Facing a mountain of debt you cannot afford can be a stressful and even embarrassing situation for anyone. Many people end up in financial distress for reasons beyond their control, such as losing a job, or suffering a serious medical issue that requires expensive treatment.
Fortunately, if you are struggling to pay your bills or make minimum payments on your debts, you can pursue a fresh start that can put you on the road to financial health and a brighter future.
For many people, bankruptcy represents the best option for dealing with unmanageable debts. At Lynch Legal Services, PLLC, we've help the people of Vermont get out of debt and rebuild a stronger financial foundation. Filing for bankruptcy can seem like a complex, scary endeavor. Let us take on those burdens for you. Our experienced Vermont consumer bankruptcy lawyer is ready to walk you through your options for dealing with debt.
We will guide you through the process when you decide that bankruptcy is the best option for getting back to financial health. Our down-to-earth approach can give you the knowledge and confidence to feel like you have finally regained control over your finances and can make the best decisions for yourself and your future.
Contact our Williston, Vermont firm today for a free, no-pressure case review to go over your rights and options. We'll discuss addressing your debts and financial issues and how we can help you get a fresh start.
Chapter 7
Chapter 7 bankruptcy is known as a "liquidation" bankruptcy because the process involves the sale, or liquidation, of most of a debtor's assets to pay off his or her debts. A person wishing to file for Chapter 7 bankruptcy:
A debtor in Chapter 7 bankruptcy may keep certain property that is exempt from creditors as a matter of law. Non-exempt property may be sold, and the proceeds are used to pay creditors, who usually only receive partial payment of debt balances.
At the conclusion of a Chapter 7 bankruptcy, most remaining unsecured debts are discharged, meaning the debtor no longer has any obligation to pay those debts. Certain debts, including mortgages, car loans, child support, certain income and property taxes, student loans, and criminal fines and restitution cannot be discharged.
A Chapter 7 bankruptcy remains on a debtor's credit report for 10 years from the date of filing of the bankruptcy petition.
Chapter 13
Chapter 13 bankruptcy, also called reorganization bankruptcy, provides a process for a debtor to reorganize his or her financial affairs while under the protection of the bankruptcy court. In a Chapter 13 bankruptcy, a debtor proposes a plan of repayment, which lasts three to five years. During this period, as long as the debtor complies with the terms of the court-approved repayment plan, creditors cannot try to collect from the debtor.
The debtor also gets to keep his or her assets during the bankruptcy. At the conclusion of a successful repayment plan, most remaining unsecured debt is discharged by the bankruptcy court. Chapter 13 also allows debtors to restructure or become current on other debts that cannot be discharged in bankruptcy, such as mortgages or back taxes.
Chapter 12
Chapter12 bankruptcy involves a process similar to Chapter 13 bankruptcy, but is specifically designed for family farmers and fishermen. Chapter 12 provides additional benefits and protections over Chapter 13 reorganization, including higher debt ceilings. Farming and fishing operations owned by a partnership or corporation cannot file for Chapter 12 bankruptcy unless a single family owns a majority of the equity interest or stock.
The first step in filing for bankruptcy in Vermont involves collecting all your financial information and records. You will need all this information to properly fill out the bankruptcy petition and associated forms. On those forms, you'll detail your income, your assets, and each of your debts.
Before you can file your petition with the bankruptcy court, you are required to take a credit counseling class. This class must be completed within the six-month period before you file for bankruptcy. The class is designed to ensure you understand all available debt-relief options in addition to bankruptcy. These classes cost a nominal fee and can be taken online.
If you decide to proceed with bankruptcy, you must file your petition and all required paperwork with the federal bankruptcy court in Burlington, Vermont. Typically you must pay the filing fee associated with your petition. If you can prove that the fee presents a financial hardship you can petition the court to waive the fee.
After you've filed your petition, you must send a copy of your most recent income tax return to your assigned trustee; the trustee may also request other additional information or documents from you, such as recent paystubs, bank statements, or loan documents. You must also take another credit counseling course before the conclusion of your bankruptcy proceeding if you want a discharge.
Finally, you will attend a hearing. If you file for Chapter 7, the hearing is known as a 341 meeting. If you file for Chapter 12 or Chapter 13, you'll attend a hearing to approve or reject your proposed repayment plan.
Most unsecured debts can be eliminated, or discharged, following the successful completion of a Chapter 7 bankruptcy proceeding. Examples of debts dischargeable in bankruptcy include:
Certain debts are also dischargeable in a Chapter 13 bankruptcy, including:
Any debts that cannot be discharged in bankruptcy will still be owed by you following a Chapter 7 bankruptcy, and in a Chapter 13 bankruptcy must be paid in full under the repayment plan.
The primary difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy is the debtor's right to keep his or her property through the process of bankruptcy. Chapter 7 bankruptcies require a debtor to sell much of his or her property to generate cash to pay off creditors.
Conversely, in a Chapter 13 bankruptcy, a debtor establishes a payment plan over a period of several years to pay off most or all of his or her debts. He or she is usually not required to sell assets to satisfy creditors so long as the debtor can make the payments on any debts or liens on that property.
Bankruptcy exemptions designate the real property and other assets that are protected from creditors in a Chapter 7 bankruptcy process. Most states have a list of exemptions under state law, while federal bankruptcy law also provides an alternative schedule of exemptions. In Vermont, you have the choice between using either the federal bankruptcy exemptions or the bankruptcy exemptions under Vermont law - but you must choose one list or the other.
The federal bankruptcy exemptions include:
The Vermont bankruptcy exemptions include:
The bankruptcy means test is intended to determine whether it is fair to your creditors that you obtain relief under Chapter 7 bankruptcy of the bankruptcy code. Under the means test, you must first list your gross income for the six months prior to filing for bankruptcy and divide by six to determine your average monthly income, then from that number determine annual income. If the annualized income doesn't exceed the median monthly income for a Vermont family the same size as yours, you may file for Chapter 7.
If your income is greater than the median monthly income in Vermont, you must complete a form on which you deduct expenses from your income, including housing and utility expenses, child care, taxes, health care costs, and insurance. If after deducting expenses you do not have sufficient disposable income to make significant payments on your debts in a Chapter 13 case, you can qualify for Chapter 7.
Certain individuals - including disabled veterans, some active duty service members, and individuals with primarily business debt - can be exempted altogether from the means test.
If the means test does not indicate you may file Chapter 7, you may have to choose Chapter 13 proceeding in order to get relief in bankruptcy.
You Are Not Required to Hire an Attorney to File for Bankruptcy. However, You Greatly Increase Your Chances of Completing the Bankruptcy Process and Obtaining a Discharge of Your Debts if You Have a Knowledgeable Bankruptcy Attorney to Guide You Through the Process.
Bankruptcy filings can seem incredibly complex for someone inexperienced with the process - making a mistake on your forms can result in the loss of various rights and options, the dismissal of your bankruptcy petition, or possibly even the imposition of civil or criminal penalties.
If you are struggling with debt, you don't have to try to fix the situation all alone. Let a Vermont bankruptcy attorney from Lynch Legal Services, PLLC help you understand your legal rights and options.
We can guide you through the process to financial health and a fresh start. Our firm can help you by:
Get a free, confidential, no-obligation consultation with a knowledgeable Vermont consumer bankruptcy attorney at Lynch Legal Services, PLLC today. We're ready to discuss your legal rights and options. You'll learn more about whether bankruptcy is the best tool for resolving your debts and financial problems.
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