A bankruptcy petition is filed with the court to begin bankruptcy proceedings, either by the debtor (voluntary) or creditor (involuntary).
Chapter 7 Bankruptcy - Eliminates Debts- Do you Qualify? Chapter 7 Bankruptcy is sometimes referred to as "Straight Bankruptcy". This is what most people need. You file a Petition to eliminate all of your debts. You have to list every debt you owe to every company or person. You also have to tell the court everything you own, including houses, cars, vacant land, bank account balances, and other valuable things you own. The reason you have to disclose everything you own, is because, you are allowed to keep your belongings, as long as it is not over the amount you are allowed to protect. The amount you are allowed to protect is called, exempt property. That varies by state. For example, in Illinois, you are allowed to protect $15000.00 equity in your house, $2400.00 worth of a car, and $4000.00 worth of everything else. These are the common exemptions. There are others, and you need to consult with an experienced bankruptcy lawyer to discuss how they apply to your situation. If you own more than you are allowed to protect, you might need to file Chapter 13 Bankruptcy to protect your things. Chapter 7 Bankruptcy, in turn, eliminates debts such as credit card, medical, some taxes and utility bills. It does not eliminate certain taxes, child support, or student loan debt. How do you qualify for Chapter 7 Bankruptcy? You have to pass the "Means Test". This test says that if you make under a certain amount of money for your size family, you can file Chapter 7. If you make more than the state median, then we have to go further, and you get certain allowances, and after the full test, you might or might not qualify. If you own too much property or make too much money, you will then have to consider Chapter 13 Bankruptcy to reorganize your debts over 3 to 5 years. Chapter 13 Bankruptcy- Reorganizes Debts and Saves Houses and Cars Chapter 13 Bankruptcy is a court-supervised reorganization of your debts. Most people who file Chapter 13 Bankruptcy are behind in house or car payments and want to save the house or car. Two things determine how much your payment in the Chapter 13 Plan will be. First, is the "Means Test". After taking your last 6 months average from your pay stubs, then deducting your expenses such as taxes and insurance and car payments, the number that is left tells the court how much you have to pay on your unsecured (credit card and medical) debt. This is a very complicated process, much like doing a tax return. The second way your payment is determined is based on how much stuff you own that is beyond what you can protect. You have to pay at least as much as the amount of property you can't protect. So if you have $10,000.00 worth of unprotected equity in your house, you have to pay at least $10,000.00 to your creditors over 3 to 5 years. The attorney develops a Chapter 13 Plan, and it tells your creditors how much they will be paid, in what order, and when. No bill collecdtors Which is best for YOU? Chapter 7 or Chapter 13? When you meet with an experienced Bankruptcy Attorney, he or she will review your whole financial situation. What you own, who you owe, and what your goals are. Then we can start to determine whether Chapter 7, Debt Elimination, or Chapter 13, Debt Reorganization, is best for you. In many cases, we have to do the "Means Test" to determine which type of bankruptcy you qualify for. The most important thing to remember is that at the end of your meeting with an attorney, you should know a bit about each type of bankruptcy, how each would affect you, and whether you'll qualify or not. Generally, if you own too much stuff or make too much money, you can't file Chapter 7 and get full debt relief. Rather, you'll probably have to file Chapter 13 and pay back at least part of your bills back. The Devil is in the Details, so it's important that you understand everything before you decide with your attorney which type of Bankruptcy Relief is best for you.
Congress has eliminated bankruptcy for the "little guy." Despite what you may have heard in the press, bankruptcy is still alive and well and available to the little guy. Yes, in October 2005, new bankruptcy reform laws went into effect that may make it more difficult for some individuals to qualify for Chapter 7 relief. However, consumers in serious financial trouble should still be able to qualify for protection under the Bankruptcy Code. The sky has not fallen on bankruptcy! Bankruptcy will ruin my credit record This is absolutely false. What ruins your credit record is your inability to pay your debts on time. After your bankruptcy case, many of your debts will be discharged, and you will be given a fresh start. If you can keep on top of any new debts you incur after you emerge from bankruptcy, your credit record should actually improve. Filing bankruptcy makes me a bad person Absolutely not! Congress passed the bankruptcy laws to help individuals and businesses with severe financial problems get a fresh financial start and become productive members of society again. Do you think it makes you a better person to avoid your creditors, ignore your bills, and drive yourself further into a debt hole that you'll never get out of, or to take on new credit responsibly, and pay your bills on time? Millions of businesses and individuals file for bankruptcy each year and become productive members of society-you can too. I won't be able to get credit after my bankruptcy Think about it. If you owned a credit card company, who would you rather give a credit card to: someone who has a massive debt load and is behind on all their bills, or someone whose bills have been wiped out? Probably the latter, right? That's why you should be able to get credit after bankruptcy. Since many of your debts will be wiped out after bankruptcy, and, in the case of a Chapter 7, you won't be able to file another one for another eight years, many creditors will see you as a good credit risk after your bankruptcy. I can't afford to hire an attorney for my bankruptcy We offer payment plans: you can make a down payment and pay the balance in installments. A debt counseling service can help me eliminate my debts without the stigma of bankruptcy on my r This myth is a very dangerous one. Debt counselors cannot get rid of your debts, nor can they stop your creditors from harassing you. All debt counselors do is help you negotiate new terms on your existing debt with your creditors-your creditors do not have to agree to any restructuring, and they can still come after you for any unpaid balances. By contrast, the moment you file your bankruptcy case, many of your creditors are prohibited by law from taking any legal actions against you, and once your bankruptcy is complete, many of your debts are gone forever. Furthermore, credit counselors do not necessarily have your best interests in mind-they are often owned by the very creditors that are making your life miserable to begin with. Don't let their non-profit claims fool you-when you use a debt counselor, someone is making a lot of profit off you, and in most cases you’ll still be hopelessly in debt. Bankruptcy cannot get rid of debts like student loans and taxes This myth ignores the fact that in some instances you can include student loans and taxes in a Chapter 13 repayment plan and pay them off over time. In many cases, this will save you money. Also, in rare instances, these debts may be dischargeable. You will need to talk to an experienced bankruptcy attorney if you have these types of debts. I can handle my bankruptcy myself Although you are permitted to handle your own bankruptcy if you wish, do you really want to? Bankruptcy involves a complex interplay of state and federal laws, and there are many traps for the unwary. Your bankruptcy will be one of the most important events of your financial life; if it is not done properly, it could have dramatic consequences for the rest of your life. You wouldn't perform your own surgery, why would you perform your own bankruptcy? I won't be able to buy a house or a car, or rent an apartment, after bankruptcy Again, not true. As we note above in myth number 4, you should be able to get credit after bankruptcy. Although it may take you a little time to start purchasing things, you should be a good credit risk once you emerge from bankruptcy, and you shouldn't have too much trouble making these types of purchases. You can also get help in making these types of purchases, such as getting someone to be a co-signer for you. I don't want to go through a difficult and time consuming court case Forget about jury trials, cross examination, and all of the other courtroom drama you see on TV. In most bankruptcy cases, you'll never appear before a judge, and in most Chapter 7 cases, your case will be complete and your debts discharged in about four months. BONUS TIP: Any lawyer can handle a bankruptcy Although any licensed lawyer can represent you in a bankruptcy case, would you hire a criminal lawyer for a real estate closing, or a patent attorney for a divorce? Don't you want to have the comfort of knowing that your case is being handled by an experienced professional? You'll likely only file for bankruptcy once in your life, so you should hire an experienced bankruptcy lawyer for this very important job.
1. Is bankruptcy the best option for me? You want a lawyer who genuinely helps advises clients based on their unique circumstances instead of just trying to make a sale. A good bankruptcy lawyer will only take on clients for whom bankruptcy makes the most sense while advising others to get help in ways that make the most sense for them. Generally, at the point in time that someone is looking into bankruptcy options, it usually means that that filing for either Chapter 7 or chapter 13 is indeed the best option for them. However, you should still try to find a lawyer who shows experience and understanding of the various alternatives, just in case. 2. What is Your Experience as a Bankruptcy Attorney? Many law firms specialize in other fields of practice and only file bankruptcies on the side. Generally, it’s a good idea to find an attorney dedicated to helping people with their debt. Having someone who really cares and files bankruptcies on a daily basis will be your best advocate for your bankruptcy success. Additionally, some cases can be more complicated than others. If you have a complex Chapter 13 case, or if your case involves student loans, you want to be sure your lawyer has the expertise for these types of cases. 3. Should I be Filing for Chapter 7 or Chapter 13? Remember to ask your lawyer which type of bankruptcy is best for you. Chapter 7 may be better for you if your income is below a certain level. This requires you to surrender much of your property, and you’ll be released from your debt, with some exceptions, such as back taxes or student loans. Chapter 13 allows you to keep your property by agreeing to a payment plan to pay off your debts over a 3-5 year period. 4. Who will be handling my case? It's really important to make sure you trust your lawyer and want them to take care of your case. We recommend meeting with the lawyer in-person before hiring them. Also, make sure an experienced lawyer will handle your case to increase the likelihood of successfully filing for bankruptcy. Some firms will only have you meet with an experienced lawyer, while an inexperienced lawyer will actually work on your case, lowering your odds for getting your case discharged. 5. What are the total costs for filing for bankruptcy? What is included? Be sure your lawyer gives you the total cost up-front, from their fees to court fees, to avoid any hidden fees later on. For example, in Chapter 7 cases, the fee is $335, and for Chapter 13 cases, the fee is $310. There are also several courses you may need to take which may cost additional money. Additionally, make sure to find out what is included in the attorney’s fees. You can also ask about payment arrangements the lawyer may be open to setting up if needed. There should always be a written fee agreement given to you, showing all the items being charged. You never want to find out down the line about some hidden fee that wasn’t brought up beforehand. 6. Will you keep me updated throughout the case? Find out from your lawyer how long the bankruptcy process will take and at what points they will contact you to keep you updated. Additionally, make sure you understand the attorney’s preferred methods of communication, whether by email or phone call. You should also ask who will field your questions or concerns if the lawyer isn’t available right away. Some attorneys communicate with clients primarily by email, while others prefer to use the phone. Some will be accessible after hours. Be sure to choose a lawyer who communicates using your preferred contact method. 7. Are there any Problems With My Bankruptcy Case? It is crucial to find a lawyer who will be upfront with you about the potential risks involved in filing for bankruptcy, such as the possibility of losing some of your property and how it may affect your credit rating. Your lawyer's response to this question will help you accurately assess their expertise and honesty. 8. How Long Will the Bankruptcy Process Take? Ask the attorney to tell you about how long you can expect each step in the bankruptcy process to take. Does your lawyer start working on the case immediately, or is there a backlog? How long your case will take depends on several factors. You can expect your Chapter 7 case to take about four months from start to finish. Chapter 13 bankruptcies tend to take longer until they are completely finished, especially if you decide upon a 5-year payment plan. 9. What Happens After My Bankruptcy? Ask your attorney if they offer personalized support with planning your finances after the bankruptcy has gone through. Some bankruptcy law firms provide useful help with improving your credit record and other financial issues.
All tickets are older than 3 years If all tickets are older than 3 years as of the date of filing Chapter 7 the debt to the city will be waived upon receiving a Chapter 7 discharge. WHAT ABOUT WHEN THERE ARE TICKETS YOUNGER THAN 3 YEARS? The original amounts. The increased penalties will be gone. The resulting balance has to be repaid over a period of time. Ticket fines double when not paid. A $60 ticket becomes $120; a $100 ticket becomes $200. Under this program the repayment goes back to the original amount. Tickets younger than 3 years at the original amount will have to be repaid over a period of 6 months to 5 years. Completing the program and you receive a discharge in Chapter 7 the city will waive all the fines and costs. Also, you must pay any ticket you get during the installment payment term. What About Cars Towed Or Booted By The City? To enroll in the program and get the car back: you must pay 25% of the tickets younger than 3 years but only at the face amount. Example: $5,000 in tickets; $3,000 less than 3 years; going back to the original amount: $1,500: Immediate payment of about $375. Car impounded for other reasons (like driving on a suspended license)? Same as the above plus $1,000 or $1,375. Steps To Take Email [email protected] List your name and address; your license number; All known license plate numbers; (past and present) If the vehicle has been booted or impounded state why: parking tickets or perhaps driving on a suspended license The city will then send its proposal to you. Bring the proposal to the lawyer of your choice. SHOULD I FILE CHAPTER 7 OR CHAPTER 13 The choice is yours. Can you live up to the payments in the proposal? A little later you will see the downside of the plan if you don't complete it. CHAPTER 13 INSTEAD OF CHAPTER 7 Chapter 13 may be the better solution with Chicago tickets that are younger than 3 years old. That is why you have to determine how much you owe for tickets younger than 3 years old. If you only have unsecured debts such as parking tickets most of our clients pay about $100 per month. When completely the Chapter 13 plan the tickets as well as all other listed debts are gone forever. What About Converting An Existing Chapter 13? The date to determine what is older than 3 years runs from the date of filing Chapter 13 and not the date of converting the Chapter 13 to Chapter 7. So, may not work. The Good, The Bad, And The Ugly If all your tickets are older than 3 years the city will waive the tickets upon getting a Chapter 7 discharge. Repayment plan for the tickets: the city will waive all tickets when you complete the program. During the term of the repayment program you must pay any new tickets. If you get a repayment plan and you fall behind: what then? The city will allow you on 2 occasions to catch up. But, not a 3rd time. If you do not complete the repayment plan you will owe all the tickets: even the ones older than 3 years and penalties will come back. Don’t file Chapter 7 unless you are 100% sure then you can complete the program. Filing Chapter 13 may well be a safer bet for you.
Chapter 7 Bankruptcy When you file for Chapter 7 bankruptcy, you essentially sell assets to a trustee, who in turn sells them to settle your debts. This process is called liquidation. Your creditors receive the net proceeds of the liquidation. You can discharge many debts, including credit card debt and other unsecured debts, although not alimony, student loans, child support, or fraudulent debts. Most of the time, all dischargeable can be eliminated. But before you can proceed, you must pass the means test. The bankruptcy means test is used to show whether your income exceeds a certain threshold. There are two forms that serve this purpose: Form 122A-1: Chapter 7 Statement of Your Current Monthly Income: Allows you to document your marital and filing status, and compares your monthly income to the median in your state based on household size. Once you calculate your annual income, and it is below the median income specific to your state, you may be eligible to file for Chapter 7 bankruptcy. Form 122A-2: Chapter 7 Means Test Calculation: Uses your income and expenses to calculate your disposable income. The form is required if your income exceeds the state*s median, and helps determine how much money you have to pay off your debts. If this amount is high enough, you may not qualify to file for bankruptcy. Having too much income to qualify is called presumption of abuse, although you may still qualify under special circumstances. You can pass the means tests and still not qualify for bankruptcy. Filing bankruptcy is not always the best option, so you may need to: Go for bankruptcy counseling File a bankruptcy court petition Meet with creditors to discuss your situation So who is eligible to file for Chapter 7 bankruptcy? Various parties, including your bankruptcy attorney, will look at several factors. These include having little or no disposable income, debts that would take five or more years to pay off, and that add up to more than half your annual income. Before filing, it*s important to weigh all your options. The process requires a good deal of paperwork and, after filing, you*ll appear in court with a judge and trustee; unless an objection is filed, a discharge can be completed in 60 days. The advantages of a Chapter 7 bankruptcy filing include: A fresh start, with only secured assets owned Protection against collections actions and wage garnishments You keep all wages and acquired property (except inheritances) Cases are usually over in 3 to 6 months There are no minimum debt requirements However, the disadvantages to filing in California including losing non-exempt property. To keep a car or home, either opt out of Chapter 7 or sign a reaffirmation agreement. You must then continue paying these debts, and any back payments owed. Disadvantages are: Chapter 7 is only a temporary defense against foreclosure Co-signers of a loan retain the debt unless they file for protection If your debts are discharged, you must wait eight years to file again A Chapter 7 filing remains on your credit report for up to 10 years Chapter 13 Bankruptcy Under a Chapter 13 filing, a 3- to 5-year repayment plan is proposed and options such as debt consolidation or reorganization are available. To be eligible for Chapter 13 bankruptcy, you must be a wage earner and have regular income. It is generally used by those who intend to keep their home, car, or other secured assets and valuable nonexempt property. With Chapter 13 bankruptcy, you can make up overdue payments over time. Your original agreement can be reinstated as well. Eligibility is also determined by the means test, although if you failed the means test for Chapter 7, you may be able to explore filing for Chapter 13 bankruptcy. However, the means test enables you to deduct some expenses and measures your ability to pay back debt in a Chapter 13. If you determine you*ll have enough to pay your debt over five years, Chapter 13 is the way to go. The process, however, requires additional qualifying tests. These include the best interest of creditors test, which shows unsecured creditors would have at least as much on their claim as with a Chapter 7 filing. The best efforts test shows all your projected disposable income is paid towards the plan. Once you file, you must start making payments within 30 days, and continue doing so every month in the form of money orders, cashier*s checks, other certified funds, or as a voluntary wage deduction, even if confirmation of your plan is pending. Once all your plan payments and terms are completed, your dischargeable debts are discharged. A Chapter 13 payment plan enables you to: Keep all exempt and non-exempt property Reduce some debts Avoid collection efforts and wage garnishment Avoid foreclosure as long as you stick to the terms Take more time to pay debts Separate creditors by class, especially when a co-debtor is involved There are some disadvantages. For example, a Chapter 13 filing stays on your credit report for seven to ten years. Also, since the payment plan uses your post-bankruptcy income, your cash is tied up for the entire plan period. A Chapter 13 filing involves higher legal fees and you will remain involved with the bankruptcy court for the duration of the term period. For professional legal advice, to learn whether Chapter 7 or Chapter 13 bankruptcy is right for you, and to receive assistance with filing, contact OakTree Law at 562-219-2979 or visit us online at https://oaktreelaw.com.
What Is Wage Garnishment? Creditors can go after your wages if you owe taxes, student loans, or child support. Most of the time, your wages can*t be garnished without a lawsuit in court first. A creditor can then seek a money judgment, which permits them to move forward with wage garnishment. The order is then forwarded to your employer; part of each pay period*s wages will be held and sent to the creditor. By law, there are limits as to how much can be taken from your weekly, bi-weekly or monthly paycheck. Some creditors can take your wages without court approval. The IRS and collectors of federally-guaranteed student loans are examples. For any garnishment you have, it will continue until the entire judgment is paid, or you, and your creditor, reach a separate settlement. How Does Chapter 7 Bankruptcy Help? Once you file for bankruptcy, a court order, also known as an injunction, is put into place. The injunction imposes an automatic stay that stops creditors from trying to collect your debt. It prohibits most creditors from continuing or initiating collection actions. Wage garnishment is a collection action so the creditor will be forbidden by the court to continue taking funds out of your paycheck once you file. The court will notify your creditors soon after you file for bankruptcy. However, it can take a week or more for them to receive official notification, but your attorney can help by directly providing your bankruptcy case number, filing date, and court location to creditors and employers. The creditor must stop the garnishment as soon as they learn of your bankruptcy. A letter of notification from the court isn*t required before they discontinue such action. In fact, continued wage garnishment would violate the automatic stay. As stated earlier, Chapter 7 bankruptcy will not stop all garnishments; however, Chapter 13 bankruptcy will, as your debts are reorganized into a plan you pay off over three to five years. Procedures for Stopping Wage Garnishment The bankruptcy court will ask for a list of your creditors, along with their contact information. It will then notify them of your bankruptcy filing, and demand the creditor suspend all garnishments. Sending a copy of your filing to the creditor on your own is possible. Doing so can speed up the process. If an automatic stay has been imposed, it will be enforced until the end of your bankruptcy case. Most of the time, Chapter 7 bankruptcy discharges any debt associated with the garnishment, so the creditor cannot resume any further collection actions. However, wage garnishment can resume if the debt subject to garnishment wasn*t discharged, or the bankruptcy case is dismissed before any discharge of debt occurs. An automatic stay may end if you have a recent bankruptcy. Wage garnishment can then proceed. For example, you will get just a 30-day automatic stay if you previously filed for bankruptcy and the court dismissed it within the past year. The court may extend this time limit if you ask it to, which requires a formal motion and for you to prove your second filing is being made in good faith. You will not receive an automatic stay with a third bankruptcy filing if you filed twice in the past year. However, it*s still possible to ask the court for an alternative decision. Various court actions can be sought depending on your situation. For example, you can recover wages garnished prior to your bankruptcy filing, although it*s typically costly to do so. There are a few requirements to recover garnished wages: The wage garnishment must have occurred within 90 days prior to filing for bankruptcy. The garnishment must exceed a certain amount, which is subject to change. The amount must be protected by an exemption. Recovering garnished wages requires your state having an exemption that protects that cash, and that you file a lawsuit against your creditor in bankruptcy court. The process may or may not be worthwhile depending on what your attorney charges and how much you could get back. Ensuring Your Bankruptcy Filing Is Successful Make sure your bankruptcy is filed correctly and achieves the desired outcome by working with an experienced, reputable bankruptcy attorney in Los Angeles. At OakTree Law, we can negotiate the terms of your bankruptcy to stop wage garnishments and other collection actions. If creditors are aggressively seeking to collect, a Chapter 7 bankruptcy can discharge most or all of your debt of it, so you can start over. Contact us today for a free case evaluation.
Completing the voluntary petition is the first step when filing for bankruptcy. Learn what you'll need to fill out this form and how a lawyer can help.