One would initially not recognize a significant difference in the preparation of documents for Chapter 7 bankruptcy and for Chapter 13 bankruptcy. After all, it seems relatively simple. In a Chapter 7 bankruptcy case, the contract rate of payment for the auto is listed in schedules J and Form 22 Means Test. Not much of a difference from bankruptcy pre-reform. However, with Chapter 13 bankruptcy preparation, the fact that the auto is paid through the Chapter 13 is not that simple. This article will describe the difference in detail so that mistakes can be avoided in the preparation and calculation of bankruptcy documents.
There is a significant difference in the preparation of Form 22 as to automobiles depending upon which chapter of the bankruptcy code a case is filed under. For example, under Chapter 7 bankruptcy, the actual auto payment signed to on the contract is the amount listed in the Form 22 Means Test. Thus, if the contract payment for the auto is $450.00 per month, that figure is what is listed in Form 22. It does not matter how many payments remain under the contract nor does it matter what the value of the auto is at the time of preparing Form 22.
Contrast that information with the preparing of Form 22 Means Test for an auto in a Chapter 13 bankruptcy case. In a Chapter 13 case, the contract rate for payments is not important. What is important is the following:
Total amount of future payments due within the next 60 months. This is calculated by taking the outstanding loan balance divided by 60 months and adding any interest. Whatever that figure amounts to must be placed in Form 22 Means Test. This figure is typically less than the contract rate of payments since must auto financing completes prior to the completion of 60 months.
If Form 22 Means Test is prepared incorrectly, the debtor is likely not providing the correct computation for his disposable monthly income. The United States Trustee has brought this to the attention of debtors' attorneys and will continue to do so until the form is completed correctly.
The above difference between Chapter 7 and Chapter 13 of the new law illustrates the complexities of preparing bankruptcy petitions. Long gone are the days when a pro se debtor could simply purchases forms from the local office supply store and easily answer questions about their income, expenses and debts.
There are some steps that have to be taken regardless of what type of bankruptcy is being filed, so let us begin there. The Bankruptcy act which enacted new laws in 2005 has forced individuals to do a number of things before filing. First, they must have taken a credit counseling course within six months prior to filing. The course must be approved by the government to count for filing bankruptcy. While some people may find this burdensome, particularly if they have already taken a course for another reason outside of the six month time frame, it is a rule that is in place so that people can find out if there are other more beneficial alternatives to filing bankruptcy.
If it is still decided that bankruptcy is necessary after taking the credit counseling course, one must decide what type of bankruptcy to file. Both categories of bankruptcy will cost money and leave a scar on credit, but the key to deciding is looking at the individuals situation. Both types of bankruptcy will also put an automatic stay protecting the debtor from creditors and from having property taken out from under them. However, there are a few things that a stay may not always cover and creditors can occasionally ask for stays to be removed. So check with your attorney about what can be protected in your individual situation.
Due to the new laws, not everyone can file a Chapter 7. Chapter 7 is what many people assume when they think of bankruptcy, an avenue to completely wipe out debt and give you a fresh start. It is not necessarily 100% true that Chapter 7 will wipe out all debt, but it does give the consumer a much lighter burden to bear. The problem is that only people who have a small enough amount of disposable income can file Chapter 7. Disposable income is what is left over to spend after all monthly expenses have been paid. The Internal Revenue Service (IRS) is the organization that gets to decide what things should cost, so just because you pay a certain dollar amount, that does not mean the IRS will allow it. Only individuals who have less than $100 a month in disposable income by IRS standards can file Chapter 7. And beyond that, a Chapter 7 will not stop foreclosure indefinitely. Usually a lender will ask to have a foreclosure stay removed as soon as it is possible to do so.
Chapter 13, on the other hand, will more likely help a homeowner keep his/her home. While Chapter 13 requirements are also stringent, requiring the debtor to make enough money for regular payments and to keep up with payments, it will usually protect a home from being foreclosed on if the consumer works to make every payment. Something homeowners need to be aware of is that if they do not make their scheduled payments, they can still put all of their property in jeopardy of being lost.
So Chapter 13 is likely the best choice for someone facing a foreclosure, but each individual has a different situation and the unique characteristics of the situation should be considered before making a final decision.
Both David Siegel & Ameen Kamadia are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
David Siegel has sinced written about articles on various topics from Dental Practice, Bankruptcy Law and Estate Planning. David M. Siegel is the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy. He is a member of the American Bankruptcy Institute and currently practices bankruptcy law in Chicago and its surrounding suburbs. Additional informat. David Siegel's top article generates over 6600 views. to your Favourites.
Ameen Kamadia has sinced written about articles on various topics from Home Buyers Guide, Foreclosure Help and Home. Ameen Kamadia aims to help Texas homeowners face the difficulties of foreclosure. That's why he has created an informational site that lists all the options homeowners have. Get an unbiased, educated opinion about. Ameen Kamadia's top article generates over 60500 views. to your Favourites.