While credit card debt is a common reason for bankruptcy, you cannot file for bankruptcy solely on the basis of credit card debt since the law requires all of your debts to be disclosed in the bankruptcy forms. Because bankruptcy can wipe your credit card and other unsecured debts, it can often leave you in a better financial situation, allowing you to keep your house.
Most people filing for bankruptcy in Ohio are concerned about keeping their homes, and there are various ways that bankruptcy can help you maintain your home while paying off unsecured debt like credit cards. If you can meet the conditions of the bankruptcy chapter you chose, whether Chapter 7 or Chapter 13, you will be able to keep your house.
Bankruptcy laws are difficult, and our Ohio bankruptcy lawyer will assist you in selecting the appropriate chapter so that you can keep your home, car, and other assets. Fesenmyer Cousino Weinzimmer’s professional and compassionate Ohio debt relief attorneys recognize that even the most well-intentioned persons can find themselves in financial hardship.
Does filing bankruptcy eliminate credit card debt?
Filing for bankruptcy might be a great treatment if you have severe debt troubles. Most collection actions, such as phone calls, wage garnishments, and lawsuits, are halted (with some exceptions). It also eliminates a variety of debts, such as credit card debt, medical bills, personal loans, and more.
How much does it cost to file bankruptcy for credit card debt?
Legal fees will almost certainly account for the majority of your bankruptcy expenditures if you opt to deal with a lawyer. It will, however, almost likely be worthwhile.
Bankruptcy laws are difficult, and if you’re not familiar with them, you could lose money or property unnecessarily. Legal counsel can help you protect yourself and increase your chances of a good outcome.
“Our mission is to make the bankruptcy process as straightforward as possible for our clients. Ashley Morgan, a bankruptcy attorney in Northern Virginia, says, “We’re here to foresee any difficulties that can be… averted.” “It takes me longer and costs more money to solve issues than it does to prevent them.”
Average costs
The cost of engaging a bankruptcy attorney varies significantly depending on the market rate in your area and the intricacy of your case.
In general, Chapter 7 fees are estimated to be between $500 and $3,500. Attorney’s fees may qualify as part of the debt discharged in a successful Chapter 7 case, therefore you’ll have to pay the cost before you file.
A Chapter 13 filing fee typically ranges from $2,500 to $6,000, but you aren’t required to pay the entire fee up front. You might be able to pay a portion of it before filing and then cover the remainder using your debt-repayment plan.
“No-look” fees
To guarantee that customers are not overcharged, bankruptcy judges have the authority to assess attorney fees to ensure that they are reasonable. In truth, several courts have made rulings in this regard “The court will normally not evaluate your attorney charges if you pay “no-look” fees (though this is still an option at the court’s discretion).
If your lawyer’s fees are higher than the national average, “The fees may be examined to ensure that they are appropriate based on the specifics of your case if you fall below the “no-look” level.
Free consultations
“Most bankruptcy lawyers provide free consultations, so there’s no harm in visiting with one,” Morgan explains.
They’ll most likely be able to offer you an estimate of how much it will cost to have them represent you during the consultation. If you’re concerned about how you’ll pay for legal services, many lawyers can work with you to set up payment plans.
“If you have a limited income, a lot of bankruptcy attorneys will cut their fees,” Morgan explains.
What debt Cannot be removed by declaring bankruptcy?
Both Chapter 7 and Chapter 13 bankruptcy have the goal of obtaining a “discharge” of debts. If a bankruptcy court releases your obligations, you will no longer be held personally liable for them. The majority of consumer debt, such as medical bills and credit card bills, can be discharged. Non-dischargeable debts, on the other hand, are those that cannot be discharged through bankruptcy. For national policy considerations, Congress has decided that these debts should not be forgiven.
Non-dischargeable debt is divided into 19 categories. In other words, creditors will be able to collect these types of debts even if you receive a consumer debt discharge. Some non-dischargeable debts do not require a hearing, while others will be discharged if a creditor does not contest their dischargeability.
To get these debts canceled, you’ll usually have to establish extraordinary circumstances, and they’re usually non-dischargeable:
- Unless the creditor was aware of your bankruptcy filing, debts that you kept off your bankruptcy petition;
In order to be non-dischargeable, other types of non-dischargeable debts must be successfully challenged by a creditor during the bankruptcy. The court will hold a hearing at which both the bankruptcy filer and the creditor will be able to present their cases. The debt will be canceled if the creditor does not object or if the court agrees with the creditor. Credit card purchases for luxury goods totaling more than $650 that were made in the 90 days leading up to the bankruptcy filing and are owed to a single creditor, fraudulently obtained debts or debts obtained under false pretenses, and debts incurred as a result of willful and malicious injuries to person or property fall into this category.
Which bankruptcy wipes out all debt?
Bankruptcy under Chapter 7 is a lawful debt relief option. If you’ve run into financial difficulties and are having trouble keeping up with your debt payments, declaring Chapter 7 bankruptcy may be able to help you get a fresh start. For the majority of people, this implies that the bankruptcy discharge eliminates all of their debt. However, not all debts are created equal, and what a Chapter 7 bankruptcy case may and cannot achieve is limited. Continue reading to find out what types of debts can be discharged in Chapter 7 bankruptcy.
Chapter 7 Bankruptcy Discharge Wipes Out Most Debts Forever
The majority of debts incurred by the average American consumer are discharged under Chapter 7. The following are the categories of debts that can be discharged in a Chapter 7 bankruptcy:
If you don’t have a reaffirmation agreement, you’re personally liable for secured obligations like vehicle loans.
When the discharge is entered, these dischargeable debts are automatically erased.
Some debts are only discharged in a Chapter 7 bankruptcy on rare occasions. The difference is determined by the timing and financial circumstances of the particular debtor filing bankruptcy.
Debts That Sometimes Can Be Eliminated In Chapter 7 Bankruptcy
Back taxes owed from income tax returns that were filed on time but not paid can be removed if they are more than three years old. There’s a lot more to determining whether a tax bill can be wiped by filing for bankruptcy, but it all comes down to timing.
Student loan debt: Student loans are not dischargeable in bankruptcy under the Bankruptcy Code. It is feasible, however, provided the filer can demonstrate that they would suffer undue hardship if the student debts were not canceled. To determine whether a debtor’s student debts should be dismissed, a separate adversary action is required. For this type of adversarial proceeding, there is no filing cost.
Debts That Sometimes Cannot Be Eliminated In Chapter 7 Bankruptcy
A credit card company or a bank may request that a debt they owe not be discharged. This can occur if the bank suspects the debtor of lying on their credit application. Credit card firms sometimes object, claiming that the debtor never intended to pay the amount and is exploiting the bankruptcy process.
Whether the individual debtor or the objecting creditor must show their case is determined under US bankruptcy law. It’s best to stop using credit cards as soon as you’ve decided to file bankruptcy to avoid this problem. Consider contacting your credit counselor during the necessary pre-bankruptcy credit counseling if you’re not sure how to make your budget work only on your monthly income. It may simply signify that you have stopped making your monthly debt payments. Although this may affect your credit score in the short term, it’s preferable to prevent a bankruptcy discharge objection.
Some Debts Can Only Be Erased In Chapter 13 Bankruptcy
A repayment plan overseen by a bankruptcy trustee is part of a Chapter 13 bankruptcy. While creditors do not receive huge interest rates (unsecured creditors do not receive any), they do receive something. That’s why, under Chapter 13 of the Bankruptcy Code, a bankruptcy filing can be used to discharge other debts related to a divorce, such as a property settlement.
Even if you meet the means test requirements for Chapter 7, if you owe a property settlement, talk to a bankruptcy lawyer about filing Chapter 13 instead. Although a Chapter 13 repayment plan can take up to five years to complete, it only stays on your credit report for seven years from the date of filing.
Filing Bankruptcy Provides Immediate Protection From Creditors
The automatic stay protects you after you file a bankruptcy petition for any type of bankruptcy. The automatic stay prevents debt collectors, banks, credit card companies, and anybody else who owes you money from contacting you or pursuing collection action. It “stays” or “stops” creditors from pursuing you for debt in any form, including wage garnishment.
This is something that everyone should be aware of. Domestic support responsibilities and back taxes are the sole exceptions. This will continue to happen if your child support payments are deducted directly from your salary. Even if you file bankruptcy, the Internal Revenue Service is entitled to withhold your tax refund to pay back taxes you owe. The automatic stay is just for a limited time. It will come to an end after the bankruptcy court has granted you a discharge.
Let’s Summarize
The majority of consumer debt can be discharged in bankruptcy. Medical costs, personal loans, credit card debt, and most other unsecured debts are all erased under Chapter 7 bankruptcy. Debt incurred as a result of a “bad conduct,” such as injuring someone or lying on a loan application, cannot be forgiven. The ability to discharge tax debt through bankruptcy is contingent on a variety of variables that should be assessed by a bankruptcy attorney.
What debts are dischargeable?
Debt that can be discharged after filing for bankruptcy is known as dischargeable debt. The debtor is no longer personally liable for the debts, and hence has no legal responsibility to repay them. When a debt is discharged, creditors are usually unable to pursue collection action against the debtor.
Credit card debt and medical bills are two frequent dischargeable debts. Domestic support and tax liabilities, for example, are often non-dischargeable due to public policy considerations. Exemptions to dischargeable and non-dischargeable debts are listed in 11 U.S.C.A. 523. The types of debts that are dischargeable and the requirements for discharge differ depending on the form of bankruptcy the debtor declares under federal bankruptcy law.
A discharge is only accessible to individuals in Chapter 7 proceedings, not companies or partnerships. As a result, in more than 99 percent of chapter 7 cases, people are able to get their debts discharged. There are, however, grounds for denial. An objection to a debtor’s discharge can be filed in bankruptcy court by a creditor or trustee, resulting in an adversary procedure. A court may also deny a debtor’s discharge for reasons outlined in 11 U.S.C.A. 727(a), such as presenting a fraudulent claim or failing to adequately explain any loss of assets to satisfy the debtor’s obligations. Secured liens are frequently non-dischargeable, even when a discharge has been obtained. If a debtor has outstanding mortgage payments, for example, his or her home may be repossessed. If a debtor wants to maintain his or her property, he or she might sign a reaffirmation agreement, committing to repay the obligation even if it has been dismissed.
When a debtor confirms a reorganization and repayment plan in a Chapter 11 case, he or she is usually eligible for discharge. However, unless the debtor is a single individual, the debt is not dischargeable if the plan is a liquidation plan rather than a reorganization plan (not a corporation or partnership). In most circumstances, if the debtor is a person, the debt will not be discharged until all plan installments have been fulfilled.
Debt can be dismissed in Chapter 12 cases if the debtor completes his or her Chapter 12 plan and certifies that all domestic support obligations due prior to the certification have been paid. Creditors who have been paid in part or in full are no longer able to pursue legal action against the debtor. In some cases, a court may give a discharge to a debtor even though he or she is unable to fulfill all plan payments under 11 U.S.C.A. 1228(b).
In Chapter 13 cases, debt can be discharged after a debtor completes his or her chapter 13 plan and (1) certifies that all domestic support obligations due before certification have been paid, (2) has not received a discharge in a prior case within specified time periods, and (3) has completed an approved financial management course if one is available. Chapter 13 bankruptcy covers more debts than other types of bankruptcy; 11 U.S.C.A. 1328(a) outlines the categories of debts that can be discharged. Under 11 U.S.C.A. 1328(b), courts may give a discharge to a debtor even if he or she has not made all plan payments in specified instances, similar to Chapter 12 cases.
Do I qualify for Chapter 7?
Because it removes the majority of your unsecured debt, Chapter 7 is known as “liquidation bankruptcy.” Credit card debt, medical costs, and personal loans all fall into this category.
It’s the most straightforward, straightforward, and widespread sort of bankruptcy. According to the American Bankruptcy Institute (ABI), Chapter 7 bankruptcy cases accounted for 63 percent of the 774,940 bankruptcy cases filed in 2019.
An even more promising bankruptcy statistic: debts were dismissed, or forgiven, in 94.3 percent of Chapter 7 filings.
To qualify for Chapter 7 bankruptcy, you must pass a “means test.” The bankruptcy means test looks at your financial records, including your income, expenses, secured and unsecured debt, to see if your disposable income is less than the state’s median income (50 percent lower, 50 percent higher). The income threshold for the means test varies by state.
Although numerous web sources indicate that 96 percent of Chapter 7 petitions are “no asset” cases, meaning there isn’t enough equity or value in the property for a trustee to sell it and pay off creditors, you may be forced to sell any non-exempt assets.
Debts That Can and Can’t Be Discharged in Chapter 7 Bankruptcy
Most of your debts should be dismissed in Chapter 7, however there are a few that cannot be released in Chapter 7.
- You owe a mortgage or a car loan that you are unable to repay (but you lose possession of)
Is Chapter 7 or 13 worse?
Chapter 7 bankruptcy is often a better option than Chapter 13 bankruptcy. For example, Chapter 7 is faster, and many filers can keep all or most of their property without having to pay creditors through a three- to five-year Chapter 13 repayment plan. However, not everyone is eligible to file for Chapter 7 bankruptcy, and in some circumstances, Chapter 7 bankruptcy isn’t the best option. Find out when filing for Chapter 7 bankruptcy is preferable to filing for Chapter 13 bankruptcy.
How do I declare bankruptcy myself?
When you walk through the doors of your local courtroom, security officers will meet you and ask you to go through a metal detector. After passing security, proceed to the clerk’s office and inform the clerk that you are filing for bankruptcy. They will collect your bankruptcy paperwork as well as your filing fee (or application for a waiver or to pay the fee in installments).
Do not give the court your bank statements or tax returns. Following the filing of the case, these documents are sent to the trustee. For further information, see Step 7 below.
While you wait, the clerk will begin working on your case by scanning and uploading your documents to the court’s online filing system. It normally takes no more than 15 minutes to complete this task.
The date, time, and place of your trustee’s meeting (also known as a “Meeting of Creditors” or “341 meeting”)
Your case has been submitted at this moment! Congrats! All debt collectors are now protected by the automatic stay. But you aren’t finished yet; there are still some things to take to gain a fresh start under Chapter 7 of the Bankruptcy Code!
What type of debt Cannot be discharged?
If a creditor objects during the lawsuit, the following debts will not be dismissed. Creditors must show that the debt falls into one of the following categories: Debts incurred as a result of deception. Debts for expensive items or services purchased 90 days prior to filing.
Immediate relief in the form of a much-needed breathing spell
You are protected from creditors as soon as your bankruptcy case is filed with the bankruptcy court. When you file for bankruptcy, all collection operations are automatically halted. All phone calls, garnishments, and collection letters must cease immediately. Repossessions, evictions, and foreclosures were all put on hold for the time being.
Permanent debt relief in the form of a bankruptcy discharge
Most sorts of debt, including credit card debt, medical bills, and personal loans, are erased when you file Chapter 7 bankruptcy. When the bankruptcy court grants you a bankruptcy discharge, you no longer have to pay these sorts of unsecured debts.
Getting your bankruptcy discharge is virtually guaranteed
You can achieve your bankruptcy discharge in as short as three months if you’ve never filed bankruptcy before, pass the means test, and act honestly with the bankruptcy court and the bankruptcy trustee. It’s virtually automatic if you make sure you meet all conditions before and after filing your bankruptcy petition.
You’ll probably get to keep all of your stuff
More than 95 percent of people who file Chapter 7 bankruptcy in the United States keep everything they own. This is because the law safeguards certain assets, known as exempt assets, from creditors. If it’s covered by an exemption, you get to retain it, whether it’s your monthly social security check, your watch, or your kitchen table.
If you want, you can even keep your car after filing bankruptcy
You’ll have to pay for it, but isn’t that just fair? If you don’t want to keep it, though, Chapter 7 bankruptcy permits you to walk away from both the car and the loan! Here’s all you need to know about preserving your car after declaring bankruptcy under Chapter 7.
After filing bankruptcy, missed monthly payments and other negative marks on your credit report no longer hurt your credit score
When your bankruptcy is discharged, you will be given a clean slate on which to rebuild your credit and raise your credit score. One year after filing Chapter 7, the majority of folks have a higher credit score than they did when they first started the bankruptcy process.
Improved Access to Credit and Banking
You’ll get more credit card offers than you know what to do with shortly after filing for bankruptcy. This will not only assist you in rebuilding your credit and increasing your credit score, but it will also provide you with the security net that comes with owning a credit card in the event of an emergency.
How many years does a bankruptcy stay on your credit report?
To have a bankruptcy removed from your credit report, you don’t have to do anything. The bankruptcy, as well as any associated accounts, will be automatically deleted.
The discharge date is when the bankruptcy plan is finished after it has been filed. However, the date of discharge has no bearing on when the data would be destroyed. In fact, it’s very feasible that the data has already been erased.
How Long Does Bankruptcy Stay on the Credit Report?
Depending on the chapter you filed, the bankruptcy public record is wiped from your credit report either seven or ten years after the filing date.
Because Chapter 13 bankruptcy requires at least a partial recovery of the obligations owed, it is removed seven years from the filing date. Because no debt is repaid, a Chapter 7 bankruptcy is erased 10 years after it was filed.
Accounts Included in Bankruptcy
Individual accounts from Chapter 7 and Chapter 13 bankruptcy can be on your credit report for up to seven years.
A person who files for bankruptcy is usually suffering substantial financial difficulties. Prior to bankruptcy, accounts are frequently substantially late.
If an account was delinquent at the time of the bankruptcy, it will be deleted seven years from the original delinquency date, which is the day the account first became delinquent and was never restored current again. Declaring bankruptcy has no effect on the account’s original delinquent date or the length of time it remains on the credit report.
What debts does Chapter 7 discharge?
Unsecured obligations, such as credit card debt, medical expenses, and unsecured personal loans, are often discharged in a Chapter 7 bankruptcy. At the conclusion of the process, which usually takes four to six months, the court will discharge these debts.
Some unsecured obligations aren’t routinely discharged in a Chapter 7 bankruptcy, including:
Your creditor may raise an objection and prevent the discharge of certain obligations. A credit card company, for example, might raise an objection to debt from recent luxury goods purchases or cash advances, and the court might rule that you still owe this portion of the credit card sum.
In addition, a Chapter 7 bankruptcy may be used to erase secured loan obligation. Secured loans are ones that are backed by collateral, such as your home for a mortgage or a lien on your property from a creditor. Even if your obligation is erased, your creditor may still be able to foreclose or repossess your property.
