Can I Still File For Bankruptcy Now That The Law Has Changed?
Absolutely!
Can I Own Anything After Bankruptcy?
Yes! Many people believe they can not own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
What Is Bankruptcy?
Bankruptcy is a legal proceeding in which a person who can not pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.
What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts.
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments.
- Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
- Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
- Eliminate certain rights of "secured" creditors. Common examples are car loans and home mortgages.
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and most taxes.
- Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
- Discharge debts that arise after bankruptcy has been filed.
What Different Types of Bankruptcy Cases Should I Consider?
Most people either file a Chapter 7 or a Chapter 13:
- Chapter 7 is known as "straight" bankruptcy or "liquidation." It requires a debtor to give up property which exceeds certain limits called "exemptions," so the property can be sold to pay creditors.
- Chapter 13 is called "debt adjustment." It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
Which Type of Bankruptcy Should I File?
Most people file for Chapter 7 because they can protect all of their assets and have little or no money left over at the end of the month. Some people choose to file a Chapter 13 in order to save their home from foreclosure or to protect assets they would have lost in a Chapter 7.
Also, if your income is above the Median Income for a family the size of your household in your state, you may have to file a chapter 13 case. The median family income by family size (1, 2, 3 and 4 people) for West Virginia is $36,135, $38,505, $49,043, and $55,920 respectively. The median family income by family size (1, 2, 3 and 4 people) for Pennsylvania is $41,971, $49,226, $61,733, and $74,072 respectively. A higher-income consumer must fill out "means test" forms requiring detailed information about income and expenses. If, under standards in the law, the consumer is found to have a certain amount left over that could be paid to unsecured creditors, the bankruptcy court may decide that the consumer can not file a chapter 7 case, unless there are special extenuating circumstances.
Chapter 7 (Straight Bankruptcy)
In a bankruptcy case under chapter 7, you file a petition asking the court to wipe out (discharge) your debts in exchange for your giving up property, except for "exempt" property which the law allows you to keep. In most cases, all of your property will be exempt.
Chapter 13 (Reorganization)
In a chapter 13, you file a "plan" showing how you will pay off some of your past-due and current debts over three to five years. The most important thing is that it will allow you to keep valuable property--especially your home and car--which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind.
You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due. Monthly plan payments may be withheld by your employer. Before the meeting of creditors, debtors must file all federal, state, and local returns for the past 4 years.
What Must I Do Before Filing Bankruptcy?
You must obtain credit counseling (your 'Ticket into Bankruptcy') from an approved credit counseling agency within 180 days before your bankruptcy case is filed. Different agencies provide the counseling in-person, by telephone, or over the Internet and for different costs. Below is the website that is frequently updated with new approved agencies:http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm
What Does It Cost to File for Bankruptcy?
The court now charges $299 to file for bankruptcy under chapter 7 and $274 to file for bankruptcy under chapter 13, whether for one person or a married couple. If you hire an attorney you will also have to pay the attorney's fees you agree to.
What Property Can I Keep?
In a chapter 7 case, you can keep all property which the law says is "exempt" from the claims of creditors. You may also have to use a different state's exemptions depending on how long you have lived in your current state.
Some of West Virginia's exemptions (for illustration purposes only) include:
- $25,000 of equity in your home
- $2,400 of equity in your car
- $400 per item in any household goods up to a total of $8,000
- $1,000 in things you need for your job (tools, books, etc.)
- $1,000 in jewelry
- $800 in any property, plus part of the unused exemption in your home;
- Your right to receive certain benefits such as social security, unemployment compensation, veteran's benefits, public assistance, and pensions--regardless of the amount.
- The amounts of the exemptions are doubled when a married couple files together.Some of Pennsylvania's Federal exemptions (for illustration purposes only) include:
- $20,200 in equity in your home
- $3,225 in equity in your car
- $525 per item in any household goods up to a total of $10,775
- $2,025 in things you need for your job (tools, books, etc.)
- $1,350 in jewelry
- $1,075 in any property, plus part of the unused exemption in your home, up to $10,125
- Your right to receive certain benefits such as social security, unemployment compensation, veteran's benefits, public assistance, and pensions--regardless of the amount.
- The amounts of the exemptions are doubled when a married couple files together.In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
What Will Happen to My Home and Car If I File Bankruptcy?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.
However, some of your creditors may have a "security interest" in your home, automobile or other personal property. This means that you gave that creditor collateral for the debt. Bankruptcy does not make these security interests go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.
You can keep the collateral or mortgaged property after you file bankruptcy by agreeing to keep making your payments on the debt until it is paid in full or by paying the creditor the property's current value in lump sum.
Will I Have to Go to Court?
Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. In most bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions under oath about your bankruptcy forms and your financial situation. Your attorney will attend all meetings and hearings with you.
What Else Must I Do to Complete My Case?
After your case is filed, you must complete an approved course in personal finances (your 'Ticket out of Bankruptcy') from an approved credit counseling agency. Different agencies provide the counseling in-person, by telephone, or over the Internet and for different costs. Below is the website that is frequently updated with new approved agencies:http://www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm.
Will Bankruptcy Affect My Credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you have filed a bankruptcy can appear on your credit record for ten years. But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
What Else Should I Know?
Utility services--Public utilities, such as the electric company, can not refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.
Discrimination--An employer or government agency can not discriminate against you just because you have filed for bankruptcy.
Remember: The law often changes. Each case is different. This overview is meant to give you general information and not to give you specific legal advice.
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