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Written by Canterbury Law Group

Can You File Bankruptcy For Medical Bills

You can file for bankruptcy to discharge or manage medical bills. Medical debt is considered unsecured debt, meaning it’s not tied to any specific asset, and it can be included in bankruptcy filings. There are two primary types of bankruptcy that individuals often file in the U.S. to manage medical debt:

1. Chapter 7 Bankruptcy (Liquidation Bankruptcy):

  • How it works: In a Chapter 7 bankruptcy, non-exempt assets may be sold to pay off creditors, but most people who file do not have significant assets that can be liquidated. After the process, most unsecured debts, including medical bills, can be discharged (eliminated).
  • Impact on medical bills: Medical bills are typically fully discharged in Chapter 7, meaning you are no longer legally obligated to pay them.
  • Eligibility: To qualify for Chapter 7, you must pass a “means test,” which examines your income, expenses, and ability to pay back debts. If your income is below the median for your state, you likely qualify.

2. Chapter 13 Bankruptcy (Reorganization Bankruptcy):

  • How it works: In a Chapter 13 bankruptcy, you create a repayment plan to pay back some or all of your debts over a three to five-year period. Unsecured debts like medical bills are included in the repayment plan, but after the repayment period, any remaining unsecured debts may be discharged.
  • Impact on medical bills: Medical bills are part of the debts that can be reorganized and partially repaid under this plan. Any remaining amount after the plan period may be discharged.
  • Eligibility: Chapter 13 is an option for individuals who do not qualify for Chapter 7 or who want to keep certain assets (such as a home or car) that they might lose under Chapter 7. It also requires a regular income.

Considerations:

  • Credit score: Filing for bankruptcy will negatively impact your credit score for several years (up to 10 years for Chapter 7 and 7 years for Chapter 13).
  • Consult an attorney: Bankruptcy laws can be complex, and consulting with a bankruptcy attorney can help you determine which type of bankruptcy is best for your situation.

Overall, bankruptcy is a legal way to manage overwhelming medical debt and can provide relief for individuals facing financial hardship due to medical expenses.

Can You Negotiate Medical Bills?

Yes, you can file for bankruptcy to discharge or manage medical bills. Medical debt is considered unsecured debt, meaning it’s not tied to any specific asset, and it can be included in bankruptcy filings. There are two primary types of bankruptcy that individuals often file in the U.S. to manage medical debt:

1. Chapter 7 Bankruptcy (Liquidation Bankruptcy):

  • How it works: In a Chapter 7 bankruptcy, non-exempt assets may be sold to pay off creditors, but most people who file do not have significant assets that can be liquidated. After the process, most unsecured debts, including medical bills, can be discharged (eliminated).
  • Impact on medical bills: Medical bills are typically fully discharged in Chapter 7, meaning you are no longer legally obligated to pay them.
  • Eligibility: To qualify for Chapter 7, you must pass a “means test,” which examines your income, expenses, and ability to pay back debts. If your income is below the median for your state, you likely qualify.

2. Chapter 13 Bankruptcy (Reorganization Bankruptcy):

  • How it works: In a Chapter 13 bankruptcy, you create a repayment plan to pay back some or all of your debts over a three to five-year period. Unsecured debts like medical bills are included in the repayment plan, but after the repayment period, any remaining unsecured debts may be discharged.
  • Impact on medical bills: Medical bills are part of the debts that can be reorganized and partially repaid under this plan. Any remaining amount after the plan period may be discharged.
  • Eligibility: Chapter 13 is an option for individuals who do not qualify for Chapter 7 or who want to keep certain assets (such as a home or car) that they might lose under Chapter 7. It also requires a regular income.

Considerations:

  • Credit score: Filing for bankruptcy will negatively impact your credit score for several years (up to 10 years for Chapter 7 and 7 years for Chapter 13).
  • Consult an attorney: Bankruptcy laws can be complex, and consulting with a bankruptcy attorney can help you determine which type of bankruptcy is best for your situation.

Overall, bankruptcy is a legal way to manage overwhelming medical debt and can provide relief for individuals facing financial hardship due to medical expenses.

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Bankruptcy Exemptions
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Written by Canterbury Law Group

Federal and State Bankruptcy Exemptions

What are Bankruptcy Exemptions?

Bankruptcy exemptions are laws that allow debtors to protect certain property from being taken by creditors during the bankruptcy process. These exemptions help ensure that individuals can maintain a basic standard of living while resolving their debts. The specific exemptions available can vary by state, but they generally fall into two categories: federal exemptions and state exemptions.

Federal Bankruptcy Exemptions

The federal bankruptcy code provides a set of exemptions that apply in every state. Debtors can choose to use these exemptions instead of state exemptions if the state allows it. Some common federal exemptions include:

  1. Homestead Exemption: Protects a certain amount of equity in the debtor’s primary residence. In 2024, the federal homestead exemption is $27,900.
  2. Motor Vehicle Exemption: Protects up to $4,450 in equity in one motor vehicle.
  3. Personal Property Exemptions: Protects specific amounts of equity in personal property, such as:
    • Household goods and furnishings (up to $700 per item, with a total limit of $14,875).
    • Jewelry (up to $1,875).
    • Tools of the trade (up to $2,800).
  4. Wildcard Exemption: Allows debtors to protect any property up to a certain amount. In 2024, the federal wildcard exemption is $1,475, plus up to $13,950 of any unused portion of the homestead exemption.
  5. Retirement Accounts: Protects most tax-exempt retirement accounts, such as 401(k)s and IRAs, up to a certain limit (IRAs are capped at $1,512,350).
  6. Public Benefits: Protects Social Security, unemployment, and disability benefits.
  7. Life Insurance: Protects life insurance policies with a loan value up to $14,875.

State Bankruptcy Exemptions

Each state has its own set of bankruptcy exemptions, and some states allow debtors to choose between the state and federal exemptions. States that do not allow the use of federal exemptions require debtors to use state exemptions. Some examples of state exemptions include:

  1. Homestead Exemption: Varies widely by state. Some states, like Florida and Texas, offer unlimited homestead exemptions, while others have specific dollar limits.
  2. Motor Vehicle Exemption: Amounts vary by state. For example, California allows up to $3,325 in equity in one motor vehicle.
  3. Personal Property Exemptions: Protect specific types and amounts of personal property, such as:
    • Clothing, furniture, and appliances.
    • Tools of the trade.
  4. Wages: Many states protect a portion of the debtor’s wages from garnishment.
  5. Retirement Accounts: Most states offer exemptions for retirement accounts similar to federal protections.
  6. Public Benefits: Protects various public benefits, such as Social Security, unemployment, and disability benefits.
  7. Wildcard Exemptions: Some states offer a wildcard exemption that can be applied to any property.

Choosing Exemptions

Debtors must choose either the federal or state exemptions, depending on their state of residence. In some cases, the choice of exemptions can significantly impact the outcome of the bankruptcy case. Consulting with a bankruptcy attorney can help debtors understand which set of exemptions is more beneficial for their situation.

Arizona Exemptions

At Canterbury Law Group, our Scottsdale attorneys are renowned bankruptcy technicians. We represent clients through the entire bankruptcy process and, although all cases are unique, the end goal of bankruptcy is always a new beginning and fresh financial start.

We help clients determine eligible exemptions for their bankruptcy case. Here are some of the most common exemptions available under Arizona law (meaning that they will emerge from bankruptcy):

  • Alimony and Child Support – Alimony and child support, up to the amount needed for support. 33-1126.
  • Bank Deposit – A debtor may exempt $300 in a single bank account. Ariz. Rev. Stat. Ann. § 33–1126(8).
  • Homestead or Residential Property – Under Arizona law, debtors may exempt up to $150,000 (per debtor or married couple) of their home or other real property covered by the homestead exemption. Ariz. Rev. Stat. Ann. §§ 33–1101, 33–1103 and 33–1104.
  • Insurance Benefits – Life insurance benefits that are payable or received by a surviving spouse or child, up to $20,000.
  • Claims for the destruction of, or damage to, exempt property – Cash surrender value of life insurance policies, subject to length of ownership requirements and other exceptions.
  • Motor Vehicles – A debtor may exempt up to $6,000 in one or more motor vehicles. An elderly or disabled debtor, or an elderly or disabled spouse or dependent of the debtor, may exempt up to $12,000.
  • Pension and Retirement Benefits – Benefits from various employee pension systems are exempt. Ariz. Rev. Stat. Ann. §§ 33–1126 and 38–792.
  • Personal Property – A debtor may exempt the following personal property:
    • up to $6,000 in household furniture and appliances not covered by other exemptions
    • up to $1,000 total in bible, bicycle, sewing machine, typewriter, computer, burial plot, rifle, pistol or shotgun
    • up to $500 in clothing
    • up to $400 in musical instruments
    • up to $800 in animals
    • up to $2,000 in engagement and wedding rings
    • up to $250 in books
    • up to $150 in watch
    • wrongful death awards
    • prepaid rent or security deposit to $2,000 or 1.5 times your rent, whichever is less, in lieu of using homestead exemption.
    • all teaching materials for youth, and
    • certain professionally prescribed health aids.
  • Tools of the Trade – A debtor may exempt up to $5,000 in trade implements, which includes farming tools if the debtor’s primary income is from farming. All arms and uniforms that a debtor is legally required to keep are exempt. Library and teaching aids of a teacher.
  • Unemployment Compensation – Unemployment compensation is exempt as long it is not commingled with other funds and except for the enforcement of child support orders. Ariz. Rev. Stat. Ann. § 23–783.
  • Wages – A debtor may exempt the lesser of the following wages, per week:
    • 25% of his or her disposable earnings, or
    • earnings in excess of 30 times the federal minimum wage
    • Workers’ Compensation – A debtor may exempt up to $6,000 in one or more motor vehicles. An elderly or disabled debtor, or an elderly or disabled spouse or dependent of the debtor, may exempt up to $12,000.

Our legal team is ready to represent you in your Scottsdale business or personal bankruptcy case. Call us today to schedule your consultation. Our track record speaks for itself! 480-744-7711.

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Regular Post
Written by Canterbury Law Group

Chapter 7 Bankruptcy Income Limits

Financial difficulties can put your resilience, patience, and even sanity to the test. All of those exams can be completed by filing for Chapter 7 bankruptcy, but filing will need passing one more test. We refer to it as the means test.

Continue reading to find out more. Please don’t hesitate to contact our knowledgeable and polite staff if you need assistance with the means test or any other aspect of your bankruptcy case.

Statistics on Individual Bankruptcies

It’s important to comprehend why the means test may be worthwhile to go through even in cases where Chapter 13 bankruptcy does not call for it before delving too far into it.

Seven out of ten individuals filing for personal bankruptcy select Chapter 7 liquidation over Chapter 13 restructuring, according to national statistics. During the one-year period ending March 31, 2012, 396,175 Chapter 13 filings were made as opposed to 958,757 Chapter 7 filings.

The explanations are rather obvious: Three to six months may pass between a Chapter 7 discharge and a five-year reorganization plan in almost all Chapter 13 cases. In addition, because to state and federal exemptions, Chapter 7 filers frequently do not lose any property.

Furthermore, you might not be able to file for Chapter 13 bankruptcy, in which case the Chapter 7 means test would need to be your backup plan. This is because Chapter 13 does not have an income ceiling; but, you might not be able to petition under Chapter 13 if your income is insufficient to cover your creditors’ reasonable debts.

Chapter 7: Maximum Income

Most likely, you’ll want to file for Chapter 7 bankruptcy unless you’re seeking to keep your property from going through foreclosure. But what happens if you have a pretty high household income? Since the bankruptcy code was redesigned in 2005, filing for Chapter 7 bankruptcy requires that an applicant’s income level be met. You can file for Chapter 7 bankruptcy protection if your income is less than the state median income for the size of your household. In Illinois, for instance, the median income for a family of four was $107,226 in July 2021.

The Means Test: What Is It?

It’s crucial to realize, meanwhile, that a household income above the state median does not always imply that a Chapter 7 is unaffordable. Instead, you can use the “means test,” a complex formula that can only be understood with the assistance of a knowledgeable bankruptcy attorney.

With the 2005 amendments to the federal bankruptcy code, the means test was instituted with the goal of guaranteeing that debtors who have the means to make at least a partial payment to creditors file under Chapter 13. The intricate mathematical formula’s final objective is to ascertain if the debtor will have enough money left over after expenses are covered to reimburse creditors.

Your Salary and the Means Examination

It should be clear to you by now that the most important consideration in the Chapter 7 means test is your income. It’s not an easy calculation, though. It is not possible to determine if you have “passed” the means test by just entering in your pay. Numerous other factors are involved as well, such as the duration of your computations, your household size, deductions, and more.

Timing of Income Calculations

The means test has been criticized in the past for being too complicated and having a unique calculation method. For instance, the computation does not use the debtor’s current income as the average. The debtor must instead calculate the average of their income over the previous six months in order to pass the means test.

This six-month period may occasionally become more difficult due to changes in your work status or job. For example, if you were unemployed for the past six months after working at a high-paying employment for five of those months, an expert attorney can assist you in accounting for that change in your means test results.

Revenue Sources

You must include sources of income other than your base wage when calculating your income for the means test. The following are some instances of revenue sources that your calculations must take into account:

Your pay
Any money from a side gig or freelance work
Income for retirement
Child support and alimony
Income from unemployment
Costs to Factor Into Your Estimate
Furthermore, the debtor’s current spending do not correspond with the amounts computed for the test. Expenses are not determined by the debtor’s actual expenses, but rather by both local and national norms. For instance, there is a nationwide figure to use, which is updated on a regular basis, for the spending categories of food, housekeeping supplies, clothes and services, personal care items and services, and miscellaneous. The only spending categories where a debtor can incorporate their actual payments in the means test computation are mortgage and auto payments.

Income and Household Size in the Means Test

Your household size will play a major role in whether or not you pass the means test. This is so because the means test income ceiling is based on the number of persons living in your household. That income ceiling will rise in proportion to the number of people living in your home.

For instance, in Missouri, a single-person household’s 2021 Chapter 7 income ceiling is $50,521. However, the cap is $89,418 if there are four people living in your home. Remember that you have passed the means test if your income is below the income limit and you are thus immediately qualified to file under Chapter 7.

It should be pretty easy to calculate the revenue limit if your household size situation is basic. To find out how the court where you will file for bankruptcy determines household size, you may need to speak with your bankruptcy attorney or trustee in more complicated scenarios involving non-resident dependents and related matters.

How to Find Out If You Qualify for Chapter 7 Bankruptcy

The amount left over, if any, after deducting expenses from income determines whether a debtor has sufficient disposable income to be eligible for a Chapter 13 filing. The assumption is that the debtor can afford to pay creditors and should file under Chapter 13 if the projected disposable income over a five-year period is more than $10,000.

A debtor is likely to be eligible for Chapter 7 bankruptcy if their disposable income for the five-year period is less than $6,000. You guessed it: an additional computation is triggered if a debtor’s disposable income is between $6,000 and $10,000.

This formula looks at the ratio of disposable income to the total amount of debt that is unsecured. The debtor will probably not be allowed to file for Chapter 7 if their estimated disposable income over a five-year period exceeds twenty-five percent of their entire amount of unsecured debt. The debtor is likely to pass the means test and be permitted to proceed with a Chapter 7 filing if the percentage is less than 25 percent.

If I Pass the Means Test, What Happens?

Good news! You can proceed with filing for Chapter 7 bankruptcy if you pass the means test. That does not mean that the work is done, though. While it usually takes less time than Chapter 13, the Chapter 7 procedure is more involved and can take many months. A reputable Chapter 7 attorney can assist you in keeping things going forward.

If I Don’t Pass the Means Test, What Happens?

Don’t give up if you don’t pass the means test. It’s possible that you can still file for Chapter 13 bankruptcy. Additionally, you can recalculate the means test results to check if you pass in the event that your income or financial circumstances alter. You can “retake” the means test as much as you’d like because it’s just a calculation that you do. Additionally, you can file for bankruptcy under Chapter 7 after passing it.

Chapter 7 Means Test: Required Forms

The forms used in Chapter 7 are test functions, which are worksheets that assist you in performing proper calculations. These are the forms that you must complete and submit with your bankruptcy.

The forms you’ll need are as follows:

Form 122A-1. The “Chapter 7 Statement of Your Current Monthly Income” is the name of this form. All this paper does is assist you in determining whether your income is less than the state median income. You have passed the means test if it is less than the median. This implies that you are not eligible to use the other two forms on this list.
Form 122A-2. If your salary exceeds the state median, you must complete out this form, which is called the “Chapter 7 Means Test Calculation.” This form will be used to calculate your take-home pay after deducting permitted costs. This will assist in determining if Chapter 7 or Chapter 13 may be appropriate for you.
Form 122A-1Supp. Ascertaining your genuine exemption from the means test is made easier with the use of the “Statement of Exemption from Presumption of Abuse Under § 707(b)(2).” For example, the means test may not be required of certain military personnel.

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Filing for Bankruptcy a Second Time

Filing for bankruptcy a second time, often referred to as a repeat or multiple bankruptcy filing, is possible under certain circumstances, but it comes with additional challenges and considerations compared to a first-time filing. Here’s what you need to know:

Chapter 7 Bankruptcy

Waiting Period:

  • Eight-Year Rule: If you previously filed for Chapter 7 bankruptcy and received a discharge, you must wait eight years from the date of the first filing before you can file for Chapter 7 bankruptcy again and receive another discharge.
  • Chapter 13 to Chapter 7: If you filed for Chapter 13 bankruptcy and want to switch to Chapter 7, you typically must wait six years from the date of filing for Chapter 13.

Consequences:

  • Impact on Discharge: If you file for Chapter 7 bankruptcy before the eight-year waiting period elapses, you won’t receive a discharge of your debts. Instead, your case may be dismissed, and creditors can resume collection efforts.
  • Complexity of Case: The court may scrutinize your second bankruptcy filing more closely, particularly if it’s filed shortly after the first one. You may need to demonstrate a significant change in circumstances to justify the need for another bankruptcy.

Chapter 13 Bankruptcy

Waiting Period:

  • Two-Year Rule: If you previously received a discharge in a Chapter 13 bankruptcy, you must wait two years from the date of the first filing to receive another discharge in Chapter 13.
  • Four-Year Rule: If you previously received a discharge in a Chapter 7 bankruptcy, you must wait four years from the date of the Chapter 7 discharge before filing for Chapter 13 bankruptcy and receiving another discharge.

Consequences:

  • Modification of Repayment Plan: If you filed for Chapter 13 bankruptcy before and are seeking another discharge, the court may scrutinize your repayment plan to ensure that creditors are receiving a fair distribution of payments.
  • Increased Oversight: The court may closely monitor your compliance with the repayment plan, particularly if you’ve filed for Chapter 13 bankruptcy multiple times.

Considerations for Multiple Bankruptcy Filings

  1. Financial Management: Before considering a second bankruptcy filing, explore other options for managing your debts, such as debt consolidation, negotiation with creditors, or credit counseling.
  2. Legal Advice: Consult with a qualified bankruptcy attorney to assess your financial situation and explore the best course of action. They can provide guidance on whether bankruptcy is the most suitable option and help you navigate the process.
  3. Long-Term Financial Planning: Consider the long-term impact of a repeat bankruptcy filing on your credit score, financial stability, and ability to obtain credit in the future.
  4. Addressing Underlying Issues: Evaluate the reasons for your financial difficulties and take steps to address any underlying issues, such as overspending, job loss, or medical expenses, to prevent future financial crises.

While it’s possible to file for bankruptcy multiple times, doing so comes with additional challenges and consequences compared to a first-time filing. Before pursuing another bankruptcy, explore alternative solutions and seek professional advice to make an informed decision based on your individual circumstances and long-term financial goals.

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What Are the Chapter 7 Bankruptcy Rules?

The most common form of bankruptcy in the United States is Chapter 7. At Canterbury Law Group, we constantly work with clients to file Chapter 7, which allows individuals to extinguish all debts which are “dischargeable” under the Bankruptcy Code. In a Chapter 7, all of the debtor’s non-exempt assets on the petition date are liquidated through the priorities set forth in the bankruptcy code. At the time of filing, the bankruptcy code establishes the creation of your “debtor’s estate” which includes all “non-exempt assets.” As a Debtor you have various duties and obligations, including significant duties of co-operation, which are owed to the Bankruptcy Trustee. These obligations are designed to assist the Trustee in the administration of your bankruptcy estate.

The Scottsdale bankruptcy lawyers at Canterbury Law Group will counsel you regarding these duties, which if followed, will make your case run smoothly. Unfortunately, many debtors who are not fully informed of these obligations run the risk of not receiving a full discharge of some or all or their debt. If you’re thinking of filing Chapter 7, here are some recommendations from our lawyers:

1. Complete the Mandatory Credit Counseling – Before you can file chapter 7 bankruptcy, it is essential to complete credit counseling. It is a mandatory step before you can file and often requires paying a fee. Otherwise, your filing will not be allowed to continue.

2. File All Chapter 7 Paperwork – Complete and file all necessary paperwork in court. Make sure all of your paperwork is accurate. Determine any fees associated with your filing.

3. Meet With Your Creditors – Approximately one month after filing the petition, you will need to meet with your creditors, an arrangement made by the court. During this important meeting, your creditors will question you regarding your finances and property. Typically this meeting involves only a few people connected with the credit card companies to whom you owe your debt. Your lawyer can certainly be present to aid you through this process.

4. Attend the Personal Financial Management Instruction Course – In addition to your credit counseling course, a personal financial management course generally costs about $30 and is necessary for completing your filing of chapter 7. If you skip the money management course, you risk dismissal of your case.

Although there are a lot of rules, Chapter 7 bankruptcy rules are not as complicated to comprehend as you might think. To guarantee a successful Chapter 7 bankruptcy filing and to gain a basic understanding of the rules, continue reading.

The local court regulations and the bankruptcy laws of the United States are combined to create Chapter 7 bankruptcy rules. The Bankruptcy Code and the Bankruptcy Rules are two distinct categories of US bankruptcy laws.

There are many of them since all bankruptcy cases are covered by these laws. But do not fret! Not all of them need to be learned. It’s a good idea to be somewhat familiar with Chapter 7 bankruptcy rules if you plan to file for Chapter 7 bankruptcy to ensure that a small mistake doesn’t ruin your fresh start.

Unofficial Guideline That All Filers Should Adhere To

Being sincere is the most crucial bankruptcy rule. The bankruptcy laws grant the “honest but unfortunate debtor” a fresh start. Even if they abide by all the other guidelines to the letter, anyone attempting to conceal anything risks punishment. Because of this, it’s crucial that you submit an amendment if you discover that something is missing from your forms.

Guidelines for Chapter 7 Bankruptcy to Adhere to Before Filing

When getting ready to file your case, there are a few easy guidelines to adhere to. To be eligible to file Chapter 7, you must complete an approved credit counseling course, use the official bankruptcy forms from the U.S. Courts, and pass the means test.

A Credit Counseling Appropriate Course Must Be Taken

Everyone is required to enroll in a credit counseling course offered by an authorized credit counseling agency at some point during the six months—180 days, to be exact—before declaring bankruptcy. You cannot file for any kind of bankruptcy without it. You must also have the United States Trustee’s approval for the credit counseling organization you select for this hour-long course.

The Official Bankruptcy Forms Must Be Used

The bankruptcy courts in the United States mandated that all individuals filing for bankruptcy, regardless of location, must utilize identical bankruptcy forms. The U.S. Courts website offers the forms at no cost. The only way to ensure that any bankruptcy forms you download are the official version is to ensure that you are downloading them from a.gov website.

Furthermore, your state’s bankruptcy court might have unique local forms. These local bankruptcy forms are not a substitute for the federal ones; they must be filed in addition to them, if necessary. Required local forms can be obtained by speaking with the clerk at your local bankruptcy court or by visiting the website of your bankruptcy district.

The Means Test Must Be Passed

Chapter 7 filing is subject to income restrictions. Using a means test, the court determines whether you are within those bounds. There are mixed feelings when one fails the means test. One the one hand, your high income precludes you from filing for Chapter 7 bankruptcy. Nonetheless, your monthly income is fairly stable, even though it might not be sufficient to meet all of your creditors’ demands for payments each month. Investigate if Chapter 13 bankruptcy would be a better choice for you in this situation.

How Is the Means Test Operational?

In essence, it establishes the income thresholds for Chapter 7 bankruptcy. You pass the means test if your monthly income is currently less than the state median income. You might still pass the means test even if your income is higher than the median. In order to file for Chapter 13 bankruptcy, you must demonstrate that your disposable income (after your living expenses and income tax withholdings are subtracted) is insufficient to pay off at least 25% of your unsecured creditors.

Chapter 7: Bankruptcy Guidelines for Following Case Filing

The automatic stay, which is a feature of the bankruptcy laws, protects you from creditors as soon as your Chapter 7 case is filed. Once a bankruptcy petition is filed, the Bankruptcy Code prohibits any further collection efforts against the debtor or their assets. Wage garnishments must therefore end immediately upon the filing of a bankruptcy case.

That isn’t the only thing that occurs, though. For the individual filing for Chapter 7 bankruptcy, their creditors, and the bankruptcy trustee managing the case, there are extra regulations.

Chapter 7: Guidelines for Bankruptcy Filers

Each individual filing for bankruptcy must fulfill the Bankruptcy Code’s requirements. Following the filing of your Chapter 7 bankruptcy case, you have the following obligations:

Apply for a fee waiver or pay the court filing fee.

Your final federal income tax return should be turned in to their bankruptcy trustee.
Attend the creditors’ meeting.
Finish the second bankruptcy course, also known as financial management or debtor education.

That is, of course, the absolute minimum. Additionally, you must work with your bankruptcy trustee. This usually entails providing them with additional paperwork in advance of the creditors’ meeting, such as bank statements. At times, this entails informing the trustee if, within six months of your filing date, you are qualified to inherit something. It all depends on the circumstances surrounding your case.

Additionally, in the event that your contact information changes, you must make sure to notify the trustee and the bankruptcy court.

What Part Does the Trustee Play in This Whole Thing?

Finding non-exempt assets that can be sold to pay off unsecured creditors is the trustee’s responsibility. This entails going over tax returns, bank account statements, and bankruptcy forms, among other documents. Asset cases remain open for as long as the trustee needs to complete them, and even after the bankruptcy discharge is approved, the filer must keep collaborating with them.

Since most Chapter 7 bankruptcy filers do not possess any nonexempt property, the trustee’s duties are restricted and frequently completed prior to the debts being discharged.

Guidelines for Handling Secured Debts

Secured debts are associated with a particular item of property. One common type of secured debt in Chapter 7 proceedings is auto loans. If you possess this kind of debt, you must file a Statement of Intentions to inform the secured creditor of your plans. That’s not all, though.

There isn’t much more to do if you are returning the car. But the Chapter 7 bankruptcy rules demand that you actually follow through on any plans you may have to redeem the car or reaffirm the loan. That typically entails signing a reaffirmation agreement or submitting a motion to redeem. The automatic stay expires and the bank is free to come pick up the car whenever they choose if you don’t act within 45 days of the date of the creditors’ meeting.

Chapter 7: Rules for Creditors in Bankruptcy

The most significant of these is the previously mentioned automatic stay found in the Bankruptcy Code. In addition, if creditors wish to object to anything in your case, they must submit their objections by a specific date. Unsecured creditors frequently take no action at all in no-asset cases. Credit card debt, personal loans, the majority of tax debt, and student loans are examples of unsecured debt.

Having a trusted legal team on your side is critical during bankruptcy. Call Canterbury Law Group today to schedule your consultation. 480-744-7711.

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What Is A Secured Debt?

Learn about secured debts and how to recover them from creditors.

A “secured debt” is a loan you owe that is backed by property that your creditors could get back in the event of a default. (“Default” refers to noncompliance with the terms of the contract, such as failure to make the required payments.)

Liens are used to produce secured debt. Liens may be willingly or unwillingly taken. Car loans and home mortgages are two instances of secured obligations that you actively take on. Contrarily, real property tax liens are unintentional liens.

A Voluntary Lien: What Is It?

You typically consent voluntarily to granting a creditor a security interest in your possessions. For instance, a lender may need you to sign a mortgage (or, in some states, a deed of trust) before approving a house loan. An agreement that gives a lender a security interest, or lien, on real property is known as a mortgage or deed of trust. If the homeowner falls behind on the monthly payment, the lien enables a foreclosure auction.

In addition, you can give a lender a lien against any personal property you own or have a stake in that isn’t real estate (real property). Vehicles, furnishings, tools, inventories, stock shares, other forms of investment interests, and even cash are considered to be personal property.

A security agreement is typically used to grant a lien against personal property. For instance, a lender can ask you to sign a security agreement giving it a lien on the automobile you’re buying before extending a new car loan. If you don’t make the agreed-upon payments, the lender may reclaim your car thanks to the voluntary lien.

An Involuntary Lien: What Is It?

Involuntary liens are security interests put on your property through a court order, a state or federal statute, or another legal process. There is no agreement in play. Among involuntary liens are:

Liens on real estate or income taxes
Engineer’s liens
judgment liens as well as landlord liens (in some areas).
How an Obligor “Perfects” a Lien
Perfecting a lien is one of the procedures a secured creditor must take to safeguard its ability to collect. The legal word “perfection” describes the procedure necessary to notify other creditors and other interested parties of a lien or security interest. Depending on the type of property and the relevant state law, a certain step is necessary to perfect a lien. For instance:

Real Estate

Most states require that the lender record all mortgages and trust deeds in the county where the property is situated in order to perfect its lien.

Vehicles Usually, a file with the state motor vehicle department and a notation on the certificate of title are sufficient for lenders to perfect liens against automobiles, motorbikes, and trucks.

Personal Tangible Property

Financing statements are filed in order to perfect security interests in the majority of tangible personal property, such as furniture, tools, items, and supplies. For a secured debt, the borrower, lender, and collateral are all listed in a financing statement.

Financing statements, unlike security agreements, do not require signatures to be in force. As long as you have acknowledged signing the security agreement for the collateral it is intended to protect, the creditor may file a financing statement. Financing statements are often submitted to the secretary of state.

For any creditor, perfecting a lien is a crucial step. Sometimes, borrowers give many creditors liens against the same asset, such as your home. Consider a home equity line of credit, which is often subordinate to the mortgage you obtained to purchase your property. In the event that the owner of the first mortgage is unable to perfect their claim, a junior lien, such as a home equity line of credit, may in fact advance in precedence.

The repercussions of a lender failing to perfect a lien might be significantly more severe in bankruptcy. If you file for bankruptcy, the court has the authority to invalidate any unperfected liens. The lender becomes an unsecured creditor when a lien is put aside because it is handled as if it never existed.

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Does Chapter 7 Bankruptcy Fall Off A Credit Report?

Find out how long Chapter 7 and Chapter 13 bankruptcy will be reported on your credit record.

Most people commence a bankruptcy case when they need to start over and get their finances under control. Improved credit scores are frequently a part of that fresh start, and filers can take proactive measures by making on-time payments and maintaining modest credit balances. Nevertheless, depending on the bankruptcy chapter you file, it may take up to ten years for the bankruptcy to disappear from your credit report.

What is included in your credit report?

The quantity of personal information in your report may surprise you. You’ll notice three different types of information in particular:

identifiable information, such as your name, address history (including accounts marked paid as agreed or charged off), employer information, credit card information, payment history, and public records like court decisions, tax liens, and bankruptcies.

Reporting of Bankruptcy on a Credit Report

After seven years, the majority of bad entries, such as late payments and charge-offs, will be removed from your report. For bankruptcy filings, it operates somewhat differently and is dependent on the specific chapter.

Chapter 7 insolvency. Your Chapter 7 bankruptcy filing will be noted on your credit report for a maximum of ten years. The credit bureaus should stop recording the bankruptcy after ten years.
Chapter 13 insolvency. The filer contributes to a repayment plan in this chapter for a period of three to five years. Only two years longer than the longest repayment plan, seven years from the filing date, the Chapter 13 bankruptcy filing is visible on a credit record. This benefit encourages filers to select the repayment option and to gradually pay back creditors.
Whether you have a high or low initial score will determine the immediate impact of bankruptcy on your credit score, and in most circumstances, a higher initial score will suffer more damage. Because scoring businesses keep the formulae used to generate scores relatively hidden, it is difficult to predict the exact outcome. But if you work hard, it’s not impossible for you to raise your credit score to the extremely high 700s in as little as two or three years after filing for Chapter 7.

Checking the Accuracy of a Credit Report

Even if you aren’t thinking about declaring bankruptcy, it’s a good idea to periodically evaluate your credit report. One way to verify is to use the free copy you’re entitled to once a year from each of the three major credit bureaus—Experian, TransUnion, and Equifax. Visit www.annualcreditreport.com to purchase your credit reports.

Because not all creditors submit reports to all three agencies, it is crucial to carefully analyze all three. Each of your creditors should note that the account was included in bankruptcy a few months after you filed for bankruptcy. If not, it would be wise to have that fixed since any line item that shows as open but unpaid could give the impression that you are still liable for that obligation to a potential lender.

The status of your Chapter 7 bankruptcy case—whether it was dismissed or your qualifying debts were erased—should also be noted on your credit report. An effective bankruptcy that results in a discharge affects a prospective lender’s choice to extend credit differently than if the bankruptcy had been unsuccessful, leaving your account liability unaffected.

It’s a good idea to fix any mistakes you see as quickly as you can. You can do this by immediately mailing a letter to the credit bureau or by disputing the item on the credit bureau’s website.

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Ideas When Filing Chapter 7 Bankruptcy

The most common form of bankruptcy in the United States is Chapter 7. At Canterbury Law Group, we constantly work with clients to file Chapter 7, which allows individuals to extinguish all debts which are “dischargeable” under the Bankruptcy Code. In a Chapter 7, all of the debtor’s non-exempt assets on the petition date are liquidated through the priorities set forth in the bankruptcy code. At the time of filing, the bankruptcy code establishes the creation of your “debtor’s estate” which includes all “non-exempt assets.” As a Debtor you have various duties and obligations, including significant duties of co-operation, which are owed to the Bankruptcy Trustee. These obligations are designed to assist the Trustee in the administration of your bankruptcy estate.

The Scottsdale bankruptcy lawyers at Canterbury Law Group will counsel you regarding these duties, which if followed, will make your case run smoothly. Unfortunately, many debtors who are not fully informed of these obligations run the risk of not receiving a full discharge of some or all or their debt. If you’re thinking of filing Chapter 7, here are some recommendations from our lawyers:

1. Complete the Mandatory Credit Counseling – Before you can file chapter 7 bankruptcy, it is essential to complete credit counseling. It is a mandatory step before you can file and often requires paying a fee. Otherwise, your filing will not be allowed to continue.

2. File All Chapter 7 Paperwork – Complete and file all necessary paperwork in court. Make sure all of your paperwork is accurate. Determine any fees associated with your filing.

3. Meet With Your Creditors – Approximately one month after filing the petition, you will need to meet with your creditors, an arrangement made by the court. During this important meeting, your creditors will question you regarding your finances and property. Typically this meeting involves only a few people connected with the credit card companies to whom you owe your debt. Your lawyer can certainly be present to aid you through this process.

4. Attend the Personal Financial Management Instruction Course – In addition to your credit counseling course, a personal financial management course generally costs about $30 and is necessary for completing your filing of chapter 7. If you skip the money management course, you risk dismissal of your case.

Having a trusted legal team on your side is critical during bankruptcy. Call Canterbury Law Group today to schedule your consultation. 480-744-7711.

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Will a Pending Lawsuit Go Away If I File for Bankruptcy?

Many people apply for bankruptcy after receiving legal notice of a lawsuit, and for good cause. A bankruptcy will effectively halt numerous legal actions. However, filing for bankruptcy won’t stop all of the actions you might encounter.

You should move swiftly if you are facing eviction. Start by reading more on bankruptcy’s automatic stay and evictions.

How Can Bankruptcy Prevent a Civil Case?

An order known as the automatic stay prohibits creditors from continuing any collection activity after a “debtor,” or the individual owing money, files a bankruptcy case. This prohibition extends to attempts to obtain a monetary judgment in a civil litigation.

The stay prevents creditors from receiving a disproportionate amount of the debtor’s available funds. The court has time to organize the available assets and fairly distribute them among all creditors by stopping the collection process.

Which Claims Are Not Stopped by Bankruptcy Filing?

People cannot completely dodge legal action by declaring bankruptcy. The following issues will persist even if a bankruptcy case is filed:

Felony cases, divorce and dissolution proceedings, child custody and support disputes, and the majority of evictions following a state court’s possession order (see below for an exception).
Most other lawsuits will be halted by the automatic stay.

Which Civil Lawsuits Will Bankruptcy Prevent?

Your debts and assets are impacted by bankruptcy. Therefore, any matter in which it is claimed that you owe money due to either your failure to make a payment on a debt or the injury you caused to someone else, the bankruptcy court will have jurisdiction over (the power to determine).

Several instances include the following:

a credit card balance, money sought for a contract breach, a financial disagreement between business partners, compensation for a negligence-related (accidental) personal injury case, like a car accident, a home foreclosure, the collection of a deficiency balance (the amount still owing after a property auction), or an eviction, if the state court has not yet issued the order for possession (see below for an explanation of the unique rules that govern eviction)

In nearly every one of these circumstances, the bankruptcy “discharge” decision that discharges qualified debt also discharges the underlying obligation, ending the legal dispute. Although not always. The creditor may occasionally pursue an action with the court’s approval.

Obtaining Approval to Continue the Lawsuit

In any case, the creditor has the right to request that the bankruptcy judge lift the automatic stay so that the state lawsuit can go forward. Such motions are frequently granted by bankruptcy courts in the following circumstances:

the lawsuit will decide a matter that must be resolved in the bankruptcy case (for example, it would be necessary to resolve an allegation of fraud to determine whether a debt will be wiped out, or “discharged,” in the bankruptcy), and it will be expensive to ask the court to make a decision. the outcome won’t affect the bankruptcy case, and the creditor faces financial harm (for example, a home lender stands to lose more money the longer it must wait to foreclose on a home that
In some circumstances, the party who filed the lawsuit may be entitled to continue it, but they must first obtain the court’s approval. An example would be a government agency pursuing an enforcement action, such as the cleanup of a toxic site, delaying the case and, out of an abundance of caution, filing an application to lift the automatic stay before proceeding with the prosecution.

After losing a lawsuit, declaring bankruptcy

It is always preferable to file for bankruptcy prior to the conclusion of the lawsuit. For instance, you might desire to do it for the reasons listed below:

to avoid the creditor placing a judgment lien on your property or obtaining a fraud judgment against you, which would make it extremely difficult to discharge the debt in a bankruptcy proceeding.
However, you are still permitted to file for bankruptcy even if you lose the lawsuit. Most attempts by creditors to recover money judgements will be halted by the automatic stay. This is accurate even if your wages or bank account are being garnished.

Additionally, filing for bankruptcy will momentarily halt a creditor’s attempt to liquidate your belongings in order to pay off a debt. To stop the judgment lien from being collected after the bankruptcy case, you must address it in bankruptcy.

Additionally, declaring bankruptcy will prevent the government from trying to suspend your occupational or driver’s license as a result of unpaid fines or traffic tickets. See Lawsuits You Can’t Stop By Filing for Bankruptcy for more information.

When Can an Eviction Be Stopped by Bankruptcy?

Landlords typically find it simple to move forward with eviction once a tenant filed for bankruptcy. However, landlords must still follow by laws that protect the rights of tenants.

If you’re in this scenario as a landlord or tenant, it’s essential to speak with an experienced attorney because the windows for action are limited and the regulations are difficult to apply.

Before the eviction court renders a judgment of removal

The automatic stay kicks in to stop the eviction if you file for bankruptcy before the eviction court rules in the landlord’s favor by issuing an order for possession or eviction judgment. However, if you have bankruptcy cases outstanding in the previous year, you might need to ask the court to impose the automatic stay.

If you are accused of threatening the property or using illicit narcotics, however, the automatic stay will expire quickly. In that situation, the landlord may proceed with the eviction by submitting a certification to the court. You can contest the certification, but you’ll need to appear in court and persuade the bankruptcy judge that the landlord is mistaken in order to do so.

After the eviction court renders a judgment of eviction

If the landlord has already received a possession order or eviction judgment from the state court, declaring bankruptcy won’t prevent an eviction. Nevertheless, after the eviction court issues the order for possession, several states permit you to make up lost rent or “reinstate” it.

But you need to move rapidly. The rent that is due in 30 days must be deposited with the bankruptcy court. You’ll have 30 days to prove to the landlord that you paid the overdue rent. Learn more about bankruptcy-related evictions and how the automatic stay might facilitate or complicate them.

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When Is a Bankruptcy Claim Contingent, Unliquidated, or Disputed?

When Is a Bankruptcy Claim Contingent, Unliquidated, or Disputed? (SEO Title, Title, URL)

Learn what it means for a bankruptcy claim to be contingent, unliquidated, or disputed.

Identifying your debts or “claims” as contingent, unliquidated, or disputed is essential to the bankruptcy process. When filling out numerous bankruptcy forms, you’ll need to understand these terms to list and categorize your debts properly

You Must List All Debts or “Claims” in Bankruptcy

On your bankruptcy forms, you explain your financial situation to the court, trustee, and creditors. Your disclosures will include how much you earn, the debts or “claims” you owe, your real estate and personal property, your monthly budget, and recent property transactions.

You’ll disclose each creditor’s name, address, and amount owed in your paperwork when listing claims. Learn about completing bankruptcy forms.

Not All Bankruptcy Debts Are Contingent, Unliquidated, or Disputed

Most debts won’t need a contingent, unliquidated, or disputed label because the label is only required if it isn’t clear that you owe the debt. In most cases, there will be no question that you owe the money. When you don’t have an issue to raise to get out of paying the debt, you won’t need to label the claim contingent, unliquidated, or disputed.

For instance, suppose you’re behind on your car loan. In that case, the claim would be for the outstanding balance. The same would apply to other everyday obligations, such as credit card debt.

When You’ll Have a Contingent, Unliquidated, or Disputed Debt

Sometimes the amount you owe to a creditor isn’t easy to figure out. Each label—contingent, unliquidated, and disputed—identifies a particular issue that needs resolving before paying the claim.

Perhaps the amount you owe could depend on what someone else does or might not be determined. Or, you and the creditor might disagree on how much you owe.

If a problem exists, you’ll indicate it when listing that claim on your bankruptcy papers under the appropriate label of contingent, unliquidated, or disputed claim (the form has checkboxes).

What Is a Contingent Claim?

Payment of the claim depends on some event that hasn’t yet occurred and might never occur. For instance, if you cosigned a secured loan (such as a car loan or mortgage), you aren’t responsible for paying it unless the other person on the loan doesn’t pay (defaults). Your liability as cosigner is contingent on the default.

What Is an Unliquidated Debt?

Sometimes you owe money, but you don’t know how much yet. The debt might exist, but the exact amount hasn’t been determined. For instance, say you’ve sued someone for injuries you suffered in an auto accident, but the case isn’t over. Your lawyer has taken the case under a contingency fee agreement—the lawyer will get a third of the recovery if you win and nothing if you lose. The debt to the lawyer is unliquidated. You won’t know how much you’ll owe the lawyer until the case settles or gets resolved at trial.

What Is a Disputed Debt?

If you and the creditor don’t agree about the amount you owe, or if you owe anything, you’ll check this box. For instance, suppose the IRS says you owe $10,000 and has put an involuntary tax lien on your property. By contrast, you believe you owe only $500. You’ll list the total amount of the lien, not the amount you think you owe, and indicate that the claim is in dispute (you can explain how much you think you owe in the notes).

You Must List All Claims in Bankruptcy

It’s common for someone to want to omit a claim from the bankruptcy paperwork for one reason or another. You can’t do it. You must list all claims—the claims you think you owe and those others believe you owe.

It’s in your best interest to do so. If you fail to list a claim, the claim might not be erased or “discharged” in your case, even if it would ordinarily qualify as a dischargeable debt.

Paying Claims in Bankruptcy

If money is available to pay creditors, here’s what will happen next:

 

The bankruptcy trustee appointed to the case will notify creditors that the case is an “asset case.”

A creditor will file a proof of claim form by a particular date to share in the available proceeds.

The trustee will review the claims and pay them according to the priority payment system in bankruptcy law.

Keep in mind, however, that each situation is unique. If you aren’t clear about what will happen to claims in your bankruptcy case, meet with a knowledgeable bankruptcy lawyer.

Source

https://www.nolo.com/legal-encyclopedia/when-is-bankruptcy-claim-contingent-unliquidated-disputed.html

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