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The Benefit of Filing Bankruptcy Quickly if Your Income Has Increased or Is About To

To qualify for Chapter 7 "straight bankruptcy" you must pass the means test. Otherwise you would likely end up in the much more time-consuming and expensive Chapter 13 "adjustment of debts." Chapter 13 is great if you need its benefits, but not if you are forced into it and would prefer the much simpler fresh financial start of Chapter 7. Taking Advantage of the Odd Means Test Definition of "Income" The key to the means test for our purposes here is the odd and very precise way it defines … [Read more...]

Dealing with a Recent One-Time Income Event for the “Means Test”

The Chapter 7 Means Test This test was designed to screen people away from Chapter 7 "straight bankruptcy" and towards Chapter 13 "adjustment of debts." Those who could afford to pay a meaningful amount to their creditors are legally required through the means test do so under Chapter 13 instead of being allowed to discharge (legally write off) their debts under The means test looks at your income first, and then if necessary at your allowed expenses. If your income is less than the … [Read more...]

You May Not Need to Take the “Means Test” if You Are a Business Debtor

The means test is the gateway for qualifying to get a fresh financial start through a Chapter 7 "straight bankruptcy" case. This test is based first on your income. If your income—based on a very distinct way of calculating it—is not low enough, then the means test also looks at your allowed expenses, based on a complicated set of rules looking at national, regional, and local expense standards. Being able to avoid all these income and expense calculations and thus be allowed to file a … [Read more...]

Why Every Day Can Make a Difference in Passing the “Means Test”

The Point of the Means Test This test is intended to determine if you have the "means" to pay a meaningful amount to your creditors over a reasonable time period. You have to pass the means test before you are allowed to go through a Chapter 7 "straight bankruptcy," which generally lasts less than four months, or instead are forced to do a Chapter 13 "adjustment of debts," which generally lasts three to five years. Focus First on "Income" At the heart of the means test is a review of your … [Read more...]

Dealing with an Unhappy Ex-Spouse Creditor

A Chapter 13 bankruptcy - the 3-to-5-year legal procedure for “adjustment of debts”—can help you in two huge ways with an ex-spouse who is unhappy with you for not paying a debt you owe to him or her: It can discharge (legally write-off forever) non-support “property settlement” obligations owed to your ex-spouse through your divorce decree. It can give you time to catch up on child support, while stopping the aggressive collection tactics otherwise available to your ex-spouse and his or … [Read more...]

Filing Bankruptcy a Second Time

The Rules for Time Required between Bankruptcy Filings How long you must wait to file a bankruptcy case after you’ve filed a previous one depends on both which Chapter the earlier bankruptcy was filed under and the Chapter of the new case being filed: 2 years from an earlier Chapter 13 case to new Chapter 13 one 4 years from earlier Chapter 7, 11, or 12 case to new Chapter 13 one 6 years from earlier Chapter 13 case to new Chapter 7 one 8 years from earlier Chapter 7 case to new Chapter … [Read more...]

Choosing Between Chapter 7 and 13 if You Have Student Loans

Discharging—legally writing off—student loans is quite difficult under either Chapter 7 “straight bankruptcy” or Chapter 13 “adjustment of debts.” The pertinent law, Section 523(a)(8) of the United States Bankruptcy Code, says is that a student loan is not discharged unless it “would impose an undue hardship on the debtor and the debtor’s dependents.” “Undue Hardship” Congress did not define what it meant by “hardship” in this language. Nor did it say what it would take to be an “undue” … [Read more...]

Choosing Between Chapter 7 and 13 if You Owe Money to Your Ex-Spouse

The Main Differences Here between Chapter 7 and 13 Child and spousal support CAN’T be discharged (written off) under EITHER Chapter 7 “straight bankruptcy” or Chapter 13 “adjustment of debts.” But other kinds of divorce obligations—sometimes called “property settlement” debts—CAN be discharged, but ONLY under Chapter 13. Also, if you are behind in your support payments, Chapter 7 CANNOT stop the collection of that arrearage by either your ex-spouse or the support enforcement agency. But … [Read more...]

Choosing Between Chapter 7 and 13 while Continuing to Operate Your Business

Chapter 7 and Chapter 13 Are Quite Different “Straight bankruptcy” Chapter 7 is a “liquidation” procedure. Your assets are reviewed, mostly by you listing them by categories in the bankruptcy “schedules,” with the help of your attorney, and being asked questions about them by the Chapter 7 trustee, both while you’re under oath. The trustee determines whether you have any assets that are not covered by property “exemptions.” If so, they are sold by the trustee and the proceeds divided among your … [Read more...]

Choosing Between Chapter 7 and 13 after Closing Your Business

If you’ve already closed down your unsuccessful business, or are thinking of closing one you are now operating, you no doubt are wondering about the best way to deal with the debts that are now saddling you from that business. The answer depends on many factors, including the type of debts that you owe. Here are the main types of business debts, and how Chapter 7 and Chapter 13 would each deal with them. Income and Withholding Taxes Very often the closing of a business leaves the owner … [Read more...]

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