There are certain income qualifications for a Chapter 7 bankruptcy. Social security income, including social security disability does not count as income on the means test (the test on the bankruptcy petition that determines which chapter of bankruptcy you qualify for). Similarly, veteran disability benefits do not count as income. For example, if you are receiving social security or veteran disability benefits you could make an unlimited amount per month and still qualify for a Chapter 7 bankruptcy.
Some people are surprised that pensions for government work such as teachers, police officers, military, or firemen still count as income. Workers’ compensation benefits also count as income. Short-term or long-term disability from a private company that is not social security are considered income. Regular wages or income from self-employment are considered income. Child support and alimony are considered income on the means test. Even if the income is not taxable, it could still qualify as income on the means test.
The issue of whether money in your account at the time of filing is exempt is a totally different issue than whether it counts as income on the means test. For example, workers compensation, child support and alimony are generally exempt even though they are considered as income on the means test Any money you have in your bank account from one of these sources in addition to social security or veteran disability benefits would be protected from the trustee.
We can exempt up to 75% of wages in your bank account. However, self-employment income is not exempt. It is important to have an attorney help you evaluate your candidacy for a Chapter 7 bankruptcy and to ensure you maximize your property exemptions.
In today’s current market business owners are faced with numerous challenges from finding employees to drastically increased costs. They are faced with the question of whether they will be able to continue their business or whether it’s better to close it.
That is a very personal decision since so much goes into starting and sustaining a business. There are several factors we look at in making that determination.
Are there any business assets such a commercial building, inventory, or equipment that should be liquidated to pay your creditors? Your assets cannot be sold or transferred for your benefit at the expense of paying your creditors. Even transferring assets to a new business venture can disqualify you from filing bankruptcy so its very important to consult with an attorney before making any decisions on the proper steps to close your business. Another issue is whether the debt is exclusively in the business name, did you personally guarantee the business debt, or did you use your personal credit lines to fund your business?
In most cases, there is a personal guarantee on business debt and personal credit cards are used to keep the business afloat. If the majority of your debt, is non-consumer or business-related then you would qualify for a Chapter 7. Again, it is important to seek the advice of an attorney to determine which Chapter type you would qualify for under the bankruptcy code.
Many times, if the business has no assets and will be closed then it can just be administratively dissolved without the need to file for bankruptcy. Another issue also is whether there are any outstanding account receivables, do you reasonably expect payments in the future, or expect any reoccurring income? There is also a potential that that could be collectable by the trustee if you are filing a business bankruptcy.
All of these factors need to be considered whether determining whether to file a business bankruptcy or a personal Chapter 7 or 13 bankruptcy.
It is quite common for bankruptcy clients to have friends, family members, or significant others as co-signers due to their inability to obtain credit without co-signer.
Our clients are oftentimes concerned about how their decision to file for bankruptcy might affect their co-signer’s credit. If you have a credit card with a co-signer, you can still get that debt discharged by filing for bankruptcy. However, your co-signer would still be responsible for paying the balance if you do not pay it or if that debt is discharged.
If you have a co-signer on your motor vehicle, you could sign a reaffirmation agreement and continue to make the payment. Those payments would be positively reported to the credit bureaus. Then your co-signer would not be affected by your bankruptcy filing.
If you are in a Chapter 13, the automatic stay would protect your co-signer from any collection efforts by the creditor while you are in the Chapter 13 plan. However, if the creditor is ultimately not paid in full then the creditor could try to obtain the balance from the co-debtor. As long as the co-debtor or you are current on the payment, filing for bankruptcy should not adversely affect their credit.
Generally, if spouses are co-debtors and have a lot of joint debt it is more practical for both to file for bankruptcy so one spouse is not stuck with the debt. A co-debtor being on a loan or credit line raises a lot of concerns and questions on the impact a bankruptcy filing will have.
If you have any questions about how filing your bankruptcy could potentially affect a co-debtor, feel free to contact me at (813) 463-8000.
People often ask how to rebuild their credit after filing bankruptcy or how bankruptcy will affect their credit. I am often asked if filing for bankruptcy will destroy credit for 10 years. Most clients are surprised at how quickly their credit rebounds after filing their cases. The ability to get a credit card or loan after filing is relatively easy to do. Of course, we don’t recommend incurring debt during or immediately after filing but getting a credit card is typically achievable. By getting a small secured credit line at your bank where you are putting in a collateral of cash in a deposit account can rebuild your credit. Additionally, becoming an authorized user on someone else’s credit card will also help build good credit history.
Making other payments such as your car payment on time will help rebuild your credit. While it’s not unheard of to get a car loan upon filing for bankruptcy, most car lenders will require a discharge which happens 90 days after filing your case in order to get a car loan. Bankruptcy allows you to surrender a car that is underwater without having to pay anything to the lender. This allows people to buy a car outright or get new financing and a lower car payment without having to trade in a car with negative equity.
Regarding home loans, there are different types of home mortgages that you could be eligible for. In order to qualify for a conventional mortgage, it can take anywhere from 2 years to 4 years from the date of your discharge. To qualify for an FHA or VA loan, it may take as little as 1 year and up to 2 years from your date of discharge. I recommend once some time has passed after you receive your discharge to contact a licensed mortgage broker to see what type of loan you might be able to qualify for.
Should you have any questions, feel free to contact my office at (813) 463-8000 and we would be happy to answer any of your questions or concerns.
If you have a debt that has been “charged off” this means that your original creditor has written your debt off their books. However, this DOES NOT mean that you are not responsible for the payment of the debt. Creditors often sell individual debts to third party collection companies whose business is debt collection. The collection company will first contact you in an attempt to collect the debt and if unsuccessful will take further actions such as filing a lawsuit and obtaining a judgment. After a judgment is entered, the creditor has the power to garnish wages, seize assets, or assert a lien against your property.
If you are uncertain whether or not an “old debt” is still valid, you should pull a credit report to obtain the date of your last payment to each creditor to determine whether the time has expired for the creditor to collect against the debt. If you are dealing with a creditor pursuing a debt that has been “charged off” or old debt and want to evaluate whether or not the debt is valid feel free to contact me to discuss your options.
During the height of the market, many people purchased investment properties that they could no longer afford. As a consequence, if the mortgage is not paid, the lender will initiate foreclosure proceedings. There are options available that will allow you to keep both your homestead and your investment property and save money in the process. For example, if your investment property in underwater, you are delinquent on the mortgage and you owe the lender $150,000 but the appraised/fair market value of the property $80,000 you can “cram down” the mortgage payment and pay the lender back $80,000 + 5.25% interest over a 5 year period, keep the property and potentially wipe out the $70,000 to the lender.
