Posted by: admin in how to file chapter 13 on
Butler to the B asked:
I am planning on filing for either chapter 7 or 13 in a few months and I was wondering what happens to extra money once you go bankrupt?
Tags: Chapter 13, Chapter 7, File Bankruptcy, Extra Money
What “extra money” are you talking about? If your state allows them to be protected, you might be able to keep your house and/or car — but you will have to pay those in full to keep them out of bankruptcy. All other assets — especially any money! — go toward debt repayment. Most common is Chapter 13, and most wind up with 100% repayment plan. After taking your assets to reduce the debt, they take your income to pay all your remaining bills. Many who file for Chapter 7 get converted to Chap 13 by the court. So on top of paying all your bills, you get to pay all the court costs, legal fees and bankruptcy trustee administration costs.
I wonder if the person who said you have to repay 100% of your debts is a creditor…
That’s simply not true.
Let me quickly answer the question you asked then I’ll tell you more about Chapter 7′s and Chapter 13′s.
Every state has exempt and non-exempt property. Here in Ohio, $400 is the cash exemption and there is a $1,075 “wild card” exemption that you can also use on cash (or anything else). So an individual filer could have $1,475 on hand when they file and joint bankruptcy filers can have $2,950 between them.
If you are wondering what happens post bankruptcy… The day after you file Chapter 7 everything you have in the bank is not property of the estate, thus it is yours and not the Trustee’s. Often attorneys will file the day before you get paid so that the paycheck is protected.
Chapter 13′s are a little different. If you were to get an inheritance during the course of your 36-60 month plan, or insurance payout, etc, the trustee could claim that as part of your estate. As far as your cash goes though, you could start saving money the day after you file your case.
Not everyone has to do a Chapter 13. Chapter 7′s still exist.
Go visit (call and make an appointment first) a bankruptcy attorney who practices mainly bankruptcy and offers free consultations.
When you are there they will ask you about a hour’s worth of questions regarding your debt. At the end of the meeting they will tell you if you are eligible for a Chapter 7 (will explain more below) or whether you should do a Chapter 13.
A Chapter 7 is a liquidation bankruptcy. That doesn’t mean you lose everything you have. You get to keep exempted items. These are different in every state. You also keep items that have no equity. Generally, if you’ve got a car payment and are current in payments, a mortgage payment and it’s current, etc., you will get to keep those items. Most household good are exempt.
Eligibility for a Chapter 7 is based on 2 tests, the median income test, and the means test. Pass one and you generally qualify.
A Chapter 7 provides an immediate fresh start. You pay the attorney, the court filing fee, credit counseling, credit report, and financial management course and the debt is completely washed away.
The credit counseling and financial management courses take about an hour each. The first meeting with the attorney will take about an hour. Retaining the attorney will take about a ½ hour. Signing your case will take about ½ hour to review and 1 hour to get through the signing. Your 341 hearing at the court will take 15 minutes.
A Chapter 13 is a repayment or restructuring of your debt. You pay the fees that are involved in a Chapter 7, but generally less up front because the majority of the attorney’s fees are paid throughout your plan (36-60 months).
If you are keeping a secured item (car, house, etc.) you pay back the secured creditor over the course of the plan. If you are behind on your car or home payment this will give you time to get caught up while being protected by the bankruptcy court.
Your unsecured creditors (credit cards, medical bills, etc.) are paid anywhere from 0%-100%. The amount they get is based on 2 tests. The DMI (Disposable Monthly Income) and the BIC (Best Interest of Creditor’s Test).
The DMI and BIC will be done in your initial meeting with the attorney. They will let you know what your monthly payment will be and what percentage your unsecured creditors will get.
It doesn’t hurt to go and see an attorney regarding your finances, just make sure the first consultation is free and that the attorney regularly practices bankruptcy law (just call your local bar association).
Unlike the rest of the economy, bankruptcy attorneys are not hurting for business. They will not advice you to file bankruptcy if they don’t think you need to.