Are you eligible for Ch. 7 or Ch. 13 bankruptcy?

Eligibility for Ch. 7 or Ch. 13 bankruptcy can turn on who is filing the bankruptcy, the type and amount of debt, the amount of income, and the amount of expenses.

Who is filing the bankruptcy:

Only a human being (or a human being and his or her spouse) can file a Chapter 13 case. Neither a partnership nor a corporation can file a Chapter 13 case, but it can file a Chapter 7, whether or not the business owner also files one individually.

The type and amount of debt:

If your debt is primarily consumer debt (a dollar amount of more than 50%), then you have to pass the means test to qualify for a Chapter 7. Under Chapter 7, there is no restriction on the amount of debt you can have in order to qualify. But, Chapter 13 is restricted to cases where the person filing has a maximum of $383,175 in total unsecured debt and $1,149,525 in total secured debt.

Amount of income:

If your income is no more than the median income for your family size and state, then you can easily pass the means test to qualify for a Ch. 7. Chapter 13 requires regular income, which the Bankruptcy Code defines as income that is “sufficiently stable and regular” to enable you to “make payments under a [Chapter 13] plan.” This makes sense because you will be making regular monthly payments for the duration of your Ch. 13 case. A Ch. 13 case will last three years if the income is less than the median income applicable to your family size and state; if the income is at the applicable median income amount or more, the Ch. 13 case will last five years.

The amount of expenses:

In Ch. 7, if your income is not below the median for your state, then you must complete a highly technical test involving some, but not necessarily all, of your expenses to see whether you pass the means test and thus whether you are eligible for a Ch. 7. In Ch. 13, a similar, but often more complicated, calculation largely determines the amount you must pay monthly into your plan to satisfy the requirements of Ch. 13.

Choosing between Ch. 7 and 13 can be simple. But there are at least a dozen major differences among them, differences of which you may not be aware. So when you come in to see me or another attorney, be clear about your goals but also be open-minded about how to reach them. You may well have tools available that you didn’t know about.

For bankruptcy in Northern New Jersey, call: (201) 676-0722.

Student loan settlement companies to be sued by Illinois AG

Student-loan settlement companies that allegedly take people’s money and do not provide the promised student-loan debt help will be sued by the Attorney General of Illinois, the New York Times reported.  Illinois will be the first state to take legal action against companies that advertise help for student loan debtors.
Two of these student loan debt [...]

Lots of business debt can allow you to qualify for Ch. 7 more easily

If you owe more business debt than consumer debt, then you can avoid not only the “means test” but also some other roadblocks to a successful post-business Chapter 7 bankruptcy case.

What happens to general unsecured debt in Chapter 7?

Your “left-over debts”–those which are neither secured by collateral nor belong to any of the special “priority” categories–often don’t drive the decision about whether to file Chapter 7 or 13. But you still need to know how these “general unsecured debts” are handled under these two options.

Options with Your Vehicle Loan under Chapter 7

Your car or truck loan may be the most important debt you have. Chapter 7 puts you in the driver seat for dealing with this debt.

Capital One making it easier for debtors to open bank accounts

Capital One bank soon will be making it easier for those with bad credit to open checking and savings accounts, under the terms of a settlement with New York Attorney General Eric Schneiderman.
Previously, Capital One would use a credit reporting agency called Chexsystems to screen out bank account applicants who had bad credit.  Now Capital [...]

Film Review of Spent: Looking For Change

A recent documentary available on YouTube highlights the high cost of being poor.  Spent: Looking For Change, a film sponsored by American Express, explores the financial lives of people who lack access to banks or who have bad credit or no credit.  Here is a basic summary of the important topics covered:
According to the film, [...]

Inherited IRAs not exempt, U.S. Supreme Court says

The U.S. Supreme Court recently made an important decision regarding Individual Retirement Accounts (IRAs) that have been inherited by someone who then files for bankruptcy.
At issue was an IRA account that the bankruptcy filer had inherited and that contained $300,000.  Bankruptcy law allows those filing for bankruptcy to keep IRA accounts, so long as those [...]

Links – stuff worth reading from the weeks of 5/18/14 and 5/26/14

Yes, A New Government Rating System for Colleges is Actually in the Works. On May 25, 2014, the New York Times had an interesting article on college presidents’ reactions to President Obama pressing ahead with his plan to impose a new government rating system for colleges.  In a funny quote, a Dept. of Education official [...]

Links – Stuff worth reading from the week of 5/11/2014

At the very beginning of this week, the Wall Street Journal had an interesting article on how banks that are located mainly in Wal-Mart stores collect a lot of fees from their customers, who tend to have bad credit histories.

From the Washington Post, there is an article on the debt buying industry and the sloppy [...]