examines the debtor’s bankruptcy paperwork and verifies his or her identification. However, these are minor responsibilities. The Chapter 7 trustee’s primary responsibility is to sell any property that the debtor is not entitled to keep and to distribute the proceeds to the debtor’s creditors. Thus, in any Chapter 7 bankruptcy case, the trustee’s primary interest will be in your personal property and any property you claim as exempt (that you have the right to keep).

Certain individuals believe that the trustee’s role is to assist the debtor throughout the process. The trustee’s role is to protect creditors, not debtors—although the trustee will be courteous and assist the case in moving forward. The best way to grasp this dynamic is to understand how the trustee is compensated. Continue reading.

Payment to the Chapter 7 Trustee

A Chapter 7 trustee is compensated a pittance of $65 per case for performing a cursory review of a debtor’s bankruptcy petition (as of August 2020). A Chapter 7 trustee, on the other hand, stands to earn significantly more. The trustee is compensated by the court a percentage of the funds distributed to the debtor’s creditors.

The funds could come from a variety of nonexempt sources (property that the filer cannot protect with a bankruptcy exemption), including money in the debtor’s bank account, nonexempt property that the trustee liquidates (sells), or funds that the debtor agrees to pay in exchange for the right to keep nonexempt property (more below). The trustee receives 25% of the first $5,000, 10% of the next $50,000, and 5% of any additional funds up to $1,000,000.

The Chapter 7 Trustee conducts an examination of the Bankruptcy Petition.

If all of your property is exempt (you get to keep exempt property), your case is considered a “no-asset” case—creditors will receive nothing. The bankruptcy notice sent to creditors will inform them that they are not required to file proof of claim forms because there will be no money available to pay them. However, they will be informed that this may change.

Under the supervision of the United States Trustee, the trustee is required to review your bankruptcy papers for accuracy and indications of possible fraud or abuse of the bankruptcy system. The trustee will review the documentation and look for indications that you are concealing or mischaracterizing assets. The petition and schedules, as well as the 521 documents you submitted prior to the hearing, will be reviewed (bank statements, paycheck stubs, profit and loss statements, tax returns, and the like).

After discovering nothing, the trustee will lose interest in the case. When the trustee has no property to seize and sell in order to pay your unsecured creditors, there is no commission to motivate the trustee.

The 341 Creditors Meeting Is Conducted by the Chapter 7 Trustee

You’ll meet the Chapter 7 bankruptcy trustee at your creditors’ meeting, which you must attend in order to avoid having your bankruptcy dismissed. The trustee will verify your identification, ask the mandatory 341 questions (along with any other issues raised by your paperwork), and allow any creditors who appear to ask questions (they rarely show up).

Generally, if all of your assets are exempt, the trustee will call the meeting to a close and you will not hear from the trustee again. You’ll complete your debtor education course and await the discharge of your debt.

If, however, you are unable to fully respond to the trustee’s questions, the trustee will postpone the creditors’ meeting and request that you submit appropriate documentation in the interim. Occasionally, the trustee may retain an attorney to pursue nonexempt assets you appear to own, or may refer your case to the United States Trustee’s office for further action if it appears as though you engaged in fraudulent activity.

Nonexempt Assets Are Seized by the Chapter 7 Trustee

If the trustee needs to seize and sell nonexempt assets, you must cooperate in delivering them to the trustee for disposition. Additionally, you can “repurchase” nonexempt assets from the trustee at a negotiated price or substitute exempt assets for nonexempt assets. Numerous trustees discount the property’s value by 20% and occasionally grant the debtor a few months to pay.

Search by the Trustee for Non-Exempt Assets

Many people are unsure whether a trustee has the authority to search their homes to ascertain whether they are concealing property. While such searches are unusual, as part of your obligation to cooperate with the trustee, you may be required to give the trustee a guided tour of your home or storage space. And if you refuse to cooperate, the trustee can obtain a court order compelling you to comply.

Abandonment of Non-Exempt Assets by the Trustee

If you own nonexempt property that is not worth much or would be difficult for the trustee to sell, the trustee can — and frequently will — abandon it, allowing you to keep it. For instance, regardless of how much your used furniture is theoretically worth, many trustees will avoid selling it. Arranging for the sale of used furniture is time consuming and rarely results in a significant profit for the creditors.

The Chapter 7 Trustee Issues Notices of Support Arrears

If you owe back child support, the trustee must notify the support claimant and the state child support agency in order to assist them in locating you following your bankruptcy discharge. Specifically, the trustee will inform the payee of his or her bankruptcy-related rights. The trustee will notify the state child support enforcement agency of the back support, the discharge, the debtor’s address and employer information, and the identity of any creditor holding a nondischargeable, reaffirmed, or a claim.

Both the payee and the child support enforcement agency have the right to request your last known address from these creditors. These creditors are permitted by law to release such information without incurring any penalties.

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Can I File for Bankruptcy If I Can’t Leave the House Due to Coronavirus?

Can I File for Bankruptcy If I Can't Leave the House Due to Coronavirus?

Learn how to file for bankruptcy while adhering to the COVID-19 outbreak’s quarantine and social distancing rules.

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Dealing with the COVID-19 pandemic’s uncertainty is especially difficult for those facing bankruptcy. Fortunately, many courts have temporarily relaxed rules, making it easier for bankruptcy attorneys to represent clients who have been quarantined. Therefore, if you are quarantined due to the coronavirus, rest assured that a large number of bankruptcy attorneys are prepared to assist you in getting out of debt.

Learn more about the temporary changes to bankruptcy procedures that have been implemented to help contain the spread of COVID-19.

Locating a Bankruptcy Attorney During the Coronavirus Epidemic

Due to the difficulty of representing yourself during the coronavirus outbreak, especially if you have ongoing health problems, your first hurdle will likely be hiring a bankruptcy attorney.

Because conducting in-person interviews will be impossible, you may wish to seek referrals from friends, family, and other attorneys. Additionally, you can search for a lawyer online or through your local or state bar association.

When contacting candidates, ensure that the office is capable of representing you while you are isolated, and that necessary accommodations are made, such as the following:

  • For attorney-client meetings and document review, telephone or video conferencing is used.
  • Options for submitting and signing documents include online, email, or dropbox.
  • the possibility of making a telephonic appearance at the 341 creditors’ meeting (the one hearing all filers must attend).
  • Additionally, inquire about the office’s free initial phone consultations. Discover the benefits of hiring a bankruptcy attorney.

Bankruptcy Filing During the Coronavirus Outbreak

While you are in quarantine, you will communicate with your lawyer and the court via technology. You will almost certainly require a computer, a printer, and a scanner (although some lawyers might let you use your phone to copy documents). Additionally, documents can be mailed or delivered by a friend or family member.

Here’s why these details will be critical.

Due to COVID-19, bankruptcy documents can be exchanged virtually.

Filing for bankruptcy is a time-consuming process. You should anticipate that your attorney will request that you complete a lengthy financial questionnaire. Additionally, you’ll need to gather numerous financial documents to substantiate your questionnaire responses.

Normally, the lawyer would hand you a packet and ask you to return it to the office later. Naturally, this will not work while you are quarantined. However, numerous attorneys already have functional systems in place.

For example, some attorneys begin the process by sending debtors a link to a website where they can complete the questionnaire online and possibly upload pay stubs, bank statements, and other documents required when filing for bankruptcy.

Others will email the bankruptcy questionnaire to the client and request that they scan and return it via email. If scanning is not possible, you can mail the documents in or have them dropped off at an office dropbox by a friend or family member (assuming that essential travel is permitted). Bear in mind that, according to some reports, the coronavirus can survive for an extended period on paper and cardboard.

Completion of Mandatory Bankruptcy Courses

You’ll complete two online courses—one prior to and one following your bankruptcy filing. Your attorney will assist you in obtaining access to the courses. Learn more about credit counseling and bankruptcy debtor education courses.

Meeting With a Bankruptcy Attorney Is Virtually Impossible Due to COVID-19

You should expect three to four consultations with your lawyer before the office files your case. The office can arrange meetings over the phone or via video conferencing.

Acquainting yourself with the attorney. You’ll ask questions, listen to the attorney’s assessment, and decide whether or not to retain the lawyer during the initial consultation. A lawyer familiar with your case may advise you of your options during that meeting.

Choosing a course of action. It is not uncommon for debtors to forget critical details inadvertently or to be unaware of the significance of certain information during the initial consultation. You’ll discuss anything new that came up in your questionnaire during this meeting. As a result, this will not be necessary unless the information contained in your questionnaire responses and financial documents contradicts what you and your lawyer discussed during the initial meeting.

Certain courts have temporarily waived the requirement that a bankruptcy attorney obtain an original or “wet signature” on the bankruptcy petition before electronically filing it with the court. This rule relaxation is extremely beneficial to both lawyers and clients during the coronavirus pandemic. It restricts the amount of contact that must occur prior to filing a case. Each day, more courts adopt similar rules.

If your local court has waived the requirement for a “wet signature,” your attorney should be able to immediately file your case online. Even if your local bankruptcy court has not yet relaxed this requirement, some attorneys may agree to a different arrangement. For example, the attorney may be able to review documents via phone or video conferencing and file the case after receiving the wet signature via mail or dropbox.

Bringing Your Bankruptcy Case to a Successful Conclusion

If you file for Chapter 7 bankruptcy, all that remains is to await your discharge—the court order that eliminates your debt.

In a Chapter 13 case, your attorney will appear via telephone at a Chapter 13 confirmation meeting (as will you, if necessary—this will depend on the court’s practice). If the court approves your repayment plan at the confirmation hearing, you will make payments for three to five years on the agreed-upon schedule.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

(480) 744-7711
INITIAL CONSULTATION

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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What Does The Chapter 13 Bankruptcy Trustee Do?

What Does The Chapter 13 Bankruptcy Trustee Do?

Learn more about Chapter 13 bankruptcy trustees, including what they do, how they are compensated, and how they manage your repayment plan.

When you file for Chapter 13 bankruptcy, the court will appoint a trustee to manage your case. You’ll learn about the Chapter 13 trustee’s responsibilities, how the trustee is compensated, and the role the trustee will play in your case in this article.

The Chapter 13 Bankruptcy Trustee’s Responsibilities

The trustee’s job in a Chapter 13 bankruptcy is to:

  • Make sure your proposed Chapter 13 repayment plan complies with all legal requirements.
  • Before you file, make sure you’ve filed your tax returns for the previous four years.
  • take advantage of the plan’s payments
  • Distribute plan payments to your creditors according to the law.
  • keep track of the required monthly income and expense reports in a Chapter 13 case, and
  • If you owe back child support, you must provide certain information to the payee and your state’s child support enforcement agency.

How are Chapter 13 Trustees compensated?

Trustees in Chapter 13 keep about 7%–10% of the payments they make to creditors. When deciding whether Chapter 13 is right for you, keep this fee in mind.

The Function of the Chapter 13 Trustee in Your Case

Many Chapter 13 trustees are involved in the cases they oversee. This is particularly true in small suburban or rural judicial districts, as well as in districts with a high number of Chapter 13 bankruptcy cases. A trustee might, for example:

  • provide you with financial advice, such as assisting you in the creation of a realistic budget (the trustee cannot, however, give you legal advice)
  • assist you in making any necessary changes to your plan
  • if you miss a payment or two, give you a temporary reprieve or take other steps to help you get back on track, or
  • Participate in any hearing about the value of a piece of property, and consider hiring an appraiser if necessary.
  • Your financial relationship with the trustee has its limits, despite the trustee’s interest in your finances.
  • You will have control over any money or property you obtain after filing, as long as you follow your repayment plan’s instructions and make all regular payments on your secured debts.

However, if your income or property rises during the course of your plan (for example, if you get a big promotion or win the lottery), the trustee can seek to amend your plan to pay your creditors a higher percentage of what you owe them rather than the lower percentage originally specified. If your income drops and you have to convert from Chapter 13 to Chapter 7, the trustee may become involved.

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Chapter 13 Bankruptcy Cost 2021

Chapter 13 Bankruptcy Cost 2021

If you’re attempting to get out from under a mountain of debt, you’re undoubtedly thinking if Chapter 7 or Chapter 13 bankruptcy can help. Your next queries are likely to be how much Chapter 13 will cost and whether it will work for you once you’ve decided it’s the best option for your financial position. We polled readers throughout the country about their recent bankruptcy experiences in order to acquire some real-life answers to these issues. What we gathered from people who filed for Chapter 13 is as follows.

What Are the Fees for Chapter 13 Lawyers?

The law of bankruptcy is complicated and perplexing. Cases involving Chapter 13 can be very complicated, and mistakes might lead to major financial troubles down the road. So it’s no surprise that almost all of our readers (97%) hired a lawyer to assist them with the Chapter 13 bankruptcy procedure. Their legal fees often ranged between $2,500 and $5,000. However, the majority of readers (63 percent) paid $3,000 or less. Nonetheless, the average cost of $3,000 was more than double what other readers spent their lawyers to handle Chapter 7 bankruptcy cases. Because Chapter 13 cases take longer and need more labor, attorneys charge more for them. However, Chapter 13 has a benefit in terms of how attorneys’ fees are normally calculated: While the great majority of bankruptcy lawyers charge a flat fee for their basic services, they usually only require a down payment before filing the Chapter 13 bankruptcy petition. (You’ll also have to pay the filing cost, which is $313 as of December 2020.) The remainder of the attorney’s fee is then included in your Chapter 13 monthly payments, which means it comes out of the money that would otherwise go to your creditors.

When a Chapter 13 Lawyer Might Cost You More or Less

The fees charged by bankruptcy lawyers are determined by numerous factors, including their level of experience and location of practice. Attorneys’ fees, like other expenses, tend to be higher in large urban centers on the coasts. However, in Chapter 13 bankruptcy situations, there is another crucial issue to consider: The amount you pay your attorney must be approved by the court. Many courts set fee standards that they will automatically consider reasonable in order to make the approval process easier (known as “presumptive” or “no look” fees). The rules may also include a list of fundamental services that should be covered, as well as additional costs for business cases and additional services that may be required (such as filing plan modifications or motions). These assumed costs differ from one state to the next, as well as between districts within bigger ones. In a few populated states, examples of the range of presumed costs for essential services include:

  • $3,300 to $5,000 in California
  • $3,000 to $3,825 in Texas
  • $3,500 to $4,500 in Florida
  • $2,600 to $3,650 in Michigan
  • $4,000 to $5,100 in Virginia

Our findings backed up the conventional assumption that most lawyers will charge that amount or less for basic services in regions where the courts have set guidelines. However, if your case necessitates additional labor, such as when:

  • You own a firm as a solo owner.
  • Your home is worth less than what you owe, and you want to get rid of your mortgage obligation (or “discharge” it).
  • you wish to get rid of your college loans, or
  • When you declare for bankruptcy, you become a defendant in a lawsuit.

Source: https://www.nolo.com/legal-encyclopedia/chapter-13-bankruptcy-what-will-it-cost-and-will-it-work.html

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Which Debts Are Discharged in Chapter 7 Bankruptcy?

Which Debts Are Discharged in Chapter 7 Bankruptcy?

To discharge (wipe out) debt, most people apply for Chapter 7 bankruptcy. Although some debts are “nondischargeable” and will not be discharged in bankruptcy, Chapter 7 will discharge numerous obligations, including medical and credit card debt.

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This article will teach you:

  • How a Chapter 7 bankruptcy can help you pay off your debts
  • what you’ll be erasing in Chapter 7, and
  • In bankruptcy filing, how do you classify debt?
  • Find out what bankruptcy can and cannot accomplish for you.

How Does a Discharge Work?

Individual debtors are released from personal accountability for debts discharged by bankruptcy, and creditors due that debt are barred from conducting collection activities against the debtor. To put it another way, the debtor is no longer obligated to pay any discharged debts. About four months after filing the bankruptcy petition, the majority of Chapter 7 filers receive an automatic discharge.

Which Debts Can Be Forgiven?

A list of routinely dismissed debts is shown below.

  • Charges on a credit card (including overdue and late fees)
  • Accounts of collection agencies
  • Medical expenses
  • Personal loans from family, friends, and coworkers
  • Bills for utilities (past due amounts only)
  • Checks that have been forged (unless based on fraud)
  • Loans for students (only in the rare circumstance that you can prove undue hardship)
  • Deficiency balances from repossessions
  • Insurance claims for automobile accidents (except those involving drunk driving)
  • Debts owed by businesses
  • Money owing to a landlord under a lease arrangement (includes past due rent)
  • Judgements of civil courts (unless based on fraud)
  • Penalties and unpaid taxes that have accumulated over a period of time
  • Lawyer’s fees (except child support and alimony awards)
  • Accounts with a revolving balance (except extended payment charges)
  • Overpayments of social security, and
  • overpayments on veterans’ assistance loans

A word regarding utility deposits and fraud. An otherwise dischargeable obligation can become non-dischargeable due to debt-related misconduct or fraud. A utility company cannot refuse to supply service due to a bankruptcy filing, but it can levy a reasonable deposit to secure future payment.

Dischargeable Debt Timing

It’s not only about the type of debt you have. When you get into debt, the obligation comes into play as well. This is how it goes.

Debt that hasn’t been filed yet. A pre-petition debt is one that you have accrued prior to filing for bankruptcy. The bankruptcy court will dismiss all qualifying pre-petition debt, such as credit card bills, personal loans, and medical debt, at the conclusion of your case.

Debt incurred after the filing of the tax return. Post-petition debt refers to the bills you accrue after filing your original bankruptcy case. You are still responsible for any outstanding balances beyond the original filing date. As a result, even if your lawsuit isn’t finished, you can go into fresh debt.

In other words, only debts incurred prior to the filing date of Chapter 7 are forgiven. Any debt you incur after filing your petition but before securing a discharge is your responsibility.

Prioritization vs. Nonprioritization Debt that isn’t secured

You must organize your debt into categories before filing for bankruptcy. If funds are available, the trustee will pay some creditors before others, depending on whether the claim is secured, priority unsecured, or nonpriority unsecured. Higher-ranking claims are paid first, followed by lower-ranking debt.

For example, “priority” debt is given special consideration and is paid first. Common examples are child support payments and tax debt. After a Chapter 7 bankruptcy, you’ll be responsible for a variety of priority debts.

Bills that you can discharge are usually classified as “nonpriority unsecured” debt. (Unsecured debt isn’t backed up by anything.) Secured debt, on the other hand, includes things like a home mortgage or a car loan.) However, a few non-priority unsecured obligations are not forgiven. For example, you won’t be able to discharge student loan debts in bankruptcy unless you file a separate lawsuit and demonstrate that you meet certain criteria.

The majority of liens will remain on the property.

Despite the fact that a debtor is no longer personally liable for discharged obligations, any legitimate lien that has not been avoided (rendered unenforceable) will remain in the bankruptcy case. For example, if you don’t sign a reaffirmation agreement to continue paying your car payment, the discharge will cancel your duty to pay the car loan; nevertheless, you won’t be able to keep the automobile. The lender will seize the vehicle using its lien rights.

After you’ve filed for bankruptcy, you can no longer receive collection calls.

If a creditor calls you after you file bankruptcy, giving them your case number and filing date will almost certainly put an end to the calls. It’s simple to find your filing date. Take a look at any bankruptcy documents that have been filed with the court. (Even if you hire a lawyer, you’ll get copies of all notices.) Next to your case number, the filing date will display at the top of the page.

A creditor can use the information to rapidly verify your bankruptcy, and if the calls don’t cease, the creditor will face consequences.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

(480) 744-7711
INITIAL CONSULTATION

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Pros and Cons of Filing Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy

In the United States, Chapter 7 bankruptcy is one of the most powerful debt relief options. It can assist customers in escaping poverty and giving them a fresh start. It allows you to start again by wiping your debts. However, bankruptcy is a personal choice, and you should carefully examine if it is the best option for you. The advantages and disadvantages of Chapter 7 bankruptcy are discussed in this article.

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What are the Benefits of Filing for Bankruptcy under Chapter 7?

An immediate sense of relief in the form of a much-needed breathing spell

You are protected from creditors as soon as your bankruptcy case is filed with the bankruptcy court. When you file for bankruptcy, all collection operations are automatically halted. All phone calls, garnishments, and collection letters must cease immediately. Repossessions, evictions, and foreclosures were all put on hold for the time being.

A bankruptcy discharge provides permanent debt relief.

Most sorts of debt, including credit card debt, medical bills, and personal loans, are erased when you file Chapter 7 bankruptcy. When the bankruptcy court grants you a bankruptcy discharge, you no longer have to pay these sorts of unsecured debts.

It’s almost certain that you’ll get your bankruptcy discharged.

You can achieve your bankruptcy discharge in as short as three months if you’ve never filed bankruptcy before, pass the means test, and act honestly with the bankruptcy court and the bankruptcy trustee. It’s virtually automatic if you make sure you meet all conditions before and after filing your bankruptcy petition.

You’ll almost certainly get to keep all you own.

More than 95 percent of people who file Chapter 7 bankruptcy in the United States keep everything they own. This is because certain property, known as exempt property, is protected from creditors under the law. If it’s covered by an exemption, you get to retain it, whether it’s your monthly social security check, your watch, or your kitchen table.

You can even keep your car after filing for bankruptcy if you want to.

You’ll still have to pay for it, but isn’t that just? If you don’t want to keep it, though, Chapter 7 bankruptcy permits you to walk away from both the car and the loan! Here’s all you need to know about preserving your car after declaring bankruptcy under Chapter 7.

Missed monthly payments and other negative entries on your credit report no longer affect your credit score after bankruptcy.

When your bankruptcy is discharged, you will be given a clean slate on which to rebuild your credit and raise your credit score. One year after filing Chapter 7, the majority of folks have a higher credit score than they did when they first started the bankruptcy process.

Improved Credit and Banking Access

You’ll get more credit card offers than you know what to do with shortly after you file for bankruptcy. This will not only assist you in rebuilding your credit and increasing your credit score, but it will also provide you with the security net that comes with owning a credit card in the event of an emergency.

What are the Disadvantages of Chapter 7 Bankruptcy?

Filing for bankruptcy under Chapter 7 is not for everyone. Even if it appears to be the best debt relief choice for you, once you consider some of the disadvantages of Chapter 7, it may not be.

If you earn too much money, you won’t be able to file Chapter 7.

If you earn less than the median income, you may be perplexed as to how this is even feasible. Don’t be concerned; this isn’t about you. This refers to people who have money left over after paying their basic living needs.

The means test determines whether or not you have disposable income. You won’t be able to simply walk away from your debt if you have too much disposable income. While you won’t be able to file for Chapter 7, you will be able to acquire a bankruptcy discharge if you complete a Chapter 13 repayment plan.

If you have good credit, it will almost certainly suffer a temporary setback.

Those who are able to make their monthly payments on time and maintain a high credit score before filing for bankruptcy will notice their score dip at first. However, a bankruptcy filing frequently benefits the filer’s credit score more than it hurts it. Plus, after their bankruptcy is discharged, they can immediately start working on improving their credit score.

It does not completely eliminate all unsecured debts.

Some unsecured debts, such as alimony and child support, are not dischargeable in bankruptcy. Other debts, such as tax debts and student loans, can be difficult to discharge in bankruptcy.

Certain forms of property can be lost.

The obligation to give up certain pricey objects is one of the trade-offs for achieving a bankruptcy discharge in a handful of months. Property that is not exempt from the bankruptcy trustee’s ability to sell to pay creditors in a Chapter 7 bankruptcy case is uncommon.

If you hold valuable property that you don’t want to lose, you should consult a bankruptcy attorney. Then you’ll know whether that’s a real possibility for you, and if it is, whether filing Chapter 13 is a better debt relief choice.

Others are not protected by your Chapter 7 bankruptcy filing.

Only your obligation to pay the debt is eliminated when you file for Chapter 7 bankruptcy. It does not relieve anyone else of their debt. The only sort of bankruptcy that can protect a co-signer is Chapter 13, but that only works if you pay off the debt under your repayment plan.

What are the advantages and disadvantages of filing for Chapter 13 bankruptcy?

For those in need of a fresh start, both Chapter 7 and Chapter 13 bankruptcy are viable possibilities. However, the benefits and drawbacks of Chapter 13 bankruptcy differ significantly from those of Chapter 7. Chapter 13 bankruptcy may be ideal for you if you have a lot of disposable income or non-exempt assets you want to protect. Learn more about the benefits and drawbacks of Chapter 13 bankruptcy in this article.

Bankruptcy is a costly process.

For Chapter 7 cases, the bankruptcy court imposes a $338 filing fee. You must pay this filing fee if your income exceeds 150 percent of the federal poverty level. If you can’t pay the amount all at once, you can file your case and pay the charge in up to four installments. However, if you do not pay it in full, the court will dismiss your lawsuit.

You’ll have to pay their attorney fees in addition to the court filing expenses if you employ a law firm or a bankruptcy lawyer to assist you. This normally amounts to around $1,500, which must be paid before your case can be filed. This is in addition to the filing fee and the cost of the required credit counseling classes.

Hiring the correct bankruptcy lawyer for your case might be a wonderful investment depending on your financial condition and the goals you want to achieve with your bankruptcy petition. However, many Chapter 7 cases are straightforward and can be finished without the assistance of a lawyer.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

(480) 744-7711
INITIAL CONSULTATION

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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How Do Bankruptcy Exemptions Work

How Do Bankruptcy Exemptions Work

If you’re one among the millions of people who lost their jobs as a result of COVID-19, bankruptcy can help you clear your debts while keeping your retirement assets intact. You won’t lose your stimulus cash, though, because the new bankruptcy “recovery rebate” law preserves stimulus checks, tax credits, and child credits.

Exemptions from bankruptcy play an important role in both Chapter 7 and Chapter 13 bankruptcy. Exemptions are used in Chapter 7 bankruptcy to determine how much of your property you get to keep. Exemptions in Chapter 13 bankruptcy help you keep your plan payments modest. Learn more about bankruptcy exemptions and how they work by reading on.

What Are the Different Types of Bankruptcy Exemptions?

Exemptions allow you to keep a specific amount of assets, such as a cheap car, professional tools, clothing, and a retirement account, safe in bankruptcy. You don’t have to worry about the bankruptcy trustee appointed to your case taking an asset and selling it for the benefit of your creditors if you can exclude it.

Many exclusions cover specific property kinds up to a certain dollar value, such as a car or furnishings. An exemption can sometimes protect the asset’s total worth. Some exemptions, known as “wildcard exemptions,” can be used on any of your properties.

Is it okay if I keep my baseball cards? Jewelry? Pets?

The goal of bankruptcy is to give you a fresh start, not to take away all of your possessions. You’ll probably be able to protect other items as well, such as religious literature, a seat in a building of worship, or a burial plot, in addition to the fundamentals. Chickens and feed are even exempt in some states. However, you should not make the mistake of assuming that everything will be well.

  • Items of high value. There are no exemptions for boats, collections, pricey artwork, or holiday homes. Instead of filing for bankruptcy, owners with such valuable assets often sell the property and pay off their debts.
  • Jewelry. Many states provide protection for wedding rings up to a certain value. Don’t expect to preserve your Rolex, diamond necklace, or antique broach collection, though.
  • Pets. The dog or cat you rescued from the shelter is unlikely to fall into the trustee’s hands. Why? It’s not that you’ll have a specific exemption to protect it; rather, the trustee would have to pay more to sell it than it’s worth in most circumstances. However, if you own a valuable show dog or a racehorse with high breeding costs, you may be forced to sell it or pay for it in bankruptcy.

Exemptions: What Are They and How Do They Work?

Whether you’re filing a Chapter 7 or Chapter 13 bankruptcy, exemptions play a significant role.

Bankruptcy under Chapter 7

A liquidation bankruptcy is one in which the appointed trustee sells your nonexempt assets to satisfy your creditors. Because the bankruptcy trustee cannot sell exempt property, exemptions assist you protect your assets in Chapter 7 bankruptcy. If your state offers a $5,000 motor vehicle exemption and you only own one automobile worth $4,000, for example, you can keep it. See Exemptions in Chapter 7 Bankruptcy for more details.

Bankruptcy under Chapter 13

You can keep all of your property and rearrange your debts with a Chapter 13 bankruptcy (which can mean paying less on some of them). The amount you must pay specific creditors, however, is still determined by how much property you can exclude. Unsecured creditors who are not priority (such as credit card companies) must be paid an amount equal to your nonexempt assets. Exemptions assist keep your Chapter 13 bankruptcy plan payments modest by lowering the amount you must pay creditors. See Exemptions in Chapter 13 Bankruptcy for more details.

Bankruptcy Exemptions at the State and Federal Level

There are bankruptcy exemptions in each state. A series of exemptions is also provided by federal law. (See The Federal Bankruptcy Exemptions for further information.) Some states force you to use their exemptions, while others allow you to choose between their exemptions and the federal system (you cannot mix and match the two).

The state exemption rules you’ll be able to use will be determined by where you lived in the previous two years (called the “domicile requirements.”). Read Which Exemptions Can You Use In Bankruptcy? for more information on the distinctions between state and federal exemptions and domicile requirements.

Nonbankruptcy Exemptions in the United States

In addition to state and federal bankruptcy exemptions, there are a number of federal nonbankruptcy exemptions. These exemptions work in a similar way to bankruptcy exemptions in terms of preserving your assets. Nonbankruptcy exemptions from the federal government are only available if you use your state’s exemptions (you cannot combine the federal bankruptcy and nonbankruptcy exemptions). You can use nonbankruptcy exemptions in addition to state exemptions if you are using state exemptions. See The Federal Nonbankruptcy Exemptions for further details.

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How Much Does Chapter 7 Bankruptcy Cost?

What is Chapter 7 Bankruptcy

Read on to learn more about the costs of Chapter 7 bankruptcy in 2021.

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How Much Does a Lawyer Charge for Chapter 7 Bankruptcy?

The first thing you probably want to know about bankruptcy is how much it will cost. Everyone who files for Chapter 7 has to pay for:

  • the filing fee ($338 in 2022, unless your income is low enough to qualify for a waiver), and
  • two required bankruptcy counseling courses (about $60 or less each).

The average cost a lawyer charges for Chapter 7 bankruptcy is $1,350 with costs varying from $1,200 to $1,500 for the US in 2021 That said, the charges can vary and be greater than this depending on your location, the complications associated with the case and the experience your lawyer has. For example, you may find it costs as little as $4,500 but sometimes can be upwards of $2,200.

Factors Affecting Fees

  • If you live in certain states, Attorneys will charge more for the same services. The cheapest state in the US to file bankruptcy is North Dakota while the most expensive states are Nevada, Maine and New Hampshire, often up to three times as much.
  • Chapter 11 bankruptcies for businesses wishing to continue operations are far more costly and complicated than a Chapter 7 bankruptcy, hence the lower cost of Chapter 7 bankruptcy filing. Chapter 13 bankruptcy is usually somewhere between the price of Chapter 7 and Chapter 11 cases.
  • A simple case where you have just one [profession, simple credit card debt and only basic assets will probably cost less than when you have a spouse, six children, winnings from betting on horses, tax debt, a mortgage, a vacation home in Florida and a wide range of physical assets.
  • An experienced attorney will cost more than an inexperienced one but if your case is complex, it may be worthwhile to have the experienced attorney.

Excessive Fees

Courts do not want people paying too much in attorney fees when they file for bankrupt. An attorney has to disclose the fees charges on a special form called “Disclosure of Compensation.” The appointed trustee reviews this and if they consider excessive fees to have been charged, a motion can be filed requesting the judge to return part of the fee or cancel the fee. The person filing for bankruptcy can also file that charge.

Bankruptcy Discharge: Different Results for Different Debts

In Chapter 7 bankruptcy, you can usually wipe out almost all qualifying debts: those that aren’t “secured” (meaning you haven’t promised to give back property like a house or car if you don’t make the payments; more on that below) or “priority” (like unpaid child or spousal support). Our readers had great results getting their qualifying debts wiped out, mixed results on some debts with special rules (back taxes), and poor results with student loan debt.

Qualifying Debts

More than nine out of ten readers had balances on their credit cards when they filed for bankruptcy—the most common kind of debt they reported by far. Almost all of them (98%) got those debts completely wiped out in their Chapter 7 cases. Also, nearly half of our readers had unpaid medical bills, and they were nearly as successful in getting relief for those debts (95% received a full discharge, while another 4% received a partial discharge). In general, readers also had high discharge rates for other types of qualifying debts, including:

  • Lawsuit judgments (after creditors sued and received a judgment against you in court)
  • Business debts for which you’re personally liable, and
  • Utility and phone bills.
  • Back Taxes
  • It’s difficult—but not impossible—to discharge some older debts for unpaid income taxes 
  • Usually, you can’t wipe out student loan debt in bankruptcy. But there is an exception if you file a separate lawsuit (known as an adversary proceeding) and prove that it would be an “undue hardship” for you to repay the loans.

Chapter 7 Bankruptcy Exemptions in Arizona

Chapter 7 Bankruptcy Exemptions In Arizon

The Bankruptcy Code is governed by federal law, which means that many aspects of bankruptcy such as the “automatic stay” apply similarly regardless of the state the petitioner lives and files in. However, it’s important to know that Arizona has legally opted out of many federal bankruptcy exemptions under the code. So people who file for bankruptcy in the state can obtain exemptions only according to state laws. This particularly pertains to property exemptions. State bankruptcy exemptions work similarly for both Chapter 7 and Chapter 13 bankruptcy in the state. If you are filing for a Chapter 7 bankruptcy, read below to find out which exemptions you may qualify for in the state:

Residential Property and Homestead Assets

Arizona’s homestead exemption allows debtors to exempt up to $150,000 equity value from any real property considered a home. Other real property may also qualify if it falls within Arizona’s homestead laws. The exemption is the same for single as well as married couples. You will have to contact a lawyer regarding which of your real properties can be exempted under the homestead exemption clause in the state.

Certain Types of Personal Property

The courts allow debtors to get exemptions for various items that can be considered “personal property.” Your personal property includes items you own like clothes, computers, guns, furniture, books, pet animals, musical instruments, health aids, and wrongful death awards among others. The state allocates a specific amount of each personal property as exemptions. For example, Chapter 7 petitioners can exempt up to $2,000 for a wedding ring. You should refer to Ariz. Rev. Stat. §§ 33–1123, 33–1125 and 33–1127 for more information, or ask an experienced bankruptcy lawyer.

Deposits

A debtor filing for bankruptcy can exempt up to $300 from deposits in one bank account. If you have multiple bank accounts, contact a bankruptcy attorney in Scottsdale to find out how you can obtain exemptions.

Motor Vehicles

Arizona has very specific exemptions for motor vehicles for Chapter 7 bankruptcy. The courts allow debtors to exempt up to $6,000 equity for each vehicle owned. Elderly petitioners or their elderly or disabled spouses can exempt up to $12,000.  Again, consultation with your legal counsel is essential.

Retirement Benefits and Pension Funds

Under federal rules, qualified retirement plans such as 401ks and IRAs, which have tax-exempt status, are also exempt in bankruptcy proceedings. Arizona upholds this rule. In addition, debtors who benefit from any type of state employee pension plan can obtain exemptions. Amounts will vary depending on the type of plan you have.  So let’s say you have $200,000 in retirement assets, you can still file and procure a bankruptcy discharge and still own your $200,000 in retirement accounts post-discharge.

Life Insurance Benefits

Up to $20,000 in life insurance that could be paid to a child or a living spouse can be exempted when filing for Chapter 7 bankruptcy. Cash surrender value will be considered for exemptions. Similar exemptions can be obtained for insurance plans that cover ill health, accidents or disability. Insurance claims for damages or destruction to property that is exempt will also be exempted from proceedings. There are many insurance exemptions, but there are also exceptions. It’s important to ask a highly qualified lawyer whether your insurance benefits can be exempted under Chapter 7 bankruptcy proceedings.

Child Support

Arizona exempts all child support or alimony payments from discharge when filing for bankruptcy. So filing for bankruptcy is not a valid reason to not pay court ordered alimony or child support.  You are your estate (after you die) will owe child support and alimony for life—and even then, your estate will be compelled to pay.

Fraternal Benefit Society Benefits

If you claim benefits from the Fraternal Benefit Society, they will all be exempted under Arizona law.

How Long Does it Take to File for Chapter 7 Bankruptcy?

Usually, the entire Chapter 7 bankruptcy process starting from the first consultation of your credit to the court’s discharge of the remaining debts, is something that can take up to six months to finish.

However, your case may take longer, for example, when the trustee asks you to submit other documents, or whether they must sell your property to pay creditors. Or maybe you want to try to get your student loan discharged in bankruptcy. That is possible, but challenging, and may require a lengthy trial.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

(480) 744-7711
INITIAL CONSULTATION

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Who Can File Chapter 7 Bankruptcy?

What is Chapter 7 Bankruptcy

Here are ways to discover if you can file for Chapter 7 bankruptcy.

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How High Is Your Income?

If your income is less than or equal to the median income for your state, you are usually eligible for Chapter 7 bankruptcy.

Do You Have Enough Disposable Income to Repay Some Debts?

The means test indicates whether you have enough disposable income to repay some of your debts over five years. Unsecured debts are those debts not backed by collateral.

The bankruptcy trustee will look at Schedule I: Your Income and Schedule J: Your Expenses. If there is enough left over each month to make a notable payment to your creditors, the trustee will recommend Chapter 13 to the court.

You Previously Received a Bankruptcy Discharge

You can’t get another Chapter 7 bankruptcy discharge if you obtained a Chapter 7 Bankruptcy discharge within the last eight years, or a Chapter 13 case within the last six years.

You will not be able to proceed if the court has turned down your bankruptcy discharge in the last 180 days when: 

  • A court order has been violated
  • the court ruled that your filing was an abuse of the system or fraudulent
  • A creditor requested an automatic stay before you filed

You Defrauded Your Creditors

  • A bankruptcy court might dismiss the case if they suspect you concealed assets from your creditors.
  • The Filer Is a Corporation or LLC
  • A business can file for bankruptcy but Chapter 7 bankruptcy won’t clear the debt of a corporation or LLC. Instead, the trustee will liquidate the assets of the company and distribute the proceeds to creditors.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

(480) 744-7711
INITIAL CONSULTATION

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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