How To File Chapter 13 Bankruptcy Without A Lawyer – Have you ever taken on serious debt and felt like you were in over your head, just based on your inability to pay your bills? Whether you’ve had a gap in employment, been buried by medical bills or taken on too much consumer debt, sometimes it can seem like there’s no way out of your situation.
If you’ve already explored other ways to deal with your debt, such as refinancing your mortgage or getting a second job, it may seem like bankruptcy might be your only option. And when you are besieged by creditors and experiencing financial stress, it might actually be a viable option as a last resort. If you have determined that this is your best course of action, we are here to let you know what to expect.
How To File Chapter 13 Bankruptcy Without A Lawyer
First, you must decide which of the two bankruptcy chapters best applies to your situation: Chapter 7 or Chapter 13.
How To File Chapter 13 Bankruptcy
Not sure which one is right for you? Read on to learn more about these two filing options so you can make the decision that’s right for your individual situation.
Known as a bankruptcy liquidation, individuals who file for Chapter 7 must sell their assets that are “insured.” This could include a house or a car. Only then will the rest of their unsecured debt (such as credit card debt or unpaid medical bills) be discharged, and they won’t have to pay it back.
Only individuals who pass a means test (something that determines if their income is too low to afford repayment) are eligible to file for Chapter 7 bankruptcy.
By contrast, a Chapter 13 bankruptcy is known as a “reorganization” bankruptcy. You can create a repayment plan that will allow you to pay your creditors a defined amount over a set period of time (typically 3 – 5 years) instead of selling your property. Once you have paid off the agreed portion of your debt, your other unsecured debts may also be discharged.
Understanding Chapter 13 Bankruptcy For Independent Business Owners In Need
Bankruptcy does not automatically mean getting rid of all your assets or life savings. There are “exemptions” dictated by your state and the federal government. In some states, you can choose to use either your specific state exemptions or the federal exemptions. Find out more about what your state allows here to compare with the federal exemptions outlined below.
Even though Chapter 7 is known as “liquidating” bankruptcy, it doesn’t mean you have to immediately sell everything when you file. Your Chapter 7 bankruptcy filings contain a detailed list of all your property and the “exemptions” you can claim for each item. (See below how the exemptions work).
If the item is not covered by an exemption, the trustee can sell it and distribute the proceeds to your creditors. If the exemption covers the entire item, it’s yours to keep. If your item is worth more than the exemption, you will be paid the difference. For example, if your vehicle is worth $10,000 and the exemption is $5,000, the trustee will sell it, give you $5,000 to cover the exemption and set aside the rest for your creditors.
Below are more details on the most well-known exemptions, but note that the amounts double for married couples. If an item is not covered by the exemption, your trustee will sell the property and use the proceeds to pay off your unsecured debts. In some cases where there are items you want to keep that are not subject to an exemption (or you have more than your limit), the bankruptcy trustee might allow you to buy them back. However, you must show that you are using funds that are not part of the bankruptcy estate, such as wages earned after filing for bankruptcy or a loan from friends or family.
Chapter 7 Or Chapter 13 Bankruptcy: What’s The Difference?
In a Chapter 13 bankruptcy, you are not “liquidating” your assets. This means that you have to keep your property, but some of this may be a cost. That is, you can only exempt a certain amount of equity in certain items. While each state has its own rules, exemptions typically cover your car and home, as well as personal and household items.
Other property, such as luxury items (a boat or an extravagant collection) will not be exempt under Chapter 13. The trustee does not sell these items as in a Chapter 7 bankruptcy. , you will have to pay for the value of the non-exempt items through your repayment plan to repay your unsecured creditors. Depending on their income and the value of their non-exempt assets, this could be unsustainable for some people. Therefore, selling them would be their best option.
For your unsecured debt (such as what is owed to credit card companies), the amount you owe will be determined by your disposable income. This is calculated from a Chapter 13 means test. As discussed earlier, a means test will indicate how much bankruptcy relief you will receive.
For your secured assets (like your home and car), you have to keep making payments, but also put the property as collateral, which means your creditor could take it back if you don’t make the agreement. – to the payment. Chapter 13 allows for a 3- to 5-year repayment plan to catch up on past payments, which means creditors can’t repossess your car or foreclose on your home in the meantime.
Chapter 13 Bankruptcy For Beginners
Not only can anyone file for bankruptcy, and that’s fine – it really should be the last resort.
In general terms, Chapter 7 bankruptcy will depend on your disposable income in relation to your income. Chapter 13, on the other hand, shows the total amount of your debt.
Chapter 7 bankruptcy is designed for someone who does not have enough disposable income to repay creditors without having their debts forgiven. The higher your disposable income, the less likely you can file for Chapter 7. And it’s not based on your personal opinion of the value of your disposable income; your application will be decided based on the results of these forms: the statement of your monthly income (if it is below the median for your state) and the Chapter 7 mean test calculation.
For Chapter 13 bankruptcy, you must show that you have a regular income, and you cannot have more than $419,275 in unsecured debt or $1,257,850 in secured debt. Note that these amounts are adjusted every 3 years for inflation. These numbers are from April 2019; the amounts for the cases presented before this was $394,725 and $1,184,200 respectively. The next adjustment will be in April 2022.
Chapter 7 Vs. Chapter 13 Bankruptcy
Before filing for bankruptcy, your first step should be to contact a professional to help you determine if Chapter 7 or Chapter 13 is right for you. And of course, you should refer to the limits above to see if Chapter 7 is even a possibility. Otherwise, read below for several more considerations that may indicate whether Chapter 7 or Chapter 13 is best for your situation.
The good news is that those stressful calls will come to an end when you file for one of these bankruptcy chapters. That’s because an automatic stay goes into effect immediately after filing that prevents collection agents from contacting debtors. While it includes wage garnishment, it does not stop criminal cases, some child support actions and certain eviction situations, nor does it apply to debts you incurred after you filed.
If the harassment continues, notify the bankruptcy court that it will determine the next course of action (something that could include fines or fees).
Your first step should be to contact a professional to help you determine if Chapter 7 or Chapter 13 is right for you. And of course, you should refer to the limits above to see if Chapter 7 is even a possibility. Otherwise, read below for several more considerations that may indicate whether Chapter 7 or Chapter 13 is best for your situation.
What Happens After A Chapter 13 Discharge?
Let’s take a look at the filing process for Chapter 7 versus Chapter 13 bankruptcy. (All the forms you may need can be found here.)
In addition to following all court orders and plans that have been approved, you will want to put in the work to rebuild your credit. Your credit report doesn’t look clean for a while; a Chapter 7 bankruptcy stays on your report for 10 years and a Chapter 13 is dismissed after 7 years.
And although it is true that lenders may be wary of extending credit to someone with a failure on their credit report, you can also start implementing better habits of financial well-being right away. Some places to start are:
The good news is that those stressful calls will come to an end when you file for one of these bankruptcy chapters. That’s because an automatic stay goes into effect immediately after filing, preventing collection agents from contacting debtors. While it includes wage garnishment, it does not stop criminal cases, some child support actions and certain eviction situations, nor does it apply to any debts you incur after filing.
How To File Bankruptcy For Free: A 10 Step Guide
If the harassment continues, notify the bankruptcy court, which will determine the next action (something that could include fines or fees).
The good news is that while failure is a big misstep, it shouldn’t dictate your future. Financial health is around the
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