Most people filing a bankruptcy will either file a chapter 7 or a chapter 13. Farmers can file a chapter 12, and a business can file a chapter 11. Chapter 11 and 12 are not be discussed. If you need information about chapter 11 or chapter 12, call for details.
EVERYTHING IN BANKRUPTCY IS INCOME RELATED. THE AMOUNT OF THE DEBTS IS INMATERIAL. FILING A CHAPTER 7 OR 13 IS PRIMARILY DECIDED BY INCOME
Chapter 7-Most common
Most debts are discharged or taken away. Chapter 7 is the easiest, simplest, and quickest way to get out of debt.
Recent taxes, student loans, child support, and debt incurred while intoxicated or criminal fines are not discharged. All other debts are normally discharged. Many people want to retain a vehicle or a home. You can keep the vehicle or home if you retain the monthly payments. Bankruptcy does not end a mortgage. If you retain the vehicle or the home, you will need to keep making the regular monthly payment.
All debts owing must be listed. Any person filing bankruptcy is required to include everyone that they know that they owe. Even though you plan to retain the home or vehicle, the debt must be listed. The holder of the mortgage on the home or vehicle is not interested in getting the home or vehicle. All they want is money.
After bankruptcy, you can pay any debt. The creditor can take or make no effort to collect the debt.
Most property owned is exempt including your home and in most cases, one vehicle for husband and wife. This means that the court cannot take items like household goods, clothing, most guns, animals, or tools of trade.
A trustee is appointed in every case. The trustee’s job is to see if you have any non-exempt property ie a boat of value with no mortgage, some vehicles, some tax refunds, savings accounts, stocks, bonds and some other assets. You get to keep all exempt items.
Most debts are discharged or taken away. However, a chapter 13 requires a payment to the chapter 13 trustee for a period of time. The time period may be as short as 36 months, or as long as 60 months. The monthly payment varies depending on the gross monthly income.
If the family or individual income is above the median income, then a chapter 13 may be required. The court uses what is called the “means test” to determine whether to file a 7 or 13. The means test is a manner in which certain expenses are allowed, ie taxes, medical insurance, food, clothing, auto expense, housing, etc., in determining the amount of money left over to pay the trustee.
Chapter 13 can also be used to pay back taxes. In most cases, the penalty of the IRS, or the OTC is eliminated in the bankruptcy.
Chapter 13 is widely used to retain homes. In the event of an arrearage, or a pending foreclosure, filing chapter 13 will stop the foreclosure. The arrearage and the house payment are paid to the chapter 13 trustee and the trustee pays the mortgage company.
Congress has set a median income for filing chapter 7 or 13. The median income changes from time to time, and varies by the number of persons in the family. For example, two person family, median annual income is approximately $49,000.00.
This means that a two person family can have a gross annual income of $49,000.00 or less and do a chapter 7 bankruptcy. If their income is higher, then the choice of a chapter 7 or 13 is determined by the means test.
DETERMINING WHICH CHAPTER TO FILE
Each person or family must determine which bankruptcy fits their needs. The attorney helping with the bankruptcy will be able to give the advice on which chapter will work. need 6 months of income records to determine the annual income. The 6 month period ends in the month before the filing.
Every person filing bankruptcy is required to take two counseling classes. These classes are very simple and easy. There really is no pass or fail. These classes can be done online or by telephone. The first course is taken before the filing of the bankruptcy, and the 2nd course is taken after the filing, but before the discharge. The courses each will take about 1 ½ hour to complete. The cost of both courses is about $40.00 for both courses for an individual, or a family.
COST OF FILING
Chapter 7-Court cost--$306.00. Legal fee will vary depending on who you choose to represent you. Most attorneys charge $1,200.00 or more. We charge $944.00. Attorneys are required to provide a written contract prior to employment. Attorneys can allow the fee to be paid on installments prior to filing. Unfortunately, the courts have ruled that anything owing to an attorney at the time of filing of bankruptcy is discharged, and the attorney can make no collection effort to collect the balance owing after the filing of the bankruptcy.
Chapter 13-Court cost--$281.00. Most attorneys charge $3,500.00 plus court cost. We charge $2,400.00 plus court cost. However, you will not be expected to pay this prior to the filing. You will pay $681.00 when we file your case and the balance of $2000.00 is paid as you make your payments to the trustee, the trustee will pay us a little each month until the balance is paid in full.
When filing bankruptcy, you can keep certain property. These are called exemptions. The court cannot take your home, (provided you live there) your household goods, clothing, one vehicle per person with an equity of $7,500.00 or less. Other exempt items are retirement accounts, limited firearms, and other miscellaneous items. Your attorney will know the exemptions.
Everyone filing a chapter 7 or 13 is required to attend what is called a meeting of creditors. Creditors are permitted to appear and ask a limited number of questions that led to the bankruptcy, or questions about retaining property, ie are you going to keep the vehicle, and are you going to reaffirm the debt.
Creditors seldom appear at the meeting of creditors. The hearing is simply a matter of being there.
SELECTING AN ATTORNEY
An attorney should be selected that you feel comfortable with, one that answers your questions, and is available for consultation. A personal recommendation is always best. You should be able to contact the attorney via telephone. An experienced bankruptcy attorney is always better than an attorney doing his first or second bankruptcy.
FEEL FREE TO CALL FOR MORE INFORMATION. WE WILL BE HAPPY TO ANSWER ANY QUESTIONS, OR DISCUSS THE MATTER FURTHER. (405) 949-5544
Chuck Moss, Attorney 500 N. Meridian, Ste 300, Oklahoma City, OK 73107