How Much Debt Do I Need to File for Chapter 7 Bankruptcy?

There is no minimum amount of debt required to file a bankruptcy.  Whether bankruptcy is appropriate for your particular case depends on a number of circumstances, including the amount of the debt.  Other circumstances we consider include your income, the size of your family, your earning potential, and your assets.

For instance, a person making minimum wage with two children may not be able to repay a $10,000.00 debt, making bankruptcy appropriate.  Yet, a person with no children making $80,000 per year in the same situation may not need a bankruptcy at all.

In fact, many people file chapter 13 bankruptcy without any concern over the amount of debt.  The filing might be to stop a foreclosure or repossession.  That gives time to allow the person to catch up on payments.  In those cases, the creditor may have stopped working with them, even though they can afford their debt.  It has little or nothing to do with the amount of debt.

In short, don't exclude bankruptcy as a possibility just because you have little debt.  It may still be the most effective tool for dealing with your particular circumstances.

What are Motions for Relief from Stay?

A motion from relief from stay is basically a request to the court for permission to pursue a state law remedy.  The creditor is asking the bankruptcy judge to sign an order allowing them to take some action against property, such as foreclosure or repossession.  This may be because no payments have been made, the client opted to surrender the collateral in the bankruptcy, and/or there is no equity in the property.  

I don't usually object or waste time fighting about them unless they are clearly wrong (ie the client wants to keep the property); the judge will sign an order in 20 days or so, and then they'll move forward with the repossession or foreclosure, unless someone files an objection.  Note this doesn't effect personal liability one bit; it will be discharged in the bankruptcy unless the debt is reaffirmed.  It also doesn't effect your state law rights with regard to the property.  For example, you still get your redemption period following a foreclosure.

Sign the Principal Paydown Plan Petition!

The National Association of Consumer Bankruptcy Attorneys has started an online petition to show support for their Principal Paydown Plan. 

The plan provides that underwater homeowners who file Chapter 13 bankruptcy can apply all of their monthly mortgage payments to principal for five years by reducing the interest on their loan to zero for that period. This will dramatically reduce negative home equity, which virtually every housing economist has cited as the leading factor pushing up home foreclosures nationwide.

This plan may not require legislation to enact, making it a fast and effective way to bring down the negative equity in the economy, temporarily reduce mortgage payments, and still protect the interests of the mortgage holder.

Click here and sign the petition now!

Our New Help Desk!

We're always looking for ways to better serve our clients. Today we've implemented a new online help desk system!

The help desk is a ticket based system that allows clients to log in and view the status of their questions, incidents, and problems.  The system also works great with e-mail. You'll see what actions have been taken and what the next course of action is.  You can also upload documents.

We'll also be implementing live chat integration, and perhaps Twitter in the future.

To submit a problem or ask a question, go to http://help.sloughlaw.com or send an e-mail to help@sloughlaw.com.

Chapter 13 Payments: How much will I have to pay?

A chapter 13 bankruptcy is a finantial reorganization.  You pay a fixed amount each month for 3 to 5 years (or less).  In return, you may be eligable to modify liens, keep property you'd lose in a chapter 7, or qualify for bankrutpcy with a high income.

By far the most common question is "how much will I have to pay?"  There are two answers to that question.

Chapter 13 is, by definition, affordable.  You pay your disposable income each month; that is, your income minus your reasonable and necessary expenses.  Take all your income from employment, self-employment, support, assistance, etc.  Subtract withholdings, and all your other monthly obligations (except your debt): food, clothing, maintenance, taxes, transportation, child care costs. . . you get the idea.  Whatever is left over, that's what you pay.  It might be $50, or $500, or $5000.

Who decides what you spend on these things?  YOU!  Of course, the expenses must be both necessary and reasonable.  But every person's situation is different, which is why the courts leave this to common sense and reason.  Age, household size, income, and location are all factors.

Also, keep in mind that your disposable income is used to pay all of your debt - including secured debt on property you keep, like your house and cars.  The number may seem high for that reason.  Unsecured creditors, like credit cards, medical debt, and personal loans, only get whatever is left over.  They do not necessarily get 100%; in many cases they get less than 10%.  The rest is discharged!  You do not have to pay everything 100%.

There is one other consideration.  You must pay your unsecured creditors at least as much as they would have received in a chapter 7. In most cases, this number is 0, because the exemptions protect all of the property in a chapter 7, leaving nothing for the creditors.  However, if the number is higher, then you must pay at least that amount within 5 years or less to your unsecured creditors.

In sum, your chapter 13 payments are your disposable income (income minus reasonable and necessary expenses) with your unsecured creditors getting no less than what they would have received in a chapter 7 (usually, nothing).