What is a Bankruptcy Trustee?

A U.S. Bankruptcy Trustee, also known as a Trustee in Bankruptcy, is an individual or an entity who is appointed by the U.S. Department of Justice to administer a bankruptcy case.  Chapter 7 and 13 trustees are typically professional accountants or attorneys.

Depending on the nature of your bankruptcy proceedings, you may have limited interaction or numerous exchanges with the bankruptcy trustee assigned to your case.  For example, if you are filing Chapter 13 bankruptcy, you can expect to have more frequent involvement with your trustee than if you are filing Chapter 7 bankruptcy.

The bankruptcy trustee’s objective is to protect the interests of the creditors involved in the case, not those of the debtor.  Individuals and couples filing Chapter 13 or filing Chapter 7 bankruptcies should be prepared to protect their interests, assets and property before meeting with a bankruptcy trustee.  Hiring an experienced bankruptcy attorney to negotiate and communicate with the trustee on your behalf is a wise investment.

Chapter 13 Trustee

A bankruptcy trustee plays a larger role in Chapter 13 cases than in Chapter 7 cases.  Individuals or couples filing chapter 13 will note the trustee plays a dual role. The trustee’s main function is to ensure that the creditors’ receive fair and timely repayment of outstanding debts.  In order to achieve this, the bankruptcy trustee will work with the petitioner to reorganize debts and schedule a repayment plan.  Once the reorganization, payment plan and schedule are approved, the bankruptcy trustee assumes responsibility for receiving the debtor’s monthly payments and distributing them to creditors.

A certain amount of negotiation and a thorough understanding of bankruptcy law are required of the bankruptcy trustee so that they may endeavor that both the creditors’ and debtor’s interests are upheld in accordance with the laws of the U.S. Bankruptcy Code.  The only way for a petitioner to guarantee their best interests are being represented is to retain the counsel of a bankruptcy attorney.

Chapter 7 Trustee

In Chapter 7 bankruptcy cases, the bankruptcy trustee plays a minimal role in the proceedings.  Individuals and couples filing Chapter 7 liquidation will first encounter their Chapter 7 Trustee at the Section 341 Creditors’ Meeting.  At this meeting, the trustee will review all creditor lists, financial documents, assets and exemptions that you and/or your lawyer submitted when filing Chapter 7 bankruptcy.

Just as the trustee’s role in Chapter 13 cases is to protect the interests of the creditors, the same is true for Chapter 7 Trustees in Bankruptcy.  The Chapter 7 bankruptcy trustee must aim to satisfy the creditors’ claims through the liquidation of the debtor’s non-exempt property or assets.  The trustee oversees the sale of non-exempt property and assets, and distributes the proceeds to pay the balance owed to priority creditors.  Most individuals and couples filing Chapter 7 bankruptcy petitions are classified by trustees as “no asset” cases, and therefore no property is lost.

Bankruptcy questions and answers

Above all else, remember the Bankruptcy Trustee represents the interests of the creditors in both Chapter 7 and Chapter 13 bankruptcy cases.  A bankruptcy attorney can answer most of your bankruptcy questions and answers, and is in the best position to address concerns you may have about dealing with a bankruptcy trustee.  If you choose to enter bankruptcy proceedings without the assistance of bankruptcy lawyers to oversee your case, you may still benefit from contacting a legal professional to answer basic bankruptcy questions and answers prior to filing Chapter 7 or filing Chapter 13 bankruptcy.

Chapter 13 Bankruptcy Information

Navigating through the potential effects of bankruptcy is something people may experience when financial situations call for decisive and protective action. A number of bankruptcy types exist to serve the needs of debtors in different kinds of circumstances, and clarity around chapter 13 bankruptcy information is helpful.

Bankruptcy - Chapter 13

Learning About Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a popular choice and has been created to help people capable of repaying debt, but who desire relief from creditor demands, threats of garnishment or repossession, and other difficulties.
As with any bankruptcy filing, Chapter 13 requires certain qualifications on the part of the debtor, and may have different degrees of impact on the lives and financial welfare of debtors depending on individual context. Discussing the possibility of a Chapter 13 filing with an attorney is a wise way to ensure this type of bankruptcy is applicable, and to secure assistance throughout the process itself. Investigating Chapter 13’s advantages and risks can also help determine whether such a filing is advisable.

Why File Chapter 13?

What draws most debtors to Chapter 13 bankruptcy is its ability to create dramatic debt consolidation. While consolidating debts is possible without going through the process of bankruptcy, Chapter 13 is often able to help debtors secure more manageable payments while also providing relief from constant phone calls and letters, as correspondence from creditors is typically re-directed to an attorney or is ceased completely.

Creditors must accept the repayment terms of a debtor who successfully files for Chapter 13 bankruptcy, and any existing repossession or foreclosure processes are immediately halted when a filing is approved and completed. As a result, debtors who can show steady employment or other means of income but who wish to protect their assets and consolidate outstanding debt –including payments for student loans, child support or alimony, and other obligations– may find a worthwhile financial solution with Chapter 13.

What are the Effects of Chapter 13

As with any type of bankruptcy filing, Chapter 13 may interfere with a credit rating and can have an impact on any credit decisions that arise over the course of a decade. While paying off outstanding debts and preventing liquidation of assets can be a powerful financial move for individuals and for families, some debtors choose to handle their debts through other means to avoid having any bankruptcy filings on their credit reports. Understanding how a credit report marked with Chapter 13 bankruptcy may interact with credit opportunities can be greatly aided through consulting with an attorney who specializes in this type of bankruptcy.

From the “341 Meeting of the Creditors” in which a trustee investigates personal eligibility for a Chapter 13 filing and examines a repayment plan to the process of completing legal filings, an attorney is a significant asset for those opting for Chapter 13 bankruptcy. As some trustees or bankruptcy judges may ask debtors specifically to retain an attorney to help guide them through proceedings, being prepared with a professional can make the process faster and far more comfortable. Though Chapter 13 bankruptcy isn’t right for everyone, it can help some people break free from debt and protect their possessions, making it a potentially valuable tool.

Understanding a Bankruptcy Discharge

If you are looking into filing bankruptcy for the first time you may realize quickly that there is some vocabulary tossed around that doesn’t really make sense. One of many legal words is “discharge” and it is a crucial part of filing personal bankruptcy. So what is it and what does it mean for you? Here is some key information to know about a bankruptcy discharge:

1. What is it?

Technically a bankruptcy discharge is a legal order stating that the debtor who has just filed bankruptcy is no longer responsible for paying back certain unsecured debt. The discharge also prohibits any debt collection attempt against the debtor including letters, phone calls or legal action. Put simply, a bankruptcy discharge is the a piece of paper signifying that your bankruptcy has been completed and it was successful.

2. When is it received?

The timeline on when a bankruptcy discharge is received depends on which type of personal bankruptcy is filed. If a Chapter 7 bankruptcy is filed then the discharge is typically received 2-3 months after the debtor’s bankruptcy hearing. If a Chapter 13 bankruptcy is filed then the discharge will not be received until the 3-5 year repayment plan is complete. Under the current bankruptcy code the discharge paperwork is mailed to the debtor via the US Postal Service.

3. Can all debts be discharged?

Receiving your bankruptcy discharge in the mail does not instantly wipe away any and all debts you have. There are certain types of debt that cannot be discharged such as student loans, child support, alimony, and debts owed to the government like back taxes and parking tickets. Before going bankrupt you should have a chance to review what debts you will still be left with after you receive your discharge. If the debt you are struggling with is mainly nondischargeable debt, then filing a Chapter 13 bankruptcy may be your best option.

3. Can it be denied?

The bankruptcy court has the right to revoke any debtors discharge if they find that fraud has taken place within the case. Committing fraud when filing bankruptcy can happen in many different ways. Some common fraud findings are: deliberately omitting information from the bankruptcy paperwork, falsely obtaining a discharge, and not admitting to any additional income expected in the next few years. In most cases hiring a bankruptcy lawyer will help you avoid simple mistakes that the court views as fraud.

A bankruptcy discharge is the light at the end of the bankruptcy tunnel for most debtors. The process of filing for bankruptcy may be difficult and complex at times and in some cases it can take longer than you wanted it to, but in the end the financial fresh start that it provides is absolutely worth the wait. If you are dealing with large amounts of unsecured debt, like credit cards or medical bills, that you cannot see yourself paying off alone then filing bankruptcy may be an option you need to consider.

Chapter 7 Bankruptcy Timeline

The law provides for very specific criteria in order to file for Chapter 7 Bankruptcy timeline. The process can take months, but is made much easier with the assistance of a local attorney.

8 Years Before Your Chapter 7 Bankruptcy is Filed

A Prior Chapter 7 Filing Within the Last 8 Years Prevents Filing of Another Chapter 7

You cannot receive a discharge in a Chapter 7 bankruptcy if you received a prior Chapter 7 discharge within the last 8 years. You may however still receive a Chapter 7 discharge if you filed Chapter 13 bankruptcy in the last 6 years and repaid at least 70% of your unsecured debt back in that prior Chapter 13 bankruptcy.

2 Years Before Your Chapter 7 Bankruptcy is Filed

What Exemptions Must I Claim in a Chapter 7?

The state exemptions that you must claim in a Chapter 7 bankruptcy are determined by where you lived 2 years (730 days) prior to filing. In an effort by Congress to prevent venue or jurisdiction shopping, you must use whatever state’s exemptions you lived in 2 years before your case is filed.

If you lived in multiple states during this 2-year period, you must claim the state’s exemptions where you lived 6 months prior to the 2-year deadline, or in other words, 2.5 years before your case is filed.

1 Year Before Your Chapter 7 is Filed

Transfers of Property to Defraud Creditors

The court may deny you a Chapter 7 discharge if you have attempted to defraud a creditor by transferring or concealing property within one year before the filing of your Chapter 7 bankruptcy. In these cases, a Chapter 7 Trustee has the power to recover the transferred property from the person(s) to whom you transferred it to, then liquidate it and use the proceeds to repay your creditors.

Preferential Payments to Relatives

If you repay $600 or more to one of your relatives or business partners (also called “insiders”) within one year prior to filing a Chapter 7 bankruptcy, it is known as a preferential payment. The Chapter 7 Trustee has the power to recover preferential payments from the people to whom you made them and use that money to repay your creditors.

Credit Counseling Requirement

180 Days Before Your Chapter 7 Is Filed

Within 180 days before filing bankruptcy, you must receive a credit counseling briefing from an approved nonprofit budget and credit counseling agency. This counseling briefing is a question and answer session with an approved non-profit credit counselor who tries to help you see if there is a way you could repay your debt and avoid bankruptcy. The briefing usually takes around 45-90 minutes and can be done via telephone, in-person, or online. If the course is not completed within the 180 days prior to filing your bankruptcy, your case is dismissed.

The Dismissal of a Previous Bankruptcy Prevents the Filing of a Chapter 7

You cannot file a Chapter 7 bankruptcy if you had a previous bankruptcy dismissed within the preceding 180 days because either:

  1. You failed to obey court orders, or
  2. You voluntarily requested the dismissal after the filing for relief from the automatic stay by one of your creditors.

90 Days Before Your Chapter 7 is Filed

Minimum Residency Requirement

You must be a resident in the state in which you are filing for the last 90 days. If you have not resided in the state that long, you can only file in the state where you have resided, or which has been your principal place of business or which has been the location of your principal assets for the majority of the last 180 days.

Preferential Payment to a Creditor

If you repay $600 or more to an individual creditor within 90 days prior to filing your Chapter 7, it is considered a preferential payment. The Chapter 7 Trustee has the power to recover preferential payments from the creditors to whom you made them and use that money to repay your creditors.

Luxury Purchases

If you incur $500 or more of “luxury goods or services” credit from any individual creditor within the 90-day period before your Chapter 7 bankruptcy is filed, the debt is presumed to be non-dischargeable and you may have to repay this debt back.

70 Days Before Your Chapter 7 is Filed

Credit Card Cash Advances

If you incur $750 or more of credit card cash advances within 70-day period before your Chapter 7 bankruptcy is filed, the debt is presumed to be non-dischargeable and you may have to repay this debt.

The Filing of Your Chapter 7 Bankruptcy

Your Chapter 7 bankruptcy is officially commenced when your bankruptcy attorney files your petition with the Bankruptcy Court. (Married couples have the opportunity to file one petition together and commence a joint case.) The filing of your Chapter 7 bankruptcy also commences the automatic stay which prohibits your creditors from any further collection actions against you.

When your bankruptcy is filed, the Bankruptcy Court assigns a Chapter 7 Trustee to administer your case and schedules your 341 Meeting of the Creditors.

15 Days After Your Chapter 7 Bankruptcy is Filed

Deadline to File Schedules and Financial Statement

Within 15 days after filing your Chapter 7 bankruptcy, your attorney must file any bankruptcy schedules that he or she did not file when with your bankruptcy petition. These schedules list your assets and liabilities, your current income and expenditures, any contracts and unexpired leases, and a statement of your financial affairs. In most cases, your attorney files all these required documents when your petition is filed.

Notice to Your Creditors

The Bankruptcy Court sends official notice of your Chapter 7 bankruptcy to you and all of the creditors listed on your petition approximately 15 days after the filing of your case. This notice informs you of the date and time set by the bankruptcy court for your 341 Meeting of the Creditors. It also informs your creditors of the deadline to object to your case.

30 Days After Your Chapter 7 is Filed

§ 341 Meeting

Approximately 30-45 days after the filing of your Chapter 7 bankruptcy, your 341 Meeting of the Creditors is held. You and your attorney are required to attend this meeting and testify under oath as to the accuracy of your filed Chapter 7 petition in front of your assigned Trustee. If you do not attend the 341 Meeting, your case can be dismissed, and you have a record of bankruptcy on your credit report without having the benefit of receiving a discharge of your debt.

341 Meetings are usually short and painless and it is uncommon for creditors to attend the meeting. Your bankruptcy attorney is present at this meeting to represent you.

SPECIAL NOTE ***Per the Bankruptcy Code, all required Trustee documents must be tendered to the Trustee by you or your attorney 7 days prior to the 341 Meeting. These documents vary by Trustee and jurisdiction, but will usually include your last 2 years of tax returns and 60 days of paystubs immediately prior to the filing date of your Chapter 7.***

Deadline to file Statement of Intention

Within 30 days after the filing of your Chapter 7 petition, your bankruptcy attorney must file your Statement of Intention. This document is also part of the Chapter 7 petition and indicates whether you are surrendering or reaffirming any debt that is secured by collateral, such as a car or a house. If you plan to keep your secured property, the Statement of Intention needs to indicate whether you intend to: (1) reaffirm the debt and continue to make the payments under the same terms of the original agreement, or (2) redeem the property by paying the fair market value of the secured property to the original creditor. Any difference owed to the original creditor above and beyond the fair market value of the property will be discharged in your Chapter 7 bankruptcy.

45 Days After Your Chapter 7 Bankruptcy is Filed

Statement of Available Chapters

45 days after your attorney has filed your bankruptcy, the Statement of Available Chapters must be filed with the court. The Statement of Available Chapters is a certificate from your attorney that you received an explanation of the various chapters of bankruptcy that are available to you under the bankruptcy code. This document is normally filed by your attorney when he initially files your petition.

30 Days After The Meeting of Your Creditors

Deadline for Your Creditors or the Trustee to Object to any Claim of Exempt Property

Your creditors and your Chapter 7 Trustee have 30 days after the conclusion of the 341 Meeting to object to any exemptions you have claimed in Schedule C of the bankruptcy petition. Most 341 Meetings are concluded on the same day they are heard by the Trustee, although the Trustee has the power to continue your 341 Meeting to a later date. Any extension by the Trustee extends the time that your creditors have to object to your claimed exemptions.

60 Days After The Meeting of Your Creditors

Financial Management Course Requirement

To be able to receive a Chapter 7 Discharge, you must complete your post-petition financial management course within 60 days after your 341 Meeting. To be able to receive a Chapter 13 Discharge, you must complete your post-petition financial management course before the completion of your case. This course is of an instructional nature and is tailored around managing your personal finances after bankruptcy. The class takes approximately 2 hours and can be done over the telephone or online. If the briefing is not completed within the allotted time period, you may not receive a discharge.

Deadline for Your Creditors to Object to the Discharge of a Particular Debt

Your creditors have 60 days after the first date set for your 341 Meeting to file an objection to the discharge of a particular debt. The Bankruptcy Code allows your creditors to object to the discharge of one of your debts based one of the following:

  • The debt was obtained by false pretenses, a false representation, or actual fraud
  • The debt was obtained from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny
  • Any debt caused by your willful and malicious injury of another
  • Any debt incurred in a divorce or separation. (Child support and spousal maintenance are not dischargeable in a Chapter 7 under any circumstances.)

Deadline for Your Creditors to Object to the Discharge of all the Debt Claimed in Your Chapter 7 Bankruptcy
Your creditors have 60 days after the first date set for the 341 Meeting to file an objection to the discharge of all debt claimed in your Chapter 7. The Bankruptcy Code allows your creditors to object to the discharge of all debts claimed in your Chapter 7 based on one of the following:

  • Any misconduct including transfer, destruction or concealment of property;
  • The concealment, destruction, falsification or failure to keep financial records;
  • The making of false statements; withholding information; failing to explain losses; or failure to respond to material questions
  • If you’ve received a discharge in a prior Chapter 7 case filed within the last 8 years.

Deadline for the U.S. Trustee or Bankruptcy Court to Move to Dismiss Your Case for Substantial Abuse
The U.S. Trustee or the bankruptcy Court may move to dismiss your case for substantial abuse within 60 days after the first date set of the 341 Meeting. This motion is typically brought by The U.S. Trustee or the Bankruptcy Court when they believe that the granting of a discharge would be a substantial abuse of the Chapter 7 Bankruptcy Code. “Substantial abuse” has been generally defined by most bankruptcy judges to mean that you have the sufficient disposable income to pay a portion of your debt back over a 36 to 60-month period.

Discharge!

Your Chapter 7 discharge is entered by the Bankruptcy Court as soon as the 60-day time period for your creditors to object to discharge or dismiss your case expires. Your discharge papers usually arrives by official mail to your listed address on the bankruptcy petition 75-90 days after your 341 Meeting.

90 Days After The Meeting of Your Creditors

If any of your assets are available for liquidation and distribution to your creditors by the Chapter 7 Trustee, your creditors must file their proofs of claim within 90 days after your 341 meeting if they wish to receive in any monies from your case.

**Please note that any government entities that are your creditors have 180 days after the filing of your case to submit their proofs of claim.**

Debt Consolidation Loans (Balance Transfers)

A balance transfer is a type of debt consolidation loan in which you transfer all or some of your debt onto a new credit card. The new creditor is lending you the money to pay off your existing debt, and usually is willing to offer a low introductory rate to get your business. They obviously are willing to do this for a reason.

Bankruptcy - Debt Consolidation

In 2004, the credit card industry reportedly took in approximately $43 billion in fee income from late payment, over-limit and balance transfer fees*.)

Creditors would not be offering such a good deal if the terms in the agreement weren’t stacked in their favor. The interest rates on new purchases may be significantly higher than the introductory interest rate applicable to your transferred debt, and the credit card agreements will often contain a provision allowing the creditor to void the introductory APR if you are late on as few as one monthly payment. If your credit isn’t perfect, it’s also possible that the new credit card will charge a steep transaction or annual fee in exchange for letting you transfer your balance.

Beware of Obtaining More Credit

The major downfall of balance transfers is that they can quickly double the amount of credit that you have. While that may sound good at first, consider the fact that more credit just allows you to borrow more money. If you’re already having financial problems, should you really be trying to obtain more credit? It’s a matter of self discipline. Usually more credit leads to more debt, and people often find themselves using the credit that has become available on their old cards as a result of the balance transfer, ending up with twice as much debt as they had before the transfer. It can happen very quickly to anyone.

For some, it is possible to take full advantage of the low introductory offers creditors make to payoff a large portion or all of the debt in the short amount of time available before the introductory rate increases. Obviously, if you have $20,000 in debt, you would rather pay a 0% introductory interest rate than your current interest rate because all payments you make would go toward payment of the principal balance. If your budget shows that you have excess disposable income each month (not counting credit card expenses), and you have the resolve to destroy all your old credit cards following a balance transfer, then a balance transfer could end up saving you some interest charges in the short-term.

Pros and Cons of Debt Consolidation Loans

PROS:
Low Interest Rates
There are many balance transfer deals offered by the major creditors, and most offer a low introductory rate for a set period of time (typically 9 months). Your payments on the new card balance will reduce the amount of principal you owe for as long as a long as the introductory rate is in place.
Only One Creditor to Deal With
Transferring all your debts to one credit card can simplify the process of organizing and repaying your debt because there is only one creditor to pay.
More Credit
You will increase the amount of credit available to you by freeing up available credit on your old credit cards (although this factor may also be a “con”).
CONS:
Too Much Credit
The biggest downfall of balance transfers is that people often find themselves using their old credit cards again, ending up with more debt than they had in the first place.
Still Have To Pay Back 100% Of Debt
You may be able to lower the interest rates on your debt, but if you don’t have the disposable income to make significant payments towards your principal balance, your debt won’t be going anywhere, and you’ll be stuck with a “band-aid” solution.
You May Not Get Approved
It’s likely that a creditor will require authorization to check your credit report before granting you a balance transfer request. Don’t assume that borrowing more money is the best bankruptcy alternative just because a creditor is willing to approve loaning you the money.
Fees
Balance transfer agreements can have steep transaction or annual fees.
You Can’t Borrow Your Way Out of Debt
A balance transfer is really just another loan, and borrowing money often leads to more debt.

Consider A Balance Transfer If…

  • You have enough disposable income to make monthly payments on your new credit card in addition to meeting your living expenses
  • You have the discipline to destroy all of your old credit cards after the balance transfer
  • You have addressed the roots of your financial problems and determined that the interest rates of your debt, and not the actual debt, is your real problem
  • You have made a master plan to be completely debt free, and a balance transfer will help you meet that goal
  • You are looking for a short term solution to manage your debt

New Century Financial Files Bankruptcy

On Monday, New Century Financial filed for Chapter 11 bankruptcy protection in Delaware. New Century, once the nation’s second largest subprime mortgage lender, also announced plans to fire 3,200 employees, about 54 percent of its work force. As part of the restructuring plan, New Century will sell its loan servicing business to Carrington Capital Management for $139 million.

New Century is the latest subprime lender to fall casualty to the dramatic increase in defaults and foreclosures nationwide. Many homeowners have seen their monthly mortgage payments increase as interest rates have risen. Due to the recent popularity of Adjustable Rate Mortgages and interest only loans, many homeowners are facing steep increases in mortgage payments as interest rates rise and fixed introductory payment periods end. Chapter 13 bankruptcy can stop a foreclosure, but you must have sufficient income to continue with the regular mortgage payments in addition to a court ordered payment to catch up on the mortgage arrears and pay off a percentage of any other debts.

The credit industry is responding to the recent collapse of the subprime market with a tightening of qualifications and some have stopped subprime loans altogether. Although it is still relatively easy to obtain a mortgage after a bankruptcy, consumers should expect to find fewer loans available immediately following a bankruptcy discharge.

Risky, or irresponsible, lending extends too many other areas of the credit industry, including pay-day loans, financing offers, credit cards, and auto loans. These industries have not received as much attention as the subprime mortgage industry, but there is clearly an over-extension of credit to consumers that simply cannot afford to carry the amount of credit given to them. These debts typically have high interest rates and unreasonable payment terms that often lead to default. The lender is harmed by the high amount of defaults, and the consumer is often forced to consider bankruptcy or other debt relief options.

How Much Does Bankruptcy Cost?

In most cases if you hire someone to perform a legal service for you then there will be some sort of fee involves. Filing bankruptcy is no different. Whether you hire a bankruptcy lawyer to guide you through the process or attempt a do it yourself bankruptcy, there will most likely be fee requirements. Hopefully this blog will give you some sense of what you may pay if you are considering a Chapter 7 bankruptcy or Chapter 13 bankruptcy in the near future.

1. Court Fees 
As of 2012 the filing fees associated with personal bankruptcy are as follows: $306 for Chapter 7, and $281 for a Chapter 13 bankruptcy. Typically these are mandatory fees that are expected as soon as the debtor (or the debtor’s attorney) files the bankruptcy paperwork. In rare cases the debtor can ask the court to waive the filing fees if they believe it will cause them hardship to come up with the funds.

2. Attorney’s Fees
Each bankruptcy attorney will create his or her own fees generally based upon an estimate of how much work the case will take. In most cases bankruptcy lawyers charge less for Chapter 7 cases because they are over quicker, take less work, and are all around more simple to work on. As of today the going rate for Chapter 7 attorney’s fees can range from $1000-$2000 depending on the attorney, the location, and the specifics of the case. Chapter 13 cases usually cost more because of the sheer complexity that is involved. Sometimes bankruptcy attorneys will allow the bulk of their fees to be included in the Chapter 13 repayment plan that will last 3-5 years.

3. Additional Fees
Although it may seem that the court fees and attorney’s fees are enough already you should always be prepared for bankruptcy to throw a few curve balls. Depending on your case and your attorney you may have a few additional fees. Some of these fees may include the 2 courses that filing bankruptcy requires. These courses can be taken online, over the phone, or in person and are typically between $40-50 dollars a piece. You may also be asked to provide the court with an appraisal of your home or vehicle which could also require additional fees.

Again, the cost of your particular bankruptcy case will depend on many variables so it may be in your best interest to obtain several quotes from local attorney’s so that you can choose the best option for you. Before signing any contract be sure you are aware of what additional costs your attorney will cover and which ones you will be required to handle. Also, pay careful attention to the payment timeline that the attorney requests. Some attorneys want all of the fees to be paid before the case is filed, and others are more lenient. Don’t let the cost of filing bankruptcy scare you from doing something that could truly benefit your financial future.

Top 10 Bankruptcy Mistakes

Bankruptcy mistakes can be very costly and all too often an individual filing bankruptcy will make inadvertent mistakes that jeopardize their chance of discharging their debts and retaining exempted property. Avoid these Top 10 mistakes and you will be well on your way to a successful bankruptcy filing.

  1. Transferring Real Estate or Other Assets:

Some people try and protect their assets by transferring them out of their name, but this strategy will not work in a bankruptcy proceeding. Recent property transfers must be disclosed to the bankruptcy trustee and the bankruptcy court may “avoid the transfer” and put the parties in the same position they were in before the transfer. Even if you don’t feel that the property or asset that your name is rightfully yours, the bankruptcy court may still “avoid the transfer”. It is often unnecessary to transfer any property or assets before filing bankruptcy as each state has bankruptcy exemptions designed to protect all or a portion of your assets.

Bankruptcy Exemptions by State

  1. Transferring Credit Card Balances:

Transferring a large amount of debt to one credit card can result in debt on the new credit card not being eliminated due to the large amount of debt incurred to one creditor right before filing bankruptcy.The new creditor may have a strong argument that the balance transfer should be presumed fraudulent, especially if the transfer was within 60 days prior to filing and over $1500.

  1. Repaying Loans to Family Members:

The bankruptcy code requires that you treat all of your creditors equally and does not want you choosing which creditors to repay right before filing bankruptcy. The bankruptcy code does not allow you to repay Uncle Bob the $2000 from when the furnace went at the expense of your other creditors.The bankruptcy trustee may pursue the relative for a portion of the funds recently transferred to them.You are required to list debts that are owed to family members, but assuming there is no discharge objection brought, the debt will be legally eliminated and you can repay the loan if you choose to.

  1. Not Including All Your Debts on your Bankruptcy Petition:

You are required by law to include all of your debts on your bankruptcy petition, even if you want to keep the debt. If you want to keep your house and automobile when you file a Chapter 7 bankruptcy , you usually will sign a reaffirmation agreement with the bankruptcy court excluding the discharge of those specific debts.

  1. Ignoring Lawsuits:

Many people fear lawsuits and don’t know what to do when they get a summons in the mail. In most cases, if you have already filed bankruptcy and receive a summons from a debt listed on your bankruptcy petition, your bankruptcy attorney should be able to fax your case information to the creditor’s attorney and get the case dismissed. However, if you are in the process of filing bankruptcy, but the case is not officially filed yet, it can be helpful to attend the designated court hearing and request a continuance to give you an opportunity to file for bankruptcy relief.

  1. Withholding Information from Your Bankruptcy Lawyer:

Bankruptcy Lawyers are often frustrated at 341 hearings when their clients are placed under oath and disclose new information that was previously withheld from their attorney. Bankruptcy lawyers need all the requested information to properly advise you and protect your income and assets. The horror stories about bankruptcy that we’ve all heard are frequently due to an individual failing to disclose vital information to a qualified bankruptcy attorney for proper advice and planning.

  1. Cashing in 401(k)’s, IRA’s, and other Retirement Funds:

Generally, 401(k)’s, IRA’s, and other retirement funds are protected from the reach of your creditors and are allowed to be kept during and after a bankruptcy. However, a common mistake is people cashing in their retirement accounts or obtaining a loan. The money that is taken out of your retirement account is no longer protected from your creditors, and you’ll likely owe penalties and taxes on any accounts that were cashed in.

  1. Filing Bankruptcy when you are expecting a Large Tax Return:

In many states, a tax refund is considered to be an asset that can be liquidated if the bankruptcy exemptions aren’t enough to protect it. Depending on the amount of the refund and the relevant state laws, it is often advisable for you to receive your tax refund and spend the proceeds on living necessities before the bankruptcy is filed. Many states offer a “wildcard” exemption that can be used to protect tax refunds among other things.

  1. Waiting Until the Last Minute Before Filing Bankruptcy:

The moment you file a bankruptcy an “automatic stay” goes into place which prohibits your creditors from any further collection activity against you, but it is unlikely that you will be able to recover any wages garnished or property taken before the filing of the case. Too many people wait until their creditors have already taken action against them before consulting with a bankruptcy attorney. It can take considerable time to prepare the bankruptcy petition, review the relevant documentation, and be certified by a trustee approved credit counseling agency. Once you have made the decision that bankruptcy is your best alternative, you should file as soon as possible to avoid anymore creditor harassment and allow yourself to put future earnings towards long-term goals and savings instead of chipping away at an insurmountable amount of debt.

  1. Not Hiring a Bankruptcy Attorney:

Fortunately, experienced bankruptcy attorneys are aware of all of these common mistakes and many more. Bankruptcy is a complex area of the law and the process has being further complicated with the new bankruptcy laws. Mistakes can be costly and a thorough case evaluation from a local bankruptcy attorney is the best way to identify any possible issues and develop a strategy to relieve your debt problems. Receive a Free Legal Evaluation with a local bankruptcy attorney.

What is a FICO Score?

Your FICO score may be better known to you as your credit score.  This system of measuring your “credit worthiness” was founded by the Fair, Isaac and Company and has been used reliably by lending institutions since the mid-1960s.  The FICO system determines your credit score based on how well – or poorly – you manage your debt.  In the case of individuals who wish to declare their self bankrupt to gain relief from creditors, bankruptcy lawyers can advise their clients of the impact various types of bankruptcy can have on a FICO score.

Your FICO score takes into consideration whether you pay your bills on time, how many credit cards you have, how much debt you carry, whether you pay the balance each month and whether you are currently bankrupt or released from bankruptcy.  All of these details are compiled by three credit bureaus who track our financial activities.  Every time you pay – or fail to pay – a bill on time, it gets reported by your lender/ creditor to one (or more) of three credit bureaus.

Your financial track record indicates your credit worthiness through your demonstrated ability to repay what you borrow from lenders. Your score is a predictor of whether you are going to repay the money on time and in full, whether you are likely to default on your payments and whether you’re on the path to making an appointment with bankruptcy attorneys.  The higher the default risk you pose to creditors, the higher the interest rate they will charge you.  High interest rates are the lenders’ insurance against the losses they expect to incur in the event you fail to repay your debt.

What do FICO scores look like?

  • 850-720  (Really good)
  • 719-700
  • 699-675
  • 674-620
  • 619-560
  • 559-500  (Not good)
  • 000-499  (Really bad)

How is my FICO score calculated?

  • Payment history (35%) – Late payments and various types of bankruptcy have a negative impact on your score.  Risk is calculated by how frequently you miss payments, how long it takes you to pay, how recently the late payment event took place, whether you’re currently bankrupt or how long since you’ve been released from bankruptcy.
  • Outstanding balances (30%) – Risk is calculated by comparing your total balances with your total available credit.
  • Length of credit history (15%) – Your score favours how long your various credit accounts have been open and how frequently you use the accounts.
  • New Credit (10%) – Opening more than one credit account within a short time frame is a good way to begin establishing a credit history.
  • Types of credit (10%) – Your score considers the total number and types of accounts open in your name. It looks at the number and type of credit cards you use (bank or department store), lines of credit such as student loans or home repair, automobile financing and mortgages.

How to Get Your FICO Score:

Beware of fake FICO reports – you do not have to pay money to learn your credit score.  Some instances where you may need to know the exact number of your FICO score include applying for a mortgage or large line of credit and investigating why your application for such loans has been rejected.  Should you choose to seek relief from creditors under the Bankruptcy Code, your credit counsellors and bankruptcy lawyers will require your credit information and score.  The easiest way to get your free credit report is to approach the credit bureaus mentioned at the beginning of this entry.  You can apply to them individually by using the contact information below:

  • Equifax (US)                           (800) 685-1111           www.equifax.com

    Equifax (Canada)                    (800) 465-7166           www.equifax.ca

  • Experian (US)                         (888) 397-3742           www.experian.com

    Experian (Canada)                  (888) 397-3742           www.experian.ca

  • Trans Union (US)                    (800) 888-4213           www.transunion.com

    Trans Union (Canada)             (800) 508-2597           www.transunion.ca

Is There Bankruptcy Software?

In 2019, approximately 5,484 Americans filed for bankruptcy protection each day.

While factors such as healthcare costs, foreclosures and job loss continue to be catalysts for bankruptcies, the majority of filings tend to be linked to consumer debt.

To meet the demand of consumers seeking do it yourself” bankruptcy alternatives, various web-based businesses and software firms have cropped up, marketing cheap and easy tools to file bankruptcy online.

Similar to do-it-yourself tax software, bankruptcy software is sold directly to the consumer and, like the former, has its share of inherent benefits and pitfalls.

An obvious advantage is the degree of explanation and step-by-step guidance throughout the software, which is altogether absent from traditional court forms.  Also, do-it-yourself bankruptcy software promises to save the user a great deal of time.

A word on this point however: the software still has a large degree of specialization, and therefore will only be truly efficient in the hands of individuals familiar with preparing bankruptcy filings.

The fee charged to file bankruptcy online or to purchase bankruptcy software runs anywhere from half the cost – to the full cost – of hiring a bankruptcy lawyer to prepare the documents on your behalf.

For all the perceived benefits of bankruptcy filing software, this alternative has definite limitations for the average consumer.  T

he software itself is unlikely to perform an incorrect mathematical function; however, the user must understand the underlying concepts for each of these functions or user errors may result in your form being inadmissible.

Initially, tax and bankruptcy software were designed not for consumer use, but intended as tools for professionals to make their own work more efficient.

Consumers with complex bankruptcy situations should retain an attorney for bankruptcy advice and to explain your rights and obligations as a debtor.

Perhaps the most important information for consumers considering do-it-yourself bankruptcy software, or planning to file bankruptcy online, is to be aware of the changes made to US bankruptcy laws in 2005 that the software cannot help the debtor fulfil.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 implemented a series of amendments to US bankruptcy laws that prescribe a series of criteria that petitioners must fulfill in order to declare bankrupt and ultimately be discharged from bankruptcy.

The first criterion is the completion of a bankruptcy means test, an income-based test which determines whether debtors are eligible for Chapter 7 or

Chapter 13 bankruptcy, and in particular determines whether the debtor has sufficient financial means to repay a portion of their debts.

The bankruptcy means test was implemented in part to prevent wealthy debtors from filing for Chapter 7 Bankruptcy and is.  Individuals filing for bankruptcy ought to seek the counsel of credit counsellors and bankruptcy lawyers to complete this test.

The final conditions that cannot be met using bankruptcy software are related to pre- and post- bankruptcy education.

Under the new US bankruptcy laws, individuals seeking relief from creditors through bankruptcy will be required to complete a pre-bankruptcy counselling session with a qualified credit counsellor.

Certificate of completion from this session must accompany bankruptcy filings.  When a debtor has reached the end of their repayment plan, they must complete a post-bankruptcy debt education course before their bankruptcy filing can be discharged.

Ultimately it is the consumer’s choice how to proceed, whether filing bankruptcy with the counsel of bankruptcy lawyers or with do-it-yourself bankruptcy software and filing online.

Under the new laws, debtors must consult with credit counsellors and complete debt education courses in order to successfully file for, and be discharged from, bankruptcy.

When applying for relief under US bankruptcy laws, it is your responsibility to be informed of your rights and obligations as a debtor, and given the complexity of many bankruptcy cases, the bankruptcy advice and professional guidance provided by bankruptcy lawyers are worth the expense.

Contact us now or use the form to apply now

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