Income Requirements – If you make too much money to file a Chapter 7 Bankruptcy, it does not always mean you cannot file Chapter 7. To eliminate your debt and start over, there are some things that can reduce you income to ³qualify². It is possible you might be able to qualify for a Chapter 7, if your expenses show you do not have enough money to pay back creditors.
Childıs College Education – A Chapter 13 plan usually does not allow you to sign for any further college loans or allow money for college expenses during the life or length of your repayment plan. Thus be aware of this if your child is close to college age. Talk in detail to your attorney because if there is not a Court Order, then you probably cannot claim your childıs college expenses in the Plan.
Length of Payment Plan - If you make above a certain income (set by U.S. Bankruptcy Court) you must have a 60 month repayment plan. However, if you are under that income level you could have a plan that is as short as 36 months. If the payment plan is less than 60 months and you would like to lower the payments, consider increasing the number of months in a plan up to 60 months.
Monthly payments - Consider the monthly payment amount and make sure it is feasible for you to commit to the length of the plan. Example: Mr. and Mrs. Jones would pay $500/month for 60 months OR $600/month for 48 months OR $700/month for 36 months. Also, consider using 50% of your tax return (during the length of your Plan) to keep your payments low. The Bankruptcy Trustee may very well take 50% of your tax refund so you may consider agreeing to pay it into the plan to keep your payments low.
Expenses - Make sure to have supporting documents for expenses such as charitable giving, medical bills, and transportation expenses. Having this information available will help answer any Trustee questions regarding higher than average expenses.
Older Auto Loans - Auto Loans that are more than 910 days old could be reduced down to the value of the auto. The court uses NADA retail value, but those numbers could be reduces if costly repairs are needed or vehicle is in very poor condition. This could lower a vehicle payment. Example: Mr. and Mrs. Jones owed $15,000.00 at 16.75% interest but loan was 920 days old when they filed to they will pay $8000.00 at 4.75% for the vehicle.
New/Recent Auto Loans – If auto loan is less than 910 days old, you may consider paying the vehicle loan through your payment Plan. This could allow you to lower the monthly amount you pay for vehicle and possibly lower interest rate (currently 4.75%). This could allow you to keep your vehicle and make your overall monthly expenses less.
2nd Mortgages – If the value of your home is equal to or less than the 1st Mortgage, then you can request the Bankruptcy Court to allow ³get rid of your 2nd Mortgage². This will allow you to keep your home and not pay back the 2nd mortgage and the lien to be removed. The second mortgage would be considered an unsecured (like a credit card balance) and thus could allow loan to be paid for as little as pennies on the dollar.
Choose your ATTORNEY carefully - Experience is a must. Equally important is choosing an attorney and staff that will spend time with you and truly evaluate your full financial situation. An Attorney who represents YOU through the entire process means you are treated like a PERSON not a NUMBER. Make sure your appointment is with the Attorney who will be handling your case and going to meetings or court with you not just someone who takes your information. You should feel comfortable and understand the process not just sign a document.
The Bankruptcy Process – The process takes time. Although, you could file quickly, the steps to get to the Discharge of Debtors can take time. Financial issues are stressful enough. An Attorney, who understands your financial situation, will provide a smoother process that will greatly increase your chances for a successful discharge of your debts. This could give you Financial Freedom at last!