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According to Fox Lake bankruptcy attorney, child support is the non-dischargeable debt most commonly attempted to be discharged by people who owe debt. For example, I received many calls each week inquiring about child support and how it can be treated in a bankruptcy. Some people are under the impression that child support is something that can be listed on a bankruptcy and eliminated, just like a credit card debt or a medical bill. Much to their dismay, they come to learn that child support not only is non-dischargeable, but it’s a priority under the Bankruptcy Code. By a priority, I mean if there’s going to be an asset to be administered, the first person to get paid other than the secured portion of that asset is going to be child-support.
If you do not have the ability to repay child-support on your own, you might have the ability to reorganize child-support within a Chapter 13 bankruptcy case. The child-support must be paid in full but you can stretch it out over a 3 to 5 year period. If you first file a Chapter 7 and eliminate your miscellaneous debt, you might have a greater ability to do a successful Chapter 13 case. By eliminating your previous debt in a Chapter 7, you may be reorganizing only your child-support debt through a Chapter 13. If you take the total amount owed for child-support, at approximately $5000 for attorney’s fees and trustees’ fees and divide by 60, you will have an idea of approximately how much you are going to pay to a Chapter 13 trustee to repay your child-support arrearage.
After we have that, we also need your credit counseling class to be taken and completed, as I discussed before. Your credit counseling class, you will have two of them. One prior to filing, which is the pre-petition credit counseling course that could be done online or over the phone through various companies. Also, you will have to take a second class, which is personal financial management instruction course that will be provided for free through David M. Siegel and Associates’ law firm. Furthermore, what also is involved in preparing the bankruptcy paperwork, we draft the petition. The petition is several pages, could possibly be up to 50 or more pages, and it basically reflects the information that you gave to us during the initial consultation.
That’ll be your information on your whereabouts, where you live, your dependents, your spouse, your spouse’s information of their income, his or her income or expenses combined, your previous jobs, your statement of financial affairs. All that paperwork is prepared prior to filing bankruptcy. Furthermore, when you’re actually preparing this, in our circumstance, if you come with David M. Siegel and Associates, our firm will prepare and draft the petition. Once the petition is drafted, we send a draft to the debtor to review the information, make sure all of that information is true and correct, make sure that all their creditors are listed as well as all of their assets, and once they look through the drafted petition, they’ll sign the petition, verifying that they’ve looked over it and that that information is true and correct, and they will send it back to our office.
A Common alternative is the debtor working with the debt consolidation company. A debt consolidation company is good, but good and bad, and here’s why: It goes back to point one where the creditor has all the power in the world to negotiate. They don’t have to negotiate with you. So the debt consolidation company will gather up all the information needed with all your debt and all your creditors and call each individual creditor and say, “We’ve been employed by so-and-so, and we’d like to work out a deal.” Debt consolidation company pretty much gathers up all the creditors and tries to consolidate all of your debt into one monthly payment plan.
This is good – if it works; however, more oftentimes than not, it does not work, and the reason being this: The creditor does not have to negotiate with the debt consolidation company, and if they don’t negotiate, they are outside of the consolidation plan for the debt consolidation company. So a debtor will come in and believe that their Visa card was paid in the debt consolidation company’s consolidation plan. However, in reality, that Visa card creditor did not agree to the consolidation plan and was not paid through the consolidation plan.
This happens more often than you would think, and after three or four years of a consolidation plan with one of these companies, not only did they not pay off all of their creditors, but now the interest and fees and everything has continued to pile up with those creditors, who are now coming after you to sue the debtor. So debt consolidation doesn’t always work, and it goes back – once again, I want to stress point one that all the power is in the creditor’s control.
Of course, you have to find out whether or not they qualify for bankruptcy, either a Chapter 7 or a Chapter 13. The Chapter 7 test, bankruptcy test, is going to be a two-part test. In order to file, you know, you need to – the attorney should review the intake and the information received by the client and do the bankruptcy test, which – the first test is the income/expenses test and then the means test, which includes the median test. So, first off, for a Chapter 7, you should know whether or not the income is greater or less than the expenses. The income should be less than the expenses and the median – generally if it’s less than their expenses – well, I’m not going to say “generally.”
If the income is less than the expenses, then you move on to see the median test, whether or not their household income is above or below the median household income given to us by the bankruptcy court. Once they pass the median test, they file for a – they can file a Chapter 7. Even if they don’t pass the median test, there are certain things that can reduce their median income or income through the means test. Those are – they’re very – there are several factors that go into that. So the good thing to know is that even if they’re over the median, there are certain ways your attorney will be able to bring you down to a Chapter 7.
If their income is more than their expenses, then a Chapter 13 – and they’re over the median, or even if they’re not over the median, a Chapter 13 might be their best solution for bankruptcy, depending on if they want to either save a house, save a home, and then, you know, save their car, get out of tax debt, parking tickets, things of that nature, child support issues, all those things.
So the most important thing to know about filing bankruptcy are those prerequisites, as far as the client’s concerned, those prerequisites of your paycheck stubs, your filed taxes, and the credit counseling class. Those are the things that need to be done before one can file bankruptcy, and that’s how somebody goes about filing for bankruptcy.
The correct answer is that you may make direct payments to a Chapter 13 trustee. You may make regular payments in certified funds such as a cashier’s check or a money order mailed to the trustee’s office. But I would highly suggest that you go on payroll control because you’ll have a much greater chance of success if you go on payroll control than if you rely on yourself to keep a regular payment schedule with the trustee.
The only reason that I think making direct payments to the trustee is appropriate is when you get your income from different sources such as social security or child support or the like, where you won’t have significant money to come out of your paycheck. Otherwise, it’s highly suggestible that you go on payroll control and make your life as easy as possible. For additional information, please consult with a local bankruptcy attorney to learn your rights and options.
On October 17, 2005, Congress enacted bankruptcy reform in which they created a two-pronged test in order to qualify for Chapter 7 bankruptcy. The first prong of that test is whether or not you are below the median income level for your household tax. In Illinois, the median income level for a household size of one is approximately $46,000. And for a family of four, the median income level of $81,000. Though, if you do not fall below the median income level, it does not automatically disqualify you from filing Chapter 7 bankruptcy but rather triggers something called a means test which I will discuss later.
The second prong of that two-pronged test is whether your expenses are greater than your income per month. In Chapter 7 bankruptcy, you are saying to the court I really have no money to pay my creditors back anything. So in order to satisfy this argument, your monthly expenses need to be greater than your monthly income. To see if you qualify, contact a local bankruptcy attorney and learn about your options. Most attorneys will provide a free, initial consultation.
You can keep some debts out of bankruptcy. If you are current on your mortgage, it can be kept and paid outside of your plan and you can keep paying it directly to your mortgage company. Child support can also be kept out of your plan if it is current and it is being deducted from your paycheck. Also, if there is a co-signer on a car or a house or any kind of secured debt and the co-signer wishes to continue making the payments outside of the bankruptcy, then it can be kept out of your bankruptcy. This often happens when parents co-sign for their children. Yes, certain debts can be kept out of your bankruptcy plan. For more information, please contact an experience bankruptcy attorney in your local area. That is your best bet for getting the relief that you are looking to receive.
The answer is yes; debts that are non-dischargeable such as taxes, student loans, municipal fines can be included and paid off within 60 months in a Chapter 13 plan. However, you will need to pay back 100% plus interest in some cases to the trustee over the next five years.
Student loans are often treated differently in which you would pay the percentage in which you are paying for the rest of your unsecured debt, your credit cards and medical bills and the like. And whatever debt was not paid will be lumped in with the payments that will begin once your Chapter 13 has ended.
Non-dischargeable debt is one of the main reasons people file Chapter 13. If you have a major tax problem, a major municipal fine or parking ticket problem, non-dischargeable debt can be dealt with in a Chapter 13 but it will be paid at 100%.
Yes, you can file alone if you’re married but it may be beneficial for you to file together. One of the main reasons to file together is that most bankruptcy firms will charge the same price for filing a joint bankruptcy as opposed to filing alone. And if only one spouse files and any of the debt is in both spouses’ names, then the spouse who did not file for bankruptcy will still be liable for that debt and will still need to make payment arrangements for that debit. Although you can file by yourself, it’s often beneficial to file jointly.
In short, the answer is no. In Chapter 7 bankruptcy, you are required to list all your debts and obligations because the court does not want you to prejudice one creditor in order to pay and other. A good example of this is that if you owe a family member $1000 and if you owe Capital One, for instance, $1000, you cannot pay your relative back $1000 and have the $1000 to Capital One discharged.
However, if you have secured debt, things like a mortgage or car and you are in good standing with those loans, you can reaffirm on those loans and continue along paying those loans back.
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