Bankruptcy
Chapter 7 Bankruptcy
Chapter 7 was created for individuals who are not currently able to pay their existing monthly bills. The Bankruptcy system was completely overhauled in the fall of 2005 and filing guidelines require that a “means test” be administered to determine whether or not an individual should be permitted to proceed under Chapter 7. If your income is greater than the median income for your state of residence and family size, creditors may be able to file a motion requesting that the court dismiss your case under section 707(b) of the United States Bankruptcy Code. The court decides whether or not the case will be dismissed. If you are not eligible for a Chapter 7 Bankruptcy you may qualify for relief under Chapter 13 or Chapter 11 of the United States Bankruptcy Code.
The purpose of Bankruptcy is to obtain a discharge of your debts. Certain types of debts are exempt from discharge and will not be erased. You will still be held responsible for child support obligations, any government fine, criminal restitution, debt which you do not disclose on your bankruptcy paperwork, debt for personal injury caused by operated a motor vehicle while under the influence of alcohol or drugs, most income taxes and all student loans. If a creditor can prove that you defrauded them in obtaining credit, the bankruptcy court may not discharge that debt either.
Chapter 13 Bankruptcy
If you have debts of less than $1,000,000.00 and are not eligible for a Chapter 7 bankruptcy you may be eligible for Chapter 13. It allows you to pay part or some of your debts over a three to five year period of time. Your attorney will file a plan with the court for you to repay your creditors. An experienced consumer bankruptcy specialist will know how to assemble a bankruptcy plan which allows you to get a plan confirmed and ultimately completed.
Chapter 11 Bankruptcy
This is for individuals with debts in excess of $1,000,000.00 who need to reorganize their debt over time. With the inflated values of real estate that currently swept across our country, many higher income individual may find themselves literally trapped in a $600,000.00 home. While the economy was strong you may have found that your business was very successful but now experience a cash flow crunch. Chapter 11 may be the perfect tool for you in order to reorganize your debt while your cash flow is low and allow you to maintain your property rather than losing it.
Chapter 11 allows you the flexibility to renegotiate mortgages and all contracts which your business may hold. You may be able to reject commercial leases which have become cost prohibitive for your business.
New Bankruptcy Law requirements
Federal bankruptcy law requires that your attorney provides you with the following disclosures prior to counseling. If you would like to meet with one of our attorneys for a free initial consultation please contact us. We will be happy to help.
Before you will be able to file for either Chapter 7 or Chapter 13 bankruptcy, you will have to participate in a credit counseling session within 6 months of the filing. After successfully filing for bankruptcy, you will also have to pay for and attend a debtor education class in order to relieve your debts.
The Bankruptcy Reform Act – The Means Test:
Your Income Vs. Your State’s Median Income
In the first part of the means test, your monthly income multiplied by 12 is compared to your state’s median annual income. Your state’s median income would be below your state’s highest incomes and above your state’s lowest incomes. Here is a list of state median incomes, organized by family sizes.
If your income falls at or below your state’s monthly median income, then your Chapter 7 bankruptcy filing will likely be successful.
On the other hand, if your monthly income does not fall below your state’s median income, then your income will then be factored into a formula. Your formula results will determine your ability to file for Chapter 7.
Means Test Formula
Under the Means Test, any creditor, trustee or judge will look at your monthly income, minus certain living expenses like food and rent. Your Chapter 7 bankruptcy will likely be successful if you are unable to pay at least $6,000 over the next five years ($100 per month). However, if you can pay at least $10,000 over five years ($166.67 per month or more) your Chapter 7 will likely be denied. If you could afford more than $6,000 but less than $10,000 over five years, then a mathematical calculation determines whether your Chapter 7 will likely be successful or not. If you could afford to pay 25% or more of your unsecured debt, then a Chapter 7 will likely be denied. If you can’t afford to pay 25% of your unsecured debt, your Chapter 7 filing will likely be successful. Examples of unsecured debts would include medical and credit card bills. Note that you can still opt for Chapter 13 in either of these cases.
You should be aware that bankruptcy law lets the government decide what is best for you. The new laws take away discretion from the Judges to judge cases based on individual circumstances.
Forms
Federal bankruptcy law requires that we provide you with the following disclosures prior to counseling with you regarding bankruptcy. For a free initial consultation, please use our consultation agreement below.
· Acknowledgement of Receipt of Disclosures
Preparing for Your Consultation
Items you need to bring with you to your initial consultation with your attorney to assist in preparing a petition:
· Tax returns for the last 3 years
· Your last 6 months of pay stubs
· A list of all of your creditors with names, addresses, account numbers and total amounts owed
· Any divorce decrees you have.
· A list of your personal assets i.e. car,401(K),furniture, etc…..
Important Information and Tools for You
Why You Need a Certified Attorney
American Board of Certification
The Jones Law Group, PLLC. is a federally designated debt relief agency. Our attorneys assist people filing for Bankruptcy relief under the United States Bankruptcy Code and have for over seventeen years. Lynda F. Jones is a Certified Consumer Bankruptcy Specialist as designated by the Tennessee Commission on Continuing Legal Education. This is an advertisement.
