For some consumers their financial obligations exceed their income to such a degree that they do not qualify for a debt negotiation program, and bankruptcy is their only option. For those consumers, bankruptcy can literally save their financial lives. Once you declare bankruptcy however, it will stay on your credit record for up to ten years, with all the negative effect associated therewith.

Our staff is trained to analyze your financial situation and determine whether bankruptcy is the right option for you. If it is, we will help you through the process in a professional and compassionate way that allows you to regain your dignity and rebuild your financial future.

Bankruptcy process

To file for bankruptcy, you are generally required to:

         Undergo a “means” test in which your income, assets, expenses, debts, personal            background and financial information are sorted. (see below for more information)

         Receive debt counseling from a government-approved organization within six months            before filing.

         Submit a repayment plan to be approved by a bankruptcy court.

         Attend a meeting with your creditors.

Once you have filed for bankruptcy, you will likely be present at a meeting between your bankruptcy attorney and representatives of your creditors so a deal can be worked out between both parties. These representatives are usually understanding of the circumstances and will try to work with you. You will find that these meetings are very short in most cases and only meant to confirm the information that was provided to them already.

CHAPTER 7 BANKRUPTCY

If you qualify for a Chapter 7, you can “discharge” (effectively eliminate) most of your financial obligations without having to repay anything, but not everyone qualifies for a Chapter 7. Under the new bankruptcy law, all applicants must take a "means test." The bottom line is that if your income is above the average for your state, OR if you can afford to pay more than $100 per month to your creditors after all of your reasonable expenses are taken into consideration, then you will probably not be allowed to file a Chapter 7. Regardless of whether they qualify, many people want to avoid a bankruptcy for their own personal reasons.

If you are struggling to catch up on credit cards, medical bills, payday loans and other unsecured obligations and do not qualify for forensic mitigation, a Chapter 7 bankruptcy may be an option for you. Chapter 7 bankruptcy is often referred to as liquidation because a bankruptcy trustee can liquidate (convert to cash) your non-exempt assets to pay part of your outstanding bills.

However, in most cases, exemptions will protect most if not all of your property as many people filing Chapter 7 own only exempt property, which is property protected from liquidation. Exemptions typically include your primary residence, tools, work equipment, vehicle, certain items of personal property and numerous other categories of property.

In most cases, exemptions will protect all of your property. If not, your court-appointed bankruptcy trustee can liquidate your non-exempt assets to pay your creditors. However, a trustee will only liquidate in most cases if he or she can obtain enough money from a sale to make a significant payment to your creditors.

Chapter 7 bankruptcy cases move relatively quickly, and you may receive your discharge in just a few months. A discharge will eliminate unsecured obligations like credit cards, medical bills, most personal loan, judgments resulting from car accidents, deficiencies on repossessed vehicles, some older tax obligations, payday loans, and garnishments. Certain debts are classified "non-dischargeable obligations" and cannot be discharged, or can only be discharged under very specific circumstances. These include child support, most student loans, and many tax debts.

The Means Test

The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required payments, to make payments on a Chapter 13 plan.

To find out whether you pass the means test, you start with your "current monthly income," calculated as described above. From that amount, you subtract both of the following:

        - Certain allowed expenses, in amounts set by the IRS. Generally, you cannot subtract what you actually spend for things like transportation, food, clothing, and so on; instead, you have to use the limits the IRS imposes, which may be lower than the cost of living in your area.

        - Monthly payments you will have to make on secured and priority obligations. Secured obligations are those for which the creditor is entitled to seize property if you don't pay (such as a mortgage or car loan); the law deems priority obligations to be so important that they are entitled to jump to the head of the repayment line. Typical priority obligations include child support, alimony, tax debts, and wages owed to employees.

If your total monthly disposable income after subtracting these amounts is less than $100, you pass the means test, and will be allowed to file for Chapter 7. If your total remaining monthly disposable income is more than $166.66, you have flunked the means test, and will be prohibited from filing under Chapter 7.

If your remaining monthly disposable income is between $100 and $166.66, you must figure out whether what you have left over is enough to pay more than 25% of your unsecured, non-priority obligations (such as credit cards, student loans, medical bills, and so on) over a five-year period. If so, you flunk the means test, and Chapter 7 won't be available to you. If not, you pass the means test, and Chapter 7 remains an option.

We can explain your options and help you determine whether filing Chapter 7 bankruptcy is the right option for you. Our bankruptcy attorneys can guide you through the process, helping to ensure that all filing requirements and deadlines are met and that you have accounted for all of your allowable expenses and proposed a plan that will allow you to make payments while keeping up your regular expenses.

Filing bankruptcy is a difficult decision that should not be undertaken lightly.