How Soon After my Chapter 7 Discharge Can I File a Chapter 13?

Getting your ducks in a row by filing for and successfully completing a chapter 7 bankruptcy case may only end up organizing half of your ducks. In other words, if you recently received a chapter 7 discharge and still have too many nondischargeable debts, what are your options? After all, bankruptcy law states that a debtor who receives a chapter 7 discharge cannot file another chapter 7 for at least eight years. Filing for chapter 13 in search of another discharge isn’t an option for at least four years after your chapter 7 discharge.

Given that the bankruptcy system in the United States was put into place to help distressed debtors, one would wonder if there is anything left to do should you find yourself just out of a chapter 7 bankruptcy only to discover that it simply didn’t help as much as you thought it would.

Luckily, the US bankruptcy system does have a plan for chapter 7 debtors who find that they are still saddled with too much debt at the end of their case. Sometimes, chapter 7 debtors also mistakenly jump into new debt immediately after their discharge because they think that their money problems have been “solved.” An example of this is the debtor who received a discharge and went right out and bought a car she couldn’t really afford. Her credit had been damaged due to the bankruptcy, so she was forced to accept an extremely high interest rate on her auto loan.

If, after a month of paying bills post chapter 7 discharge, you fall short financially, it is easy to panic. You have most likely been told by your attorney that you cannot file for another bankruptcy until the legal timelines have passed. So: WHAT ARE YOU SUPPOSED TO DO?

Even though you can’t file for a chapter 13 bankruptcy with the intention of receiving another discharge for four years after your chapter 7 discharge, you CAN file a chapter 13 after your chapter 7 if your intent is to reorganize your remaining debt so that it is manageable. This likely will not reduce the total amount of your remaining debt significantly, but it may reduce it slightly, and your attorney can help you negotiate the payment terms on your remaining debt.

If you have creditors who are threatening to garnish your wages (take money directly out of your paycheck) because you can’t afford to repay all of your remaining debts, filing for a chapter 13 will give you the benefit of another Automatic Stay. This prevents any of your creditors or lenders from setting up wage garnishment, repossessing your vehicle or other property, or foreclosing on your home.

A chapter 13 after a chapter 7 is sometimes referred to as a chapter 20, because essentially the two bankruptcies are working together to help you both discharge the debts that can be wiped out and reorganize those that are remaining so that you can really, truly begin again. If you’ve been through a chapter 7 discharge and are still struggling, ask your NJ bankruptcy attorney about a chapter 13 after chapter 7, or a “chapter 20.”

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Can I File for Chapter 7 and Chapter 13 at the Same Time?

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“Sometimes one bankruptcy isn’t enough.” – George Veitengruber, Esq.

As we’ve discussed before on our blog, there are time limitations put into place that prevent a debtor from receiving a second chapter 7 discharge unless at least eight years have passed since their first chapter 7 discharge. You also cannot be granted a chapter 13 discharge unless at least four years have passed since you filed for chapter 7, so where on earth can we possibly be going with this?

Bankruptcy law disallows back to back bankruptcy discharges in order to avoid people abusing the bankruptcy system. With no restrictions, any debtor could theoretically bounce from one bankruptcy discharge to another, and that wouldn’t be fair to creditors, nor would the debtor learn any valuable lessons regarding their finances.

There are situations, however, wherein a debtor can file consecutive bankruptcy cases, but only when the desired outcome is not a second discharge.

Most people associate bankruptcy with ridding themselves of all of their debt, the closest thing to a financial “do-over” that exists in the real world. While a bankruptcy discharge can indeed be akin to a capital tabula rasa, giving debtors a clean slate isn’t the only function of the bankruptcy system.

For example, one of the most beneficial (and immediate) effects of filing for any type of bankruptcy is the automatic stay:

Automatic stay \noun\  a judicial order known as an injunction that halts any and all lawsuits as well as actions by creditors attempting to collect money from someone who has filed for bankruptcy

Many people file for chapter 7 when they have a significant amount of unsecured debt.

Unsecured debt \noun\ a debt that doesn’t have any collateral attached to it that a creditor could take for payment if the debtor defaults
Examples of unsecured debt: credit card debt, student loans, utility bills, medical bills, some taxes, and most personal loans

In filing for chapter 7 relief, many or all unsecured debts can be discharged at the end of the bankruptcy case, as long as the applicant meets the filing requirements and no fraud is at play.

Frequently, a discharge of all unsecured debts so significantly reduces the financial strain on the debtor that they are then able to resume paying their monthly living expenses without difficulty.

Sometimes, though, even after a chapter 7 wipes out a huge chunk of their debt, some people are still left facing a significant amount of non-dischargeable debts.

Non-dischargeable debt \noun\ money owed that can almost never be discharged via any type of bankruptcy proceeding
Examples of non-dischargeable debt: child support, alimony, student loans, income tax debt

Still other people, after filing for chapter 7 and receiving a discharge, are left with secured debt(s) that they want to continue making payments on in order to keep the property that secures the debt(s) in question.

Secured debt \noun\ a debt that has collateral attached to it that a creditor could take for payment if the debtor defaults
Examples of secured debt: home mortgage, auto loan, valuable personal property loan (mechanical equipment, furniture, tools, etc)

Whether the debtor is left with substantial non-dischargeable debt or secured debt(s) that hold important value (usually a mortgage and/or auto loan), filing for chapter 13 immediately after a chapter 7 discharge will allow for a reorganization of any subsequent arrears owed, allowing the debtor to bring the loan(s) current.

Veitengruber Law can navigate your path through multiple bankruptcies! If you thought your financial situation was too “messed up” to be fixed – think again. Even better – we want to help you. Please give our office a call if your debts have gotten out of control. Your consultation won’t cost you thing, so you’ve got nothing to lose.

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How to Convert a Bankruptcy from Chapter 13 to Chapter 7

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In a chapter 13 bankruptcy, debtors are able to reorganize their current debt load in order to make their monthly payments feasible. You should consider filing for chapter 13 if you have a steady  income but your debts are too much for you to handle. Chapter 13 bankruptcies allow you to keep all of your assets. You will still have to continue making payments on all of your debts; however, your debt timelines will be extended (typically over a three to five year period).

Sometimes debtors file for chapter 13 only to realize that they cannot even manage their agreed upon payments. If this happens, you should be able to modify your chapter 13 plan. For example, if part of your reorganization plan involves a monthly car payment – you could surrender your vehicle and your plan payment amount will go down. Of course, this is only possible if you can get by without a car, or if you have another vehicle that you can use.

If there are no effective ways to significantly modify your chapter 13 plan, you still have another option: bankruptcy conversion.

What is bankruptcy conversion?

A bankruptcy conversion equates to changing bankruptcy chapters.

How does a bankruptcy conversion work?

The first step in converting your bankruptcy is to speak with your bankruptcy attorney. This should always be your initial reaction whenever making any changes to your finances if you’re currently in bankruptcy. Your NJ bankruptcy attorney will be able to determine whether you will qualify for a chapter 7 or if it would be more beneficial for you to modify your existing chapter 13 plan.

As long as you have not received a chapter 7 discharge within the past eight years, you can “convert” a chapter 13 to a chapter 7 bankruptcy by re-filing some of your bankruptcy forms. You’ll be assigned a new trustee, and some of your assets will be sold in order to lower your debt total. At the end of a chapter 7 case, you’ll (ideally) be granted a discharge of all or most of your remaining debts that were not paid by liquidating some of your assets.

Will I qualify for chapter 7?

If you already successfully filed for and were granted a chapter 13 reorganization bankruptcy, you should be able to voluntarily switch to a chapter 7 at any time. You and your attorney will have to file a Notice of Voluntary Conversion with the court.

When a debtor is interested in converting their chapter 13 to a chapter 7, it is typically due to a significant life event that has altered their ability to make their previously agreed-upon payments. These life events include (but are not limited to) things like:

  • Divorce
  • Job loss
  • Foreclosure
  • Injury
  • Disability
  • Natural disaster
  • Eviction

If you’ve experienced one of more of the above situations, converting your chapter 13 bankruptcy to a chapter 7 liquidation bankruptcy makes sense and the bankruptcy court will likely grant you a conversion with no problems.

What if I previously filed for chapter 7 and was denied?

In the event that you have recently filed for chapter 7 but didn’t qualify, you may have to take the NJ Means Test. If your jurisdiction doesn’t require that you pass the Means Test, the court will request a written explanation from you disclosing why you need to convert to a chapter 7.

How much paperwork is involved in converting a chapter 13 into a chapter 7 bankruptcy?

Luckily, you do not have to completely start over if you want to convert to a chapter 7 bankruptcy. Some forms will need to be re-filed so that the court has your updated financial information, but your original bankruptcy petition will remain in place.

To learn more about converting from a chapter 13 to a chapter 7 bankruptcy, talk to an experienced New Jersey bankruptcy lawyer. Your specific case details are important and your attorney will be able to steer you in the direction that will get you to your desired financial destination as quickly as possible.

 

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Is Unpaid College Tuition Dischargeable in Bankruptcy?

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Unless you’ve been living under a rock for a significant stretch of time, you probably already know that student loans are very challenging to discharge via chapter 7 bankruptcy. It’s been that way since the 197os when Congress began putting limits on when graduates could discharge their student loan debt.

Prior to 1976, it was possible to discharge any student loan debt via bankruptcy. However, because so many students were failing to pay back their student loans, a law was passed with the intention of protecting federal investments. Initially, the law stated that a student loan would not be eligible for discharge within five years of its conception.

Slowly, through a series of tweaks to the law over the next two decades, the five year restriction stretched to seven years. 1998 saw the time restriction completely lifted and, in 2005, an amendment to the law was written to include private student loans, making the discharge of any type of student loan virtually inconceivable.

While it isn’t completely impossible to discharge student loan debt, to do so you must be able to prove that paying back your loan(s) will cause you ‘undue hardship.’ Proving undue hardship is exceedingly difficult to do, and those who succeed typically have some kind of severe physical disability that prevents them from earning a living.

What if I owe money directly to the school? Can I discharge that type of debt?

Ah, now here’s any interesting quandary! As it turns out, students or graduates who paid their college expenses (tuition, room and board, supplies) without signing any kind of loan paperwork or promissory note, actually have a decent chance of discharging any past due payments.

The key to whether or not your particular debt is dischargeable in bankruptcy has everything to do with nuance. For example, if you at some point received a bill from your college and failed to pay it, you technically owe the college money but not in the form of a loan.

Therein lies the nuance. Unpaid college fees such as tuition are not the same as unpaid college loans wherein you borrowed money and had a written agreement in place stating that you agreed to pay that money back. Simply failing to pay your tuition bill doesn’t magically turn it into a loan.

If you owe money directly to an institution of higher education that was never in the form of borrowed money to be repaid at a later date, you should be able to include it in your bankruptcy case and have it wiped out with a successful discharge.

However, pay close attention to the wording that your college uses in the near future, as some institutions have begun to change their paperwork/billing in order to make unpaid debts look like they were actually loans. This is an attempt to conceal the fact that your debt is dischargeable if you file for bankruptcy. These practices are not above board and your bankruptcy attorney must be diligent when reviewing any documents received from the school’s billing department.

Do you have unpaid college tuition debt that you feel should be dischargeable based on the description contained in this article? Do you have student loans that are causing you a great deal of financial hardship? In either case, Veitengruber Law can help you determine the best option for you:  a chapter 7 or 13 bankruptcy case, loan consolidation, forbearance, debt negotiation and more. Call now for a free one hour consultation.

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Will a Gainful Job Offer Affect My Bankruptcy Case?

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So, you’ve found yourself way over your head in debt. You’re certainly not alone. If the fact that you aren’t alone in your financial distress doesn’t buoy your spirits, try this: Help is available.

Maybe you’re just able to keep paying your rent, utilities and living expenses. Anything above and beyond those payments has likely been put off repeatedly, like student loan debt, quickly compounding credit card bills, personal loans and medical bills.

It may appear to the untrained eye that you are doing ‘ok’ since you are able to remain in your home, pay your utility bills, and put food on your table. However, only you know exactly just how ‘not ok‘ your financial situation is, and with every credit card bill that you toss (unpaid) into the trash, your stress level is bound to increase. Your mental and physical health have undoubtedly begun to suffer due to a nearly constant feeling of worry.

Some people are in this or a very similar situation due to a lack of information about debt resolution. Oftentimes, we talk to people who (falsely) believe that filing for bankruptcy is only an option if you’re chronically unemployed and have essentially already lost everything, including your home. We are happy to rectify this misinformation!

If your income allows you to pay rent (or your mortgage) and feed your family but you have thousands of dollars of unpaid debt, you have a very solvable problem. Bankruptcy law focuses on helping struggling debtors just like you repay money and/or wipe out debts in order to get them back on track.

Don’t assume that you wouldn’t qualify for bankruptcy just because you have maintained a place to live and haven’t had your electricity shut off. If you have significant debts that you are simply unable to even make a dent in, bankruptcy is very likely a good option for you.

What if my job situation may improve in the near future?

First of all, congratulations on your perseverance! Secondly, a Chapter 7 bankruptcy would focus on your financial situation at the time of filing. If you successfully file for bankruptcy and subsequently obtain better employment or receive a raise, you don’t have to worry about losing any of that money to your bankruptcy trustee.

With that being said, there are strict laws in place that help prevent bankruptcy fraud. For example, you cannot legally accept a large sum of money (for example an inheritance) within a year after filing for bankruptcy. Debtors are also prohibited from repaying only  selective lenders prior to filing for either a Chapter 7 or Chapter 13 bankruptcy. This ensures that all of your creditors are paid back equally with none of them receiving preferential treatment.

However, as long as you are acting in good faith, you have the right to accept a better job or even a pretty significant raise after your bankruptcy has been filed. After all, the primary goal of bankruptcy laws is to eradicate your debts and see you on your way to a brighter financial future.

 

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Bankruptcy and the New Jersey Means Test

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If you’re having significant trouble paying your bills and making good on your debts, it’s important that you stop trying to keep up with the Joneses. The first step to getting back to financial wellness is to take a good, hard look at your purchases and eliminate anything non-essential. If that means your neighbors will have a better Christmas display this year because your animated Santa and reindeer blew a fuse, so be it.

But, you say, you make as much money, if not slightly more, than the Joneses. Why is it that you’re the one filing for bankruptcy? And, when it comes to Bankruptcy Court, will your income (as compared to everyone else’s) play a role in the outcome of your case?

The answer is complex, but in general: Yes.

Part of the process of filing for bankruptcy in the State of New Jersey includes something called the Means Test. This test involves comparing your income with a schedule of the median incomes in your state. The number of people in your household comes in to play as well. If you take home less money than the median household does, you will qualify to file for a Chapter 7 bankruptcy. This assumes that your bankruptcy matter is also rather straightforward in that you hold no properties, goods, pensions, or other items that exceed exemption, and that you are not knee-deep in mortgage arrears, student loans, or child-support debt, etc.

If, when you take a look at the Schedule of Median Incomes, you find that your income exceeds the median, don’t despair. A skilled NJ bankruptcy attorney can run a unique means test based on your personal economic situation and financial obligations. You still may qualify for a Chapter 7 bankruptcy if you are slightly above the median income, but proving your case will become increasingly difficult.

Are social security payments included in means testing? Will your child support payments affect where you fall on the income scale? These are important questions that your bankruptcy attorney can answer for you. Based on your income and your obligations, your attorney will be able to begin your Chapter 7 bankruptcy filing, (which will discharge most or all of your debts) or will help you file for Chapter 13 bankruptcy (in which you will set up payment plans you can afford).

If you’ve been on the fence about filing for bankruptcy, time is of the essence. Although it may seem that median incomes would be on the rise due to the slight upturn in the economy, the cold hard truth is that the opposite is true in most areas. The unemployment rate has dropped a bit, but many people have taken lower paying jobs than they held previously. Furthermore, countless employees have been dealt pay cuts or freezes in order to keep their jobs. These factors combine to mean that, although less people are unemployed, the median income isn’t going up.

What that means for you:

Let’s assume that your income is $50,000/year and that the latest median income data for a family like yours is $52,199.

In that example, you fall below the median income for your area, and you would qualify to file for Chapter 7 bankruptcy, which would give you the best chance at financial recovery. However, because the Census Bureau shares updated information with the courts regularly, you could easily end up above the median income if the numbers continue to drop and the courts begin using the new data. Once the median income in your area falls to $49,999, it will become much harder for a judge to look at your case and grant you a discharge of all debts, because “most people” have it even worse than you do.

By meeting with a bankruptcy attorney in New Jersey, you can finally get the help you need, and it’s better to do it sooner rather than later, while the numbers are (hopefully) still in your favor.