Nashville Bankruptcy and Foreclosure Lawyer

The prospect of declaring bankruptcy is a daunting one, and something you shouldn’t have to face alone. Whether you’re looking at Chapter 7, Chapter 11, or Chapter 13 bankruptcy, the attorneys at Nashville Bankruptcy Law Center can help you during this stressful time in your life. At Nashville Bankruptcy Law Center, we know that although every bankruptcy proceeding is unique, most people feel intimidated when filing. The paperwork involved in bankruptcy cases can be quite confusing, and, more often than not, your creditors will have teams of lawyers behind them. Our objective is to make the bankruptcy process as simple and painless as possible for our clients. Depending on how far you are into the process, our bankruptcy attorneys may be able to:

Help you understand eligibility requirements and the different types of bankruptcy

File your petition with the U.S. Bankruptcy Court

Negotiate with your creditors at your 341 Meeting

Argue on your behalf in bankruptcy court, if necessary

Help you regain control of your finances and get a fresh start

When you’re having financial problems, time is of the utmost importance. Acting quickly and hiring an attorney when you miss credit card payments or when your business starts failing is the first step in gaining control over your finances. Contact Nashville Bankruptcy Law Center today to discuss your financial situation and whether bankruptcy is right for you.

Why Choose Us?

  • Free Initial Consultation
  • Personal Attention On Every Case
  • Flexible Appointment Availability
  • Local Representation

A Checklist of Information for Your Bankruptcy Consultation

Being prepared for your bankruptcy consultation is the key to success

Overcome with debt and feeling the frustration of today’s economy often the thought of filing for bankruptcy starts to seem like a viable option. Anyone thinking about filing will want to do some research and think about their options. If you reach the point that you think filing for bankruptcy is your best option you will want to plan a bankruptcy consultation with an attorney or a bankruptcy specialist. You will cover a large amount of information during a consultation so you want to have all the information they need at your fingertips. This bankruptcy consultation will help you understand the journey that you are about to embark on.

Use the following check list before you make a bankruptcy consultation appointment with a bankruptcy specialist.

List of debts.

  • You should make a simple list of every debt you owe, including mortgage and car payoff balances, loans, credit cards, overdrafts, bounced checks, loans from friends or family, medical bills or any other debt you might owe. The name of the creditor and the amount owed is the basic information you need for your consultation.

Bills.

  • As you go through your bills to put the list together for your consultation, you should gather your bills together since they will eventually be needed if you file bankruptcy. Put the bills into an envelope, bag or box. You don’t have to bring them to the consultation, but they will be needed if you go forward with filing a bankruptcy case.

Income records.

  • If you get a paystub from a job, you should bring your most recent paystub or your most typical/average paystub if your pay varies. Under the new law, we will need some documentation of all your incomes for the last six months so if you have them, bring it. If you work for yourself, don’t get a paystub, or don’t have the information, please bring whatever records you have that will show what you have made over the last six months so you can decide on your options.

Legal documents.

  • If you were sued, have a foreclosure against you, were divorced with a separation agreement, or have any other legal documents that you think might be important, you should bring them with you to the consultation.

Car values.

  • Get a printout for ALL vehicles you own or are titled in your name, whether they are paid for or you are making payments. Please print the page from The National Automobile Dealers Association www.NADA.com and bring it with you.

House/land value.

  • If you own a house or other land, it is helpful to have a good idea of the value that you could sell it for. You should probably know this anyway. Appraisals for refinancing are often higher than true market value so you should not rely on those, but if you have had any recent appraisals, bring that too. Look in your neighborhood to see what similar houses/land is listed and selling price. Speak to realtors that are selling in your area. You can look online for comparative sales to get a general idea.

During your bankruptcy consultation you will go over your financial situation. The consultant will review your finances to determine if filing for bankruptcy is the best option for your situation. They will also explain the bankruptcy process to you during this visit. Filing for bankruptcy is a very involved process and it can take several months to complete. They will want to make sure that you are committed to completing the process and that you actually want to do it. You will be told about the filing requirements, the means test, the creditors meeting and the eventual discharge of your debt. Being prepared for this meeting is the key to a successful bankruptcy consultation and a smooth process when filing for bankruptcy.

Credit Cards After Bankruptcy

…and what you need to know before you apply for one.

credit card

Photo Credit: adamr

You have filed for bankruptcy. Now you are trying to rebuild your damaged credit. So the question remains: should you apply for a new credit card? Upon first thought, the answer might be a resounding “NO!” But in reality, opening a credit card after bankruptcy can actually be a smart move. Credit card users who pay off their full balance each month can quickly build up good credit. The key is to be smart in your usage habits.

If you do opt to open a new credit card post-bankruptcy, only make purchases with it that you would otherwise make with cash or your debit card. In other words, view a credit card as another method of payment for things you can afford. If you could not afford to buy the item with cash or the money on your debit card, don’t purchase it. This will keep you from accumulating too high a balance and getting nailed on high interest charges.

But what if credit card debt was the reason you filed for bankruptcy in the first place? It might be a little scary to go right out and apply for another card. That doesn’t mean it’s completely out of the question. One way to give yourself a bit of a safety net is to wait until you have two months’ salary saved up before you even apply for a card. This will give you a little bit of a buffer and will allow you to easily pay off your balance each month.

If you do decide to open a card, try to go six consecutive months paying off the full balance. If you can do that, continue using the card to reestablish your credit. But if you have even one month where you spend more than you can pay back, stop using the card. You likely have not altered your spending habits from before the bankruptcy and are likely to fall into debt again. Get out before you become so far over your head that you are back in the same position you were in before the bankruptcy.

If you feel you are ready for the financial responsibility of a credit card, don’t just apply for any card. A secured credit card is a great way to go if you’re just recovering from bankruptcy. A secured card means you will be required to put down a security deposit with the card issuer before you can receive the card. You will also want to choose one that sends monthly reports of your payment history to all three major credit reporting agencies so that you can be sure you are actually rebuilding your credit.

Prepaid cards keep you from charging more than you can pay off, but they won’t help increase your credit scores. You can still use them though to help you stick to a spending budget. Just make sure you have a credit card that you make the minimum amount of purchases possible each month so that you can pay it off in full and rebuild that credit.

When using your credit cards, keep your monthly balances low. Whatever your spending limit is, keep your monthly spending to no more than 10% to 15% of that amount. Avoid charging your card up to its limit, no matter what. This type of spending causes people to charge more than they can afford and wind up back in debt.

On a final note, if you do decide to get a new credit card, make sure you wait until after your bankruptcy has been discharged. Do not apply for one beforehand. Taking on additional credit while you are still completing a bankruptcy could jeopardize your case.

 

Back-To-School Shopping and Bankruptcy

5 tips back-to-school shopping tips that won’t break the bank

back-to-school

Photo Credit: papaija2008

Ah, sweet summer is still upon us! Days filled with BBQ, camping, sunshine… and back-to-school? That’s right, back to school shopping is right around the corner. Every year schools issue the back-to-school list and parents flock to big box stores to fill up their carts with paper, pencils and clothing.

While back-to-school is always an exciting time for your children, you may be dealing with the stress of bankruptcy and having to add this expense onto your already tight budget. Back to school shopping doesn’t have to break the bank though. Follow these tips for a sure fire way to keep in budget and enjoying the last little bit of summer!

Tip #1 – Start early.

We all know those back to school lists are coming each year and after your first shopping list, you already have a pretty good idea on what your child is going to need. As simple as it sounds, it is probably one of the best moves you can make – start your shopping early. You can actually start planning ahead for next year too. While stores like Target and Walmart offer some great deals during this time of the year, towards the end of their back-to-school season, prices will be slashed. This is a perfect opportunity for you to start stocking up on those required items like pens, paper, and markers.

Tip #2 – Take inventory.

Chances are you already have some items on your back-to-school list. Use this time as a time to organize and take inventory of what your child already has. Items such as rulers and binders can be passed on from year to year. You can also get creative and choose a plain binder for your child to use, but dress it up with a FREE printable online. Not only will it allow your child to have a fun binder, but it can be changed throughout the year depending on your child’s preferences.

Tip #3 – Create a budget…and stick to it.

Money is most likely tight if you are going through a bankruptcy. It is important to set aside a budget and stick to it. Do your research and find out how much items will cost using your back-to-school shopping list as a guide. Pinching pennies is okay here , especially when it comes to pencils and paper. Pinching pennies could mean choosing the plain pencils over the glow-in-the-dark ones or scouting out deals on cheap paper. Things to include in your budget: school supplies, shoes, clothing items, sports items if your child plays a sport, lunch box, etc. This is also a great opportunity to teach your children about budgeting. Have them sit down with you and work on the budget together.

Tip #4 – Shop on tax free day.

August 2 – 4 is official known as Tax-Free Holiday weekend here in Tennessee (for your state, check here). Take this opportunity to save a few extra dollars by planning your school shopping on these days. Items that are tax free are school supplies, computers, and clothing. While there is a price limit on these items, saving every extra penny can help during this time. The great thing about the TN Tax Free Holiday is it includes items sold via mail, telephone, e-mail and the internet if you order and pay during the tax free period.

Tip #5 – Hit up the bargain stores.

While stores like Target, Walmart, and Old Navy have good deals during back-to-school shopping, it doesn’t hurt to shop at some of the bargain stores, such as the Dollar Tree. Here you can find plain school supplies – and the craft necessities to jazz them up with your child.

Wherever you are at in the bankruptcy process, if you have kids, with a little planning and creativity, you can make this a special time for them. If you have the money, set aside a little for something special they really have their eye on or even just a special treat while you are out shopping. The time spent preparing can be a great bonding experience and learning opportunity for your children. Make the most of this time!

Bankruptcy: 12 Things You Need To Know

What you need to know before you file bankruptcy

bankruptcy

Photo Credit: Stuart Miles / FreeDigitalPhotos.net

1. The Difference Between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy

If you are an individual filing for bankruptcy (in other words, you are filing bankruptcy on your own behalf, not on behalf of a business you own), you have two filing options. You can file a Chapter 7, which allows you to walk away from debts entirely. This option is used by those whose debts are so high or income so low that after basic expenses they don’t have extra income for a payment plan. You can also file a Chapter 13, which allows you to draft a plan to repay all or part of the debts over three to five years.

2. You Will Not Lose Your Assets

Filing bankruptcy, whether a Chapter 7 or a Chapter 13, will not force you to give up all your possessions. You keep your personal property, such as clothes, electronics, household furnishings and other exempt assets. In some cases, you might even be able to retain larger items like your house and cars during bankruptcy. These exceptions depend on your state laws, the type of bankruptcy you file, and your financial situation.

3. Your Assets are Important in Determining Which Bankruptcy Option to File

If you were out of work and behind on making your house payments, but can now meet your monthly mortgage obligations, then a Chapter 13 might be your best option. If you don’t own a home, but are struggling with medical bills, then Chapter 7 might be a better choice. The best thing to do is write down the assets that are important to you. When you talk with an attorney, go through the list and find out how both a Chapter 7 and a Chapter 13 bankruptcy would impact each item.

4. You Have to Qualify for a Chapter 7 Bankruptcy

Before you can file for Chapter 7 bankruptcy, you have to show proof that you are unable to repay your debts. This is done though your proof of income and expenses.

5. Where You Live Matters

When it comes to which assets you can keep when filing bankruptcy, rules vary widely by state. Income and expense limits used for determining whether you qualify for a Chapter 7 bankruptcy will also vary by location.

6. Bankruptcy Should Only Be Filed as the Result of Major Life Events

People should only turn to bankruptcy as a solution when they have had major life events that significantly reduced their income, increase their bills or both. Such events can include divorce, unemployment and crippling medical bills.

7. Bankruptcy will Cost

Total costs of filing for bankruptcy will vary depending on your attorney and location. But you should know that a Chapter 7 bankruptcy can run $1,500 to $2,500, while a Chapter 13 bankruptcy can run $2,000 to $4,000. With a Chapter 13 bankruptcy, you can include bankruptcy costs in your plan and pay them over three to five years. With Chapter 7 bankruptcy, that’s not an option.

8. Bankruptcy Goes on Your Credit History

A bankruptcy will stay on your credit history for approximately 7 – 10 years. The good news is, however, the older that bankruptcy is, the less power it has to scare lenders and impact your credit score. Most people can rebuild credit much sooner than this.

9. It May Not Actually Affect Your Credit

While filing for bankruptcy will show on your credit history, it may not have as much impact on your credit. For example, if you’ve had financial problems such as chronic late and missed payments, charge-offs, etc., you might not notice much of a change in your score at all. A lot depends on your credit activity before filing.

10. Bankruptcy is Public Record

If you file, Chapter 7 or Chapter 13, it is a matter of public record. The days of posting bankruptcies in the local newspapers are long gone, however, because this information is public record, it can still be accessed if taken the time to look for it.

11. Bankruptcy Doesn’t Protect Joint Account Holders

A bankruptcy dissolves your obligation to a creditor. It will not dissolve anyone else’s if they happen to hold responsibility for your debts. This can affect joint account holders or co-signers. Your bankruptcy makes that bill his or hers alone. This happens most often in divorces. If possible, pay off bills or have the obligations transferred into the name of one party or the other before finalizing a divorce.

12. You Will Be Required to Attend a Class on Bankruptcy

Before you can file a Chapter 7 or Chapter 13, you will be required to take a 90-minute credit counseling class. You will also have to take a second, two-hour class before your bankruptcy can be finalized. These classes are available in person, by phone or online and should cost no more than $50 per class. If you are receiving free or discounted legal services, or you’re living on Social Security disability payments, you can have the fees waived.

Bankruptcy and Rebuilding Your Credit Score

Rebuilding your credit after bankruptcy can be done!

bankruptcy

Photo Credit: Stuart Miles / FreeDigitalPhotos.net

While it may seem devastating, bankruptcy can allow for you to have a fresh start at your financial freedom. Recovering from bankruptcy does take time, diligence and patience – you don’t accrue debt overnight, so you cannot expect to fix it over night. Have hope though, many individuals who have declared bankruptcy have gone on to fix their credit scores and become financially successful. You too can overcome bankruptcy.

One of the main areas to focus on while recovering from bankruptcy is learning to manage your monthly bills. If you are not used to working on a budget, this can prove to be quite challenging, especially with the burden and stress of bankruptcy. Creating a budget is imperative to your future financial success and bankruptcy recovery. A budget can be time-consuming to initially set-up, but once you do the initial work ,the rest is easy. Some important categories that need to be included in your budget are:

  • Annual Expenses: car registration, taxes, HOA fees, and other yearly fees.
  • Monthly Expenses: mortgage/rent, insurance, gas, food, utilities, and other once a month expenses. Also include any payments that you must pay from your bankruptcy in this category.
  • Emergency Money: it is important to save some money in case of an emergency.
  • Retirement: don’t stop investing in your future. Allocate monthly earnings to your retirement account.
  • Savings: if you can, automatically put a portion of your monthly earnings into a saving account.

There are also many online tools, and mobile apps, that can help you create and manage a budget, getting you on track to recover from bankruptcy. Apps such as Mint, Manilla, and You Need A Budget are excellent, free resources to help you stay on track. Be diligent in paying your bills on time – a late payment could be reported on your credit score deterring all the effort you are putting into rebuilding it after bankruptcy. All of these apps allow you to set up reminders when bills are due so you can stay on top of your finances, which is part of the bankruptcy recovery process.

The next step you need to make post-bankruptcy is re-establishing your credit score. Ironic as it may seem, opening up a credit card is one of the best ways to help raise your credit score after taking a hit like bankruptcy. While this is one of the quickest ways to build up your credit, it can also be one of the most detrimental if not used properly. After bankruptcy, you may have to start with a secured credit card. A secured credit card is a credit card that allows you to put a cash payment down to “secure” your line of credit. The amount you put down is how much your line of credit will be. A word of caution must be given about opening up a credit card. You must be very careful about how you use this card. The point is to use it to build your credit, but do not use it beyond your means. Make a few purchases with it each month and then aim to pay it off in full each month. If you are careful and use your credit card properly, you will soon be eligible for non-secured cards. These cards typically have high interest rates, so being mindful of that is also suggested.

In addition to the budget and credit card, make sure you are keeping an eye on your credit score regularly. Check for inaccurate information. If you come across inaccurate information, write a letter of dispute to the agency asking for it to be removed. Here is more information on how to request the removal of inaccurate information from your credit report.

Bankruptcy can be a very stressful situation. You may need to seek out additional help in order for you to recover from bankruptcy and raise your credit score. The important thing to remember is that you CAN and WILL recover from bankruptcy. Your budget may be tight for a while and you may have to sacrifice some of the “wants” in your life, but in the end your goal is overall financial health and it will be worth every struggle you go through after bankruptcy.

Bankruptcy Myths

…and the Honest Truth

bankruptcy

Photo Credit: David Castillo Dominici

A friend of a friend told your Aunt Edna’s first child who told your mom who told you that if you file for bankruptcy you will grow a beard, lose your job and have to donate your kidney. As silly and unbelievable as it may sound, there is a lot of misinformation regarding personal bankruptcy.

Let’s take a look at 9 common bankruptcy myths and the truth behind those myths.

1. Bankruptcy clears you of all debts

False. Some debt cannot be cleared up in bankruptcy. Debt such as school loans, child support and alimony, and certain taxes are deemed as non-dischargeable in a bankruptcy case. Bankruptcy CAN help you clear up medical bills, credit cards, and personal loans.

2. People who file bankruptcy are irresponsible with their money.

False. Most bankruptcy cases can be traced back to job loss, divorce, or illness/injury. Filing for bankruptcy does not determine whether or not the person filing is irresponsible. In fact, a study done by Harvard University found that the biggest cause of bankruptcy was due to serious illness. Sixty-two percent of personal bankruptcy cases fall into this category. Bankruptcy can be a means to protect your family and begin a fresh financial future.

3. Bankruptcy ruins your credit permanently.

False. Bankruptcy is a negative mark on your credit score and will most certainly bring your score down. However, with time and diligence you can recover from bankruptcy and bring your credit score back up. Make a budget, pay all your bills on time, and keep an eye on your credit score. Interestingly enough, and very ironic, one of the best ways to re-establish credit is to open a line of credit. You can start with a secure credit card with a low monthly limit and get in the habit of using it and paying it off in full each month. Exercise caution with this as it can lead to issues if it is abused or neglected. Understanding your limits is imperative if you choose to open a line of credit.

4.  If your spouse files for bankruptcy, it will not affect your credit score.

False. If there is one or more joint accounts, it will affect your spouse’s credit score. However, the Bankruptcy Code allows a spouse to file individually without the other spouse. The non-filing spouse’s credit should go unaffected. The main point here is it must be individual debt. It cannot be debt accrued as a joint effort.

5. If you file bankruptcy you will never be able to purchase a house

False. Filing for bankruptcy does not dictate future ownership of a house or car. If the time and diligence is taken to repair your credit score, you could be a homeowner one day. The key is to build up your credit score again.

6. There is a minimum amount of debt needed in order to file for bankruptcy.

False. There is no magic minimum debt number that qualifies you for bankruptcy. If neglected, even a small amount of debt can cause financial strain and could be cause for filing bankruptcy. The key point here is not to ignore your debt. Be proactive and seek help immediately if you are struggling.

7. You will never get credit again if you file for bankruptcy.

False. The truth is filing for bankruptcy could actually improve your credit score by improving your debt to income ratio and opening up new lines of credit. As mentioned before, the debtor could use this new credit wisely and turn their credit around much sooner than it takes for the bankruptcy to get off your record.

8. You will lose everything you own if you file for bankruptcy.

False. Not necessarily true. Depending on the type of bankruptcy filed, you could still keep your house, car and other items. Many associated bankruptcy myths include: you can only keep one car if you file, you have to give up all of your vehicles if you file, and you can only have one TV in your house if you file. These are simply not true.

9. There is hope after filing bankruptcy.

Truth. You can move past bankruptcy and into a healthy financial future. It takes time, but starting with small steps you can improve your credit score, own a home, and live the life that you want with financial freedom you deserve. While bankruptcy can be a scary and stressful time, it is very important that you seek out help from an individual experienced in bankruptcy.

Chapter 7 Bankruptcy

Filing for Chapter 7 Bankruptcy

Many people contemplating filing bankruptcy need to know whether Chapter 7 bankruptcy is the best option for them. So in order to make that call, they need to be clear on what Chapter 7 bankruptcy is and what filing for it involves. It is the single most common bankruptcy chapter filed in the United States. Chapter 7, commonly referred to as liquidation bankruptcy, refers to the chapter of the Bankruptcy Code which can be found in Title 11 of the United States Code. It involves the sale of a debtor’s non-exempt assets by a trustee. Any proceeds obtained by the bankruptcy trustee are then turned over to creditors.

Here are some common questions asked when you are contemplating filing for Chapter 7.

1. Who can file a Chapter 7 case?

Anyone who qualifies and resides in, does business in, or has property in the United States is able to file a Chapter 7 bankruptcy case. (That does not mean you will necessarily get approved, but you a can file for it.) You may also file if you have intentionally dismissed a prior bankruptcy case within the last 180 days.

2. Who is not eligible for a Chapter 7 discharge?

  • Someone who has been granted a discharge in a Chapter 7 within the last 8 years.
  • Someone who has been granted a discharge in a Chapter 13 case within the last 6 years, unless 70 percent or more of the debtor’s unsecured debts were paid in the Chapter 13.
  • A person who acts with the intent to defraud his or her creditors or the trustee in the Chapter 7 case.
  • A person who fails to explain any loss or deficiency of his or her assets.
  • A person who refuses to answer questions or obey orders from the bankruptcy court.
  • A person who, after filing the case, fails to complete an instructional course on personal financial management.

3. How do I prepare a petition?

Prior to filing a Chapter 7 bankruptcy, you should gather together all of your financial records in order to fill out the bankruptcy petition, schedules, statement of financial affairs and other documents. Financial records include but are not limited to, bank statements, credit card statements, loan documents, and pay stubs. These records are critical because they act as proof that the financial information you list on your petition is accurate. They also allow you to easily comply with any requests by the trustee to verify your information.

4. What documents will I need to complete before filing?

Documents you will need to fill out prior to filing for a Chapter 7 bankruptcy include a voluntary petition for relief, schedules of assets and liabilities, declarations regarding your education, and a statement of financial affairs. These documents give the bankruptcy courts full access to your financial history including a listing of all your property, debts, creditors, income, expenses, and property transfers. Once you have filled out these documents in their entirety, you must file them with the bankruptcy court and pay a filing fee.

5. What is a Means Test?

Before you can file a petition for Chapter 7 bankruptcy, you must also pass a means test. This test calculates whether you are able to afford, or have the “means” to pay your debts. The means test annualizes your income for the past six months and compares it with the median income for your place of residence. The means test also includes your secured debt in determining whether you can afford to pay for your debts. You must pass the means test in order to be eligible to file Chapter 7 bankruptcy, unless you fall under very specialized circumstances.

6. What happens during the Meeting of Creditors?

After you have filed for Chapter 7, the court will issue a document giving notice of your Meeting of Creditors. This notice is also sent to all of the creditors that are listed in your bankruptcy documents.  Any creditor may appear at this meeting and ask questions about your bankruptcy and finances. During the Meeting of Creditors, the bankruptcy trustee will ask you various questions. The main thing they want to know is that all of the information contained within the bankruptcy documents is true and correct. You may also be asked other questions about your financial affairs. If the trustee feels your case requires further investigation, he or she may continue your Meeting of Creditors to a future date. If he or she feels they have obtained all the information they need, the trustee may conclude on the first meeting.

7. What happens to my assets?

If you have any non-exempt property, the bankruptcy trustee has the ability to seize and sell the property. Exemptions would be federal or state statutes which allow you to keep certain types of property from seizure in bankruptcy or can satisfy a judgment. Common exemptions include retirement accounts, such as a 401(k) plan. Exemptions must be set forth in Schedule C, a bankruptcy document completed upon filing your petition for Chapter 7. Any assets that the trustee seizes are distributed to creditors.

8. How long will it take for my petition to discharge?

The last day to file a complaint objecting to your petition is 60 days after the first session of the Meeting of Creditors. If no complaint is filed, the discharge is usually entered several days later. If neither the trustee, nor any creditor objects to your discharge, the bankruptcy court will automatically give your petition a discharge at some point after the last day to object.

9. What does a discharge do?

The discharge prevents creditors from attempting to collect any debt against you, personally, that arose prior to you filing Chapter 7. Essentially, the discharge effectively wipes out your previous debts. However, there are certain debts that are not dischargeable, including, but not limited to, certain taxes and child or spousal support obligations. It is important to remember that your bankruptcy discharge is personal which means that a creditor can still collect on a discharged debt from any co-debtor you may have had that did not file for bankruptcy.

10. What debts are not dischargeable in Chapter 7?

  • Tax debts and debts that have been assessed within 3 years of filing.
  • Debts obtained by fraud for money, property, services, or credit.
  • Debts not listed on the debtor’s Chapter 7 forms.
  • Debts for domestic support, which include alimony, maintenance, or support, and certain other divorce-related debts, including property settlement debts.
  • Debts for intentional injury to the person or property of another.
  • Debts for some fines or penalties.
  • Debts for student loans, unless a court finds that not discharging the debt would impose an undue hardship on the debtor.
  • Debts for personal injury or death caused by the debtor’s operation of a motor vehicle while intoxicated.
  • Debts that were, or could have been, listed in a previous bankruptcy case of the debtor, in which the debtor did not receive a discharge.

Chapter 13 Bankruptcy

When to File for Chapter 13 Bankruptcy

Before you can assess whether or not to file for a Chapter 13 bankruptcy, it’s imperative to know exactly what that means. Chapter 13 allows you to repay creditors in a 3-5 year plan at 0% interest. Usually, if you have filed for Chapter 13, you will only have to pay your creditors a percentage of what you actually owe. Most importantly, you get to keep all of your assets. You will get put on either a weekly or monthly payment plan that is designed around your personal budget and income. So when should you file for Chapter 13 bankruptcy? Here is a list of circumstances in which filing for Chapter 13 bankruptcy might be a good option.

1. You have filed a Chapter 7 bankruptcy within the last 8 years and you cannot file a Chapter 7 again, filing for a Chapter 13 might be a good option for you.

2. You are facing a short-term financial setback like job loss, illness, or a large unexpected expense.  If you have fallen into financial distress that has caused you to fall behind on your bills, but you still have regular income, filing a Chapter 13 could help. It allows you some breathing room to get back on you feet and back on track with your payments without losing your home or property.

3. Your creditors are threatening to repossess your car, garnish your wages, and are pressuring you with constant phone calls. Filing for a Chapter 13 will stop all this immediately because you become under what is known as automatic stay. Basically, this means your creditors are barred from making any more attempts to collect on the debts you owe. So, if you are looking to repay your debts, but according to your affordability rather than at the demands of your creditors, filing a Chapter 13 might be your answer.

4. You are facing possible foreclosure or repossession. Filing a Chapter 13 can help you avoid foreclosure or repossession because it allows you to catch up past due payments over that 3 -5 year period, while keeping current payments up to date.

5. You are making too much to file a Chapter 7 bankruptcy. When filing for a Chapter 7 bankruptcy, you must pass a “means test” that proves your income is lower than the average household income in your state. If you have assessed your situation and found that your income is too high and you do not have enough dependents to file a Chapter 7, you might have better luck filing a Chapter 13.

6. You have a lot of assets. Your house, you car, your equity…these are all assets that you will lose if you file a Chapter 7. A Chapter 13 can let you keep all of your assets. It allows you the same protections as a Chapter 7, but you don’t have to turn your assets over to your creditors. If your house is still under mortgage or your car is being leased and you are unable to keep up the monthly payments for them, you should consider filing for Chapter 13, to avoid losing them.

7. You have a lot of taxes, student loans, or other debts that are non-dischargeable in a Chapter 7. If you need protection from the IRS or student loan collectors attacking your pay and bank accounts, you might be better off filing a Chapter 13.

8. You have enough disposable income to pay toward your debts after paying your essential living expenses. If you are able to make periodic payments, you are eligible for Chapter 13.

Chapter 11 Bankruptcy

Filing for Chapter 11 Bankruptcy 

If you’re a small business falling into insurmountable debt, filing for a Chapter 11 bankruptcy, commonly known as reorganization bankruptcy, might be your best option. It can be costly, time-consuming, and complicated, which is why some small businesses avoid it. But, it’s the only bankruptcy option that allows a business to stay in business. Chapter 11 allows a business to restructure and continue to operate. To determine whether or not filing a Chapter 11 bankruptcy is the right course of action for your business, consider the following questions.

What is Chapter 11?

Chapter l1 is a term that makes the news when major corporations have financial problems and turn to the bankruptcy courts for help. The truth is, though, small businesses and companies that are not well known file the most Chapter 11 bankruptcies. Under Chapter 11, a business can restructure its finances through a plan of reorganization approved by the bankruptcy court. A Chapter 11 plan can help a business balance its income and expenses while regaining profit, regaining profitability, and continuing to operate. Chapter 11 also allows the person petitioning to sell some or all of their assets and downsize their business if necessary.

What types of businesses are eligible for Chapter 11?

Any business that is owned by a partnership, a limited liability company (LLC), or a corporation that is looking to restructure, is eligible to file for Chapter 11. It is the only bankruptcy option for individual businesses that are in debt, want to reorganize, and owe too much money to meet Chapter 13 eligibility requirements.

How long does the process of filing a Chapter 11 take?

A business has a 120-day period during which it has an exclusive right to file a plan. This exclusivity period may be extended or reduced by the court, but under no circumstances may this period be longer than 18 months. After the exclusivity period has expired, a creditor or the case trustee may file a competing plan. One of the drawbacks to filing a Chapter 11 is that it can take many years to be resolved unless the court, the U.S. trustee, the committee, or another party in interest acts to ensure the case’s timely resolution.

Are there any special provisions for small businesses filing a Chapter 11?

For the most part, small businesses have to abide by the same rules and procedures as major corporations and must meet the same requirements to reorganize under Chapter 11. There are, however, some special provisions that can help them reduce fees and restructuring costs that speed up the resolution process.

1.  Under the Bankruptcy Code, a Chapter 11 proceeding filed by a small business debtor is considered to be a small business case. A “small business debtor” is defined as person or entity who:

  • is engaged in business or other commercial activities
  • owes no more than $2,490,925 in total claims (excluding obligations owed to insiders such as family members of the business owners)

2.  In Chapter 11 cases, a committee is usually appointed to represent the interests of unsecured creditors. A creditors’ committee can retain attorneys and other professionals at the petitioners expense, which can significantly increase the cost of Chapter 11 reorganization. In a small business case, the bankruptcy court can order that no creditors’ committee be appointed.

3.  Small businesses are subject to some reporting and filing requirements that other Chapter 11 petitioners are not. A small business debtor must attach its most recently prepared balance sheet, statement of operations, cash flow statement, and federal tax return to its bankruptcy petition when filing for Chapter 11 relief.

4.  Under the bankruptcy laws, small business cases are subject to more oversight by the U.S. Trustee’s office than other Chapter 11 proceedings.

5.  In small business cases, the business has only 300 days to propose a Chapter 11 plan.  The court can extend the 300-day deadline, but only if the debtor proves that it will be able to obtain approval of a plan within a reasonable period of time.

6.  In most Chapter 11 cases, the petitioner must prepare a disclosure statement, submit it to the bankruptcy court for its approval, and circulate copies to creditors and other parties in interest. They must provide extensive information about the debtor and proposed plan, and are often expensive to prepare. In small business cases, the bankruptcy court can waive the disclosure statement requirement, which can significantly expedite the reorganization process and reduce legal and other costs.