Facts About Bankruptcy
Deciding to file for bankruptcy can be a difficult decision, at best. You will carefully weigh the pros and cons of filing for bankruptcy, in order to determine whether a bankruptcy filing is the best thing for your long-term financial future. If you are like most people, reckless spending is not the cause of your present financial situation, rather you may have been dealing with astronomical medical expenses, the loss of a job, a divorce, or another financial hardship.
The demographics of the “typical” bankruptcy filer has changed over the past few years, and today the average filer is married, older, has a high school education and makes less than $30,000 per year. Senior citizens are filing bankruptcy with increasing frequency, likely due to an inability for many to pay for basic existence on Social Security. Gender seems to have little impact on bankruptcy filings, with about the same numbers of men and women filing bankruptcy each year. More than 64 percent of those filing for bankruptcy are married, with about 15 percent of filers either divorced or in the process of divorce.
What is Chapter 7 Bankruptcy?
While there are several types of bankruptcy filing, Chapter 7 is the most common, and, in most ways, the simplest. For those who really need quick financial help, Chapter 7 Bankruptcy may be a good option, as it typically takes just a few months from start to finish. If you have little income, have few valuable possessions which would not be protected by state exemption laws, and have a significant amount of unsecured debt (credit cards, personal loans or medical bills), you could be a good candidate for Chapter 7.
What About Chapter 7 Exemptions?
If you decide to file for Chapter 7 Bankruptcy in the state of Montana, you can protect some of your assets with Montana’s bankruptcy exemptions, and you may also use applicable federal bankruptcy exemptions. If you are married, filing joint bankruptcy, each spouse is allowed the applicable exemptions, thereby doubling their protections. Below are typical Montana bankruptcy exemptions:
The homestead exemption allows you to protect the equity in your home up to $250,000.
Life insurance proceeds
Medical, hospital or surgical care benefits
Group life insurance proceeds
Annuity contracts (certain conditions apply)
Up to $2,500 in equity in one vehicle
Furniture, firearms, clothing, jewelry, sporting goods, crops, feed, animals, appliances or furniture, up to $600 per item, and $4,500 total.
A pre-purchased burial plot
Any prescribed health aids, such as hearing aids
Coop association shares
Alimony and/or child support
Pensions and other retirement benefits
Public benefits such as public assistance, veteran’s benefits, unemployment, crime victim’s compensation and silicosis benefits
Tools of your trade up to a value of $3,000.
You may be able to keep certain secured debts by reaffirming those debts. To do this, you must sign a voluntary “Reaffirmation Agreement.” You will still owe the debt, and must continue to pay it just as you were prior to filing for bankruptcy. You are renewing your legal obligation to pay that certain debt you are reaffirming. You cannot reaffirm a debt unless you are current on the debt payment. This means if you are several months behind on a debt, but you want to reaffirm the debt, you must bring it current.
Steps Of Chapter 7 Bankruptcy
Consult with a Bankruptcy Attorney
As stated above, bankruptcy is complicated that mandate certain procedures be taken before, during, and after your petition has been filed with the court. The first step that should be taken is to consult with an attorney that can analyze your situation and discuss the advantages, disadvantages, and effects of filing for bankruptcy. In order to do so, you must prepare a lot of information in advance which includes your income and all of your liabilities (or at least a ballpark thereof).
You must also meet certain financial requirements to qualify for a Chapter 7 Bankruptcy. One way of qualifying for a Chapter 7 is to determine whether you are above or below the median income for your state and household size. Your income, for bankruptcy purposes, is determined by your income from all sources within the last six months from the time you file your petition. The median income does change periodically. As of now, the median income is as follows:
|Household Size||Median Income|
If your income is below the median income for your household size, then you qualify for a Chapter 7. If your income is above the median income for your household size, you still may qualify. However, there are additional steps that must be taken. In that case, we have to analyze whether your income and debts meet the courts “means test.”
If you don’t qualify for a Chapter 7 either based on your income or by application of the means test, a Chapter 13 Bankruptcy may still be an option. Chapter 13 bankruptcies are also power debt reduction tools.
After you have consulted with an attorney and have determined that Bankruptcy is in your best interests, your attorney will work with you to get all the necessary documentation needed to prepare your Bankruptcy petition and schedules.
Credit Counseling Course
The U.S. Bankruptcy Code mandates that debtors take two classes during the bankruptcy process. The first class you must take is the credit counseling course, and this course must be taken before your attorney can file your petition. The class may be taken online or over the phone, and generally takes approximately two hours to complete. Some course providers allow you to start and stop the course as needed. Once you have completed the course, you will receive a certificate that needs to be filed with the court. A majority of course providers send the certificate directly to your attorney, so there is no need to worry about that.
Filing Your Petition
Once your attorney receives your credit counseling certificate, and has finalized the petition and schedules, he or she will file the petition and schedules with bankruptcy court. After it has been filed, the bankruptcy court will generate a Notice of Bankruptcy Case. The Notice of Bankruptcy Case contains the date, time, and address for your Meeting of the Creditors.
Meeting of the Creditors
The Meeting of the Creditors is a meeting with the trustee and any creditors that choose to attend. You will be sworn in and asked questions regarding the information disclosed on your petition and schedules. Your creditors have the right to attend and ask questions as well.
The debtor education course is generally the last step one has to take before receiving a discharge of debt. It is the second course required pursuant to the Bankruptcy Code. Like the credit counseling course, it takes approximately two hours and can be taken online or over the phone. You will also receive a certificate upon completion. Depending on whether the course provider files the certificate with the court, you may have to sign a form regarding your completion of the course
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