Chapter 7 Bankruptcy Discharge
The goal of a Chapter 7 Bankruptcy petition is to receive a discharge order from the Bankruptcy Court. What exactly is a discharge order and what protections does it provide?
Collection of Discharged Debts Prohibited
The discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a
creditor is not permitted to contact the debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages
or other property, or to take any other action to collect a discharged debt from the debtor. A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor.
However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against
the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a
debtor may voluntarily pay any debt that has been discharged.
Debts That are Discharged
The chapter 7 discharge order eliminates a debtor’s legal obligation to pay a debt that is discharged. Most, but
not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed.
Debts That are Not Discharged
Some of the common types of debts which are not discharged in a chapter 7 bankruptcy case include:
a. Debts for most taxes;
b. Debts incurred to pay nondischargeable taxes;
c. Debts that are domestic support obligations;
d. Debts for most student loans;
e. Debts for most fines, penalties, forfeitures, or criminal restitution obligations;
f. Debts for personal injuries or death caused by the debtor’s operation of a motor vehicle, vessel, or aircraft
g. Some debts which were not properly listed by the debtor;
h. Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not
i. Debts for which the debtor has given up the discharge protections by signing a reaffirmation agreement in
compliance with the Bankruptcy Code requirements for reaffirmation of debts; and
j. Debts owed to certain pension, profit sharing, stock bonus, other retirement plans, or to the Thrift Savings
Plan for federal employees for certain types of loans from these plans.
As such, the discharge order entered by the Bankruptcy Court is what provides debtors a fresh start from their debts that have been discharged. The above information is only a general summary of the bankruptcy discharge in a Chapter 7. There are exceptions to these general rules. Because bankruptcy law is complicated, you should consult an Auburn, AL bankruptcy attorney to determine the exact effect of the discharge if you are granted one by the Court.
Do I earn too much money to file for Chapter 7 bankruptcy in Auburn, AL?
In order to file Chapter 7, you must “pass” the means test. This is an income-based test designed to keep filers with higher incomes from filing Chapter 7 bankruptcy. Having to take the Chapter 7 means test, however, doesn’t mean that you must be penniless in order to file Chapter 7. You can earn a significant monthly income and potentially still qualify for Chapter 7 bankruptcy if you have a lot of allowable expenses/income offsets. Some examples of allowable expenses/income offsets include:
1. Your family size – the more people that depend on your income, the higher the allowance
2. Taxes – owing the IRS may make it easier to qualify for bankruptcy
3. Mortgage – mortgage payments can be used to offset your income.
4. Charitable contributions – helping others can actually help you qualify for Chapter 7
5. Childcare – day care costs can be used to offset your income
6. Insurance – term life insurance, medical insurance and some other insurances
7. Car payments – similar to mortgage payments, your car payments and operation expenses can be used to offset your income.
8. Medical expenses – medical and dental expenses can help you qualify for Chapter 7
There are many others. As you can see, it’s not enough to know how much you make but we also need to evaluate your allowable expenses/income offsets to see if we can qualify you for Chapter 7 bankruptcy. Call today to schedule a free consultation with one an Auburn, AL Bankruptcy Attorney.
What is Chapter 13 Bankruptcy in Auburn, AL?
Are you in the Auburn, AL area wondering what Chapter 13 bankruptcy is all about? Chapter 13 Bankruptcy (also known as debt consolidation) is a 3 to 5 year payment plan where you make monthly payments to the Chapter 13 trustee who in turn pays your creditors in accordance with your bankruptcy plan. In Chapter 13 bankruptcy, the Trustee usually pays secured debt such as a car loan through the plan. Your unsecured creditors are paid either a percentage of what you owe or nothing at all.
Determining how much, if any, you would have to pay to your unsecured creditors is determined by whether or not you have disposable income under the “means test” or if you have unexempt equity in real or personal property. If you pass the means test and do not have any unexempt equity in real or personal property, you may be able to pay nothing to your unsecured creditors while paying your car note through the Trustee at a reduced interest rate.
In order to file Chapter 13 bankruptcy, it is important to have regular monthly income (e.g., from a job or disability income) so that you would be able to make your plan payments. If you are behind on your mortgage payments and facing foreclosure, Chapter 13 bankruptcy is ideal for because you can catch up the arrearage in your bankruptcy plan and keep your home. Similarly, if you have missed car payments and your car is about to be repossessed, filing a Chapter 13 bankruptcy would allow you to pay the car through your bankruptcy plan and prevent the repossession.
Once you file a Chapter 13 bankruptcy petition, the Bankruptcy Court enters an automatic stay preventing your creditors from collecting on any debt included in your bankruptcy. The Order entered by the Bankruptcy Judge is very powerful as it halts all collection calls, pending lawsuits, pending foreclosures, and wage garnishments. Chapter 13 bankruptcy could be your avenue to a fresh financial start.
If you live in East Alabama and have questions regarding Chapter 13 bankruptcy, please let us know and our Auburn, AL Bankruptcy Attorney would be happy to address your questions. We help people file for Chapter 13 bankruptcy living in Auburn, Opelika, Valley, Lanett, Phenix City, Alexander City, Roanoke, Tuskegee, Wadley, Wedowee, Eufaula, Union Springs, Midway and the surrounding areas.
New Alabama Means Test Numbers – Do You Still Qualify for Chapter 7 Bankruptcy?
On November 15, 2013, the Department of Justice updated the means test numbers here in Alabama for chapter 7 bankruptcy filers. As this may impact the ability of some families to file a chapter 7 I wanted to share these updated numbers with you. Here are the updated income limits and household size for people living in the State of Alabama:
|Household Size||Annual Income||Monthly Income|
For each household member after eight (8) you add an additional $8,100 per year or $675 per month.
What If I Make Too Much for a Chapter 7 Bankruptcy?
If you make more than the allowed amount under the means test you still may be able to file a chapter 7 bankruptcy. There are dozens of allowable expenses/deductions we can take to bring your income down below the median income for a family of your size. My point – even if you make more than the allowed amount, there is still a fairly good chance you may still qualify for a chapter 7 bankruptcy in Alabama.
Strategic Reasons for Filing Chapter 13 Bankruptcy in Opelika, AL
In some cases, it makes more sense to file for Chapter 13 Bankruptcy (even if you qualify for Chapter 7) for strategic reasons. Here are some examples:
1. You’re behind on mortgage payments – If you want to keep your home and you’re behind on your mortgage payments, Chapter 13 gives you the ability to make up or “cure” the missed payments through your Chapter 13 plan.
2. You’re behind on car payments – If you’re behind on your car payments and the lender is threatening repossession, filing a Chapter 13 will cease such collection activity and allow you to pay for the car through your Chapter 13 plan.
3. Reduce interest rate on your car – If you have a high interest rate on your vehicle, Chapter 13 may be advantageous since we can usually reduce the interest rate to 4.25% through the plan.
4. Taxes – Similar to missed car/mortgage payments, you’ll be given up to 60 months to repay the Internal Revenue Service during which no more penalties or interest will be assessed.
The Bankruptcy Code can provide you a second avenue at living debt free and strategically can be in your best interest. If you have questions regarding how Chapter 13 Bankruptcy could help you, please contact our Bankruptcy Attorney (Opelika, AL) for a free no obligation consultation. We proudly help consumers in the following counties file bankruptcy petitions: Randolph, Chilton, Chambers, Tallapoosa, Lee, Macon, Russell, Bullock, and Barbour.