Bankruptcy Law Services

There are two ways to file a consumer bankruptcy under the Bankruptcy Code: Chapter 7 and Chapter 13. Chapter 7 is the preferred option for most people, because it involves wiping out your unsecured debt without paying anything. In order to qualify to file a Chapter 7, there are two tests that you must pass. One test is called the means test, and the other test is a budget test. There isn’t a specific amount of money that you have to owe in order to qualify to file bankruptcy. If you pass both tests and believe that you need to do it, the judge will allow you to proceed.

To pass the means test, you must show that your annual gross income is below the median income in the State of Iowa for a household of the same size as yours. Take advantage of some detailed information on how the test works.

To pass the budget test, you have to be able to show the judge that pretty much all of your available take-home pay in a typical month is required to pay your month-to-month living expenses and those bills that you would still be paying even after you filed bankruptcy, such as secured loans that you decide to keep or non-dischargeable debts. If you can show the judge that kind of budget, that means you are legally insolvent, because you are insolvent when you don’t have enough cash flow to both pay your ongoing expenses and your old debts. If that is the jam you are in, then you pass the budget test to file a Chapter 7 petition.

If you do not pass both of the tests described above, your only option is to file a Chapter 13 petition. Chapter 13 presumes that you have disposable income left over after you pay all of your ongoing expenses.

In a Chapter 13 case, you have to promise to pay your disposable income every month to the bankruptcy trustee, to be applied toward payment of your unsecured debt. If your gross annual income is below the median, you can propose a plan of 36 to 60 months in length, but if your income is above the median, then you have to propose a 60-month plan. The plan must be approved or confirmed by the bankruptcy judge.

The judge will approve any amount that you propose to pay each month, as long as he and the trustee are satisfied that the amount represents your best effort. You then make that payment every month for the designated length of your plan, with the understanding that after you make all of the promised payments, the judge will discharge, or wipe out, the rest of what you still owe on that debt.

Before a person can file a bankruptcy petition, he or she must obtain pre-bankruptcy counseling. If you hire attorney Nathanson to help you, he can direct you to a website where you obtain the counseling online for a fee of only $10. There is a lot of paperwork involved with filing bankruptcy. The petition that is filed is typically about 55 pages. Our office will give you a questionnaire to fill out and a list of documents we need from you that give us the information that we need in order to prepare the petition for you.

Once we have all of the necessary information, we can usually get the petition ready for you to sign within about one week. Once you have obtained a certificate proving that you obtained prebankruptcy counseling, signed your petition, and paid for the job to be done, the petition is filed. From that point, it only takes a little over 90 days to complete the court procedure.

Regardless of whether you file under Chapter 7 or Chapter 13, when you file a petition, a notice of stay is sent to all of your creditors that tells them that they are forbidden by law to have any contact with you or make any effort to collect the debt. That means that they cannot garnish your wages, they cannot sue you, they cannot call you on the phone, they can’t even send you bills.

Any contact that a creditor wants to have with you about the debt, they have to call our office and deal with us instead.

The second thing that happens is that a case trustee is appointed to represent the unsecured creditors, and a meeting with the trustee is scheduled for approximately 30 days after the petition is filed. The meeting is low-key and does not take very long. Attorney Nathanson will attend the meeting with you.

The case trustee’s job is to look over the list of property that you own, and the list of property that you are claiming exempt, to see if you own anything valuable that you cannot claim exempt. If you do, his or her job is to take it from you, sell it, and use the proceeds to pay off your creditors.

After the meeting with the trustee, there is a 60-day waiting period. The reason for the waiting period is to give your unsecured creditors a chance to pull up their records on your account to see if there is a pattern that you ran up your credit card balances by getting either a large cash advance or buying a luxury item shortly before you filed. If a creditor thinks that they can prove that you abused your credit privileges shortly before filing, they can file a complaint and try to have their debt excluded from discharge.

You have to do one thing while we are waiting for the deadline to pass, and that is that you have to take a class on personal finance management. If you hire us to help you with the process, we can direct you to a website where you can take the course online for a charge of only $10. The class will take a couple of hours of your time, but you will get valuable information from it about how to set up a budget and live within it so that you can avoid getting into trouble with credit cards after your case is closed.

After the 60-day waiting period has passed, the judge will file a discharge order that formally discharges, or wipes out, your personal liability for all of your dischargeable debts. Then, your case is closed.