If you are thinking about filing bankruptcy in 2022, you are not alone. This year has caused some major financial disruptions for many people. With the unforeseeable impacts of COVID-19 and millions of people on unemployment, there is no doubt that individuals who were already struggling financially before the pandemic will continue to struggle even more.
Individuals who are facing credit card debt have options. Many individuals don’t like to hear the word “bankruptcy” when reviewing what financial options they have available to them. By doing a quick search online, individuals will find many misconceptions about the bankruptcy process. Bankruptcy is a tool to help individuals get out of debt and start over. Many people assume that filing bankruptcy means that they will be financially ruined and will never get credit again. This is far from true. Congress enacted bankruptcy laws to help individuals struggling with debt, through no fault of their own.
Filing Bankruptcy does not mean that individuals will never be able to get credit again. Many individuals can get credit immediately after they receive their bankruptcy discharge. If individuals couldn’t get credit again, it would be nearly impossible for them to start over. Individuals who manage good credit practices after bankruptcy can have a perfect credit score within two years of filing bankruptcy.
How Does Filing Bankruptcy in 2022 Work?
Individuals in credit card debt who need to file bankruptcy, often wonder how the bankruptcy process works. There are three different types of bankruptcy: Chapter 13 bankruptcy, Chapter 7 bankruptcy, and Chapter 11 bankruptcy. Each of these types of bankruptcies have different laws surrounding who can file. Consumers who want to file bankruptcy will file bankruptcy under Chapter 13 and Chapter 7 bankruptcy. While Chapter 11 bankruptcy is for larger businesses. Below we will go over Chapter 13 bankruptcy and Chapter 7 bankruptcy which can be used for individuals and small businesses.
Individuals who want to file bankruptcy should speak with a bankruptcy attorney to decide what chapter they should file. A bankruptcy lawyer can go over an individual’s financial situation to determine a plan of action for tackling debt. Many bankruptcy attorneys provide free consultations that individuals should take advantage of. During an initial consultation with a bankruptcy lawyer, he or she will be able to review all of the individual’s finances and assets to determine which chapter will help them eliminate their debt and keep their property safe.
Filing Chapter 7 Bankruptcy to Get Rid of Debt
Chapter 7 bankruptcy is one of the fastest ways that individuals can get rid of their debt. The Chapter 7 bankruptcy process usually takes about 4 months from beginning to end. To qualify for Chapter 7 bankruptcy individuals must qualify under a Means Test. The Means Test compares an individual’s household income to the State’s median household income where they reside. Chapter 7 bankruptcy, helps individuals who have little assets wipe out debt and start over. Chapter 7 bankruptcy is a good option for individuals, sole proprietors, and small businesses.
Filing Chapter 13 Bankruptcy to Eliminate Debt
Chapter 13 bankruptcy is much different than Chapter 7 bankruptcy. Chapter 13 bankruptcy is only available to individuals. Thus, corporations and entities can’t file for protection under Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, individuals pay their debts in a 3-5 year repayment plan. Chapter 13 bankruptcy is available to individuals who have high income and equity in their assets.
Chapter 13 bankruptcy is a great tool for individuals facing foreclosure. Chapter 13 bankruptcy allows individuals to pay back their arrears while continuing to make their monthly mortgage payments. This allows them some time to catch up on their past-due mortgage payments. Moreover, individuals can sometimes enter into a loan modification program through the Bankruptcy Court. Loan modifications provide individuals with ways to catch up on their debt by extending the mortgage loan or putting the arrears at the end of the loan.
What Happens To Property in Bankruptcy?
Individuals often assume that filing bankruptcy means their property will be taken away from them. Generally, this is not the case. Many individuals can use the bankruptcy process to help them eliminate debt and keep their property. When Congress enacted bankruptcy laws they understood that individuals need necessities to live. If everything was taken away, it would be almost impossible for people who filed bankruptcy to start over. Thus, Congress set out bankruptcy exemptions to allow individuals to keep their property safe from creditors.
Bankruptcy exemptions allow individuals to keep certain assets like their retirement accounts, pensions, home, clothes, and vehicles. Bankruptcy exemptions can be very complicated. Individuals that file Chapter 7 bankruptcy, must exempt their property. Any property that is not exempt can be sold to pay off creditors. Chapter 13 bankruptcy works a little differently. In Chapter 13 bankruptcy, individuals can keep their assets that are unexempt as long as they can pay back the equity in their property.
Individuals who have assets should consider speaking with a bankruptcy lawyer to determine if their property is exempt and falls under a bankruptcy exemption. Exemptions are complicated and using the wrong exemptions can be a recipe for disaster.
Automatic Stay
The automatic stay is one of the strongest protections for individuals who want to file bankruptcy. The automatic stay stops creditors from suing individuals. When creditors sue individuals and individuals don’t answer, creditors are awarded default judgments. Default judgments against individuals allow creditors to put liens on their property, garnish their wages, and commence foreclosure actions. As soon as a bankruptcy case is filed the automatic stay is initiated. Even if a creditor has been awarded a judgment against an individual, the creditors can no longer continue to try and collect on it because the individual has filed bankruptcy. Creditors that don’t adhere to the automatic stay can end up in big trouble with the Bankruptcy Court.
What Is the Bankruptcy Process Like?
Depending on which chapter of bankruptcy an individual files, the process can be different. Below we will briefly describe each process:
Chapter 7 Bankruptcy Process
The chapter 7 bankruptcy process, begins with the filing of a bankruptcy petition. The bankruptcy petition lists all of the debtor’s income, assets, and debt. Individuals will sign their petition and file it with the Bankruptcy Court in the district they reside in.
Once the bankruptcy petition is filed, individuals will be a signed a Trustee. The bankruptcy Trustee represents the individual’s creditors. The Trustee is who oversees the case to make sure the debtor was honest when filling out their petition. Further, the Trustee will be the person questioning the individual at Court.
Every individual that files a Chapter 7 bankruptcy must attend a court hearing. The Court hearing is called a 341 meeting of creditors. At this meeting, the individual is questioned by the Trustee under oath. Generally, this meeting lasts about ten to fifteen minutes. Creditors can object to an individual’s discharge at this hearing. If the meeting goes well the trustee will close the meeting. Sometimes the trustee may hold the meeting open if they want more information.
Once the meeting has closed individuals will get their discharge papers in the mail within 3 months from that date. The discharge papers show that the individual’s are no longer liable for their debts.
The Chapter 13 Bankruptcy Process
Just like a Chapter 7 bankruptcy, the individual will create a petition and file it with the Court. The Trustee will also be assigned to oversee the case. The difference between the Chapter 7 bankruptcy process and the Chapter 13 bankruptcy process is that the Chapter 13 bankruptcy process is much longer. Further, the individual must file a repayment plan along with their petition. The repayment plan must be in the best interest of the creditors and show the debtor has enough disposable income to pay their debt back.
Chapter 13 filers will also have to attend more than one bankruptcy hearing. Aside from the 341 Meeting of Creditors, individuals will be required to attend a confirmation hearing. At the confirmation hearing, the judge decides if the repayment plan the individual submitted is feasible.
When Should Bankruptcy Be Something to Consider?
Individuals often consider filing bankruptcy when they can no longer meet ends meet. Individuals who continue to come up negative after expenses each month should consider bankruptcy.
Often, individuals consider other debt-relief options before filing bankruptcy and end up in a worse financial position. Debt negotiation and debt consolidation are often other types of debt relief options that individuals seek out before filing bankruptcy. Unfortunately, there are many debt-relief scams out there that prey on vulnerable people who are looking to get out of debt. Many times individuals enter into these programs who really shouldn’t be in them. Individuals who can’t afford to make their payments usually don’t succeed in debt settlement programs. This is because as the individual continues to not pay the debt, the balance increases due to fees, interest, and penalties. More often than not, individuals end up getting sued in these programs.
Seeking Financial Help
Individuals seeking financial help should consider speaking with a bankruptcy lawyer to help them decide which debt-relief option is right for them. Many bankruptcy attorneys also practice debt settlement and debt negotiation. Individuals seeking to enter into a debt settlement program should think about hiring a lawyer to help settle their debts instead of entering into a debt settlement program. A lawyer can review an individual’s entire financial history and determine whether bankruptcy or debt settlement is better.
Bankruptcy laws are complex and hiring someone to represent an individual throughout the process can make the process much less stressful.
If you are thinking about filing bankruptcy in 2020 and live in Staten Island or New Jersey you can contact our lawyers today. Karra L. Kingston Esq. has been helping individuals get out of debt and start their lives over for years. Karra L. Kingston Esq. understands that being in debt is emotionally and physically exhausting. Our lawyers ensure that whatever debt relief option you decide to take, it is the best option for your financial situation. To learn more about what debt relief options may be available, contact us at (973)-979-9078 or email us at karra@klkbankruptcylawyer.com.