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Written by Canterbury Law Group

Pros and Cons of Chapter 13 Bankruptcy

Chapter 13 bankruptcy offers individuals an opportunity to restructure their debts and create a manageable repayment plan, allowing them to retain their assets while gradually paying off creditors. Like any financial decision, Chapter 13 bankruptcy has its advantages and disadvantages. Let’s explore the pros and cons:

Pros of Chapter 13 Bankruptcy

  1. Debt Repayment Plan:
    • Structured Plan: Chapter 13 allows individuals to create a structured repayment plan to pay off their debts over a period of three to five years.
    • Retain Assets: Unlike Chapter 7 bankruptcy, Chapter 13 allows individuals to keep their assets while repaying creditors, including homes and vehicles.
  2. Protection from Creditors:
    • Automatic Stay: Filing for Chapter 13 triggers an automatic stay, halting all collection actions, including foreclosure, repossession, wage garnishment, and creditor harassment.
    • Debt Discharge: Upon successful completion of the repayment plan, remaining qualifying debts may be discharged, providing a fresh start.
  3. Flexible Payment Terms:
    • Tailored Repayment Plan: The repayment plan is based on the individual’s income, expenses, and debt obligations, making it more manageable.
    • Potential Reduction of Debt: Some unsecured debts may be reduced or paid off for less than the full amount owed, depending on the individual’s income and assets.
  4. Credit Score Recovery:
    • Shorter Impact: While Chapter 13 bankruptcy remains on your credit report for seven years, its impact on credit scores is generally less severe and shorter-lived compared to Chapter 7 bankruptcy.
    • Opportunity to Rebuild Credit: Making consistent, on-time payments towards the repayment plan can demonstrate responsible financial behavior and contribute to credit score improvement over time.
  5. Protection for Co-Signers:
    • Co-Signer Protection: Co-signers on loans are protected from collection actions while the debtor is under the protection of the bankruptcy court.

Cons of Chapter 13 Bankruptcy

  1. Longer Repayment Period:
    • Extended Timeline: Chapter 13 bankruptcy requires a commitment to a repayment plan for three to five years, which may feel burdensome for some individuals.
  2. Strict Eligibility Requirements:
    • Debt Limits: There are debt limits for filing Chapter 13 bankruptcy. If your debt exceeds the specified limits, you may not qualify for Chapter 13 and may need to consider alternatives.
    • Stable Income Requirement: Individuals must have a stable income to support the repayment plan. Unstable income or inability to meet plan payments may result in dismissal of the case.
  3. Impact on Credit Score:
    • Remains on Credit Report: Chapter 13 bankruptcy remains on your credit report for seven years, which can affect your ability to obtain credit or loans during that time.
    • Credit Restrictions: Some creditors may be hesitant to extend credit to individuals with a Chapter 13 bankruptcy on their record, and if they do, it may come with higher interest rates.
  4. Potential Loss of Discharge:
    • Failure to Complete Plan: If you fail to adhere to the terms of the repayment plan, your case may be dismissed, and you may not receive a discharge of your debts.
  5. Limited Debt Discharge:
    • Non-Dischargeable Debts: Some debts, such as certain tax obligations, student loans, and child support payments, are typically not dischargeable in Chapter 13 bankruptcy.
  6. Court Oversight:
    • Ongoing Oversight: The bankruptcy court supervises the repayment plan, requiring regular payments and compliance with court orders, which may feel intrusive to some individuals.

Chapter 13 bankruptcy can be a valuable tool for individuals struggling with debt, providing a structured framework for debt repayment while protecting assets from creditors. However, it’s essential to weigh the pros and cons carefully and consider alternatives before proceeding with Chapter 13 bankruptcy. Consulting with a qualified bankruptcy attorney can provide personalized guidance based on your financial situation and goals.

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Can You Clear Medical Debt in Bankruptcy?

Can You Clear Medical Debt in Bankruptcy?

Yes, medical debt can be discharged in bankruptcy. Here’s a detailed overview of how this works:

Types of Bankruptcy

There are primarily two types of bankruptcy filings that individuals use to discharge debt: Chapter 7 and Chapter 13.

  1. Chapter 7 Bankruptcy:
    • Liquidation Bankruptcy: This type of bankruptcy involves the liquidation of a debtor’s non-exempt assets to pay off creditors. However, many personal assets are often exempt, allowing individuals to keep essential property.
    • Discharge of Debts: Most unsecured debts, including medical debt, are discharged under Chapter 7. This means that once the bankruptcy process is complete, the debtor is no longer legally obligated to pay these debts.
    • Eligibility: To qualify for Chapter 7, debtors must pass a means test, which assesses their income and expenses to determine if they have the means to repay a portion of their debts.
  2. Chapter 13 Bankruptcy:
    • Reorganization Bankruptcy: This type involves creating a repayment plan to pay off a portion of the debts over a period (typically three to five years). The remaining unpaid debt is discharged at the end of the repayment period.
    • Repayment Plan: Under Chapter 13, the debtor proposes a repayment plan to the court, detailing how they will pay off their debts. Medical debts are included in this plan and are treated as unsecured debts.
    • Eligibility: Chapter 13 is available to individuals with a regular income who can commit to a repayment plan.

Impact on Medical Debt

  • Dischargeable Debt: Medical debt is considered unsecured debt, similar to credit card debt, and is generally dischargeable in both Chapter 7 and Chapter 13 bankruptcy.
  • Collection Efforts: Filing for bankruptcy triggers an automatic stay, which halts all collection efforts, including those related to medical debt. Creditors cannot pursue collection activities while the bankruptcy case is active.

Process of Filing for Bankruptcy

  1. Credit Counseling: Individuals must complete a credit counseling course from an approved provider before filing for bankruptcy.
  2. Filing the Petition: The debtor files a bankruptcy petition with the court, including detailed information about their debts, assets, income, and expenses.
  3. Automatic Stay: Upon filing, the automatic stay goes into effect, providing immediate relief from debt collection efforts.
  4. Meeting of Creditors: A meeting (called a 341 meeting) is held where creditors can ask questions about the debtor’s financial situation.
  5. Discharge: If the court approves the bankruptcy filing, the medical debts, along with other qualifying debts, are discharged.

Considerations and Consequences

  • Credit Impact: Filing for bankruptcy significantly impacts the debtor’s credit score and remains on their credit report for seven to ten years, depending on the type of bankruptcy.
  • Legal and Filing Fees: There are costs associated with filing for bankruptcy, including attorney fees and court filing fees.
  • Long-Term Financial Health: While bankruptcy can provide relief from overwhelming debt, it also requires careful financial planning and discipline to rebuild credit and financial health.

Medical debt can be cleared through bankruptcy, providing a viable solution for individuals struggling with overwhelming healthcare-related expenses. Chapter 7 and Chapter 13 bankruptcy offer different approaches to discharging medical debt, each with its own eligibility requirements and processes. Consulting with a bankruptcy attorney can help individuals understand their options and navigate the legal complexities of the bankruptcy process.

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Can Bankruptcy Stop Wage Garnishment?

Can Bankruptcy Stop Wage Garnishment?

Yes, filing for bankruptcy can often stop wage garnishment. When you file for bankruptcy, an automatic stay goes into effect, which immediately stops most creditors from continuing collection efforts, including wage garnishment. The automatic stay prohibits creditors from pursuing or continuing with collection actions, including wage garnishment, lawsuits, foreclosure, repossession, and harassing phone calls.

Here’s how bankruptcy affects wage garnishment under each chapter:

  1. Chapter 7 Bankruptcy: In Chapter 7 bankruptcy, the automatic stay stops wage garnishment as soon as the bankruptcy case is filed. However, if the wage garnishment is for certain types of debts, such as child support, alimony, or certain taxes, it may continue even after filing for Chapter 7 bankruptcy.
  2. Chapter 13 Bankruptcy: In Chapter 13 bankruptcy, the automatic stay also stops wage garnishment immediately upon filing. Additionally, Chapter 13 bankruptcy allows debtors to propose a repayment plan to catch up on past due debts, including those subject to wage garnishment, over a three to five-year period. As long as the debtor makes timely payments under the Chapter 13 plan, wage garnishment will be halted.

It’s important to note that while bankruptcy can stop wage garnishment, it may not eliminate the underlying debt. Certain types of debts, such as child support, alimony, student loans, and some taxes, are generally not dischargeable in bankruptcy and may continue to be collected even after filing.

Additionally, filing for bankruptcy has long-term financial consequences and should be carefully considered. It’s advisable to consult with a bankruptcy attorney to discuss your specific financial situation, understand your options, and determine whether bankruptcy is the right solution for you.

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Sample Cease Communications Letter To Creditor

Sample Cease Communications Letter To Creditor

Here’s a sample cease communications letter to a creditor:

[Your Name] [Your Address] [City, State, Zip Code] [Your Email Address] [Your Phone Number] [Date]

[Creditor’s Name] [Creditors’ Address] [City, State, Zip Code]

Subject: Cease Communication Request

Dear [Creditor’s Name],

I am writing to request that you cease all communications with me regarding the debt associated with account [Account Number]. Pursuant to the Fair Debt Collection Practices Act (FDCPA), 15 USC § 1692c(c), I am exercising my right to request that you cease all communications with me, my family members, and any third parties regarding this debt.

Please be advised that I am aware of my rights under the FDCPA and will take appropriate action to enforce them if necessary. I expect your compliance with this request immediately.

Please confirm in writing that you have received this letter and will cease all communications with me regarding this debt. Any further communication from your company after receipt of this letter will be considered a violation of the FDCPA.

Thank you for your prompt attention to this matter.

Sincerely, [Your Name]

It’s important to send this letter via certified mail with return receipt requested to have documentation of the creditor’s receipt. Additionally, keep a copy of the letter and the mailing receipt for your records. If the creditor continues to contact you after receiving the letter, you may want to consult with a consumer rights attorney or file a complaint with the Consumer Financial Protection Bureau (CFPB).

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What Happens to My Car During Bankruptcy?
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Can You Keep Your Car After Filing Bankruptcy?

Whether you can keep your car after filing bankruptcy depends on several factors, particularly the type of bankruptcy you file, the value of your car, and the exemptions available in your state. Here’s a breakdown:

Types of Bankruptcy:

  • Chapter 7 Bankruptcy: This type aims to liquidate non-exempt assets to pay creditors. Whether you keep your car depends on:
    • Car Value vs. Exemption: If your car’s value falls below the motor vehicle exemption allowed in your state, you can likely keep it. This exemption protects a certain value of your car from being sold by the bankruptcy trustee to pay creditors.
    • Car Loan: If you have a car loan, keeping the car requires either:
      • Reaffirmation: You agree to continue making payments under the original loan terms. This can be risky as you lose the protection of bankruptcy if you default on payments later.
      • Redemption: You pay the car’s current value to the lender to keep the car and own it free and clear.
  • Chapter 13 Bankruptcy: This type involves creating a repayment plan to repay creditors over 3-5 years. You generally keep your car as long as you stay current on your car loan payments and other plan payments.

Here are some additional points to consider:

  • Equity: The difference between your car’s value and your loan balance is your equity. If your equity exceeds the exemption, the trustee may sell the car and use the proceeds to pay creditors in a Chapter 7 case.
  • State Exemptions: Each state has different bankruptcy exemptions, so it’s crucial to research the specific exemption amount for your state’s motor vehicles. You can find this information online, through legal resources, or by consulting with a bankruptcy attorney.

What Happens to Your Car in Chapter 7 Bankruptcy?

In Chapter 7 bankruptcy, the fate of your car depends on various factors, including the equity you have in the vehicle, whether you’re behind on payments, and the exemptions available to protect assets in your state. Here’s what typically happens to your car in Chapter 7 bankruptcy:

  1. Equity and Exemptions: If your car has significant equity (the value of the car exceeds any outstanding loans or liens), it may be at risk of being sold by the bankruptcy trustee to repay your creditors. However, many states offer exemptions that allow you to protect a certain amount of equity in your car. If the equity in your car is within the exemption limit, you may be able to keep your car.
  2. Secured Debt: If you have a car loan, it’s considered a secured debt, meaning the loan is secured by the vehicle itself. In Chapter 7 bankruptcy, you have the option to reaffirm the debt, redeem the car by paying its current value in a lump sum, or surrender the car to the lender. Reaffirming the debt means you agree to continue making payments on the car loan and retain ownership of the vehicle.
  3. Vehicle Exemption: In many states, there’s a specific exemption called the motor vehicle exemption, which allows you to exempt a certain amount of equity in your car from being used to repay creditors in bankruptcy. If the equity in your car falls within the exemption limit, you can typically keep your car.
  4. Loan Arrears: If you’re behind on car payments and want to keep the car, you may have the option to catch up on missed payments through a reaffirmation agreement or a repayment plan approved by the court.
  5. Nonexempt Equity: If the equity in your car exceeds the exemption limit and you’re unable to protect it, the bankruptcy trustee may sell the car, use the proceeds to pay off your creditors, and distribute any remaining funds to you.
  6. Leased Cars: If you’re leasing a car and want to keep it, you may have the option to assume the lease and continue making payments. However, you’ll need to continue making payments on time to retain possession of the leased vehicle.

What Happens to Your Car in Chapter 13 Bankruptcy?

In Chapter 13 bankruptcy, the fate of your car can be different compared to Chapter 7 bankruptcy due to the structure of the repayment plan. Here’s what typically happens to your car in Chapter 13 bankruptcy:

  1. Automatic Stay: Like Chapter 7 bankruptcy, filing for Chapter 13 bankruptcy triggers an automatic stay, which temporarily halts creditor collection actions, including repossession of your car.
  2. Repayment Plan: In Chapter 13 bankruptcy, you propose a repayment plan to the court to repay all or a portion of your debts over three to five years. Your car loan is included in this plan.
  3. Cure Arrears: If you’re behind on car payments, your Chapter 13 repayment plan allows you to catch up on missed payments (arrears) over the plan’s duration. This allows you to keep your car while repaying what you owe.
  4. Valuation and Treatment: The value of your car is determined based on its fair market value, not the amount owed on the loan. If the value of your car is less than the amount owed (negative equity), you may have the option to cram down the loan to the car’s fair market value, potentially reducing the principal balance and interest rate.
  5. Interest Rate: In some cases, Chapter 13 bankruptcy allows you to reduce the interest rate on your car loan, making monthly payments more affordable.
  6. Reaffirmation: You may have the option to reaffirm your car loan during Chapter 13 bankruptcy, meaning you agree to continue making payments on the loan and retain ownership of the vehicle. However, reaffirmation is subject to court approval and may not always be necessary or advisable.
  7. Surrender or Redeem: If you’re unable to afford the car payments or no longer want to keep the car, you may have the option to surrender the vehicle to the lender or redeem it by paying its current value in a lump sum.
  8. Completion of Plan: Once you successfully complete your Chapter 13 repayment plan, any remaining balances on your car loan and other unsecured debts may be discharged, allowing you to retain ownership of your car free and clear of debt.

How is Debt Managed in Chapter 7 Bankruptcy

In Chapter 7 bankruptcy, debt is managed differently compared to Chapter 13 bankruptcy. Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” involves the sale of nonexempt assets to repay creditors and the discharge of qualifying debts. Here’s how debt is managed in Chapter 7 bankruptcy:

  1. Automatic Stay: Upon filing for Chapter 7 bankruptcy, an automatic stay goes into effect, which temporarily halts creditor collection actions, including foreclosure, repossession, wage garnishment, and debt collection lawsuits.
  2. Liquidation of Assets: In Chapter 7 bankruptcy, a bankruptcy trustee is appointed to oversee the liquidation of nonexempt assets. Nonexempt assets are those not protected by exemptions under federal or state law. The trustee sells these assets and distributes the proceeds to creditors. However, many states have exemptions that allow debtors to protect certain assets from liquidation, such as a primary residence, personal belongings, and retirement accounts.
  3. Debt Discharge: Certain types of debts may be discharged (eliminated) in Chapter 7 bankruptcy, meaning you’re no longer legally obligated to repay them. Qualifying debts typically include unsecured debts such as credit card debt, medical bills, personal loans, and certain types of loans. However, certain debts, such as child support, alimony, most student loans, and certain tax debts, are generally not dischargeable in Chapter 7 bankruptcy.
  4. Exempt Property: In Chapter 7 bankruptcy, debtors are allowed to keep (“exempt”) certain property up to a certain value, as determined by federal or state exemption laws. Exempt property typically includes necessities such as clothing, household furnishings, tools of the trade, and a primary residence up to a specified equity limit.
  5. Means Test: To qualify for Chapter 7 bankruptcy, debtors must pass a means test, which evaluates their income and expenses to determine if they have enough disposable income to repay their debts through a Chapter 13 repayment plan. If a debtor’s income exceeds the median income for their state or if they fail the means test, they may be required to file for Chapter 13 bankruptcy instead.
  6. Debt Counseling: Before receiving a discharge in Chapter 7 bankruptcy, debtors are required to complete credit counseling from a court-approved agency. Additionally, debtors must complete a financial management course after filing for bankruptcy.
  7. Discharge of Debts: Once the bankruptcy process is complete and any required courses are finished, qualifying debts are discharged, providing debtors with a fresh financial start. However, it’s important to note that not all debts may be discharged, and certain obligations, such as child support, alimony, and certain tax debts, may survive bankruptcy.

How is Debt Managed in Chapter 13 Bankruptcy?

In Chapter 13 bankruptcy, debt is managed through a court-approved repayment plan. Unlike Chapter 7 bankruptcy, where certain assets may be sold to pay off creditors, Chapter 13 allows individuals with regular income to reorganize their debts and create a plan to repay all or a portion of their debts over a period of three to five years. Here’s how debt is managed in Chapter 13 bankruptcy:

  1. Filing and Plan Proposal: To initiate Chapter 13 bankruptcy, you must file a petition with the bankruptcy court and propose a repayment plan outlining how you will repay your debts over the plan’s duration. The plan typically prioritizes certain types of debts, such as priority debts (e.g., taxes, domestic support obligations), secured debts (e.g., mortgages, car loans), and unsecured debts (e.g., credit card debt, medical bills).
  2. Automatic Stay: Upon filing for Chapter 13 bankruptcy, an automatic stay goes into effect, which temporarily halts creditor collection actions, including foreclosure, repossession, wage garnishment, and debt collection lawsuits.
  3. Plan Confirmation: After filing the repayment plan, the bankruptcy trustee and creditors have an opportunity to review and object to the plan. If no objections are raised, or if objections are resolved, the bankruptcy court holds a confirmation hearing to approve the plan. Once the court confirms the plan, it becomes binding on both the debtor and creditors.
  4. Payment to Trustee: Under the Chapter 13 repayment plan, you make regular payments to the bankruptcy trustee, who then distributes the funds to creditors according to the terms of the plan. The trustee’s role is to oversee the administration of the bankruptcy estate, ensure compliance with the plan, and facilitate payments to creditors.
  5. Debt Repayment: During the plan’s duration, you make monthly payments to the trustee based on your disposable income and ability to repay debts. The trustee allocates these payments to creditors according to the plan’s terms. Secured debts, such as mortgages and car loans, are typically paid in full or brought current through the plan, while unsecured debts may receive partial repayment based on available funds.
  6. Completion of Plan: Once you successfully complete the Chapter 13 repayment plan, any remaining balances on eligible debts may be discharged, meaning you’re no longer legally obligated to repay them. However, certain debts, such as student loans, domestic support obligations, and certain tax debts, may not be dischargeable in Chapter 13 bankruptcy.

Overall, Chapter 13 bankruptcy provides individuals with a structured framework to repay their debts over time while retaining their assets and avoiding liquidation. It’s essential to work with an experienced bankruptcy attorney to navigate the Chapter 13 process, develop a feasible repayment plan, and achieve your financial goals.

How Does Bankruptcy Affect Credit?

Bankruptcy can have a significant impact on an individual’s credit score and creditworthiness. Here are some ways in which bankruptcy can affect credit:

  1. Credit Score: Filing for bankruptcy typically results in a significant drop in credit score. The extent of the drop depends on various factors, including the individual’s credit history, the type of bankruptcy filed (Chapter 7 or Chapter 13), and the amount of debt discharged.
  2. Credit Report: Bankruptcy remains on a credit report for a certain period, depending on the type of bankruptcy filed. Chapter 7 bankruptcy remains on a credit report for ten years from the filing date, while Chapter 13 bankruptcy remains for seven years from the filing date.
  3. Credit Availability: After filing for bankruptcy, individuals may find it challenging to obtain new lines of credit or loans. Lenders may view them as high-risk borrowers and may offer credit with higher interest rates and less favorable terms.
  4. Credit Card Accounts: Credit card accounts included in a bankruptcy filing are typically closed by the creditor. This can reduce the individual’s available credit and further impact their credit utilization ratio.
  5. Rebuilding Credit: While bankruptcy can have a negative impact on credit, it is not permanent. With responsible financial management and timely payments, individuals can begin rebuilding their credit over time. This may involve obtaining secured credit cards, making on-time payments, keeping credit utilization low, and avoiding new debt.
  6. Credit Counseling Requirement: Before receiving a bankruptcy discharge, individuals are required to complete credit counseling from a court-approved agency. This counseling may provide valuable financial education and help individuals develop strategies for managing credit responsibly in the future.
  7. Employment and Housing: While not directly related to credit, it’s worth noting that some employers and landlords may check credit reports as part of the application process. A bankruptcy filing could potentially impact employment opportunities or housing options, although this varies depending on the employer or landlord’s policies.
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The Consequences Of Filing For Bankruptcy

Can Filing For Bankruptcy Make Your Tax Debt Go Away?

Filing for bankruptcy can offer a fresh start for those burdened by overwhelming debt, but it does come with consequences that can impact your financial and personal life. Here’s an overview of the potential downsides:

Financial Impact:

  • Credit Score Damage: Bankruptcy remains on your credit report for 7 years (Chapter 13) or 10 years (Chapter 7), significantly impacting your credit score during that period. Obtaining loans, credit cards, and other forms of credit might be difficult or come with high interest rates.
  • Asset Liquidation: Chapter 7 bankruptcy may involve selling non-exempt assets to repay creditors, potentially leading to property loss. Chapter 13 allows you to keep your assets but requires a repayment plan, potentially straining your finances.
  • Employment Considerations: While federal law prohibits discrimination based on bankruptcy, some employers might conduct credit checks during hiring, and seeing a bankruptcy filing could create challenges in specific industries.

Personal Impact:

  • Emotional Stress: Navigating the legal process, dealing with financial hardship, and facing social stigma associated with bankruptcy can be emotionally overwhelming.
  • Limited Opportunities: Lower credit scores can restrict access to certain opportunities like renting apartments, obtaining professional licenses, or qualifying for insurance with favorable rates.
  • Relationship Strain: Financial stress and the complexities of bankruptcy can strain relationships with family and friends. Open communication and understanding can help mitigate this impact.

However, it’s important to consider the potential benefits alongside the consequences:

  • Debt Relief: Bankruptcy can provide lasting relief from overwhelming debt, offering a clean slate and peace of mind.
  • Improved Financial Management: The process can incentivize healthy financial habits and budgeting practices to avoid future debt pitfalls.
  • Rebuild Opportunities: While credit repair takes time, responsible financial management after bankruptcy can gradually improve your credit score and access to financial products.

Financial Consequences:

  1. Credit Score Impact:
    • Filing for bankruptcy will likely have a severe negative impact on your credit score. A bankruptcy record can remain on your credit report for several years, making it challenging to obtain credit or loans.
  2. Difficulty Obtaining Credit:
    • After bankruptcy, obtaining new credit, such as credit cards or loans, may be more difficult, and if approved, interest rates may be higher.
  3. Limited Access to Financial Products:
    • Bankruptcy can limit access to certain financial products and services. For example, you may find it challenging to qualify for a mortgage or an auto loan with favorable terms.
  4. Asset Liquidation:
    • In Chapter 7 bankruptcy, some of your assets may be sold to pay off creditors. Certain assets, however, may be exempt from liquidation.
  5. Repayment Plans (Chapter 13):
    • In Chapter 13 bankruptcy, you may be required to follow a court-approved repayment plan to pay off your debts over a specified period, usually three to five years.
  6. Impact on Co-Signers:
    • If someone co-signed a loan with you, they may become responsible for the debt if you file for bankruptcy.

Non-Financial Consequences:

  1. Public Record:
    • Bankruptcy is a public record, and your filing will be accessible to creditors, employers, and the general public.
  2. Employment Impact:
    • While federal law prohibits discrimination based solely on bankruptcy status, some employers may consider it during the hiring process. Positions involving financial responsibilities may be particularly affected.
  3. Housing and Utilities:
    • Some landlords and utility companies may inquire about your bankruptcy history, potentially affecting your ability to secure housing or utility services.
  4. Impact on Personal Relationships:
    • The stress and strain of financial difficulties and bankruptcy can impact personal relationships, including those with family and friends.
  5. Loss of Non-Exempt Property:
    • In Chapter 7 bankruptcy, non-exempt property may be sold to pay off creditors. Exemptions vary by state and protect certain types and amounts of property.

It’s important to note that the specific consequences can vary based on the type of bankruptcy filed (Chapter 7 or Chapter 13), individual circumstances, and applicable state laws. Additionally, while bankruptcy has significant consequences, it also provides individuals and businesses with an opportunity for a fresh financial start.

Remember:

  • The specific consequences of bankruptcy vary depending on your individual circumstances, type of bankruptcy filed, and state laws.
  • Consulting with a qualified bankruptcy attorney is crucial to understand the process, potential ramifications, and explore alternatives best suited to your situation.
  • Bankruptcy should not be considered lightly, but it can be a valuable tool for overcoming financial struggles and achieving long-term financial stability.

 

Filing for bankruptcy can affect certain types of tax debt, but it does not automatically make all tax obligations disappear. The treatment of tax debt in bankruptcy depends on the type of tax, the specific circumstances, and the chapter of bankruptcy you file.

General Rules:

  • Tax debt is treated differently than other debts in bankruptcy. In most cases, it’s considered a “priority debt,” meaning it gets higher priority for repayment compared to other unsecured debts.
  • Discharging (eliminating) your tax debt through bankruptcy is generally difficult. You’ll need to meet specific criteria and exceptions.

Here’s a General Overview:

  1. Chapter 7 Bankruptcy:
    • In a Chapter 7 bankruptcy, your non-exempt assets may be liquidated to pay off creditors, but certain debts, including some tax debts, may be discharged. However, not all tax debts are dischargeable. To be dischargeable in Chapter 7, the tax debt must meet specific criteria, including that it is income tax debt, the tax return was filed on time, and the tax assessment is at least three years old.
  2. Chapter 13 Bankruptcy:
    • Chapter 13 bankruptcy involves a repayment plan over three to five years. While you won’t necessarily eliminate tax debt in a Chapter 13 case, you may be able to include tax debt in your repayment plan, allowing you to pay it back over time. This can provide a structured way to address tax arrears.
  3. Priority Tax Debt:
    • Some tax debts are considered priority debts and may not be dischargeable in bankruptcy. Priority tax debts include recent income tax debts, certain payroll taxes, and taxes associated with fraud. Priority tax debts are generally not dischargeable, but a Chapter 13 plan can help you manage the repayment.
  4. Tax Liens:
    • Bankruptcy may not remove tax liens. While the personal obligation to pay the tax debt may be discharged, a tax lien secured by property may survive bankruptcy. The IRS or state taxing authority may still have a claim on your property, and you may need to address the lien separately.
  5. Professional Advice:
    • It’s crucial to consult with a tax attorney or bankruptcy attorney to assess your specific tax situation. They can provide guidance on the dischargeability of tax debt based on the applicable bankruptcy laws and help you navigate the complexities of the process.

In summary, while bankruptcy can address certain tax debts, not all tax obligations are dischargeable, and the treatment of tax debt in bankruptcy can be complex. Seeking professional advice is essential to understand how bankruptcy may impact your specific tax situation and to explore the available options for managing tax debt.

Important points to remember:

  • Consulting a bankruptcy attorney and a tax professional is crucial before making any decisions. They can assess your specific situation and advise you on the best course of action.
  • Bankruptcy shouldn’t be seen as a way to avoid paying your taxes. It should only be considered as a last resort after exploring other options like payment plans or negotiating with the IRS.
  • Filing for bankruptcy has long-term implications, including a negative impact on your credit score and potential difficulties obtaining credit in the future.

Here are some additional resources that you might find helpful:

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Can Filing For Bankruptcy Make Your Tax Debt Go Away?

Can Filing For Bankruptcy Make Your Tax Debt Go Away?

Filing for bankruptcy can affect certain types of tax debt, but it does not automatically make all tax obligations disappear. The treatment of tax debt in bankruptcy depends on the type of tax, the specific circumstances, and the chapter of bankruptcy you file.

General Rules:

  • Tax debt is treated differently than other debts in bankruptcy. In most cases, it’s considered a “priority debt,” meaning it gets higher priority for repayment compared to other unsecured debts.
  • Discharging (eliminating) your tax debt through bankruptcy is generally difficult. You’ll need to meet specific criteria and exceptions.

Here’s a General Overview:

  1. Chapter 7 Bankruptcy:
    • In a Chapter 7 bankruptcy, your non-exempt assets may be liquidated to pay off creditors, but certain debts, including some tax debts, may be discharged. However, not all tax debts are dischargeable. To be dischargeable in Chapter 7, the tax debt must meet specific criteria, including that it is income tax debt, the tax return was filed on time, and the tax assessment is at least three years old.
  2. Chapter 13 Bankruptcy:
    • Chapter 13 bankruptcy involves a repayment plan over three to five years. While you won’t necessarily eliminate tax debt in a Chapter 13 case, you may be able to include tax debt in your repayment plan, allowing you to pay it back over time. This can provide a structured way to address tax arrears.
  3. Priority Tax Debt:
    • Some tax debts are considered priority debts and may not be dischargeable in bankruptcy. Priority tax debts include recent income tax debts, certain payroll taxes, and taxes associated with fraud. Priority tax debts are generally not dischargeable, but a Chapter 13 plan can help you manage the repayment.
  4. Tax Liens:
    • Bankruptcy may not remove tax liens. While the personal obligation to pay the tax debt may be discharged, a tax lien secured by property may survive bankruptcy. The IRS or state taxing authority may still have a claim on your property, and you may need to address the lien separately.
  5. Professional Advice:
    • It’s crucial to consult with a tax attorney or bankruptcy attorney to assess your specific tax situation. They can provide guidance on the dischargeability of tax debt based on the applicable bankruptcy laws and help you navigate the complexities of the process.

In summary, while bankruptcy can address certain tax debts, not all tax obligations are dischargeable, and the treatment of tax debt in bankruptcy can be complex. Seeking professional advice is essential to understand how bankruptcy may impact your specific tax situation and to explore the available options for managing tax debt.

Important points to remember:

  • Consulting a bankruptcy attorney and a tax professional is crucial before making any decisions. They can assess your specific situation and advise you on the best course of action.
  • Bankruptcy shouldn’t be seen as a way to avoid paying your taxes. It should only be considered as a last resort after exploring other options like payment plans or negotiating with the IRS.
  • Filing for bankruptcy has long-term implications, including a negative impact on your credit score and potential difficulties obtaining credit in the future.

Here are some additional resources that you might find helpful:

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How Often Can You File For Bankruptcy?

How Often Can You File For Bankruptcy?

There’s no limit to how many times you can file for bankruptcy in your lifetime, but there are waiting periods you must adhere to between filings. These waiting periods depend on the specific chapters of bankruptcy you file under and whether your previous filings were successful.

Chapter 7 bankruptcy:

  • You must wait 8 years after a successful Chapter 7 filing before filing again.
  • If your previous Chapter 7 filing was dismissed within the past 6 years due to your failure to comply with court orders or provide required documents, you must wait 6 years to file again.

Chapter 13 bankruptcy:

  • You must wait 4 years after a successful Chapter 13 filing before filing for Chapter 7.
  • You can file for Chapter 13 again 2 years after a successful Chapter 13 filing, as long as you paid off at least 70% of your debts through the previous plan.
  • If your previous Chapter 13 filing was dismissed within the past 6 years due to your failure to comply with court orders or provide required documents, you must wait 6 years to file for Chapter 13 again.

Exceptions:

  • There are a few exceptions to these waiting periods. For example, if you can demonstrate that you have experienced undue hardship since your last filing, you may be able to file again sooner.
  • You can also file for a different chapter of bankruptcy than you used before without waiting the full period. For example, if you filed for Chapter 7 in the past, you can file for Chapter 13 now, or vice versa.

It’s important to consult with a bankruptcy attorney to discuss your specific situation and determine the best course of action for you.

Here are some additional things to keep in mind about filing for bankruptcy:

  • Bankruptcy can have a negative impact on your credit score.
  • You may lose some of your assets in a Chapter 7 bankruptcy.
  • You will need to complete credit counseling before filing for bankruptcy.

It is not appropriate for everyone to file for Chapter 7 bankruptcy. Even if filing for Chapter 7 bankruptcy seems like the best option for you to reduce your debt, you should weigh the drawbacks first.

If your income is too high, you cannot file for Chapter 7.

You must not have any disposable income and make less than the state median income in order to qualify for Chapter 7. Individuals with disposable income are those who have money left over after covering their essential living expenses and can save. The means test can be used to get your disposable income.
If you have too much extra money than you need, you can’t just stop paying off your debt. While filing under Chapter 13 repayment plans is not permitted, you can still receive a bankruptcy discharge.

There Will Be a Brief Detriment to Your Credit

Prior to filing for bankruptcy, those who are able to make their monthly payments on time and maintain a high credit score will initially see a decline in their score. Additionally, your interest rates may rise momentarily. Nonetheless, declaring bankruptcy frequently improves a filer’s credit rating over time. You have the chance to raise your credit score right away if your bankruptcy discharge is approved.

Not All Unsecured Debts Are Erased by Chapter 7

Certain unsecured debts, such as child support or alimony, are never dischargeable in bankruptcy. Certain debts, such as tax obligations and certain student loans, may be difficult to discharge through bankruptcy. A common misconception is that filing for bankruptcy cannot be used to discharge student loan debt. According to the Bankruptcy Code, you may be able to discharge your student loan debt if repaying it would put you through extreme hardship. The Department of Justice gave courts more precise guidelines in late 2022 regarding what constitutes undue hardship. See if you qualify for this requirement by reading our article on how to file for bankruptcy while having student loans. Our group even produced a filing tool to facilitate the cancellation of student loans.

Some Property Types May Be Lost

Giving up some pricey things could be one of the trade-offs for receiving a bankruptcy discharge in a matter of months. We refer to these things as nonexempt property. In Chapter 7 bankruptcy proceedings, the bankruptcy trustee may sell assets of this kind to satisfy creditors. Having said that, Chapter 7 cases hardly ever involve this.

Your Bankruptcy Under Chapter 7 Others Are Not Protected by Filing (Like Co-signers)

Your only obligation to pay the debt is eliminated by Chapter 7. It does not relieve someone else of their debt. The only kind of bankruptcy that can shield a co-signer is Chapter 13, but that protection is limited to situations where you pay off the debt through your repayment plan.

What Is Bankruptcy Under Chapter 13?

For those seeking a fresh start, Chapter 7 and Chapter 13 bankruptcy are both effective debt relief options. Chapter 13 (also known as the “reorganization” bankruptcy) may be appropriate for you if you have a lot of disposable income, nonexempt assets that you wish to preserve, and the ability to adhere to a payment schedule.

The Price of Bankruptcy Filing

The cost of declaring bankruptcy can be high. The two required credit counseling and debt education courses, the court filing fee, and the cost of legal representation (should you decide to retain counsel) must all be taken into account. For Chapter 7 cases, the Bankruptcy Court levies a $338 filing fee, which, unless you are granted a waiver, you must pay. The court will dismiss your case if you fail to pay the fee in full, even though you are able to request to pay it in four installments. In addition to the court filing fees, you will be required to pay the attorney fees of any law firm or bankruptcy attorney you retain for assistance. This usually adds up to roughly $1,500, and it needs to be paid before your case is filed.
The price of attending the required debt education and credit counseling courses is in addition to the filing fee and legal fees.

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Can You File Bankruptcy Twice?

It’s legal to file as many bankruptcy cases as necessary, but there are rules about how often you can file. The U.S. Bankruptcy Code regulates multiple case filings, how long a filer must wait, and other specifics that we’ll cover in detail below.

The mandatory waiting period between filings depends on several factors, including:

The result of your first bankruptcy case: If you received a bankruptcy discharge for your first case, the waiting period before you can file again is different than if your previous case was dismissed without discharge.

The type of bankruptcy you filed before: Individuals and families generally file either Chapter 7 or Chapter 13 bankruptcy. The time limits before you’re allowed to file again differ depending on the chapter of your previous filing.

The chapter of bankruptcy you file the second time: The waiting period between bankruptcy filings is affected by both the chapter of the previous bankruptcy and the chapter you plan to file in the subsequent case. 

What’s the Mandatory Waiting Period Between a First and Second Bankruptcy Filing?

Under bankruptcy law, people can file for bankruptcy more than once to get the fresh start they deserve. The mandatory waiting period between bankruptcy cases depends on whether the first bankruptcy case was successfully discharged, whether your first bankruptcy case was a Chapter 7 (liquidation case) or a Chapter 13 (reorganization with repayment plan), and what chapter of bankruptcy your second filing will be.

Successful Discharge of First Bankruptcy Case

The two main types of personal bankruptcy are Chapter 7 and Chapter 13. Most individuals and families file Chapter 7 bankruptcy. This is the quickest form of bankruptcy. It’s also known as a liquidation bankruptcy, though the majority of filers get to keep most or all of their belongings. 

It makes more sense for some people to file for Chapter 13 bankruptcy. Under Chapter 13, your debts are reorganized and you pay on a repayment plan that lasts three to five years. This has benefits that Chapter 7 doesn’t. 

Filers receive a bankruptcy discharge at the end of a successful Chapter 7 or Chapter 13 bankruptcy case. The discharge is a bankruptcy court order that erases certain debts and means lenders can’t ever legally attempt to collect on discharged debts again. 

The following outlines when you can file bankruptcy again and be eligible for a second discharge. The clock starts ticking on the date you filed your first bankruptcy, not the date of discharge.  

Filing Chapter 7 After Chapter 7

You must wait eight years between Chapter 7 bankruptcy cases. To receive a second discharge, you must wait eight years from the date you filed your first successful Chapter 7 case until you can file your second Chapter 7 case.

Filing Chapter 7 After Chapter 13

You must wait six years between filing a Chapter 13 case and filing a Chapter 7 case. This timeline starts on the date you filed your first successfully discharged Chapter 13 case. Once six years pass, you can file a second bankruptcy case under Chapter 7. The six-year waiting period can be waived if you paid all of your unsecured creditors in full during the initial Chapter 13 bankruptcy payment plan. Unsecured debts include credit card debt, medical bills, and other debts not secured or backed up by property.

Filing Chapter 13 After Filing Chapter 7

You must wait four years to file a Chapter 13 bankruptcy case after filing a Chapter 7 case. This four-year waiting period only applies if you’re hoping to receive a second discharge of debt in your second bankruptcy filing.

In some instances, it might make sense for a person to file a Chapter 13 bankruptcy after receiving a discharge in a Chapter 7 but before the four-year waiting period has passed. This is because Chapter 13 bankruptcy requires you to follow a payment plan to repay your debts. This can help you to catch up on missed payments. 

As soon as you file bankruptcy, creditors must stop all collection activity against you because of the automatic stay. This means that filing for bankruptcy can stop a foreclosure, at least temporarily. A Chapter 7 bankruptcy can stop a foreclosure while a person is in bankruptcy, but if you want to keep your house you have to make your monthly payments and catch up on any missed payments. 

A Chapter 13 bankruptcy includes a repayment plan that allows you to make up any missed mortgage payments over a three-to-five-year repayment plan. During this repayment plan, generally, your house can’t be foreclosed. This is why some people file Chapter 13 even though they’re not seeking to have their debts discharged. In this case, it wouldn’t be necessary to wait four years between filings. 

Filing Chapter 13 After Chapter 13

You must wait two years between Chapter 13 bankruptcy cases. To receive a second discharge of debts in Chapter 13, you must wait two years from the filing date of your first successfully discharged Chapter 13 case until the filing date of your second Chapter 13 case.

All waiting periods between bankruptcy filings are calculated from the filing date of the first case, not the discharge date. 

First Bankruptcy Case Not Discharged

There is a difference between a bankruptcy case that’s discharged and one that’s dismissed. If your first bankruptcy case was dismissed, you didn’t receive a discharge so you may be able to file a second bankruptcy case immediately. When a bankruptcy case is dismissed without a discharge, it means that none of the filer’s debts are erased and they’re still obligated to pay back their debts. 

Bankruptcy cases can be dismissed if:

  • You don’t appear at a required bankruptcy hearing, including the 341 meeting of creditors. 
  • You fail to file all necessary documents properly and on time or fail to pay required bankruptcy filing fees.
  • You don’t pay the required Chapter 13 plan payments.
  • You aren’t truthful in your bankruptcy filing.

Depending on the reasons your case was dismissed, you may be able to file for bankruptcy protection again right away or you may need to wait before filing again. Under the Bankruptcy Code, you must wait 180 days to re-file a bankruptcy case if your first case was dismissed by the bankruptcy court for not following the court’s orders or appearing before the court when required. 

You may also need to wait 180 days before filing a second bankruptcy case if you asked for a voluntary dismissal of your first bankruptcy case after one of your creditors filed for relief from the automatic stay. This means that a creditor formally asked the court to let them continue collection activity against you even though you filed for bankruptcy protection. 

When people file a second bankruptcy case after a first case is dismissed, the court will evaluate if the bankruptcy was filed in good faith. Good faith means that you’re not trying to take advantage of the bankruptcy process. For example, if your first case is dismissed for failure to pay the necessary filing fee, it’s generally okay for you to file a second case immediately as long as you pay all necessary fees in the second case. 

Is It a Good Idea To File Bankruptcy a Second Time?

Filing for bankruptcy is a powerful debt relief tool. You’ll need to look at your financial situation to determine whether filing a second bankruptcy case is a good idea for you or not. Filing for bankruptcy will harm your credit score and negatively impact your credit report, at least in the short term. A Chapter 7 bankruptcy will stay on your credit report for 10 years from the filing date and a Chapter 13 bankruptcy for seven years. 

While bankruptcy can harm your credit, not filing can also be harmful due to missed payments, outstanding debts, and lawsuits for unpaid debts. If you’re facing a second bankruptcy after many years have passed, it’s important to explore why you’re in this situation again. Then take steps to ensure your financial well-being moving forward.

In some cases, it’s a good strategic financial move to file a second bankruptcy after a successful discharge. For example, you may benefit from filing a Chapter 13 after a Chapter 7 discharge to set up a repayment plan to pay off past-due mortgage payments to save your house, catch up on child support arrears, or pay tax debts that were too new to be discharged in your Chapter 7 bankruptcy case. In the case of child support arrears or back taxes, filing a Chapter 13 second bankruptcy could help you avoid wage garnishment and stretch out your repayment plan over three to five years. There are many valid benefits to filing a second bankruptcy case. 

Abusive Bankruptcy Filings

The bankruptcy court looks closely at cases that may be abusing the bankruptcy process. An abusive bankruptcy filing could be a Chapter 7 filer that fails the means test. It could also apply to cases where an individual is inappropriately using the bankruptcy process to avoid paying back a debt, avoid a creditor, or buy time in a collection action, such as a foreclosure or pending lawsuit for unpaid debt. 

The court frowns upon people who abuse the bankruptcy process or who have no intention of following through with their bankruptcy case. People who file multiple cases are more heavily scrutinized by the bankruptcy courts. Repeat filers may lose some of the benefits of bankruptcy protection. For example, the court may deny their discharge or revoke the automatic stay, which stops collection activity. 

If You’re Seeking a Second Financial Fresh Start, Get Professional Help

Filing bankruptcy can be complex — filing successive bankruptcies can be difficult, confusing, and financially dangerous if you don’t plan well. An experienced bankruptcy attorney can help guide you. Bankruptcy attorneys are well-versed in the pitfalls of bankruptcy and multiple filings, the advantages bankruptcy offers, and court requirements. Many bankruptcy lawyers offer free consultations. 

Many people who are struggling with debt start their debt relief journey with credit counseling. Pre-bankruptcy credit counseling can help you evaluate all of your debt relief options, including bankruptcy, debt consolidation, debt settlement, and other debt management options that may be right for you. Debt relief solutions are never one-size-fits-all. You need to know what’s best for you given your financial situation.

Below is a summary of filing fees for bankruptcy, the price of required credit counseling, and if you qualify for fee waivers or installment payments.

You have to pay filing fees and expenses for credit and debt counseling when you file for bankruptcy. You may be eligible for a fee waiver or be able to pay in installments if you are unable to pay the filing fee.

You can find a summary of what needs to be paid, when, and how to be eligible for installment payments or a fee waiver in this article.

Bankruptcy Petition Fees: Chapter 7 and Chapter 13 Filing Fees

The total amount of fees you have to pay in order to file for bankruptcy is as follows, as of December 1, 2020:

For Chapter 7, $338
For Chapter 11, $1,738
Chapter 12: $278; Chapter 13: $313
Periodically, the bankruptcy court raises these fees. The U.S. Courts fee webpage has the most recent fees available.

Chapter 7: Installments and Waivers of Filing Fees

The filing fee is usually due at the time your bankruptcy petition is filed. There are two exclusions from Chapter 7 bankruptcy, though. Asking the court to waive the fee completely or allow you to pay it in installments is an option.

Application for Installments of the Chapter 7 Filing Fee

You file Form 103A Application for Individuals to Pay the Filing Fee in Installments to request permission from the court to pay your filing fee over time. You must indicate on the form that you are unable to pay the fee in full and that you will make no more than four payments within 120 days of the petition’s filing.

Request for Waiver of Chapter 7 Filing Fee

If the court waives the fee, you are not required to pay it. If you are eligible for a fee waiver, you

must be unable to make payments in installments and have an income that is less than 150% of the federal poverty threshold (official poverty line estimates are available from your bankruptcy court).
Fill out Form 103B, Application to Have the Chapter 7 Filing Fee Waived, and send it in to request a fee waiver. In many cases, the judge will approve the application without requiring you to appear in person, but you may still be required to appear in court so the judge can question you.

See how to make changes to bankruptcy forms.

In Chapter 13, there are no fee waivers or installment payments.

Fee waivers and installment payments are generally not available to Chapter 13 filers because they must have sufficient funds to support a repayment plan for three to five years following filing for bankruptcy. When submitting the case, budget for the cost.

Extra Fees Associated with Bankruptcy Filing

Credit counseling from an authorized provider must be completed no later than six months prior to filing for bankruptcy under Chapter 7 or Chapter 13. To get your bankruptcy discharge (the order that eliminates qualifying debt), you have to complete a debtor education course after filing your case.

For the necessary counseling, the majority of approved credit counseling providers charge $15 to $30, but you might not be required to pay anything. In accordance with the law, agencies must offer counseling regardless of your financial situation, so please inform the agency if this is not possible for you.

Additionally, the debtor education classes run about $35. You can request that the provider waive the fee or let you pay a smaller amount if you are unable to pay the full amount.

How to Pay Your Attorney Fees in Bankruptcy

Since many bankruptcy attorneys charge as little as $100 to begin, finding a way to pay Chapter 13 bankruptcy fees is not too difficult; the remaining amount can be rolled into your Chapter 13 repayment plan. You can pay your Chapter 13 fees gradually with this method.

You must pay your attorney in full before filing for Chapter 7 bankruptcy. For what reason? because legal fees are eliminated in Chapter 7 bankruptcy. Your attorney won’t get paid if you don’t make the entire payment.

To file for Chapter 7, how do you obtain the necessary funds? Most Chapter 7 filers divert their payments intended for bill cancellation during bankruptcy to pay their attorney. The funds will be borrowed by others from friends and relatives.

But there are other approaches. If you are unable to pay for a bankruptcy attorney, you can find out more information here about your options.

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What Is The Downside of Filing For Bankruptcy

What Is The Downside of Filing For Bankruptcy

It is not appropriate for everyone to file for Chapter 7 bankruptcy. Even if filing for Chapter 7 bankruptcy seems like the best option for you to reduce your debt, you should weigh the drawbacks first.

If your income is too high, you cannot file for Chapter 7.

You must not have any disposable income and make less than the state median income in order to qualify for Chapter 7. Individuals with disposable income are those who have money left over after covering their essential living expenses and can save. The means test can be used to get your disposable income.
If you have too much extra money than you need, you can’t just stop paying off your debt. While filing under Chapter 13 repayment plans is not permitted, you can still receive a bankruptcy discharge.

There Will Be a Brief Detriment to Your Credit

Prior to filing for bankruptcy, those who are able to make their monthly payments on time and maintain a high credit score will initially see a decline in their score. Additionally, your interest rates may rise momentarily. Nonetheless, declaring bankruptcy frequently improves a filer’s credit rating over time. You have the chance to raise your credit score right away if your bankruptcy discharge is approved.

Not All Unsecured Debts Are Erased by Chapter 7

Certain unsecured debts, such as child support or alimony, are never dischargeable in bankruptcy. Certain debts, such as tax obligations and certain student loans, may be difficult to discharge through bankruptcy. A common misconception is that filing for bankruptcy cannot be used to discharge student loan debt. According to the Bankruptcy Code, you may be able to discharge your student loan debt if repaying it would put you through extreme hardship. The Department of Justice gave courts more precise guidelines in late 2022 regarding what constitutes undue hardship. See if you qualify for this requirement by reading our article on how to file for bankruptcy while having student loans. Our group even produced a filing tool to facilitate the cancellation of student loans.

Some Property Types May Be Lost

Giving up some pricey things could be one of the trade-offs for receiving a bankruptcy discharge in a matter of months. We refer to these things as nonexempt property. In Chapter 7 bankruptcy proceedings, the bankruptcy trustee may sell assets of this kind to satisfy creditors. Having said that, Chapter 7 cases hardly ever involve this.

Your Bankruptcy Under Chapter 7 Others Are Not Protected by Filing (Like Co-signers)

Your only obligation to pay the debt is eliminated by Chapter 7. It does not relieve someone else of their debt. The only kind of bankruptcy that can shield a co-signer is Chapter 13, but that protection is limited to situations where you pay off the debt through your repayment plan.

What Is Bankruptcy Under Chapter 13?

For those seeking a fresh start, Chapter 7 and Chapter 13 bankruptcy are both effective debt relief options. Chapter 13 (also known as the “reorganization” bankruptcy) may be appropriate for you if you have a lot of disposable income, nonexempt assets that you wish to preserve, and the ability to adhere to a payment schedule.

The Price of Bankruptcy Filing

The cost of declaring bankruptcy can be high. The two required credit counseling and debt education courses, the court filing fee, and the cost of legal representation (should you decide to retain counsel) must all be taken into account. For Chapter 7 cases, the Bankruptcy Court levies a $338 filing fee, which, unless you are granted a waiver, you must pay. The court will dismiss your case if you fail to pay the fee in full, even though you are able to request to pay it in four installments. In addition to the court filing fees, you will be required to pay the attorney fees of any law firm or bankruptcy attorney you retain for assistance. This usually adds up to roughly $1,500, and it needs to be paid before your case is filed.
The price of attending the required debt education and credit counseling courses is in addition to the filing fee and legal fees.

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