Bankruptcy is a federal court proceeding that will help eliminate or payback debt.  It is a legally declared or recognized condition of insolvency.  Bankruptcy can be utilized by individuals, married couples or businesses unable to pay their debts.


 

For most people, even the thought of filing bankruptcy (BK) can be an overwhelming experience. The biggest deterrent for the majority of clients is the perceived amount of time, and paperwork that goes into the BK legal process.  On top of this, there are the complicated laws, courts and attorney’s to deal with when claiming bankruptcy in the United States.  We understand the amount of stress you’re under, and Total Debt Network is here to tell you it doesn’t have to be as hard and complicated as some lawyers make it out to be.  Whether you’re drowning in a sea of collection letters and debt collection calls, or just tired of barely scraping by week in and week out due to never ending high interest debts; there is a way to break free.

 

Filing for bankruptcy usually requires the following steps…

• Undergoing a “means” test.
• Receiving debt counseling from an approved organization.
• Submitting a repayment plan.
• Attending a meeting with creditors.

 

About Bankruptcy: What is bankruptcy and how to file

There are 4 forms of bankruptcy but the two most commonly used forms are Chapter 7 and Chapter 13.

 

Chapter 7

Chapter 7 BK is the most commonly used form of bankruptcy and is often times referred as a “Straight BK”. Chapter 7 is knows as a liquidation proceeding, meaning the debtor turns over any/all non-exempt (see below for explanation) property to the BK trustee. The trustee then sells the items and distributes the funds to creditors.  This will stop the harassment of creditor’s calls and put you on the track to a new financial future.

Chapter 7 allows the client the ability to keep some possessions called “Exempt Items.” An exempt item is an item that is not accounted for in the bankruptcy proceedings. While exempt items vary from state to state, generally in Chapter 7 exempt items are the same regardless of the residing state.

These exempt items typically include:

  • The primary residence
  • One vehicle
  • Personal items
  • Retirement savings in pension funds
  • 401Ks
  • IRAs

Individuals will only be allowed to keep their primary home and vehicle if they can afford those payments after completing the Chapter 7 bankruptcy proceedings.

The process generally takes 4-6 months from the filing date to the final discharge. Chapter 7 is the best option for people who have few or no assets, little to no income, and a great deal of debt. This is the simplest and quickest form of BK and can only be filed once every 6 years, but stays on your credit score for 10 years.

 

Qualifying for Chapter 7

In 2005 Congress added into the bankruptcy law something called the “means test”. The “means test” must be passed in order for an individual to claim Chp 7.  The test is a fairly simple 2 step process.

  1. First thing that’s examined is the household income in direct comparison to the state median income (based on family size). The past 6 months are looked at to determine your annual income. If your income is less than your state’s median income, you’ve passed the test and can proceed with filing Ch. 7.
  2.  

  3. If your income exceeds the state median, it gets a bit more complicated. Disposable income is now calculated to determine if you can afford to make monthly payments towards outstanding debts and pay them off in 5 years.

 

Do not let the Chapter 7 means test intimidate you, nearly 50% of people attempting to file Ch. 7 “pass” the means test at step 1.  Those above the median line have certain allocations available around disposable income to meet step 2.  For those who don’t qualify for Chapter 7, Chapter 13 or an alternative Debt Relief program is also an option.

 

What to Expect following Filing Ch. 7 BK:

The  end result of claiming Ch. 7 BK is to create a clean slate and a fresh start, free from debt.  However, certain debts survive a Chapter 7 bankruptcy because they are exceptions from the discharge by law.  The most common exceptions are as follows.

  • Child support
  • Income taxes less than 3 years old
  • Property taxes
  • Fines and restitution imposed by the court
  • Student loans

 

CLICK HERE to read about Chapter 13 Bankruptcy and Emergency Filing

 

If you would like to speak with one of our specialists about enrolling in a particular program, or just need some help deciding which solution is right for you, feel free to call us at (888) 609-1854 | Opt. #1 or complete the form on our CONTACT page.