Are you one of the thousands of people who think that filing bankruptcy is only beneficial for those individuals trying to get out of debt? Well after this blog you will understand that eliminating debt is just one reason that people choose to file bankruptcy. In today’s economy creditors will do whatever it takes to get paid, and garnishing wages is one of their first choices. For a creditor, access to garnish a debtor is great because it is court ordered and there are only 2 ways to stop it: completely paying the debt back or filing bankruptcy. That’s right – you can bring a garnishment to a halt just by filing Chapter 7 or Chapter 13 bankruptcy. Here’s more information about exactly how it works:
On the day that your bankruptcy is officially filed with the courts a notice of filing is mailed to all of your creditors. This notice of filing will inform them that an “automatic stay” has been put into effect. The automatic stay is essentially an umbrella of protection over you that says no one can attempt to collect a debt from you any longer. Once this stay is in place your creditors must adhere. Therefore, the company garnishing your wages loses the right to do so on the day your case is filed. This occurs because of what a garnishment really is: a court order. The only item that trumps a court order is another court order, and in this case the “automatic stay” is a direct order from the bankruptcy court.
As with any legal process there are exceptions. One type of garnishment that filing a bankruptcy typically cannot stop is one where the government is the creditor doing the garnishing. If you are being garnished by the government for debts such as child support, alimony, or back taxes then you should inform your bankruptcy attorney as soon as possible so that he/she can find out what a bankruptcy will be able to do for your specific situation.
Garnishments can be detrimental to your finances. In most cases it is legal for creditors to garnish up to 25% of your gross wages, and if you are being garnished by the government they may be able to take much more. Filing Chapter 7 or Chapter 13 bankruptcy to end a garnishment can allow you to start seeing your full paycheck again which will help you in your goal of becoming financially free. If you are being garnished and do not know where to turn then it may be time for you to contact a local bankruptcy attorney to see if filing would be beneficial to you.
Chapter 13 bankruptcy is the second most common type of personal bankruptcy filed in the United States today. It is also the more complex of the two. A Chapter 13 bankruptcy is considered more complex because it involves a 3-5 year payment plan in which the debtor is allowed to payback a percentage of their overall unsecured debt. So, for our purposes the timeline will be a minimum of 3-5 years. This may seem like a long time, but it will go by quickly and at the end of the payment plan you will be debt free. Here’s a generic timeline to help you see how your Chapter 13 bankruptcy will go:
- Locate and Hire an Attorney – Because of its complexity, it is nearly impossible to file a Chapter 13 bankruptcy without a licensed attorney. The payment plan involves specific calculations and constant communication with the bankruptcy court that the average layman just can’t do. The time it takes you to locate and hire an attorney is dependent entirely on you.
- Provide paperwork – Once you have hired an attorney you will be responsible for providing them the financial documentation they need. Most of the required paperwork involves items that you alone will have access to, and this is why the attorney does not obtain them. The paperwork includes pay stubs, bank statements, prior year tax returns, mortgage documents, car loan information, and other financial items.
- Draft Petition – The documentation you provide to your Chapter 13 bankruptcy attorney
- is for his/her use in preparing the official document required to file a bankruptcy: the petition. The amount of time needed to draft the petition depends on a lot of variables, but you should check with your attorney for an estimate.
- Confirmation Hearing – After your case has been filed the bankruptcy court will set up a time to meet with your attorney to discuss the repayment plan he/she has requested for your Chapter 13 case. This is called a confirmation hearing and you are not required to attend if your attorney is present. In many cases it is not necessary for the debtor to be present. The bankruptcy trustee will either approve your plan or send it back to be revised.
- Meeting of creditors – If your payment plan is approved then the court will schedule another hearing which you will be required to attend known as the meeting of creditors. This hearing will involve the bankruptcy trustee asking you a series of questions to ensure that no fraud has taken place.
- Payment Plan – Your first Chapter 13 payment will be due 30 days after your case was filed and will continue for 3-5 years depending on what the court agreed to. You will make 1 payment every month.
- Discharge – At the end of your payment plan you will receive discharge papers in the mail from the bankruptcy court stating that your case was successfully completed. This means that you are debt free and done with your Chapter 13 bankruptcy!
Chapter 7 bankruptcy is the quickest and most common type of bankruptcy filed in America today, but have you ever wondered exactly how long it takes to file Chapter 7 bankruptcy? Below is a generic timeline for what to expect. As you will see, the time it takes to file a bankruptcy is quite dependant upon the debtor taking proactive steps to further the process.
- Hire an attorney – The time you take to find and hire an attorney is completely up to you. This process will include initial consultations, discussion of your debt situation, conversations about fees and court costs, and ultimately the signing of a contract for services.
- Providing documents – Once you have met with your new bankruptcy lawyer you will most likely be provided with a list of financial paperwork that you must provide in order for the case to proceed. This documentation can include pay stubs, bank statements, tax returns, mortgage documents, car loan information, etc. If you are struggling to obtain any of this information you should let your attorney know immediately. Failure to provide these documents will stall the completion of your case.
- Drafting the petition – The official court document that is required to file a bankruptcy is called the petition and it will be drafted by your attorney once they have received the necessary documents from you. The time it takes your attorney to draft the petition will depend on his/her workload, the complexity of your case, and other variables. However, you should request an estimate of when your petition will be completed so you can be prepared for the next step.
- Review of petition – In order to make sure all of the information listed is correct, your attorney may want to schedule an in person meeting with you to go over the petition they just drafted. This will only take about an hour.
- Filing of Petition & Hearing – After you review the petition with your attorney they will file it with the bankruptcy court. This will involve a filing fee of $306. Thirty to Forty-Five days after the filing of the petition you will be required to attend a court hearing with your attorney where a bankruptcy trustee will review your case. This takes 10-15 minutes.
- Discharge of Debts – 60-90 days after your official bankruptcy hearing you will receive discharge papers in the mail stating that your Chapter 7 bankruptcy has been successfully completed. This means that your unsecured debt has been eliminated.
The truth is that a Chapter 7 bankruptcy can take as long as you want it to take. During my time as a bankruptcy paralegal I saw Chapter 7 cases filed in 14 days, or cases that were still waiting to be filed 2 years after the debtor hire our firm. Be a proactive debtor and gather your documents quickly, communicate constantly with your attorney, and ask plenty of questions.
One of the most important parts of the bankruptcy process is the completion and filing of the bankruptcy petition. It is, put simply, the official form required to file a bankruptcy in the United States. A bankruptcy petition can range from a dozen pages to hundreds of pages in length depending on the specific financial situation of the debtor. Each section of the petition is referred to as a “schedule.” Even if you hire an attorney to help you with your bankruptcy it is still vital that you understand, as the debtor, what your petition must include. Below is an explanation of 5 of the most important parts of the bankruptcy petition:
- Schedule D – In this section of the bankruptcy petition your secured creditors will be listed. A secured debt is one that is tied to a specific tangible item. This list can include your mortgage lender, the company who holds your car loan. Just because these creditors are listed does not mean that the items they are associated will be taken from you. In most cases you can keep your secured items safe by remaining current on the payments.
- Schedule E – This section of the petition involves listing your unsecured creditors. Unsecured debt is the most common type of debt in America and can include things like credit cards, medical bills, personal loans, payday loans, judgments, etc. In order to accurately list all of your unsecured creditors your bankruptcy lawyer may recommend pulling an up to date credit report.
- Schedule I – This schedule is a comprehensive list of the debtor’s household income. Even if your spouse is not filing a joint case with you, it is likely that the bankruptcy court will want to see his/her income as well.
- Schedule J – This schedule is a comprehensive list of the debtor’s monthly expenses. This list includes life’s necessities such as rent, car payment, utilities, clothing, groceries, and others. You will create this list with your attorney by estimating what you spend each month. Using this schedule in connection with Schedule I (income) the court will determine whether or not you qualify to file a Chapter 7 or Chapter 13 bankruptcy.
- Signature Page – On the final page of the petition the debtor(s) must sign their name agreeing that to their knowledge the petition is correct and does not involve fraudulent statements. Without a signature on this page your bankruptcy could be thrown out.
As you can see the petition involves lots of detailed information. It may seem overwhelming to you, but that is why hiring a bankruptcy attorney is recommended. Bankruptcy attorneys see petitions every single day and have an understanding of exactly what information needs to be on each schedule. Before signing the petition your attorney should go over the information with you and answer any questions you may have about the information you see.