Understanding who can file for bankruptcy can go a long way toward informing you of your options when you have financial issues. It is important to keep in mind that bankruptcy should really be turned to as an absolute last resort for getting out of debt. Here at LeBaron & Jensen, we strive to provide a multitude of services to inform you whether bankruptcy is the best option for you and to help guide you through the bankruptcy process.

When to File for Bankruptcy

As previously stated, bankruptcy is a final resort after you have tried other options for getting out of debt. You should only file for bankruptcy after you have tried to negotiate a repayment plan with your creditors. If they refuse to work with you to form a repayment plan that you will be capable of paying, you may want to consider filing for bankruptcy. When your liabilities exceed your assets, bankruptcy may be the best option. If you find that you are going further into debt every month, it is important to take action to get out of debt. In addition, it is often a good idea to look into bankruptcy if you can’t see your financial situation improving over the next 5 years.

Who Can File for Bankruptcy?

In general, anyone is able to file for bankruptcy. However, there are certain requirements for the various types of bankruptcy. You will only be able to file for that particular type of bankruptcy if you meet all of the relevant requirements. If you are filing for bankruptcy as an individual, rather than as a business, you will most likely be eligible for either a chapter 13 bankruptcy or a chapter 7 bankruptcy. Keep in mind that your bankruptcy case may be dismissed by the court if they feel that you are trying to cheat your creditors. These cases may also result in persecution for fraud.

Who Can File for a Chapter 7 Bankruptcy?

A chapter 7 bankruptcy can’t be filed for another 8 years after a previous chapter 7 bankruptcy has been filed. Only individuals may be eligible for a chapter 7 bankruptcy, businesses will most likely have to file for a chapter 11 bankruptcy. In addition, you will not be eligible to file for a chapter 7 bankruptcy if you have had a bankruptcy case dismissed by the court in the previous 180 days. To become eligible for a chapter 7 bankruptcy, your current monthly income will be examined closely. Your monthly income will be determined based on your prior 6 months’ income. This income will be paralleled against the average income for a family of a similar size as your family. If your monthly income is less than or equal to the median income for a family the identical size as yours, you are most likely eligible to file for a chapter 7 bankruptcy. However, if your monthly income is more than the average, you will be required to meet the means test.

The Means Test

The means test is a test that examines your finances in order to determine which type of bankruptcy you are eligible for. This test determines if you have enough disposable income in order to repay at least a portion of your unsecured debts. Your disposable income is the amount of money that you have remaining after you have subtracted certain allowed expenses and required debt payments from your monthly income. If you do have a substantial amount of disposable income, it is likely that you will be required to file for a chapter 13 bankruptcy rather than a chapter 7 bankruptcy.

Who Qualifies for a Chapter 13 Bankruptcy?

A chapter 13 bankruptcy is often referred to as the “wage earner’s bankruptcy.” It is available only to individuals or married couples filing together, not to businesses. In order to qualify for a chapter 13 bankruptcy, you must have a steady source of income. In addition, there is a limit to your debts to qualify for a chapter 13 bankruptcy. Your unsecured debts are required to be less than $394,725. In addition to this, your secured debts must total an amount less than $1,184,200. This specific number is adjusted every 3 years in order to account for inflation. You are not able to file for a chapter 13 bankruptcy within a certain period of time following a previous bankruptcy or within 180 days of having a previous case dismissed.

What Debts Can’t Be Wiped Out by Bankruptcy

There are certain debts that can’t be resolved through the use of bankruptcy. Understanding which types these are can help you to decide if bankruptcy is the best approach for your particular situation. Student loans and debts to government agencies can’t be wiped out by bankruptcy. Alimony and child support payments are also not able to be resolved with bankruptcy. Other debts that can’t be wiped out by bankruptcy include income taxes, court fines or penalties, and debts for personal injuries that were caused by you driving while intoxicated.

Debts that May Be Wiped Out by Bankruptcy

Alternatively, there are many types of debt that are able to be wiped out with bankruptcy. A few of these types of debt include personal loans, credit card debt, lawsuit judgments, medical bills, and obligations from leases or contracts.

Reasons to File for Bankruptcy

There are several reasons that commonly lead to filing for divorce. Medical debt is a common thing that causes individuals to file for bankruptcy, especially because medical issues can also lead to job loss. Being sued by creditors, job loss, and divorce are all reasons that many people decide to file for bankruptcy. Keep in mind when you make this decision that it will have a long-term impact on your credit and personal life, though there are still a few benefits to bankruptcy in the right situation.

Here at LeBaron & Jensen, we strive to provide you with superior guidance to help you throughout the bankruptcy process. Our skilled team is experienced in each step of the process in order to ensure that you are able to obtain the best possible outcome. To learn more about the legal services and guidance that we are able to provide and how they can improve your bankruptcy process, contact our experts today!

Filing for bankruptcy around tax season can bring up the question regarding what happens to your tax refund during bankruptcy. Your tax refund is the amount that you have essentially overpaid in taxes throughout the year. Many people choose to pay more in taxes throughout the year and receive a tax refund during tax season. This also helps to avoid the possibility that you will end up owing money on your taxes when tax season comes around. Many people rely on their tax refund in order to pay off debts or bills, so it can be especially important to understand how your tax refund may be impacted during your bankruptcy.

Filing for Bankruptcy

Filing for bankruptcy has been shown to provide a multitude of benefits. It can help to provide you with an alternative that will allow you to pay off your debt. However, filing for bankruptcy certainly has its drawbacks as well. If you are considering filing for bankruptcy, it is incredibly important to consult with a legal professional to determine precisely how the bankruptcy will impact your situation and your life. Here at LeBaron & Jensen, we specialize in providing superior guidance to help you throughout the bankruptcy process. There are multiple types of bankruptcy and the various types of bankruptcy may impact taxes differently. The most common types of bankruptcy for individuals to file are chapter 13 bankruptcies and chapter 7 bankruptcies.

Chapter 13 Bankruptcy

In a chapter 13 bankruptcy, a repayment plan is designed to allow you a reasonable way in which to pay off your debt. In this situation, some assets are protected, which means that you will likely be able to keep your home and car. However, a chapter 13 bankruptcy requires that you use all of your disposable income to pay off your debt. In a chapter 13 bankruptcy, some debts may be dischargeable, which often means that you aren’t paying back the entire amount of your debt. Some debts, like student loans, may not be considered unsecured debts and they will be required to be paid in full.

Tax Refunds in a Chapter 13 Bankruptcy

Chapter 13 bankruptcies generally require you to spend all of your disposable income on paying off your debt. In these situations, tax refunds are often considered disposable income. Though it is largely up to the court, in the majority of cases, you will be required to surrender your tax refund in order to pay off your debts. Unfortunately, this won’t lower your ordinary plan payment. If your repayment plan doesn’t completely cover the same value that you owe, it is likely that the court will require you to put your tax refund toward paying back these debts.

Alternatively, if you owe money on your taxes, it can be beneficial to file for a chapter 13 bankruptcy. Your tax debt may be considered unsecured debt, which may be able to be discharged through the bankruptcy process. Discuss with your legal professional to determine how your tax refund will be impacted by a chapter 13 bankruptcy.

Chapter 7 Bankruptcy

A chapter 7 bankruptcy gathers your unprotected assets into a bankruptcy estate. Any unprotected assets are liquidated in order to pay back your debts. These assets will be distributed by a designated trustee, which will provide you with little influence over their distribution. Since assets are distributed by a trustee, it will largely be up to the court to determine what happens to your tax refund.

Tax Refunds in a Chapter 7 Bankruptcy

Tax refunds are often handled somewhat differently in a chapter 7 bankruptcy. In most situations, what happens to your tax refund will depend primarily on when the tax refund was earned. If the refund was earned for the work that you did before filing for bankruptcy, it is likely that it will be required to go to your bankruptcy estate, unless it is protected with an exemption. However, if it was earned after you filed for bankruptcy, it is possible that the individual may be allowed to keep their tax refund. This can become complicated depending on when the tax refund is earned and bankruptcy is filed. It may become necessary to split the tax refund between the individual and the bankruptcy estate, depending on the situation. The ultimate decision will be determined by the court.

How to Save your Tax Refund

There are a few ways that you may be able to save your tax refund throughout your bankruptcy. You may be able to keep your tax refund by waiting until after you have received it to file for bankruptcy. In these situations, you will likely want to spend it before you file for bankruptcy. Keep in mind that it should only be spent on necessities. Purchasing luxuries will be problematic for your bankruptcy process. Exemptions may allow you to protect your tax refund. Some states allow for a “wildcard exemption” which can help to protect any asset of your choice. In addition, if you don’t receive a tax refund, you don’t have to worry about protecting it. This can be done by adjusting your tax withholding. This will take less money out of your paycheck, which may ease the financial strain of the repayment plan. However, if you choose to do this, you will need to save up some extra funds in case you end up owing money on your taxes.

Here at LeBaron & Jensen, we specialize in the field of bankruptcy law. Our experienced, professional team can provide you with the information and guidance that you need to obtain the best possible outcome for your bankruptcy process. Filing bankruptcy comes with a substantial amount of legal and financial consequences, so it is vital to consult with a professional when you consider filing for bankruptcy. To obtain more information regarding how your bankruptcy will impact your tax refund, contact our experts at LeBaron & Jensen today!

Student loans are typically not dischargeable through bankruptcy, though there are options for debt relief in extreme situations. This also changes depending on the kind of loan that has been received. Federal loans or loans obtained through a non-profit organization like a school are unlikely to be dischargeable. However, private loans may be easier to discharge when filing for bankruptcy. It is vital to consult with a bankruptcy lawyer to determine whether applying to discharge a student loan is even possible for your specific situation. The vast majority of individuals are not eligible to discharge their student loans through the bankruptcy process, though there are multiple other options that can help ease the financial strain caused by student loan payments.  

The Brunner Test

There are three conditions that courts often used to determine whether or not an individual is eligible to discharge their student loans. All three conditions must be met in order to discharge student loans. This is called the Brunner Test. It was designed to prevent students from incurring student loan debt and filing for bankruptcy immediately after graduation. The three components of the Brunner Test are:

• Proving that you can’t maintain a minimal standard of living for yourself and your dependents based on your current income and expenses.
• Proving that your financial situation is unlikely to change during the loan’s terms. This may include proving some medical condition that prevents you from obtaining an additional job.
• Proving that you made good faith efforts to repay the loans, though this doesn’t necessarily indicate making payments. It can include searching for an affordable repayment plan or contacting your existing loan provider.

Other Tests

Though the Brunner Test is commonly used by a court during the bankruptcy proceedings, there are a few other tests that may be implemented to determine eligibility for student loan discharge. The Totality of the Circumstances Test, for example, looks at all relevant factors in the situation. This is done to determine if paying student loans will cause undue hardship to the quality of life of the individual. Undue hardship can be difficult to define and is largely up to the ruling of the court. It can be useful to look at the past history of the court to determine the likelihood of success.

An Adversary Proceeding

Essentially, student loans are generally not looked at as dischargeable assets during the bankruptcy process. In order to bring student loans into the mix, an adversary proceeding must be filed along with the bankruptcy. To prepare for filing an adversary proceeding, it will be important to ensure that you have made a good faith effort to repay the debt. This means that you need to document communication with your lender to show that you made an effort to adjust the payment plan. These proceedings are separate proceedings from the regular bankruptcy processes, though they will occur in conjunction with the process.

Chapter 13 Bankruptcies

Chapter 13 bankruptcies generally include implementing a reasonable payment plan that will allow you to repay your debts. This may similarly help to lower your student loan payments. However, in most situations, you will still be responsible for the remaining debt after your repayment plan has concluded. This is different from dischargeable assets, which are generally discharged after all of the payments in the plan are made.  

Chapter 7 Bankruptcies

Through a Chapter 7 bankruptcy, the student loan debt may be discharged completely, though this is extremely uncommon. Chapter 7 bankruptcies generally sell off assets to repay debts and the remaining debt is frequently discharged. The ideal type of bankruptcy to file for will depend primarily on the overall situation, so it is important to consult with an experienced legal professional when undergoing the bankruptcy process. There are many different types of bankruptcies, though Chapter 13 and 7 Bankruptcies tend to be the most common for individuals.

Possible Outcomes

Essentially, when you attempt to discharge your student loans, there are three possible outcomes. The first possibility is a complete discharge of student loans. In this situation, you will no longer be responsible for any remaining student loan debt. The second potential outcome is a partial discharge of the loan. This will result in a portion of the debt becoming discharged, which will reduce the total amount of debt and often the overall payments. They may also reduce the interest rate of the applicable loan. The final, and most common, outcome is no discharge of student loan debt, which will cause you to still be responsible for the student loan debt, even after completing the bankruptcy process.

Options

Federal loans are usually not dischargeable due to the availability of Income Driven Repayment Plans. These plans take your income into consideration and design a corresponding repayment plan, which may be a percentage of the total income or other consideration. This can cause the monthly payment to be as low as $0. $0 will not affect your standard of living, so it can be difficult for a court to justify discharging federal student loans.

There are several other options to minimize the financial strain of student loan repayment. For example, deferment is a possibility for student loans. Deferment essentially temporarily stops payments and may prevent the necessity of paying the cost of interest during the deferment period. Forbearance can stop loan payments from being required for up to a 12 month period. However, this method does require payment of the interest accrued during this time. The availability of alternative repayment plans is often why it is so difficult to discharge student loan debt during bankruptcy.  

Contact us for your Bankruptcy Needs

Bankruptcy should be used as a last resort for financial hardship. It has significant legal, personal, and economic consequences. Bankruptcy can remain on your credit for 10 years, which can prevent you from securing future loans. Due to the dramatic impact of filing for bankruptcy, it is important to consult with a knowledgeable bankruptcy lawyer. To obtain superior legal counsel regarding your bankruptcy, contact us at LeBaron & Jensen today!