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Low Cost Bankruptcy

Low Cost Bankruptcy.

Pre-Bankruptcy Considerations

Debtors can file a low cost bankruptcy, if they have the knowledge to do so.  Bankruptcy can be affordable.  Filing fees for a Chapter 7 case are under $400.  Attorneys are optional, but usually charge less than $1,000.  Fees and costs are discussed at the bottom of this article.

Chapter 7 Bankruptcy

Occasionally, there are no options other than bankruptcy.  The good news is that most debtors qualify for Chapter 7 bankruptcy, which allows debtors to absolve themselves of most debts.  Some debts simply aren’t dischargeable, like student loans.  In any event, Chapter 7 is generally reserved for individuals with little or no assets and is referred to as “consumer bankruptcy.”  Chapter 7 is also referred to as a “liquidation.”  All property of the debtor is sold at an auction, or is otherwise exempt under state or federal law.

A chapter 7 discharge is obtained by filing and maintaining a chapter 7 bankruptcy case and being eligible for a chapter 7 discharge.  However, not all debts are discharged by a chapter 7 discharge.  Certain types of debts are by law not dischargeable under chapter 7 and debts of this type will not be discharged even if the debtor receives a chapter 7 discharge.  More information on Chapter 7 bankruptcy is available on another post here.

A chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 7 of the Bankruptcy Code.  Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation.  The Bankruptcy Code is a federal law that deals with bankruptcy.  A person who files a chapter 7 case is called a debtor.  In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then con­verts the property to cash and pays the debtor’s creditors.  In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.

2013-Chapter-13-Book

Qualifying for Chapter 7

In order to obtain a chapter 7 discharge, the debtor(s) must qualify under the “means test.”  Means testing is a method of determining a person’s eligibility to maintain a chapter 7 case.  Under means testing a person whose current monthly income from all sources multiplied by 12 exceeds the median annual income, as reported by the U.S. Census Bureau, for the person’s state and family size, must show that he or she is not able to pay a minimum of $117.08 per month for 60 months to his or her unsecured creditors from his or her disposable monthly income in order to be eligible to maintain a chapter 7 case.  Disposable monthly income is a person’s current monthly income from all sources less the person’s permitted current monthly expenses.  The chapter 7 case of a person whose disposable monthly income is such that he or she is deemed to be able to pay $117.08 per month or more to unsecured creditors for 60 months will be dismissed or converted to chapter 13 unless special circumstances exist.  Means test calculators are available on the internet.

Cost of Filing Chapter 7

[highlight]The filing fee is $306.00 for either a single or a joint case.[/highlight]  The filing fee must be paid when the case is filed.  However, if the person filing can show that his or her income is less than 150 percent of the official poverty line and that he or she is unable to pay the filing fee, the court can waive payment of the filing fee.  If the person filing is unable to pay the entire filing fee when the case is filed, it may be paid in up to four installments, with the final installment due within 120 days.  The period for payment may later be extended to 180 days by the court, if there is a valid reason for doing so.  Unless payment is waived by the court, the entire filing fee must ultimately be paid or the case will be dismissed and no debts will be discharged.

Thus, in order to obtain a Chapter 7 discharge, a debtor must pay the $306.00 filing fee.  A debtor may also hire a bankruptcy attorney.  Although it makes the process much easier, retaining an attorney is not necessary.  [highlight]Most attorneys charge between $1000 and $500 to file a Chapter 7 case.[/highlight]  Search online for a local experienced bankruptcy attorney in your area.

Argyle’s Handbook on Consumer Bankruptcy

Argyle’s Handbook on Consumer Bankruptcy is written for attorneys practicing bankruptcy law, but it is often used by individuals contemplating bankruptcy because of its comprehensive and easy-to-read nature.  It contains step-by-step information guiding you through the Chapter 7 bankruptcy process.  It comes complete with already filled-in forms to assist you with the process.

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Affordable Bankruptcy: How to Discharge Your Debt on the Cheap

Affordable Bankruptcy Student-past-due-300

Bankruptcy Alternatives, or the Lack Thereof

Bankruptcy can be affordable.  Fees and costs are discussed at the bottom of this article.  However, prior to filing for bankruptcy, individuals should consider whether there are any other viable alternatives.  In fact, the Bankruptcy Code requires debtors to act in good faith to attempt to satisfy their debts.  Thus, the first step for individuals with large debt loads is to consider whether there are any alternatives to their current situation.
[quote style=”boxed” float=”right”]”the threat of bankruptcy can provide significant leverage against creditors”[/quote]
The most important aspect to keep in mind is that the threat of bankruptcy can provide significant leverage against creditors.  In most situations, unsecured creditors (such as credit card companies) will not see a dime if you file for bankruptcy.  Therefore, if you threaten to take bankruptcy, and take concrete steps indicating you’re serious, the creditor is likely to negotiate a significant reduction in the principal outstanding as long as you make some material lump sum payment.  Some debtors start by offering ten cents on the dollar for my entire outstanding credit card balance. See our post of bankruptcy alternatives for more information.

Chapter 7 Bankruptcy

Occasionally, there are no other options for the debtor.  The good news is that most debtors qualify for Chapter 7 bankruptcy, which allows debtors to dissolve all debts.  Chapter 7 is generally reserved for individuals with little or no assets.  It is referred to as “consumer bankruptcy.”  Chapter 7 is also referred to as a “liquidation” because in most cases creditors don’t get a dime.  All property of the debtor is sold at an auction, or is otherwise exempt under state or federal law.  Real estate is often liquidated at a price that will facilitate a quick and easy sale.

A chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 7 of the Bankruptcy Code.  Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation.  The Bankruptcy Code is a federal law that deals with bankruptcy.  A person who files a chapter 7 case is called a debtor.  In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then con­verts the property to cash and pays the debtor’s creditors.  In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.

A chapter 7 discharge is obtained by filing and maintaining a chapter 7 bankruptcy case and being eligible for a chapter 7 discharge.  However, not all debts are discharged by a chapter 7 discharge.  Certain types of debts are by law not dischargeable under chapter 7 and debts of this type will not be discharged even if the debtor receives a chapter 7 discharge.  More information on Chapter 7 bankruptcy is available on another post here.

2013-Chapter-13-Book
Handbook on Consumer Bankruptcy

Qualifying for Chapter 7

In order to obtain a chapter 7 discharge, the debtor(s) must qualify under the “means test.”  Means testing is a method of determining a person’s eligibility to maintain a chapter 7 case.  Under means testing a person whose current monthly income from all sources multiplied by 12 exceeds the median annual income, as reported by the U.S. Census Bureau, for the person’s state and family size, must show that he or she is not able to pay a minimum of $117.08 per month for 60 months to his or her unsecured creditors from his or her disposable monthly income in order to be eligible to maintain a chapter 7 case.  Disposable monthly income is a person’s current monthly income from all sources less the person’s permitted current monthly expenses.  The chapter 7 case of a person whose disposable monthly income is such that he or she is deemed to be able to pay $117.08 per month or more to unsecured creditors for 60 months will be dismissed or converted to chapter 13 unless special circumstances exist.  Means test calculators are available on the internet.

Cost of Filing Chapter 7

[highlight]The filing fee is $306.00 for either a single or a joint case.[/highlight]  The filing fee must be paid when the case is filed.  However, if the person filing can show that his or her income is less than 150 percent of the official poverty line and that he or she is unable to pay the filing fee, the court can waive payment of the filing fee.  If the person filing is unable to pay the entire filing fee when the case is filed, it may be paid in up to four installments, with the final installment due within 120 days.  The period for payment may later be extended to 180 days by the court, if there is a valid reason for doing so.  Unless payment is waived by the court, the entire filing fee must ultimately be paid or the case will be dismissed and no debts will be discharged.

Thus, in order to obtain a Chapter 7 discharge, a debtor must pay the $306.00 filing fee.  A debtor may also hire a bankruptcy attorney.  Although it makes the process much easier, retaining an attorney is not necessary.  [highlight]Most attorneys charge between $1000 and $500 to file a Chapter 7 case.[/highlight]  Search online for a local experienced bankruptcy attorney in your area.

Argyle’s Handbook on Consumer Bankruptcy

Argyle’s Handbook on Consumer Bankruptcy is written for attorneys practicing bankruptcy law, but it is often used by individuals contemplating bankruptcy because of its comprehensive and easy-to-read nature.  It contains step-by-step information guiding you through the Chapter 7 bankruptcy process.  It comes complete with already filled-in forms to assist you with the process.

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The Flag Still Stands for Freedom… And Your Option to Take Bankruptcy Protected by Our Constitution

Lee Greenwood: Constitution Guarantees Bankruptcy = Freedomflag-freedom-bankruptcy

Bankruptcy is protected by our constitution.  In fact, nothing brings tears to the eyes of every American like a good rendition of Lee Greenwood’s “God Bless the U.S.A.” served over fireworks.  This past weekend, our staff at Argyle Publishing enjoyed many good firework displays, all of which had one thing in common: Lee Greenwood.

“If tomorrow all the things were gone I’d worked for all my life And I had to start again With just my children and my wife
I’d thank my lucky stars To be living here today ‘Cause the flag still stands for freedom And they can’t take that away.”

“Start again”  That sounds like bankruptcy.  It turns out, nothing is more essential to American freedom than the right to take bankruptcy, which is protected by the U.S. Constitution.  This wasn’t always the case.

Bankruptcy Historically

In ancient Greece there was no bankruptcy.  If a debtor could not pay his bills, he, his wife, and his children were forced into slavery.  In ancient Rome, at least initially debtors could be put to death for unpaid debts.  In later years, the penalty was tempered to mere life in prison.  India, on the other hand, historically permitted a creditor to invade “with impunity” the debtor’s wife’s chastity as repayment for a debt.  Finally, in 1542, England passed the Statute of Bankrupts, which protected debtors.
Given these historical atrocities, our Founding Fathers protected debtors by building the right of bankruptcy into our Constitution.   Article 1, Section 8, Clause 4 guarantees “uniform Laws on the subject of Bankruptcies throughout the United States.”  Debtor’s prison was outlawed.  Congress finally passed laws in 1841, 1847, 1867, and 1898 (known as the Nelson Act) which established the modern concepts of debtor-creditor relations.  These laws finally permitted voluntary bankruptcy.  Today’s bankruptcy law, recently amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, permits debtors to file for voluntary bankruptcy, though the BAPCA made it substantially more difficult for debtors to file for Chapter 7 bankruptcy, under which most debts are forgiven.  2013-Chapter-13-Book

Modern Bankruptcy = Freedom

Today, the flag still stands for freedom, a large part of which is the ability of all Americans to take bankruptcy.  Famous debtor-Presidents who took bankruptcy include Thomas Jefferson, Abraham Lincoln, and Ulysses S. Grant.  Without our voluntary bankruptcy laws, these great historical figures may never have had the impact they did on our country’s future, and the freedoms we enjoy today as Americans.
For more information on bankruptcy see Argyle Publishing’s Attorney’s Handbook on Consumer Bankruptcy and Chapter 13 (2013).