Deciding to file for bankruptcy is not an easy decision to make. Many people are uncertain of what it means to file for bankruptcy, and what happens during and after they file. At The Dansby Law Firm, we understand how you are feeling, but we want you to know that the laws are here to protect you from financial ruin and help you when you need it most. Below are answers to some of the questions our Montgomery bankruptcy attorneys hear most often as they help people throughout the region find solutions to their financial problems with bankruptcy or debt settlement. If you have other questions or need immediate help, call 334-834-7001 to talk to an attorney.
Is it hard to qualify for Chapter 7?
Amendments were made to U.S. bankruptcy law back in 2005 which changed the eligibility rules for Chapter 7. If your monthly household income is below the median income level in your county, you should be able to file Chapter 7. If your monthly income is above this amount, you must undergo a means test to determine whether you have too much income to qualify for Chapter 7. Your bankruptcy attorney can walk you through the steps to determine if you qualify for Chapter 7. If you are not eligible for Chapter 7, you are likely still eligible to file a Chapter 13 and get relief that way.
How long does a bankruptcy stay on my credit report?
A Chapter 7 filing stays on your credit report for ten years, and a Chapter 13 stays on your credit report for seven years. These filings cannot be removed early, so don’t believe ads from so-called “credit repair” companies that say otherwise. However, having a bankruptcy on your credit report does not mean that you cannot get credit. Quite the contrary. You are likely to receive offers for credit soon after a bankruptcy discharge, and you can begin rebuilding your credit immediately.
Is debt settlement better than bankruptcy?
A debt settlement will look better on your credit report than a bankruptcy, but whether debt settlement is better or worse than bankruptcy depends on the facts in your own unique situation. Here are some things to keep in mind before deciding on debt settlement, however. Filing for bankruptcy institutes an automatic stay of all attempts to collect debts from you, including garnishments, repossessions and foreclosure. Also, a bankruptcy can result in a complete discharge of debt, not just a reduction in the amount owed as with debt settlement. Finally, in a bankruptcy, all your creditors are brought together and required to submit to the terms of an approved bankruptcy plan. With debt settlement, you must negotiate separately with each creditor, and there is no guarantee that any one of them, much less all of them, will agree to a modification or settlement of your debt.
Is tax debt dischargeable in bankruptcy?
Most tax debt is not dischargeable in bankruptcy, although you can get a discharge of a federal income tax debt in certain circumstances. The debt must be from a return whose filing deadline is over three years old, and your return must have been filed more than two years ago. Also, the tax assessment must be at least 240 days old, and there must not be any evidence of fraud or tax evasion. Even if you can’t discharge your tax debt, a bankruptcy may still free up your disposable income so that you can afford to pay your tax bill and avoid interest, penalties, and even jail.
How can I stop bill collectors and credit card companies from harassing me?
Creditor harassment is a very real problem for people in debt. Bill collectors can be forced to abide by the Fair Debt Collection Practices Act, which limits when and where they can call you and regulates how they must behave toward you. This law does not apply to all your creditors, however. If you file for bankruptcy, the automatic stay provision of the law puts an immediate stop to all debt collection efforts. Also, if you are represented by an attorney, any creditor can be told to stop contacting you directly and communicate only with your lawyer.