Important Bankruptcy Rules
- The means test can determine which bankruptcy you can file.
- You must declare all of your debts and property when you file.
- If you don't declare debt, it won't be discharged in bankruptcy.
Whatever type of bankruptcy case you are filing, you need to make sure you know all of the bankruptcy code rules and regulations involved. Any mistakes on your bankruptcy forms could mean the court denies your case. If you want a bankruptcy discharge of your debt, it’s essential that you follow federal bankruptcy laws.
A bankruptcy lawyer in your state can guide you through the entire process to ensure you avoid mistakes and protect your financial best interests.
There are different types of bankruptcy based on different chapters of the U.S. Bankruptcy Code. For most personal bankruptcy filings, the options are a Chapter 7 or Chapter 13 case.
Even before filing, you have to go through credit counseling. Before debt is discharged at the end of the bankruptcy process, you then have to complete a debtor education course. This information can help filers get a fresh start without returning to insolvency in a few years.
Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), eligibility for Chapter 7 is based on the means test, which looks at your regular income, expenses, and debt. If you don’t make enough money to pay off your debt, you can go forward with Chapter 7. If the bankruptcy judge thinks you make enough money to pay off the debt, you will fall under Chapter 13 bankruptcy.
Chapter 7 bankruptcy uses the liquidation process, where the bankruptcy trustee sells your nonexempt assets to pay off as much of your debt as possible. After selling your assets and giving the money to creditors, any remaining debt will be discharged.
With Chapter 13, you get to keep most of your assets, but you must set up a repayment plan with the creditors. The U.S. trustee will oversee the plan and distribute payments to the creditors. At the end of three to five years, any remaining debt will be discharged.
When applying, you have to list every last bit of debt in the disclosure statement. This includes everything from business loans to credit card bills. Do not leave anything out of the report. The court must know about all of your debt, not just portions. Bankruptcy affects your entire financial situation. If you leave anything out of the filing, it won’t be discharged, even for unsecured creditors.
This is something that many people want to do because they think they can keep property secret so they can keep it after bankruptcy. For instance, maybe you have a second car you don’t want to lose. Never leave any assets off your disclosures, even those you know are exempt from having to sell.
Once you decide to file for bankruptcy, you may be tempted to run up your credit card debt on things that cannot be returned, like food, vacations, or a big night out. You might figure that you’ll just wash that debt away when you file, and an automatic stay will protect you from debt collectors. However, if done intentionally, this is a federal crime. The court may also find that you are still responsible for this extra debt.
When you file for bankruptcy, you present your case before a federal bankruptcy judge. If you fail to disclose assets or try to hide income, you could be charged with lying to the judge. This is true for verbal testimonies or written testimonies. Stick to the truth when telling the court exactly what you owe and what you own.
Give the court all the proper personal and business information, tell them about all income — even that which has not been paid yet — and answer any questions truthfully. Being honest can help the process go more smoothly so you can move on with your life after bankruptcy.
There will be additional rules based on your filing type, such as how often you have to pay off your debt under a reorganization plan or how the United States trustee will sell your assets under a liquidation plan. Be sure to ask your lawyer any questions you have about the process.
An experienced bankruptcy attorney can help you through the bankruptcy process from start to finish. Bankruptcy lawyers are familiar with bankruptcy rules and will help you avoid common pitfalls so you resolve all debts and get a new financial start. Talk to a bankruptcy lawyer about your bankruptcy options.
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