What Happens to Debts I owe to Family or Friends During Bankruptcy?

These sorts of debts are considered to be owed to favored or preferred creditors. You can include additional creditors into this category, like certain credit card companies if you want to keep the card you’ve been using with them. The best way to resolve these debts if they are over $600 and fall within the applicable preference period is to have your bankruptcy trustee set these debts aside. It’s best to not delay filing for bankruptcy until you’re able to pay back debts, so one thing you could do is wait until you have filed, then use exempt assets or any income you’ve accumulated after filing to pay back these preferred or favored debts.

To better understand if filing for bankruptcy is the right action for you to take, it is recommended that you set up a consultation with a local bankruptcy attorney.

What’s the Difference Between Chapter 7 and Chapter 13 Bankruptcies?

Chapter 7 and chapter 13 bankruptcies both provide solutions towards debt relief, but both chapters differ in their specific benefits. Chapter 7 bankruptcies are the most common type of bankruptcy filed by consumers, and they deal with unsecured debt by selling off any assets that are not exempted from the debtor’s estate to creditors to satisfy debts. Chapter 13 bankruptcies allow for debtors to keep all current property by having them agree to a repayment plan to pay back some, if not all, of their total debt. These chapters differ in duration as well, as most chapter 7 cases achieve a discharge in a few months, while chapter 13 cases usually take about 3 years to achieve discharge in order to satisfy the repayment plan debtors undertake while under a chapter 13 bankruptcy. Chapter 7 cases tend to benefit low-income debtors who don’t have much nonexempt property, as well as those who wish to get their debt discharged sooner rather than later. One important requirement for chapter 7 bankruptcies however is that debtors who wish to file under chapter 7 need to meet a “means test” which shows that the debtor’s income is at or below their state’s median income for their specific household size. Chapter 13 payments benefit higher-income debtors who wish to protect or keep their nonexempt property, and allow for debtors to catch up on payments for property that can be repossessed or foreclosed.

To better understand if filing for bankruptcy is the right action for you, it is recommended that you set up a consultation with a local bankruptcy attorney.

Smart Money: Your Tax Return Could be a Ticket to Financial Freedom

This tax season, the average American taxpayer is receiving a $3,000 return. What

will you spend your tax return on this spring? Studies have shown that 43% of

Americans put their tax return into savings, 36% put the money towards paying off

their debt, 10% put money towards vacation, 6% purchase a luxury item, and 5%

make a necessary purchase, such as a house or car. While all are worthy ways to

spend money, paying off your debt could be the best investment you can make

with your tax return if you are in debt. Carrying around high-interest debt, with

interest compounding against you every month can be especially stressful. Surveys

tell us that debt is the most common cause of financial stress in the United States.

Your tax return could be a ticket to financial freedom.

If you have excessive amounts of debt that you are struggling to pay off, you could

spend your tax return most efficiently by putting the money towards filing for

bankruptcy. Bankruptcy offers the opportunity for you to get caught up on mortgages

or car loans without the threat of repossession or foreclosure and sometimes you can

be relieved from the legal obligation to pay some debts. To better understand if this

is something worthy of investing your tax return in, set up a consultation with your

local bankruptcy attorney to learn more.

After Bankruptcy: What is Next?

Bankruptcy gives you a fresh start in your financial life. But once you’ve
received your discharge from your bankruptcy, you may not know exactly
what steps to do moving forward.

1. Collect and file all your bankruptcy paperwork

Be sure to keep a copy of your bankruptcy petition, the 40-50 page document
that details your financial information. Also keep your notice of bankruptcy
filing  as well as a copy of your discharge order that you received from the
court.

Why should you do this? Sometimes when lenders are considering you for
new credit, they want to see your bankruptcy papers. It is also important to
keep these documents in case anyone wants to collect on your old debt in
the future.

2. Start a budget and review it frequently

Many bankruptcies begin as a result of unforeseen medical expenses, job
losses, or sudden family changes such as divorces or birth of children.
Creating a budget allows you to prepare and set goals for the future. There
are many great budgeting tools you can access through apps on your phone.

3. Start an emergency fund

As part of starting a budget, you will want to designate some funds for
unforeseeable emergency financial events. This fund could even turn into
retirement savings or college tuition savings in the future.

Why should you do this? This fund will prevent you from creating new debt
when emergencies arise. This fund will also make you feel less anxious about
your finances and prevent panic when emergencies happen.

4. Think about ways to improve your credit

Fresh out of your bankruptcy, you will have little to no debt. This is a great
opportunity to build your credit. However, be careful not to let yourself get
carried away. Begin with a small credit limit, monitor your charges, and pay
more than just the minimum amount every month. Another opportunity for
building credit is by investing in a secured-CD.

5. Explore financial management resources in the area

Because bankruptcy allows a fresh start on your financial life, it never hurts
to learn more tips and tricks to navigating personal finance in the future. You
can check out free seminars offered by local non-profits or community colleges.

Discharging Student Loans

If you are looking to discharge your student loans, it is a complex process, but not impossible.

After 1990, student loans are no longer considered “dischargeable.” This means that in order

to seek relief, an adversary proceeding is required--a lawsuit must be filed separate from the

bankruptcy case. You must prove that the payment on your student loans causes an undue

hardship. Most courts use the Brunner test to measure the burden of the debt. It is a three-

pronged evaluation that requires the following: 1) the individual and their dependents

cannot maintain a minimal standard of living if they were required to pay the student loan,

2) there must be additional factors that guarantee this poor standard of living will continue

throughout the whole payment period, and 3) the individual has made good faith effort to

pay the loans. If you can demonstrate that you meet these conditions, your student loan

could be cancelled as a whole.

There are advantages and disadvantages to discharging student loans. To better understand

if filing for an adversary proceeding is for you, it is recommended that you set up a

consultation with your local bankruptcy attorney.

Full Disclosure In Bankruptcy

When filing for Chapter 7 or Chapter 13 Bankruptcy, it is of the utmost importance to be fully honest and transparent with your attorney.  Often times, people fear losing possession of value and through that fear omit items when disclosing assets.  This can cause huge issues later in the bankruptcy process when these omitted items come to light and also can result in loss of the property in question.  By fully disclosing all assets up front with their attorney, clients can usually keep those possessions of value by utilizing State or Federal Exemptions.  For more information on how State or Federal Exemptions can be utilized to protect personal property in a bankruptcy, it is recommended to contact your local bankruptcy attorney.  

341-Hearing

Approximately 7 days after you file your bankruptcy, you (and the creditors you list in your bankruptcy papers) will receive a notification that a "meeting of creditors" has been set. The assigned bankruptcy trustee leads the hearing and, after swearing you in, will ask you questions about your bankruptcy and your papers you filed. Your bankruptcy lawyer will be at that hearing with you. In the large majority of Chapter 7 bankruptcies, this is your only visit to the courthouse.

For more information on our services with an attorney, feel free to call our Grand Rapids' office at (616) 920-0555.