Do I Need to File a Bankruptcy Case

Posted by Kevin Ryan | Aug 07, 2016 | 0 Comments

       The answer to this question is not always an easy one.  Making the decision as to whether or not to file a bankruptcy case should be made after careful consideration of the unique facts and circumstances of each case.  A decision as to whether or not to file a bankruptcy case can also be an emotional decision.  Bankruptcy cases often flow from a set of circumstances that are fully or partially outside of a person's control ( death of a spouse, loss of a job, an unforeseen medical condition, divorce,  moving to a new city or state,  etc.   

       The best way to reach a decision as to whether or not to file a bankruptcy case is to meet with an attorney who is experienced in this area of law.   An attorney who engages in the practice of bankruptcy law on a full time basis can review your financial circumstances and your assets to help you decide on what the best move will be.  If there is a way to avoid filing bankruptcy to deal with certain debts, your attorney can advise you on these options.   

        Chapter 7 Bankruptcy 

       In most cases, the first option you and your attorney should examine is Chapter 7. A Chapter 7 bankruptcy is the fastest way for an individual person to obtain a fresh financial start.  In most Chapter 7 cases, the Debtor receives a Discharge Order from the United States Bankruptcy Court ( 11 U.S. Code, Section 727)  which cancels out the Debtor's liability for all scheduled debts.  The Debtor can reaffirm debts such as mortgage loans and auto loans in a Chapter 7 case, and remain personally liable on the underlying promissory notes for these types of debts.  Security interests of creditors, or "liens," remain unaffected by the bankruptcy Court's Discharge Order.   In some instances, a Debtor in a Chapter 7 case can "redeem" certain property from a secured creditor by asking the Court for an Order permitting the Debtor to pay the secured creditor only the fair market value of the property which secures the debt.  There are a few lenders who will provide a free evaluation as to whether a redemption loan can be obtained by the Debtor in this process.  This is one aspect of Chapter 7 cases that an experienced bankruptcy attorney can help you with.  

          Chapter 13 Bankruptcy      

      There are other situations where a Chapter 7 case will not be feasible, or situations where the Debtor is simply not eligible to file a Chapter 7 case.   The United States Bankruptcy Code provides certain household income limitations on Chapter 7 Debtors.  In every Chapter 7 case, a "Means Test" form ( Official Bankruptcy Form 22A) must be completed to determine the debtor's eligibility to file under Chapter 7.  There are also limitations on filing a Chapter 7 case where the Debtor has filed a prior bankruptcy case ( where a Discharge Order was in fact issued) within the previous eight ( 8 ) years.  This eight (8) year "lookback" has been in effect since October, 2005.   

          A Chapter 13 case is a bankruptcy case where the debtor makes a monthly payment under the terms of a Chapter 13 Plan. The Chapter 13 Plan has to run for a term of at least 36 months, up to a maximum length of 60 months.   The term of the Plan is determined by several factors.  The "Means Test" that applies in Chapter 7 cases similarly applies in Chapter 13 cases ( Official Bankruptcy Form 22 C).  The Chapter 13 "Means Test"  is generally a determiner as to how much money the debtor must pay to general unsecured creditors.  The debtor's income ( along with the income of the debtor's spouse, even if not filing jointly) is included on the "Means Test" as household income. A series of deductions are applied through the "Means Test" to determine the debtor's "disposable income."  Disposable Income multiplied by 60 determines the amount the Debtor must pay as a threshold to general unsecured creditors.  The applicable Median Income as determined by IRS quarterly data will determine the required length of the debtor's Chapter 13 Plan.  A debtor who is over the applicable Median Income must proceed under a 60 month plan.  

       Chapter 13 is also a "reorganization" bankruptcy case.  This means that secured debt such as mortgage loans and car loans can be decelerated and paid back ( the arrears at the time of case filing) over the term of the Plan, with zero interest.  Auto loans can be stretched out in some Chapter 13 cases, and in cases where the loan is older than 910 days the principal amount can be reduced ( or "crammed down") to the fair market value of the collateral.  The balance of the debtor over and above the "crammed down" amount is treated in the Plan as general unsecured debt.  At the end of the Chapter 13 Plan, after all payments are made, the Debtor receives a Discharge Order, similarly to the Discharge in Chapter 7 cases.  

      There are of course a myriad of details and benefits to filing a Chapter 7 and Chapter 13 bankruptcy case which cannot be fully covered in this limited Blog space.   In order to take full advantage of all of the benefits of Chapter 7 and Chapter 13 ( the most common individual bankruptcy cases), contact us to schedule a free no obligation consultation about all of your options.   

About the Author

Kevin Ryan

"I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. And I'll make them go away."  -Kevin Ryan, Attorney at Law Kevin Ryan is a graduate of the College of Wooster and the Cleveland Marshall College of Law. He is admitted to practice before all Alabama State Courts, the United States District Court for the Southern District of Alabama, and the United States Bankruptcy Court for the Southern District of Alabama. The United States Bankruptcy Court is a part of the United States District Court. Since 1998, Mr. Ryan has represented thousands of individual clients in bankruptcy, criminal, divorce, probate, personal injury, and real estate matters.  Attorney Ryan is also a licensed real estate agent in Alabama.  He handles  Bank-owned properties, short sales, and conventional sales in addition to conventional real estate listings.   This wide range of experience enables Attorney Ryan to take a wider look at your legal matter. It is important to consult with an attorney who can see from experience how other legal issues may affect your situation, and advise you accordingly. Personal Info Kevin Ryan is a member of First Baptist Church in Silverhill, Alabama. He resides in Silverhill with his wife Jessica and their three children. Committed to helping our Clients achieve a fresh financial start Our practice focuses primarily on consumer bankruptcy matters under Chapter 7 and Chapter 13 of the United States Bankruptcy Code.  Our law practice also includes matters where bankruptcy litigation, appellate work, or involvement in civil lawsuits is needed by a client.     No representation is made that the quality of any of these legal services is of higher quality than another attorney or law firm.   The United States Bankruptcy Code requires the following notice:  We are a Debt Relief Agency, which means we help people get legal relief from their Debts through the bankruptcy process. Interested in learning more about our bankruptcy attorney near Mobile, Alabama? Contact Us for help with chapter 7 bankruptcy or chapter 13 bankruptcy in Mobile, Baldwin and Washington counties. Education Juris Doctor, Cleveland Marshall College of Law, 1997 Employed full time as a paralegal while attending law school in the evenings. B.A., The College of Wooster, 1994 NCAA Div.III All Conference (N.C.A.C.) Football Team : Defense 1993; Most Inspirational Senior Award 1993; Co-captain 1993; Letterman 1991-1993; Phi Sigma Alapha Fraternity 1991-1994; Athletic Director Jurisdictions Admitted to Practice Alabama


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I'll BE there for you.

I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. - Kevin Ryan, Attorney at Law