Chapter 7 Bankruptcy 8 Year Filing Limit

You must wait eight years between filing Chapter 7 bankruptcies. This prohibition limiting filing can cause many complications for individuals facing debt multiple times in their lives.

No one wants to file Chapter 7 bankruptcy multiple times. However, circumstances of life will sometimes dictate the need to do so. Unfortunately, the prohibition against filing in less than eight years is ironclad. If you are unable to file because you have already filed within the last eight years, there are several strategies that you can pursue.

First, you will normally be able to file a Chapter 13 bankruptcy in less than eight years. This would require you to repay at least a nominal amount of debt to your creditors. In some cases, Chapter 13 bankruptcy may be the only bankruptcy that you qualify for even when the eight years expires. If your income has gone up, or you have acquired equity in a home or other property, Chapter 13 bankruptcy may be the only option. There may be no reason to wait.

A second option may be to reach out to your individual creditors and negotiate individual payments in lieu of bankruptcy. After the fact, if you cannot maintain these payments, you may be able to file a Chapter 7 bankruptcy at a later date. The payments to creditors may be able to buy you time until you can file at the later date.

A third option you may need to discuss with your bankruptcy attorney is whether or not to just simply ignore your creditors until you qualify again. Creditors have a wide range of actions they can take against you, including suing you and putting liens on your property. In some circumstances this may be a manageable problem. Creditors have a wide range of actions they can take against you, including suing you and putting liens on your property. In some circumstances this may be a manageable problem with the guidance of an experienced attorney. Reaching out to an experienced bankruptcy attorney may help you navigate this waiting period.

Call us at 412-414-9366 to discuss your situation and see if bankruptcy is an option, or will be an option down the line. I will be happy to discuss your situation and answer your questions.

Chapter 13 Bankruptcy Plan Duration

Chapter 13 bankruptcy allows you to repay your creditors spread out over a 3 to 5 year repayment plan. In a Chapter 13, you can stop a foreclosure, pay back the IRS and stop a tax lien, pay unsecured creditors at 0% interest, and sometimes at less than the full amount, and get a car out of repossession. It has many uses and benefits.

Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy will last for a duration of time. As mentioned above, a Chapter 13 will last for 3 to 5 years. But what determines exactly how long it is? First, if you are above the means test , which is discussed elsewhere on my website, you are required to be a five-year (60 month) repayment plan. If you can pay all of your creditors in full before that time, the court may allow you to schedule a shorter plan.

If you are below the means test, and you are able to repay all creditors as required, you can schedule a plan to be a short as three years or 36 months.  Under no circumstances can you initially at filing schedule plan to be longer than 60 months or shorter than 36 months. The Chapter 13 trustee will sometimes proceed for another month or two beyond the 60 month limit if you were finishing up your payment. But you cannot extend it beyond that length.

In some cases, if all creditors are paid as required, a plan may end before the 36 months. However, you cannot schedule the plan to be shorter than 36 months at the filing. It only happens when the payments have actually been made. You are not required to continue a plan once everything is paid in full.

For the most part, the Court and the Chapter 13 trustee are pretty flexible in accommodating plans within the 36 to 60 month window. Your bankruptcy attorney should discuss what will work best for you. In some cases, a longer plan is better because it will make your payment lower. For some filers, a shorter plan is preferable because it allows them to wrap it up quicker and get on with their lives. Calculating your payment and determining the duration is an important part of the process.

Speaking with an experienced bankruptcy attorney can make sure that it is done right. If you would like to discuss Chapter 13 bankruptcy, or you have any questions about the process, feel free to call 412-414-9366 and set up a free consultation. I would be happy to look at your situation, see if you qualify, and answer your questions.

Savings and Bankruptcy

You must list all checking, savings, and credit union accounts when you file any type of consumer bankruptcy, including chapter 7 bankruptcy and chapter 13 bankruptcy. This is in addition to listing all other personal assets. But, checking in savings accounts can sometimes be a particular problem, because of the type of earnings that go into them, and the fact they are often shared with other people in your life who are not falling bankruptcy.

When I file a bankruptcy, all checking and savings accounts are listed in schedule B of the bankruptcy petition. The money in those accounts is then exempted in schedule C. Exemptions allow us to protect your personal property from being liquidated for your creditors. In the vast majority of cases, my clients do not have an excessive amount of money in savings, which is not surprising because they are filing a bankruptcy. Oftentimes, they have spent down their savings trying to pay off their creditors, or just to survive.

However, in some cases, there are large amounts of money in savings. You may have just received an inheritance, a large bonus, or you may have a joint account with a spouse who has earnings and savings. The exceptions are a bit limited in these cases because roughly only $15,000 can be protected from your creditors. Using this wildcard exemption, you may not have enough exemptions for other things if you have a large amount of savings.

If you do have a joint account, for bankruptcy purposes only one half of the money in that account must be exempted. In some circumstances, such as when your name is on the account only administrative purposes or for one of your children who are not of legal age, it can be argued that none of the money in the account is yours.

Accounts with spouses are usually considered to be equally shared by both spouses. In some cases, if there is just too much money and a joint account, I would recommend splitting up accounts between spouses if your non-filing spouse is making most of the money. However, you have to be careful about moving money into the account of a spouse or family member who is not filing when the money is predominantly yours and earned by you.  This may go beyond bankruptcy planning and become bankruptcy fraud. Transfers to friends or family members can be a huge problem. So, you need to discuss your savings and checking your account very carefully with your bankruptcy attorney to see what will be allowable.

Another issue with checking or savings account is when creditors who have sued you and received a judgment. Unfortunately, sometimes it is too late to get the money back. I will normally recommend opening up a new account in another bank when we file the case. This is not a long-term solution, but can be useful in the short term.

If you have questions about your savings and whether or not it could be impacted by filing bankruptcy, contact us at 412-414-9366. I would be happy to set up a free consultation to discuss your situation and answer these and other questions. What you can (and cannot do) with your savings is very important, and if you do the wrong thing it may prohibit you from filing bankruptcy now or in the future. Get a professional opinion now!

Means Test Update for April 1, 2024

The bankruptcy means test has been updated once again as of April 1, 2024. The means test looks at gross income for a household in the six months before filing bankruptcy. If you are above the threshold, you are required to do a five-year chapter 13 bankruptcy repayment, with all disposable monthly income being paid to your unsecured creditors. The test is normally updated once or twice per year, and usually the amount goes up. However, in November 2023, the amount decreased. In the latest update, the threshold increased across the board, which should make it easier for some debtors to qualify for chapter 7 bankruptcy.

The amounts listed below are for gross income, that is money earned before taxes and any deductions from your paycheck. Household size is determined by spouses and dependent children living in the home. Keep in mind, even if you are the only spouse filing, the bankruptcy court will look at both incomes in determining the test. The amounts listed at the maximum gross monthly household income to be below the means test threshold.

• Household of 1: $5,577.00

• Household of 2: $6,798.00

• Household of 3: $8,598.00

• Household of 4: $10,488.00

• Household of 5: $11,313.00

• Household of 6: $12,138.00

• Household of 7: $12,963.00

• Household of 8: $13,788.00

Call us at 412-414-9366 if you have any questions about whether or not you qualify for chapter 7 bankruptcy under the means test, and if not what a repayment may look like in a chapter 13. I would be happy to discuss your situation and see if I can help.

Home Equity Loans and Debt

Many people dealing with large amounts of debts consider home equity loans as a way to consolidate the debt, reduce their payments, and hopefully pay it all back sooner. It seems like a great idea on its face, but there are a lot of potential problems.

Home equity loans allow you to reach into the equity. you have built up in your home over the years and use it for various things. Most commonly, they are used for repairs and additions to the home. However, they are also used on some occasions to try and pay back credit card and other unsecured debt.

Home equity loans are not as easy to get as it may seem. Many people find that the equity in their home is remains locked, even if it is significant.  I often tell people that home equity loans are usually only available to people who don’t really need them. What I mean is that when you are in a tough position banks are reluctant to give you money, even if there is equity in your home. Home equity loans are best utilized by individuals with large amounts of income and equity.  Unfortunately, people who need to access their home equity find it most difficult.

Banks, don’t actually want to have to foreclose on your home to get paid. Therefore, they only let money to people who they believe will almost certainly pay them back.

Even if you get a home equity loan, they still raise problems.  First, with rising interest rates the loans often are still 11% to 12%. While this is better than nearly 30% on credit cards, it is still significant.

But, the biggest problem is that if you don’t pay a home equity loan you can lose your house.  Failing to pay your credit cards can be problematic, of course. However, if you fall behind on your credit cards, they cannot come and directly take your house. If you fall behind on your home equity loan, that can absolutely happen. Even if you think you should have no problem, paying it back, things happen. You can get sick, injured, or lose your job.  You don’t want your worst-case scenario to be losing your home.

Call us at 412-414-9366 and I would happy to be at discuss some different options, including chapter 13 bankruptcy. Despite the name of bankruptcy, it involves repaying your creditors at 0% interest , with none of the dangers of a home equity loan. I would be happy to discuss your situation and see if it is a better option.