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FRIENDLY, AFFORDABLE AND KNOWLEDGEABLE Chapter 7 Chapter 13 Loan Modifications

6 Steps to Qualify for Chapter 7 Bankruptcy

Chapter 7 bankruptcy may be a way to solve your financial problems, but it is not the only way. Chapter 7 bankruptcy liquidates nonexempt property to equitably distribute your wealth to your creditors. If you own a small business or sole proprietorship, you can file under Chapter 11 to liquidate a few nonexempt assets to pay settlement amounts on your delinquent accounts, make extra payments to reduce the principal, or extend the duration of your loans, sales contracts, or leases. Under Chapter 11 or Chapter 13, you can reduce your installment payments by paying for three or five years. You may be able to increase your cash flow by removing encumbrances from your mortgage or your primary business property. If you owe primarily taxes, child support, student loans, or accounts secured by collateral, you can’t discharge or liquidate them. You can file a Chapter 13 repayment plan to repay your secure creditors over three to five years.

Pass the Bankruptcy Means Test

The means test calculates your disposable income. You must pass the test to qualify for liquidation of your nonexempt assets and discharge of your past due accounts. High income does not disqualify you. High income individuals with unusual expenses, such as, high mortgage or car loan payments, delinquent taxes, school loan payments, child support arrears, and medical bills qualify for Chapter 7 bankruptcy.

Official Chapter 7 Means Test calculation

The official Chapter 7 means test calculation form attached to the U.S. Bankruptcy Court website begins with your monthly income adjusted with your spouse's monthly income. It considers the number of exemptions on your federal income tax form, and asks for your specific costs of food, clothing, health care, monthly mortgage or rent, other loans secured by your home, ownership and operating costs of vehicles, taxes (federal, state, local, self-employment, Medicare, and social security), telephone, and other necessary expenses. Your disposable income is your combined monthly income minus the summation of all your living expenses. Lastly, if your disposable monthly income times 60 is less than $7,700, you pass the test. If your disposable monthly income times 60 is more than $12,850, you are presumed to be abusing the Chapter 7 process.

Must be an Individual, Married Couple, or Small Business

A business which files for Chapter 7 liquidation is radically different than an individual filing for Chapter 7. The Chapter 7 process allows a business owner to turn his or her business over to a federal trustee for liquidation. An individual leaves Chapter 7 unencumbered and in a better financial condition. The liquidated business ceases to exist. The court distributes the money from the business liquidation sale equitably to its creditors.

You must be an individual or married couple

Chapter 7 gives honest individuals a “fresh start” with no liability for discharged debts. Chapter 7 is only for individual debtors, not a sole proprietorship, partnerships, or corporations according to 11 U.S.C. § 727(a)(1).
Liquidation helps those who own only exempt property that is covered by the stay of the court, whose income is below average, and with unsecured delinquent accounts that can be discharged. You should consider those who cosigned for you or helped you get financing. The cosigner owes the money if you default.

No Recent Bankruptcy Discharge

You must allow at least eight years after your first Chapter 7 liquidation to file another one. You can probably file a second petition if you did not receive a discharge the first time. You better consult a lawyer. You will not receive the automatic stay that stops your lien holders from trying to reposes or foreclose when you file another case in quick succession.

You will have difficulty convincing the court that you have enough income for a Chapter 13 repayment plan if you just convinced the court that you did not. If you have non-dischargeable court ordered obligations like past due child support, Chapter 13 may be beneficial immediately following your previous attempt. Chapter 13 can keep you out of jail and on your job to pay the debt in arrears. The second filing simply gives you more time to honor your obligation to your children.

Federal taxes are another good reason for attempting Chapter 13 immediately after the discharge of your debts. Rather than an official judgment and wage garnishment against you, you may be able to negotiate a reasonable payment plan. Under Chapter 13 you may have five years to make your payments. You can regain control of your finances.

Mortgage Modification Assistance

If your problem is impending foreclosure, you may need our attorney to help you with mortgage modification. Mortgage modification is a permanent restructuring of your mortgage. Your lender can reduce your interest rate, change your variable interest rate to a fixed one, forbear some of your principal, or extend the length of your loan to reduce your monthly payments. Our law firm can help you avoid foreclosure, complete the modification paperwork for you, advise you of sound programs, and will be there for you if your lender violates federal laws.

No Recent Bankruptcy Dismissal

You can’t file for Chapter 7 or Chapter 13 if you had a similar case dismissed within the 180 days before filing your current petition. The right to a discharge is not absolute.

You can file again unless you failed to obey a court order to appear in your previous case. The 180-day waiting period applies if a creditor filed a motion for relief from your previous stay.

You are not eligible for liquidation and discharge again, but you can possibly file under another Chapter. A small business owner can restructure under Chapter 11 reorganization, or an individual can file an extended repayment plan under Chapter 13.

Receive Credit Counseling

A certificate of completion from a pre-bankruptcy credit counseling course approved by the U.S. Trustee Program must be filed with your initial petition for bankruptcy. For your convenience, the United States Court web page links to the U.S. Trustee Program, credit counseling agencies, and approved debtor education courses.

Speak with a Bankruptcy Attorney

Call or contact our Long Island bankruptcy law firm for a free initial consultation to discuss Chapter 7 or Chapter 13 bankruptcy or to get more information about mortgage modification assistance. Our bankruptcy attorney, Adam C. Gomerman has the knowledge and experience to guide you through the process. We can help homeowners, investors, and businesses with income tax litigation, probate problems, fraudulent conveyances, and fraud and avoidance issues. We will help you decide if you qualify for liquidation or if you need a Chapter 13 repayment plan.

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