Some of the questions we ask potential bankruptcy clients when deciding how to advise them to move forward are:
- How long have you had the debt?
- What is your total unsecured debt? What is your secured debt?
- How much debt is on your home?
- What personal loans do you have?
- How many family members do you have?
- What is your income? What is your spouse’s income?
- Do you have any lawsuits against you?
- Do you owe any taxes?
- Do you have any other collection debts?
Is There A Point When You’re Talking To Them Where They’re Saying, “I’m In A Serious Debt But I Don’t Think It’s Too Bad”? Is There That Cut-Off In Your Mind Or In Your Experience Where Yes, This X Amount Of Debt Is Too Much, You’ve Got To File Bankruptcy?
It is a more comprehensive decision than that. The baseline is, does this individual have more than $10,000 in debt? If there is more than $10,000 in debt, then I review their savings, income, and family size. How long the client has been struggling with the debt is also taken into account. For instance, if the client has had the debt for more than six months, there could be opportunities to settle the debt and offer a debt settlement. If they have been struggling with the debt for two or three years and the debt has not decreased, then it is time to seriously consider bankruptcy.
What Is The Chapter 7 Bankruptcy Exactly?
Chapter 7 bankruptcy involves the appointment of a bankruptcy trustee who is responsible for liquidation of the debtor’s non-exempt assets to pay creditors. It is considered a straight bankruptcy and provides a discharge to the individual at the end of the proceeding. The trustee can sell or liquidate any non-exempt assets and use those funds to pay creditors, and the remaining debt is discharged.
What Is The Chapter 13 Then?
A chapter 13 bankruptcy is the reorganization of an individual’s finances to repay creditors under the supervision of a chapter 13 trustee. The repayment plan must provide a substantial repayment to creditors, and it uses 100% of the debtor’s disposable income for repayment. For example, the plan can repay arrears on a home mortgage or income taxes. The plan must be approved by the court.
What Would You Say Is The Defining Point Where You Would Suggest To Someone Whether Chapter 7 Or Chapter 13 Is Right For You? How Do I Know Which One Is Right For Me?
The difference between chapter 13 and chapter 7 bankruptcy is whether the individual needs a repayment plan to repay arrears on a home mortgage, has income tax debt or other nondischargeable debt. A chapter 7 bankruptcy does not provide for repayment of debt. The goal in a chapter 7 case is to obtain a discharge from the individual’s debt. In addition, if the individual savings or equity in a car or home that is not exempt, he or she can retain the home or the car by repaying the amount of equity in that asset in chapter 13. Chapter 13 allows retention of non-exempt assets and repayment of the value of those assets.
In A Chapter 7, Who Qualifies Or What Is That Means Test We Hear So Much About?
The Means Test looks at the gross income of the debtor and their spouse in the household during the six months prior to the filing. If your household income is below the median income in your state and county, you will qualify for chapter 7 bankruptcy. However, if your gross income is above the median level in your state and county, you are not precluded from chapter 7 bankruptcy. You will be able to go through a more detailed means test analysis and deduct certain expenses to determine whether you qualify for chapter 7. These deductions can include secured debt like a home mortgage payment and car loan payments. In Montgomery County Maryland, an individual can make about $71,000 in gross income and qualify for chapter 7.
For more information on Bankruptcy Law In Maryland, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (240) 539-9393 today.
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Former Chapter 7 Trustee