Bankruptcy Law can be very complicated at times and needs to be understood for maximum clarity.
Here are some of the common questions we’ve discovered during our consultations.
This depends on the type of bankruptcy being sought, but generally, most debts can be discharged. Some common examples of dischargeable debt are: credit card balances, medical bills, past-due utility bills, and more. There are 19 categories of debts that are non-dischargeable, however, such as child support, alimony, fines owed to the government, and more. Some non-dischargeable debts can still be discharged if a creditor does not challenge them.
Under the Bankruptcy Code, there are six different types of bankruptcy. The average individual usually files for bankruptcy under Chapters 7 and 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy lets a debtor get rid of certain debt by liquidating (i.e. selling) their non-exempt assets to pay off their debts. Certain assets (e.g., a car) could be considered “exempt” and do not have to be sold. The court usually appoints a trustee to conduct the sale and then uses the proceeds to pay creditors. Chapter 7 bankruptcy is especially helpful for those who have low income or insufficient income to pay their debts. You must pass a “means” test in order to file for Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy lets an individual make a payment plan to repay their debts within 3 to 5 years. Under Chapter 13 bankruptcy, you can keep your house or your car but your debts will not be discharged until the plan is completed. Chapter 13 bankruptcy is better for those with a regular income.
A creditor is the party extending the money or line of credit to the debtor. Once the payment is due, the creditor requests payment from the debtor.
A debtor is a person (individual or organization) who agrees to receive money from another party in exchange for liability to pay back the money they owe later on.
Bankruptcy is a way for those unable to pay their debts to get a new start by discharging certain debts.
A bankruptcy filer must have a permanent residence, own property, or have a place of business located in the United States. The filer must also complete a financial counseling course (with some exceptions). You do not need to be a U.S. citizen or insolvent to complete a bankruptcy filing.
1) You do not need any minimum amount of debt to qualify for bankruptcy but there are certain maximum debt limits to Chapter 13 bankruptcy.
2) There is no age limit for those who file.
Yes, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) changed various provisions of the U.S. Bankruptcy Code. There are a few important changes for individuals:
1) The CARES Act provides eviction relief by preventing landlords of a “covered dwelling” from filing an eviction action or charging additional fees for failure to pay rent for 120 days beginning March 27, 2020.
2) Chapter 13 debtors will most likely see a reduced monthly payment obligation as a result of the CARES Act. Now, Chapter 13 debtors who have experienced a “material financial hardship” as a result of COVID-19 may modify their payment plants, such as extending their payments for up to seven years after their first payment was due.
3) Coronavirus related payments from the federal government will also not be included in the definition of “income” for eligibility purposes, nor for calculating “disposable income” for plan confirmation purposes. This lets debtors receive stimulus payments without worrying that it will impact their bankruptcy status.
4) For those student loans that are covered, the CARES Act suspends payments and waives interest from March 13, 2020 through September 30, 2020.
We are certain that more revisions to the bankruptcy code will come. We will keep our clients posted and notify them at the time of consultation.