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tax refunds in bankruptcy

Tax Refunds In Bankruptcy

Your tax refund is an asset in bankruptcy. This is true whether you file Chapter 7 or Chapter 13. Your refund is treated differently in each chapter, but generally you can keep your tax refund in bankruptcy.

Chapter 7

In Chapter 7, your bankruptcy assets are any assets you already own, or reasonably expect to own. A tax refund is a great example. If you have not filed your taxes yet, but you know that you will receive a refund, that refund is part of your bankruptcy estate. Because the refund does not represent income earned in the last 60 days, it cannot be exempted under N.C.G.S. 1-362. It can, however, be exempt under N.C.G.S. 1C-1601(a)(2). This is commonly known as your “Wild Card” exemption. It can be applied to any assets.

By claiming an exemption, you are exercising your right to protect certain assets. Your Wild Card exemption is available to cover up to $5,000 of assets. So, as long as your refund is $5,000 or less, you can use your Wild Card exemption to protect it. If you’re filing with a spouse, you both have a Wild Card exemption, for a total of $10,000 in Wild Card exemption available.

By protecting your tax refunds in bankruptcy with an exemption, your bankruptcy case can move forward without the bankruptcy trustee taking that asset. You will receive your discharge, and when you receive your tax refund, it’s yours to keep.

Another option is to receive and spend your tax refund in bankruptcy before you file. So long as you spend the refund on normal living expenses, you are not running afoul of the bankruptcy rules. Additionally, if you purchase household goods like furniture, you can still protect those new purchases with your household exemption under N.C.G.S. 1C-1601(a)(4).

Chapter 13

If you are in Chapter 13, the same rules apply as outlined above for Chapter 7. However, these rules are only applicable to the year in which you are filing your Chapter 13. Because a Chapter 13 case runs for three to five years, you need to be concerned about future tax refunds in Chapter 13.

If you receive tax refunds in Chapter 13 in a year beyond your first year, you must disclose this refund to the Chapter 13 bankruptcy trustee. Generally, you are allowed to keep $1,000 per debtor each year. Additionally, if you have any unused Wild Card you can apply it to your tax refunds received in subsequent years. Lastly, if your tax return shows that your refund is due to an earned income credit or a child tax credit, the refund is yours to keep.

If you cannot protect your tax refund in Chapter 13 in the above manner, you can also petition the court to keep your refund due to the fact it is necessary for living expenses. An example would be that you have been putting off repairs to your home or vehicle, and the non-exempt tax refund will be used for those repairs. Quite often, clients are making ends meet but putting off normal and routine household expenditures to do so. For this reason, the court entertains a request to use your tax refund in Chapter 13 to get ‘caught up’ on household expenses.

Adjusting Your Withholding In Bankruptcy

One allowable way to help insure you don’t lose any money in Chapter 13 is to adjust your tax withholding. This way, rather than receive a large refund in bankruptcy at the end of the year, you receive more income each month. Your Schedule I and J filings in Chapter 13 should reflect this, and your overall budget will change slightly; however, it will help you avoid an annual chore of trying to prove to the Chapter 13 court that you should be allowed to keep your tax refund.

Speak With A Charlotte Bankruptcy Attorney Today

Bankruptcy is a very powerful solution with long-lasting positive effects. If you’d like to speak with a lawyer about filing bankruptcy, we’re here to help. Consultations are free and answering questions is part of the job. Call us at 704.749.7747 or click for a FREE CASE EVALUATION and we will reach out shortly.

How much will my Chapter 13 payment be

How Much Will My Chapter 13 Payment Be?

Your Chapter 13 payment is a combination of a few factors. We discuss these factors in this post. If you have questions please call 704.749.7747 or click for a FREE CASE EVALUATION and we will reach out today.

Priority Debts

There are some debts which must be paid in full during the course of your Chapter 13 bankruptcy. A list is below:

IRS Tax Debt

State Tax Debt

Mortgage Arrears

HOA Arrears

Spousal or Child Support Arrears

Car Arrears

If you owe any of the above items at the time of your Chapter 13 filing, you must pay them through your Chapter 13 plan. If your plan is 60 months, you can divide the totals above by 60 to get your estimated monthly amount applicable to these items. If you do not owe any of the above items, you should discuss Chapter 7 with your bankruptcy attorney.

Ongoing Car and Mortgage Payments

Your mortgage on your primary residence will also be paid through the Chapter 13 plan. This is known as a Conduit Payment because it flows through the Chapter 13 trustee. This is to insure your mortgage creditor is protected in the Chapter 13 plan, ongoing.

Your ongoing vehicle payment will also be built into your Chapter 13 payment plan. In some cases, your interest rate can be lowered in the Chapter 13. Additionally, your vehicle loan balance may be lowered—your attorney can assist with this equation. Lastly, if you surrender your vehicle in Chapter 13, any loan balance above and beyond the blue book value will simply be treated as unsecured debt, discussed below.

Unpaid Attorney Fees

The Chapter 13 fee is set by the court at $4,500.00 plus the filing fee. Your attorney will require some of that to be paid up front. Any remainder will be built into your Chapter 13 plan payment.

Unsecured Debt

Your unsecured debt will typically be paid back at a very low percentage in your Chapter 13. First, you must present a budget to the Chapter 13 court. Then, you must propose that any remaining funds after all of your ongoing monthly expenses, be paid as part of your Chapter 13 payment. This amount varies depending upon your income and expenses, of course. Essentially, the remainder is used to pay the items above, and to pay a small amount to unsecured creditors.

One example of a Chapter 13 plan would be to propose to pay 10% to unsecured creditors. This means if you have $50,000 in unsecured debt (credit cards, medical bills, etc.), you would pay a total of $10,000 to those creditors during the course of the plan. Over  a 60 month plan, this equates to roughly $80 a month.

What Is Your Ability To Pay?

Ultimately, your Chapter 13 payment is a function of your Ability To Pay. In the end, you must show the court that your payment includes the mandatory items above, plus a small amount to your unsecured creditors, and lastly, that it also represents the most you can afford each month.

Changes To Your Chapter 13 Payment

If you income changes (up or down), your Chapter 13 plan payment may also change. This is because the plan payment is based on your ability to pay. As a result, you may be required  to update the court or your attorney periodically, as to your income.

The Trustee Fee

Lastly, remember the trustee receives roughly a 4% fee for every dollar that flows through the plan. If your Chapter 13 plan calculation comes to $1,000 a month, it will need to be increased to roughly $1,040 a month in order to pay the trustee fee.

Speak With A Charlotte Bankruptcy Attorney Today

If you have questions about Chapter 13 and would like to speak with a Charlotte bankruptcy attorney today, call us at 704.749.7747 or click for a FREE CASE EVALUATION. Consultations are free and we’re here to help.

File bankruptcy

Need A Raise? File Bankruptcy

Financial stress is a common form of anxiety and worry. In a recent CNBC article, it was reported that 30% of Americans say they are constantly stressed out about money. The stress is due not only to existing bills and debt, but also to the threat of unexpected expenses. If money is already tight, even the thought of a small unexpected expense can cause a great deal of anxiety.

Free Yourself From Financial Stress

There are two primary ways we can free ourselves from financial stress. First, we can make more money. While increasing your income is not an option for everyone, it does solve the financial problem for some Americans. So long as your expenses don’t increase with your income, you should be able to better manage your debt. For most of us, the idea of increased income is a good one, but the reality is we don’t have the option to do it or we would have done it long ago.

The second way to free yourself from financial stress is to reduce debt and expenses. If you’re like most clients we work with, you’ve already reduced your monthly expenses, and you now realize it’s the debt that is causing most of the stress. This is where filing a Chapter 7 or Chapter 13 bankruptcy can change everything.

Filing Bankruptcy Is Like Getting A Raise

It’s time to put the myths of bankruptcy aside and start focusing on the benefits of bankruptcy. Consider this: if you have $500 a month in debt payments you are making, your bankruptcy will eliminate those payments provided they are related to credit card debt, medical bills, or other unsecured debt. You were spending $500 of your post-tax money a month on those bills. Assuming you’re taxed at roughly 27%, that is roughly $700 a month in pay. When you calculate it annually, it comes to $8,400. Under this scenario, by filing bankruptcy, you effectively give yourself a $8,400 raise. For most Americans, a raise like that is a game changer. Add to that the fact that the debt is gone, and you realize financial relief is a few simple steps away.

But Isn’t Filing Bankruptcy Stressful?

No, filing bankruptcy is not stressful. We know our clients sometimes have an emotional response to the idea of filing bankruptcy. Once we’ve had an initial consultation and decided to make a decision that benefits us and our families, the idea of filing bankruptcy shows itself as a solution.  When we have a solution to our problems, we experience peace and joy—the opposite of stress and anxiety.

How Do I Get Started?

Getting started is so very easy. You simply make a phone call and discuss your options. The call will take about 20 minutes. After, you’ll be provided with a login and password where you can enter some specific information to help us determine if you qualify for Chapter 7. Most clients do, and those who do not can qualify for Chapter 13 in most cases. Either way, the debt goes away and peace is restored to your life.

Speak With A Bankruptcy Lawyer Today

Call us at 704.749.7747 or click for a FREE CASE EVALUATION and we will reach out to you. We know financial stress is tough. There is a solution, and we are proud to be part of it. We hope you choose to Recover With Us.

filing bankruptcy while married

Filing Bankruptcy While Married

If you’re considering filing bankruptcy while married, you’re not alone. Thousands of married couples are in your situation, and the bankruptcy filing statistics are easily found online, showing you that you’re not alone. The good news is one spouse can file bankruptcy without affecting the credit of the non-filing spouse. This article contains an examination of a few scenarios where you may want to file bankruptcy while married—even if your spouse isn’t filing with you.

One Spouse’s Debt Can Cause Anxiety In A Relationship

If one spouse brings debt to a marriage, despite best intentions, the other spouse may feel resentful of the pre-marriage debt. At the very least, as a couple, you deserve a ‘fresh start’ together and that includes being free of debt you did not decide to incur together.

Computing The Means Test In Bankruptcy

If you’re filing bankruptcy while married, you will need to disclose the income of both spouses. This is done for the purpose of passing The Means Test in bankruptcy. The reason is that the federal bankruptcy code uses household income as the starting point for determining whether you qualify for bankruptcy. If you live with your spouse, you’ll need to count their income. The good news is most couples still qualify even when counting the income of their spouse.

Lastly, there is an option to take a Marital Deduction on The Means Test. This option allows you to more accurately show the court the amount of the household income which is being used by the non-filing spouse. Ultimately, this deduction reduces your income for The Means Test. The deduction is easy to calculate and your bankruptcy attorney will walk you through it.

Protecting Your Spouse’s Credit In Bankruptcy

Your spouse’s credit will not suffer due to your bankruptcy. Your bankruptcy will not show on their credit report, nor will it come up when applying for credit of any kind. When one spouse files for bankruptcy, the bankruptcy only affects the debts of the spouse who is filing. In other words, the marriage does not change the effect of the bankruptcy from a credit standpoint.

Protecting Your Spouse’s Assets In Bankruptcy

None of your spouse’s own assets will be affected by your bankruptcy. If you have joint assets such as a house or a jointly owned vehicle, those assets can typically be protected in bankruptcy. The good news is only half of their value is counted for your bankruptcy filing when married. Lastly, if your spouse has a 401k or savings account in their name only, those assets are not part of the bankruptcy filing.

Joint Debt In Bankruptcy

If you have joint debt with your spouse, you may want to consider filing together. However, it is still perfectly fine to file without your spouse. One thing to consider is the obligation on joint debt. Most marital debt obligations are “joint and several” liability. This means that both spouses are obligated for the full balance of the debt. If one spouse file bankruptcy, that spouse will no longer be responsible for the debt; however, the non-filing spouse will still be responsible for the entire balance of the joint debt. If the non-filing spouse decides to file at a later date, that would of course eliminate their obligation on the debt.

Your non-filing spouse may choose to attempt Debt Settlement instead of filing bankruptcy. This is a common way to successfully address a small amount of joint debt or debt that belongs only to the non-filing spouse.

Vehicles In Bankruptcy When My Spouse Isn’t Filing

The only vehicles which must be disclosed as assets are those vehicles which are titled in the name of the individual who is filing. If you transferred title to a vehicle from one spouse to another within four years of filing bankruptcy, that transfer should be disclosed in your bankruptcy filing. The transfer most likely will not negatively affect your bankruptcy filing, but disclosing it is in alignment with the court’s requirements for full disclosure of all transfers to family members and “insiders” (family and friends) within a four year period preceding your bankruptcy filing.

Further Reading

You can read hundreds of articles like this one on our Bankruptcy Blog.

Speak With A Bankruptcy Lawyer Today

If you’d like to set up a free consultation about filing bankruptcy while married, you can call us at 704.749.7747 or click to request a FREE CASE EVALUATION and we will reach out to you. We know you have choices, and we hope you choose to Recover With Us.

Do I make too much money for Chapter 7

How Does Bankruptcy Affect You?

While this question is general, we understand the concern. Most clients want to understand what it will be like during their bankruptcy, right after their bankruptcy, and a few years down the road from bankruptcy. This article is meant to address the question “How does bankruptcy affect you?” and we hope it helps. You can also read more specifically about how quickly you can file bankruptcy, or about Chapter 7 or Chapter 13.

How Are Things Right Now?

It’s important to put things into perspective when wondering how bankruptcy will affect you. It’s worthwhile to take stock of some of the experiences you’re having currently. They may include:

Creditors Pursuing You

No Savings For Emergencies

Inability To Save For The Future

Feeling Like You’re Failing Financially

Stress And Anxiety

All of these are very real concerns. Filing bankruptcy helps every single one of these concerns, from the moment you decide to file.

What Happens When I File Bankruptcy?

Creditor Calls Stop—Creditors are no longer allowed to contact you or pursue debt, in accordance with The Automatic Stay in bankruptcy. You get this protection from the day your bankruptcy lawyer files your case. We have addressed Credit Cards In Bankruptcy in a prior article.

Savings Increases—You immediately stop paying creditors with your hard-earned income, and can use those funds to make sure rent or mortgage is paid. You can make your car payments on time. Or, if there is extra money leftover, you can put it aside for savings.

You Feel Financially Healthy—With all of your unsecured debt gone, the immediate effect of bankruptcy is to free you from the burden of having overwhelming debt that you can’t keep up with over time.

Stress Melts Away—It’s amazing how stressful financial situations are. Without aggressive creditors calling you and reminding you every day that you owe them money, you’re free to focus on what’s important to you. The household budget is suddenly ‘balanced’ and you can afford necessities.

Credit Score—Immediately after filing bankruptcy, your credit score will drop due to the filing. Unless your credit was perfect before filing, you’ll find this dip in your credit score is a small price to pay for all of the benefits you receive upon filing bankruptcy. You can read more about your Credit Score In Bankruptcy as well.

How Does Bankruptcy Affect You One Year After Bankruptcy?

Credit Score—About a year after filing bankruptcy, your credit score will recover to where it was just before filing. From there, you can continue to re-build your credit quickly.

You’ll Receive Credit Card Offers—While most clients swear off credit cards upon filing bankruptcy, receiving offers for credit cards a year after filing bankruptcy is a sign of healthy credit. It means if you do decide to buy a car or need credit, it’s available for you. The reason for this is when you file bankruptcy you eliminate a lot of debt. From a creditor’s standpoint you become a great candidate for extending credit. Creditors also know you can’t file bankruptcy again for roughly eight years, so they count on you paying your monthly credit card bill if they offer you a credit card.

You’ll Have Opportunities To Save—With high monthly payments to creditors out of the way, you will find that each month you can set aside some money. This may be for savings, a future vacation, or some other necessity life brings your way. The peace of mind that comes with having some savings is priceless.

How Does Bankruptcy Affect You A Few Years After Bankruptcy?

Your Credit Score Fully Recovers—While bankruptcy may stay on your credit report for about 8 years, it doesn’t mean your credit score can’t recover much sooner than that. By making on time payments on mortgage, car, or other debt, you’ll accrue a good credit rating over time.

You Can Buy A House—Two years after filing bankruptcy, you’ll become eligible for some federal loan programs for purchasing a home. Four years after filing, you’ll become eligible for most private funding available on the marketplace from lenders like Quicken, Wells Fargo, or other mainstream mortgage providers.

You’ll Know You Made The Right Choice—With all of the financial options in front of you, and with all of your debt behind you, your decision to file bankruptcy will reveal itself as one of the best decisions you’ve made for yourself and your family.

Further Reading

How Does Bankruptcy Affect My Spouse?

Click to read over 100 Bankruptcy Blog Articles.

Speak With A Bankruptcy Lawyer Today

If you would like to get some questions answered, or take the next steps toward a painless bankruptcy filing, call us at 704.749.7747. You can also click for a FREE CASE EVALUATION and we’ll reach out to you. We know you have choices. We hope you choose to Recover With Us.

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Social Security Benefits And The Means Test In Chapter 7

If your income is low enough, you will automatically qualify for Chapter 7 bankruptcy. However, many clients have income slightly above the median income level, and must pass The Means Test in order to qualify for Chapter 7. This is not uncommon. The Means Test is simply a comparison of your income to your debts—some actual, and some allowances by the bankruptcy code.

Fortunately, The Means Test focuses on your most recent six months of income. This allows you to take advantage of some timing, if you have inconsistent income or unusual income which will not continue into the future. Your bankruptcy attorney will discuss this in more detail with you.

Types Of Income Included In The Means Test

The safe assumption is that every dollar hitting your accounts each month will be considered income for the purpose of The Means Test. This includes spousal support, support from family members, W-2 income, 1099 income, retirement income, and 401k early withdrawals.

Types Of Income NOT Included In The Means Test

While Veterans’ benefits DO count as income for The Means Test, Social Security benefits DO NOT. This means you may pass The Means Test if a large part of your income each month is Social Security benefits.

Current Monthly Income

Current Monthly Income is different from The Means Test calculation. Once you pass The Means Test, you still have to complete a budget reflective of your current income for the month. This is different from your income from the past six months. Additionally, you get to compare your actual expenses to your actual income for the month, where The Means Test does not always allow you to take your actual expenses. Even though your Social Security benefits will be counted in your Current Monthly Income, if you passed The Means Test, you should have nothing to worry about when it comes to Current Monthly Income calculations.

Further Reading

Want to learn more? Read one of over 100 articles on our Bankruptcy Blog Articles.

Speak With A Charlotte Bankruptcy Lawyer Today

The easiest way to get a better idea of whether you qualify for Chapter 7 is to speak with a Charlotte bankruptcy attorney today. You can call us at 704.749.7747 or click for a FREE CASE EVALUATION. After a brief discussion with an attorney, we can usually give you a good idea as to whether you will qualify for Chapter 7. We can also help confirm if a Chapter 7 or a Chapter 13 is the best choice for you.

can i file bankruptcy and keep my car

How Can I File Bankruptcy And Keep My Car?

Easily, that’s how. Whether you can file bankruptcy and keep your car is a question of the fair market value of the car at the time of the bankruptcy filing. That value is compared with any outstanding balance on the vehicle at the time. The difference between the fair market value and the outstanding loan balance is the equity. For example:

Vehicle: 2016 Toyota Camry
Fair Market Value: $15,500
Outstanding Loan: $13,000
Equity: $2,000

In the example above, we have a vehicle that is essentially worth $2,000 for bankruptcy purposes. The reason is that if you were to sell the vehicle, you would only end up with $2,000 after the loan was paid. For the purposes of your bankruptcy filing, this is a $2,000 asset.

Using Exemptions To Protect Your Car

If you’re wondering “How can I file bankruptcy and keep my car?” the federal bankruptcy code provides exemptions for each person filing bankruptcy which usually allow this. Some exemptions are specific to the type of property, while others can be applied to any property you choose. Each person filing Chapter 7 or Chapter 13 bankruptcy is entitled to use a vehicle exemption of up to $3,500, per N.C.G.S. Sec. 1C-1601(a)(3). Under the scenario above, you can keep the vehicle in a Chapter 7 filing.

What If My Equity Exceeds The Vehicle Exemption?

If the above example resulted in $4,000 of equity, you would exceed the exemption allowed under N.C.G.S. Sec. 1C-1601(a)(3) by $500. In that case, you could use some of the $5,000 exemption allowed under N.C.G.S. Sec. 1C-1601(a)(2). This is commonly known as the Wild Card exemption, and if it has not been applied to protect your primary residence, you can use it to protect any other property you own.

What If My Vehicle Does Not Have A Loan?

If your vehicle does not have a loan, the equation is still the same. In that case, the fair market value of your vehicle is the same as the equity. That amount would need to be protected or ‘exempted’ by using the NC bankruptcy exemptions. If the fair market value of your vehicle exceeds both the NC motor vehicle exemption and the NC wild card exemption, you may have ‘exposed’ equity, which would have to be addressed in the bankruptcy with the bankruptcy trustee. This is discussed below.

Addressing ‘Exposed’ Equity In Chapter 7

If you have additional equity which cannot be exempted with your NC bankruptcy exemptions, your attorney will negotiate an arrangement with the trustee by which you pay some or all of that exposed equity to the court. Typically, in order to avoid a sale of the property, which is costly and time consuming, the trustee will be flexible in reaching an agreement for a discounted amount. For example, if you have $2,500 of equity which cannot be exempted, you will list it as such on your bankruptcy filing.

The trustee assigned to the case will negotiate with our firm to have you pay an agreed upon amount to the trustee over time. A reasonable agreement in this scenario would be a payment of $1,500 (payments of $250 each) due in equal installments over the next six months. When the payments are complete, you will receive your discharge in bankruptcy and of course this means you get to keep your car. While this is not the best answer to the question “How can I file bankruptcy and keep my car?” it does provide a solution where there’s too much equity for bankruptcy purposes.

Speak With A Charlotte Bankruptcy Attorney Today

We’re here to answer the question “How can I file bankruptcy and keep my car?” Hopefully this article helped. Filing Chapter 7 can be a powerful relief, but certain rules must be followed to insure you get the result you desire. Your Charlotte bankruptcy attorney can identify the challenges associated with your case prior to filing, and discuss them with you. Once you have an agreed upon plan of action, you can file your case with the confidence that you’ll get the result you desire. If you’d like to speak with an attorney today about Chapter 7, call us at 704.749.7747 or click for a FREE CASE EVALUATION and we will call you today. We know you have choices. We hope you choose to Recover With Us.

Bankruptcy And Gifts

This article will discuss both the giving of and the receiving of gifts in bankruptcy. If you’d like to speak with a bankruptcy attorney today, call 704.749.7747 or click to request a FREE BANKRUPTCY CONSULTATION and we will reach out to you.

Receiving Gifts In Bankruptcy

Most gifts you receive can be kept. The key to a successful bankruptcy is disclosure. If you receive a gift prior to filing bankruptcy, you should disclose that gift. Generally, that gift will either be an asset (Diamond Ring), or income (Cash). When it comes to bankruptcy and gifts, you can generally use your Bankruptcy Exemptions to protect your assets from the bankruptcy trustee. If the gift is considered income for bankruptcy purposes, it will need to be counted and included in the Means Test calculations.

Gifts received after you file bankruptcy are typically not part of the bankruptcy estate, and therefore not a problem. A general exception would exist if you became entitled to the gift before you filed bankruptcy. In that case, the gift should be disclosed in your bankruptcy filing, and an exemption can be used to protect it—this, even though you haven’t received the gift yet at the time of filing.

Giving Gifts In Bankruptcy

If you give gifts to others before you file bankruptcy, there are instances where those gifts can be deemed Fraudulent Transfers. Fraudulent transfers are subject to being ‘undone’ by the bankruptcy trustee. In that case, the trustee can pursue the person who received the gift in order to have them turn it over to the court. Or, in the alternative, you can offer to pay the value of the gift to the trustee to settle the issue. As it relates to bankruptcy and gifts, this is obviously a horrible outcome, so the key to avoiding a situation like this is disclosing all gifts to your bankruptcy attorney before you file. Your bankruptcy attorney may recommend you wait a certain time to file, so that the gift is no longer an issue. Lastly, your bankruptcy attorney may recommend disclosing the gift with an explanation to the trustee as to why it should not be considered a fraudulent transfer.

Bankruptcy and Gifts Are Not Usually A Problem

For most people, filing bankruptcy is done out of necessity. It’s very infrequent that a client is giving away assets just before filing bankruptcy. Typically, clients have very few assets to their name when they file bankruptcy. If you’re in doubt about a transaction, simply tell your bankruptcy attorney and you can discuss how to address the item in your bankruptcy filing. Remember, if you’re filing bankruptcy and gifts are a concern, disclosure is the key.

The Statement of Financial Affairs is the part of the bankruptcy petition where you disclose gifts. The safe assumption is to disclose any gifts exceeding $600 (total) over the past 4 years to any individual. The same is true of charities, though the threshold for charitable allowances is much greater and again, typically not a problem.

Speak With A Bankruptcy Lawyer

If you’d like to speak with a bankruptcy attorney today, call 704.749.7747 or click to request a FREE BANKRUPTCY CONSULTATION and we will reach out to you. We know you have choices. We hope you choose to Recover With Us.

bankruptcy how long discharge

How Long Does Bankruptcy Take?

This article helps answer the question how long does bankruptcy take. The answer depends upon a few factors. Primarily, they are:

  • How quickly you can deliver documentation to your bankruptcy attorney
  • Whether you are choosing a Chapter 7 or a Chapter 13
  • Reasons which may exist to delay your filing

Delivering Documentation For Bankruptcy

Your ability to deliver documents can change the answer to the question “How long does bankruptcy take?” Most bankruptcy attorneys will accept documentation in electronic or paper format. Clients are usually pleasantly surprised at how easy it is to meet the documentation requirements, which shortens how long it takes to prepare to file for bankruptcy. While there may be more documentation required, generally you will need to provide:

  • Drivers License
  • Social Security Card
  • Vehicle Registration
  • Two years of tax returns
  • Six months of bank statements
  • Six months of pay stubs or proof of income

Once your bankruptcy attorney has this information, they can review it to be sure the bankruptcy petition they are drafting matches the activity on your accounts and tax returns.

Chapter 7 or Chapter 13

Chapter 7 bankruptcy results in a discharge roughly 120 days after the filing of the bankruptcy. Chapter 13 bankruptcy is a years-long bankruptcy where you make a monthly payment for 36 or 60 months. You receive a discharge after making your last payment. Your bankruptcy attorney will be able to help you decide between Chapter 7 and Chapter 13. Generally speaking, you must pass the Means Test to qualify for Chapter 7. Most clients who choose Chapter 13 do so because of one of the following:

  • Too much income
  • Too many assets
  • A desire to ‘catch up’ on a mortgage or car loan

After a free phone consultation, our office can typically predict for you whether you will need to file Chapter 7 or Chapter 13. From there, you can decide which route is best for you. If neither of the two options is appealing, we can always discuss the option of pursuing debt settlement instead of bankruptcy.

Reasons To Wait To File Bankruptcy

While the bankruptcy rules are very powerful in favor of the debtor, sometimes it makes sense to wait to file your bankruptcy. Usually, these waiting times are well worth it, and relatively easy to spot if you’ve been honest with your bankruptcy attorney. Because the bankruptcy rules look at a specific window of time regarding your financial activity, waiting an extra month or two to file can sometimes make the difference between a smooth and easy bankruptcy, or a rocky road. Here are a few reasons your bankruptcy attorney may recommend you wait to file:

  • Too much income in the past 6 months
  • A transfer to a friend or family member in the past year
  • A large payment to a creditor in the past 90 days
  • A new loan taken out in the past 90 days
  • Credit card use in the last 90 days beyond day to day purchases (Luxury items, etc.)

Hearing that you need to wait to file your bankruptcy may be frustrating. It certainly changes the answer to the question “How long does bankruptcy take?” if your attorney is recommending waiting, for the sole purpose of letting a financial item ‘drop off’ of your timeline. However, taking the advice of your bankruptcy attorney prior to filing will pay off for you in the end.

Speak With A Bankruptcy Attorney Today

We would love to help you get an answer to the question “How long does bankruptcy take?” A quick phone call with a bankruptcy attorney can put your mind at ease and help you understand the options. The path to financial recovery is usually very smooth. You’ll find most of your fears about bankruptcy are unfounded. We’d love to help you make a decision. You can reach us at 704-749-7747 or click for a FREE CONSULTATION and we’ll reach out quickly to make contact. We know you have choices. We hope you choose to Recover With Us.

Further Reading

How Does Bankruptcy Affect My Spouse?

Will The Bank Freeze My Bank Accounts In Bankruptcy?

The answer is NO, you can’t keep credit cards in bankruptcy. But there’s good news, too. Keep reading.

When you file your bankruptcy, you’re only required to notify your creditors with whom you carry a balance. However, even credit card companies you have a zero balance with will be notified of the bankruptcy filing. They receive that notice through credit reporting agencies. When they receive notification they will typically freeze and close the account. They do this as a policy, and it has more to do with bankruptcy than it has to do with their relationship with you. So, don’t take it personally.

Your credit card debt is discharged in bankruptcy. This means without a reaffirmation agreement in place, the debt is no longer your responsibility. This is part of the powerful relief of Chapter 7 bankruptcy. Reaffirming or re-entering into credit card debt is typically not a wise choice, and most courts frown upon it. So, when a credit card company realizes someone has filed bankruptcy, the safest thing for them to do is close down the account. This doesn’t mean you won’t be able to do business together again in the future.

Credit Cards After Bankruptcy

It’s reasonable to wonder whether you will be able to obtain credit cards after bankruptcy. Some clients want a credit card for emergency purposes, or to re-build their credit score. others simply want to know when things will return to “normal” in terms of relationships with credit card companies.

There are two types of credit cards: Unsecured and Secured. An Unsecured credit card is the type of credit card most of us are familiar with. The bank loans you money, and you re-pay that money with a monthly payment. If you fail to re-pay, the bank can sue you for the outstanding amount. A Secured credit card works a little differently. You start off by depositing money into an account at the bank (typically a credit union). Then, you’ll be allowed to charge against those funds. Each month, you’ll receive a monthly statement and a minimum payment. This arrangement is beneficial to the bank because your ‘debt’ is secured by your deposit. For someone with a low credit score of just coming out of bankruptcy, this is a great option because it allows you to build your credit score—your monthly payments to the bank will be reported to the credit agencies and your score will build accordingly.

Credit Card Offers After Bankruptcy

After you receive your discharge in bankruptcy, you may be surprised at how many offers for credit cards you receive. Clients are always surprised to hear this. The reasons make sense, though. First, by filing bankruptcy you have eliminated a lot of debt. Individuals without debt are good candidates for credit cards. Second, your debt to income ratio has improved. While your income has not changed, your debt has gone down. Again, you look like a good candidate for extending credit. Lastly, banks know you can’t file bankruptcy again for several years. This means that you’re more likely to re-pay any credit card debt you incur after bankruptcy.

Speak With A Bankruptcy Lawyer Today

If you have questions about bankruptcy, we’re here to help. Most of the answers are surprisingly better than you think. If you’d like to speak with a bankruptcy lawyer call us at 704.749.7747 today. Or, click HERE to request a call from us. We know you have choices. We hope you choose to Recover With Us.