The nation's bankruptcy laws are complex and can be confusing, which is why it’s important to find an experienced bankruptcy attorney you can trust to guide you through the process. Before you hire a lawyer, though, it’s good to know what the role of your lawyer will be as well as what they won’t be able to do on your behalf. Here are five bankruptcy attorney laws you didn't know about.
1) The means test
In order to qualify for Chapter 7 bankruptcy, you need to pass the means test. To do so, you must take your annual income and compare it with the median income in your state. If you make less than the median income then you will automatically pass the means test.
If your annual salary is higher than the state's median income, then there is a presumption that you can repay some of what you owe on time.
2) The automatic stay
The automatic stay law is a part of the bankruptcy law that prohibits creditors and others from starting or continuing collection actions against you. The stay applies to any collection actions including garnishing wages, foreclosing on the property, repossessing property, and more. The automatic stay also prohibits lawsuits from being filed against you while your bankruptcy case is pending. This is a huge relief for people who are filing bankruptcy because they have been harassed by their creditors before the bankruptcy filing or because they can't afford to pay off their debts right now.
3) The discharge
Bankruptcy is a legal process that can provide relief to people who are no longer able to pay their debts. When you file for bankruptcy, the court will order your discharge. What does this mean? A discharge is the removal of debt from your credit report, so it doesn't show up on your record anymore. If you have more than one type of debt, only one type may be discharged in your bankruptcy case.
4) The exemption
Bankruptcy attorney laws vary by state, but in general, there are exemptions to protect certain assets and property. Here are five bankruptcy attorney laws you didn’t know about:
1) A person cannot file for bankruptcy if they owe child support or alimony payments that were ordered within two years of filing. 2) A person cannot file for bankruptcy if they owe student loans that were ordered within two years of filing. 3) A person cannot file for bankruptcy if they own a car worth more than $9,500; this excludes any gifts given to the person after the car was purchased. 4) Any secured debts that exceed the current market value of the asset will not be discharged in a Chapter 7 case.
5) The reaffirmation
When you reaffirm a debt, you agree to repay the original debt in the same manner as before. The difference is that the creditor cannot use any remedies they might have had if you had defaulted on the loan, like repossession of an automobile or foreclosure on a house. Reaffirming may be advisable when it is clear that you are going to have enough income in the future to repay what you owe and your present credit rating is good. When considering whether or not to reaffirm a debt, ask yourself these questions:
Do I have enough income in the future to repay what I owe?
What is my present credit rating? The answer to both of these questions should be yes before proceeding with reaffirmation.