Filing for Bankruptcy – When, How, & Why
Determining if you Qualify for Bankruptcy
Individuals file personal bankruptcy because there is financial relief needed and they seek a second start. If you feel there is no way out of your debt troubles and these debt troubles are regular occurrences, filing bankruptcy maybe your best option.
- Debt troubles a regular occurrence
- You fear losing your home/facing home foreclosure
- Wage garnishment has been assigned to paychecks
- Laid off/ job problems
- Medical crisis to your family
- Creditor harassment
- Recent divorce
- Lawsuit pending
To Qualify for Bankruptcy there are steps you must take.
1) Attend a court-approved financial counseling course
2) Figure out if your monthly income is more or less than the median income in your state.
One way to Qualifying for the bankruptcy means test:
Current monthly income minus expenses
Times that by 60 to get your result
If your result is more than 25% = $10,000
Less than 25%=$6,000 or less
1400* 60 = 84000*.25 = 21000 (File for chapter 13)
400*60=24000*.25 = 6000 (File for chapter 7)
3a) If Income is more than median income then you can file a 5 year chapter 13 bankruptcy
3b) If Income is less than median income then you can file a chapter 7 bankruptcy
4) Get a discharge from your bankruptcy through an approved Credit Counseling Course.
A Chapter 7 bankruptcy or a Chapter 13 Bankruptcy can help you overcome problems. Learn more about what filing a Bankruptcy can do to help you in Bankruptcy 101
If you are at risk of losing your home due to foreclosure, mortgage mediation and modification might be your best solution. Contact us anytime to learn more information about Western Washington mortgage mediation, the fairness act, and how to avoid foreclosure.
Is Bankruptcy Embarrassing?
Being an adult is rough. As an adolescent we would hesitate to do things, worried about what our peers would think, and often, being an adult is no different. Being an adult doesn’t mean you no longer have emotions or that you don’t worry about others judging you. However, being an adult DOES mean that you need to go ahead and make the hard decisions that DO come with consequences, BUT do turn out better for you in the long run.
Bankruptcy has a weird stigma and connotation like people think their name will appear on some “website of shame” or something. The truth is, unless you’re a celebrity, you probably won’t hit any tabloids.
Most of bankruptcy is between you and your lawyer. As with any other attorney/client relationship, the attorney/client privilege of confidentiality applies.
When your case is filed with the bankruptcy court, your case will be sent to your creditors for obvious reason. Additionally, any family or friends that you owe money to will be notified as well since you are required to list ALL debts. Therefore, now your lawyer knows and the people you owe money. No one else. It is true that your filing of bankruptcy is public record but no one would ever know unless for some reason they purposely sought it out.
The only time you will be out in public discussing your bankruptcy is at your “Meeting of Creditors”. This meeting is a short meeting between you and your bankruptcy trustee. Creditors are welcome to attend however, they usually don’t. These meetings are generally held in a conference room and last about five minutes or so. So, rest assured that this is a short meeting with STRANGERS that you’ll probably never see again. So, once again unless you’re a celeb and get caught by TMZ, the process is relatively short and painless.
No one will know you filed for bankruptcy unless you tell them. Besides all this, if you’re facing serious financial problems and TRULY WANT to begin to do what RIGHT with your money, you shouldn’t feel any shame in creating a fresh start with a clean slate for yourself. Hold your chin up and begin on the path of financial responsibility. You got this.
Protecting funds in a bank account is often a top priority of those filing for Chapter 7 or 13 bankruptcy. The effect that bankruptcy will have on any money deposited into your personal bank accounts is dependent upon if the money has been protected by a bankruptcy exemption and the amount of pre-bankruptcy planning you were able to do to protect the money that is not exempt in the bankruptcy process.
Pre-bankruptcy planning is common and legal, it is sometimes referred to as asset conversion. Though it may sound like it is something sneaky asset conversion is a method used to re-organize any assets and keep as much property in your hands and out of the reach of creditors as possible. The way to do this with bank account funds would be to invest any amount over the exemption amount in exempt assets.
While it is perfectly legal to convert the non-exempt property into the exempt property it needs to be done in “good faith” and the law does not allow someone filing for bankruptcy to hinder, delay, or defraud creditors. You need to be extremely careful when converting bank account funds to the exempt property because determining the good faith of your asset conversion is tricky and while courts recognize asset conversion as legal a small amount of courts recognize pre-bankruptcy planning as ethical practice.
Read more: Should I Even File Bankruptcy?
Forms of allowable pre-bankruptcy planning that do not send up red flags in court include: paying down your mortgage in states with large homestead exemption, making an annual contribution to your retirement account, IRA or other exempt pension plan as defined by your state exemption list, purchase exempt personal property like cars furniture and clothes according to state exemption amounts, purchase of life insurance, pay down nondischargeable debts like taxes, student loans, alimony and child support.
If a court finds that you have attempted to defraud creditors with asset conversion it could impose civil or criminal penalties. Courts will look at factors such as misrepresenting asset values, investments made were worth less than money spent, family or close friends were involved in property purchases, a radical change in lifestyle.
There is another thing you can do to protect finds in your bank account. If you owe the bank or credit union you have an account with money at the time you file for bankruptcy, for example if you have taken out a mortgage or car loan with them,they have the right to “set off” any debts owed to them with any bank account funds you have in their bank. They have the right to do this at anytime regardless of a bankruptcy claim. Banks rarely use “set off” rights but it is still a good decision to take every precaution and think of every likely scenario before filing for bankruptcy.
Bankruptcy laws are very different in every area and it is impossible to know the best way to protect accounts and what measures you should take without an experienced lawyer. If you are considering filing for bankruptcy please contact the team at Advantage Legal Group.