Chapter 7 Bankruptcy 8 Year Filing Limit

You must wait eight years between filing Chapter 7 bankruptcies. This prohibition limiting filing can cause many complications for individuals facing debt multiple times in their lives.

No one wants to file Chapter 7 bankruptcy multiple times. However, circumstances of life will sometimes dictate the need to do so. Unfortunately, the prohibition against filing in less than eight years is ironclad. If you are unable to file because you have already filed within the last eight years, there are several strategies that you can pursue.

First, you will normally be able to file a Chapter 13 bankruptcy in less than eight years. This would require you to repay at least a nominal amount of debt to your creditors. In some cases, Chapter 13 bankruptcy may be the only bankruptcy that you qualify for even when the eight years expires. If your income has gone up, or you have acquired equity in a home or other property, Chapter 13 bankruptcy may be the only option. There may be no reason to wait.

A second option may be to reach out to your individual creditors and negotiate individual payments in lieu of bankruptcy. After the fact, if you cannot maintain these payments, you may be able to file a Chapter 7 bankruptcy at a later date. The payments to creditors may be able to buy you time until you can file at the later date.

A third option you may need to discuss with your bankruptcy attorney is whether or not to just simply ignore your creditors until you qualify again. Creditors have a wide range of actions they can take against you, including suing you and putting liens on your property. In some circumstances this may be a manageable problem. Creditors have a wide range of actions they can take against you, including suing you and putting liens on your property. In some circumstances this may be a manageable problem with the guidance of an experienced attorney. Reaching out to an experienced bankruptcy attorney may help you navigate this waiting period.

Call us at 412-414-9366 to discuss your situation and see if bankruptcy is an option, or will be an option down the line. I will be happy to discuss your situation and answer your questions.

Gather Up All Of Your Collection Notices

In Chapter 7 bankruptcy it is important to include all of your creditors in the schedules. This guarantees that the underlying debt will be discharged from your financial record. Discharge wipes out that debt forever, it cannot be collected on or transferred to anyone else. There are no tax implications as the debt is discharged, not forgiven. Therefore, the creditor cannot write off the debt and send you a 1099C (which would require you to pay taxes).

When I file a Chapter 7 bankruptcy for a client I run a bankruptcy specific credit report. This credit report should catch most of your major debts. However, some things are not reported and some things slip through the cracks. A common example is medical bills. Medical bills rarely are disclosed on credit reports. When you file Chapter 7 bankruptcy you want to make sure that all of your medical debt is discharged. It is important to gather up all medical statements and provide them to your bankruptcy attorney. This may require you to call your medical providers to get any bills or statements. You should also track down any collection notices you may have received from third parties who are collecting on medical debt.

It is likewise important to find any collection notices for any credit cards. While the underlying debt should be discharged in any case, it still will make your life easier if all of the collection agencies are notified when you file bankruptcy.

If you have retained an attorney to follow Chapter 7 bankruptcy, make sure to keep any collection notices in the lead-up to filing. All utility bills are also worth gathering up as they sometimes do not show up on the credit report. If you owe individuals such as old landlords (or even individual people), you should include them as well even though they will probably not be on the credit report.

If you have any doubt whether or not to provide something to your attorney, error on the side of giving them everything. If you have any questions about what can be included in a chapter 7 bankruptcy, call us at 412-414-9366. I would be happy to discuss your situation and set up a free consultation!

Why "Liquidaton" Is Not Always A Concern

A common fear expressed by new callers when asking about bankruptcy is that all of their property will be liquidated. Or sometimes they believe they will lose their home, their car, or retirement or savings accounts. In most cases, this could not be further from the truth.

The problem arises because individuals do a good thing… they look for information about their problem! But, in doing so, when researching bankruptcy law you will sometimes come across references for a “liquidation” bankruptcy in Chapter 7. Even bankruptcy attorneys will sometimes use this title in shorthand. However, this can cause great confusion and misunderstanding. The reality is that very few bankruptcy cases end up involving liquidation of assets.

The only time this occurs is when you have assets that are not exempt from your creditors. Under bankruptcy law, there are exemptions that are used to protect your personal property. These exemptions are not unlimited, but they are normally sufficient for most people looking to file bankruptcy. In some cases the exemptions actually ARE unlimited. Qualified retirement accounts have an unlimited exemption. Personal injury settlements that are needed to support the debtor are also unlimited. For most other types of property there are limitations. This includes the homestead exemption for your home, the vehicle exemption for your car, in the wildcard exemption that is normally used to protect cash or savings. In most cases, at least in Pennsylvania where the federal exemption are allowed, there is enough to protect everything. So, when people call me up and say, “I don’t want to file bankruptcy because I know I’ll lose my car”, in reality it is just not a problem. Liquidation bankruptcy is an issue that normally does not come in to play.

However, what happens when the exemptions are not sufficient to protect your property? In that case there are two options. One, you can allow the property to be liquidated. Oftentimes, unless the property is of significant value, it is not even worth the time of the trustee to liquidate the asset, and they will abandon it.

The second option is to file Chapter 13 Bankruptcy and pay back your unsecured creditors dollar-for-dollar for the unexempt amount. This sometimes occurs when a debtor has too much equity in a home. Whether or not this makes sense will depend on how much you owe to your creditors and how much you will need to repay. In some cases it will still save you tens of thousands of dollars .

Call me at 412-414-9366 if you have questions about whether or not your property will be fully exempt or will need to be liquidated. As discussed above, in many cases where debtors are concerned about liquidation, in reality they will not lose anything. I would be happy to discuss your situation with a free consultation! Don’t let the word “liquidation” scare you. It is rarely a result.

Calculating Your "Income" For Bankruptcy Purposes

The definition of "income" is pretty straightforward in most contexts. It's generally somewhere along the lines of, "the money I make at work" or the money received from regular benefits such as Social Security or a pension. It seems simple enough.

However, things get a bit more confusing in the bankruptcy context, as they normally do. Income is important in bankruptcy because it determines whether you can file a Chapter 7 bankruptcy, or whether you must file a Chapter 13 bankruptcy (and if so, how much you must pay). The bankruptcy "means test" looks back at the six months before filing to determine your income during that period. So, you just need to look at your paystubs or benefit statements, right?

Nope... not that simple. "Income" as determined by the bankruptcy means test has a very broad definition. Yes, you will need to look at your traditional income, and your paystubs are a good start. But, "income" also includes one time payments, commissions, and bonuses. Income includes household contributions from friends or family members (something few people would think of as "income"). It includes lottery and gambling winnings. It also includes rent, dividends, interest, and royalties, or one time distributions. Most confusingly, it can include alimony or child support (which is normally not taxable), or even inheritances! The definition is so broad it occasionally precludes people in great need of debt relief from filing.

Another confusing aspect of this look back period is that the money is considered earned when it goes into your bank account, not when you actually do the work. So, if you perform a service in December, but are not paid the commission until the next April,  it would be considered "income" in the look back period from August (for which April is in the six month look-back period). The means test can be counter-intuitive, so it is very important your attorney explains it and carefully reviews all income. If in doubt as to whether something is income, tell your attorney!

There are a few exceptions to what is considered income that can work to your favor. Social Security payments are not considered income. Loans are also not income, and neither is your tax refund. But, once again, assume any money coming into your possession in the last six months to be income. An experienced bankruptcy attorney will not lead you astray.

So, what can be done if a one time bonus or windfall is included in your look back period, preventing you from filing Chapter 7 bankruptcy, or artificially distorting your Chapter 13 payment? Wait! No... I don't mean wait for my answer. I mean wait to file!

Proper bankruptcy planning is an important part of my job. Sometimes it is necessary to wait before filing. If you wait a few months, these distorting payments will no longer be part of your look-back period. It's just good planning.

On the other end of the spectrum, sometimes you need to hurry up! If you know that you will soon receive a large bonus at work, you will want to file before it becomes your "income". Remember, it's not when you do the work, it is when you receive the payment. You can use that distinction to your advantage.

Contact us if you want to discuss whether or not your income (or your "bankruptcy income") prevents you from filing. I'd be happy to walk you through this sometimes confusing world!

What is an "Asset" in Bankruptcy?

Bankruptcy law often refers to "assets and liabilities". This seems like a simple enough idea, and for the most part it is. However, what qualifies as an asset is much broader than what many people considering bankruptcy would believe.

The simplest definition of "asset" in bankruptcy is anything you own, or have the rights to, that has value (or potential value). This certainly includes your home, rental properties, cars, bank accounts, personal property, and cash. If you can sell it or transfer it, it is probably an asset.

However, the definition of asset goes far beyond these obvious examples. Assets also include contingent and unliquidated property. Contingent property is any property that becomes yours upon the occurrence of a certain condition, such as an inheritance (which becomes yours upon the condition of someone else dying). If you file a bankruptcy, and you are the heir to a deceased person whose estate is being administered, you must list your interest in the property you are to inherent. NOTE: You are not required to list property you stand to inherent if the person granting you the property is still alive. In a Chapter 7, however, you must inform the Court of any property inherited within 180 days of your discharge.

Unliquidated property is property for which the value or amount has not yet been determined. An example of unliquidated property would be a lawsuit in which your damages or award has not yet been determined. Once again, you will need to list this property as an asset.

Assets may also includes intangible property, such as intellectual property (patents, trademarks, copyrights) and franchises. A customer list used by a sales person could be an asset. A tax return, payment, or commission due to a debtor can also be considered an asset, even though the debtor does not yet possess it.

Clearly, the definition of an asset is very broad. All assets will be listed in Schedules A and B of your bankruptcy petition. Your attorney should closely review all of your assets, so they can be disclosed and exempted. If assets are hidden from the Bankruptcy Court, your case could be dismissed with prejudice. Perjury charges could even be filed.

If you have any doubt if something is an asset, disclose it to your attorney so he or she can determine if it must be disclosed to the Court.