What Can You Not Do Before A Chapter 7 Bankruptcy Filing
The bankruptcy court will examine past transactions made within a specified period before you file. The “look back” period is usually one to two years but can be up to ten years. Many mistakes can be avoided simply by delaying your bankruptcy filing until these periods have expired. But that’s not always the case, so it’s important to talk with a bankruptcy lawyer to avoid potential allegations of bankruptcy fraud.
The Look Back Period For Chapter 7 Or Chapter 13
Your attorney will submit your bank statements to the Trustee prior to your 341 Meeting of Creditors. The Trustees job is to find money to repay your creditors if there is any. He or she needs your bank statements to see if there have been any preferential or fraudulent transfers or luxury purchases during the look back period, which is ninety days for general creditors and one year for insiders like friends and family.
At the 341 meeting the Trustee will ask you whether you have made such transfers or purchases, as well as whether you used your credit cards in the months prior to filing. An example of this is when you go on a spending spree in the month before filing knowing that you are going to file Bankruptcy.
The First Bankruptcy Means Test Form
The first form, Chapter 7 Statement of Your Current Monthly Income , helps you calculate your current monthly income and yearly income for bankruptcy purposes. You’ll start by listing all gross income received during the six full months before your bankruptcy filing date.
You’ll pass the test as long as your income doesn’t exceed the state median income. To get the correct comparison figure, you’ll divide your gross figure by six and multiply it by twelve before comparing it to the state’s annual median income figure.
If you pass this portion of the test, it won’t be necessary to fill out additional forms.
Don’t Miss: I Got My Period Early After Taking Plan B
What Are Transfers And Why Do They Matter
Under the Bankruptcy Code, a transfer is when you sell or give away your legal rights to an asset. For example, selling your car is a transfer. If you let someone else borrow your car for an extended time, but your name is still on the title, thatâs not a transfer. Other transactions that donât count as transfers include:
-
Giving gifts for birthdays, holidays, and special occasions .
-
Donating items to Goodwill or a similar charity. Donating money to a charitable organization, though, usually does count as a transfer.
-
Tithing or giving to a religious organization, as long as itâs less than 15% of your gross annual income.
What Is A Chapter 7
Chapter 7 is known as straight bankruptcy or liquidation. In a Chapter 7, a list of all of your assets and debts is filed with the bankruptcy court. The court will appoint a trustee to represent the interests of your creditors who can sell your property to pay debts. In most Chapter 7 cases, however, your property will be exempt by law. It cant be sold to satisfy creditors claims. When your chapter 7 case is over , most of your debts will be erased. If you filed under Chapter 7 and your debts were discharged, you must wait eight years before filing another Chapter 7.
You May Like: What To Do If Your On Your Period
Time Matters When Filing Chapter 7 Bankruptcy
You can avoid financial pitfalls by understanding whenand when notto file for Chapter 7 bankruptcy, so it makes sense to think about when you should file your case.
In this article, youll learn about:
- issues that affect whether you should file now or wait
- filing fast in an emergency, and
- the time youll need to wait before wiping out debt in a second Chapter 7.
How Does Your Income Stack Up
There is something called the means test that is applied to your household income to determine whether you qualify to file for Chapter 7 bankruptcy. The first part of the test compares your current monthly income with the Pennsylvania state median income. The latest Pennsylvania median income numbers are as follows:
Eligible sources of income include the following:
- Wages, salary, tips, bonuses, overtime, pay, and sales commissions
- State disability insurance
- Gross income from a business, profession, or farm
- Regular child support or spousal support
- Pension and retirement income
- Annuity payments
You dont have to include income tax refunds or payments from Social Security retirement.
If your monthly income falls equal to or below the median, you can file for Chapter 7. If your income exceeds that number, you still have a chance to pass the second part of the means test, below.
Also Check: How Many Days Late Can A Period Be
Timing Your Chapter 7 Bankruptcy Every Eight Years
You can only file one Chapter 7 bankruptcy every eight years. This is calculated from the date of filing the first case until the second filing date. You can file a Chapter 13 immediately after Chapter 7 to catch up on your foreclosure or for other valid reasons. But you only get a discharge in Chapter 7 or 13 by waiting any required amount of time. The type of chapter you want to file, what you filed before, and how much a chapter 13 pays back dramatically changes how long you have to wait. Filing one Chapter 7 after a prior Chapter 7 is eight years and the most extended period you will have to wait.
In some cases, you may not need the discharge of Chapter 13. Chapter 13 cases that only need to catch up with a mortgage or manage student loans or tax debts might not require a permanent discharge or have a waiting period.
Fraudulent And Other Transfers Of Property Prior To Bankruptcy
There is another lookback period which Trustees have to pursue other transfers of assets.
These transfers are basically any that are made where the debtor made the transfer:
- With the intent to hinder, delay, or defraud their creditors, or
- Did not receive reasonably equivalent value for the transfer
So, for example, if you sold your house to someone for less than its fair market value, the bankruptcy trustee can sue the recipient for the difference in what should have been received.
Or, if you just give money to someone without getting anything in return, that is recoverable.
The lookback period for these types of events is two years prior to the bankruptcy filing.
However, most states have similar statutes which allow recovery of fraudulent transfers. California does and it has a 4 year lookback period. And an 8 year general fraud statute of limitations. So the Trustee in a Chapter 7 case can use the state laws also to recover.
And in cases where the Internal Revenue Service is involved, the lookback period can be up to ten years.
So be sure to discuss all transfers made in these periods with an experienced bankruptcy attorney before filing a case.
Read Also: I Took A Plan B And My Period Is Late
What Is The Lookback Period For The Means Test
Loan Lawyers, LLC is licensed to practice law in the state of Florida. If you have a legal matter that you would like to discuss and you are NOT located in Florida, please contact your states Bar Association to get the information of a lawyer that can assist you in your home state. Thank you.
All consumers filing a bankruptcy case must complete Form 22A-1 or Form 22C-1 , more commonly known as the means test, and submit it with their bankruptcy petition. This test is actually a simplistic measure of a bankruptcy debtors capacity, i.e., the amount of money, he or she has available to repay creditors. Thus, the means test takes into account a prospective bankruptcy debtors income, typically in the form of wage earnings. How long is the lookback period for calculating income for the means test?
The applicable income review window for means test purposes is a blind look-back period of six months. By the term blind, the review looks back six months and includes any money earned during this period, unless it is social security income or falls within another exception.
As an example, consider a bankruptcy filing that occurs on August 21st, 2017. The six-month means test lookback period ends on the last day of the month prior to the month in which the bankruptcy case was filed. In this case, that would be June of 2017. Counting backward six months would determine that January of 2017 was the first month of the six-month lookback period.
- About the Author
Talk To A Bankruptcy Lawyer
Need professional help? Start here.
Copyright ©2023 MH Sub I, LLC dba Nolo ® Self-help services may not be permitted in all states. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Your use of this website constitutes acceptance of the Terms of Use, Supplemental Terms, Privacy Policy and Cookie Policy. Do Not Sell or Share My Personal Information
Read Also: Can I Be Pregnant And Still Have My Period
The Chapter 7 Discharge
A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records failed to explain satisfactorily any loss of assets committed a bankruptcy crime such as perjury failed to obey a lawful order of the bankruptcy court fraudulently transferred, concealed, or destroyed property that would have become property of the estate or failed to complete an approved instructional course concerning financial management. 11 U.S.C. § 727 Fed. R. Bankr. P. 4005.
The Means Test Doesnt Apply To Business Debts
While this wont apply to most, it should be noted that the means test only applies to consumer debts. If youre filing primarily due to business debts , the means test doesnt apply to you. In that case, you can file chapter 7 regardless of your income.
Generally speaking, a business debt is a debt incurred in pursuit of a profit for your business. If you own a small business in Los Angeles and paid for a flight from LAX to NYC to see an important client and put the bill on the company credit card, thats a business debt. Unfortunately, your home mortgage will count as a personal debt, which often throws the ratio more toward the personal side.
Also Check: Why Do I Have Cramps After My Period
What Is A Fraudulent Transfer
Before discussing what makes a transfer fraudulent, it is important to understand what a transfer is within the context of bankruptcy. Usually, a transfer is moving the ownership of property from one entity to another. A transfer could be tangible and intangible property or an interest in property that reduces the value the debtor retains. A transfer could also be the act of incurring additional debt that reduces the value of a debtors assets.
Another important concept to understand is solvency. A debtor is a solvent when they can meet their long-term debts and obligations. When a debtor is unable to meet their financial obligations, they are considered to be insolvent. A person could be insolvent and not in bankruptcy. However, every person in bankruptcy is insolvent.
As stated above, a fraudulent transfer occurs when a debtor moves their assets to hide them from creditors, the trustee, or delay the payment of a debt. Fraudulent conveyances could be intentional or unintentional transfers. If a debtor transfers assets while insolvent, then the transfer will likely be evaluated as a fraudulent conveyance.
There are three elements necessary to prove a transfer was fraudulent. A creditor will have to demonstrate that the debtor owed them a debt. Next, the transferred property could have been used to pay the debt. Finally, the debtor must have intended to defraud the creditor.
What Can A Chapter 7 Bankruptcy Do
A Chapter 7 bankruptcy can:
- Stop foreclosure on your home and allow you to catch up on missed payments.
- Stop repossession of a car or other property, or, in some situations, force the creditor to return property even after it has been repossessed.
- Stop debt collection harassment.
- Restore or prevent termination of your utilities for nonpayment of previous bills.
- Restore your drivers license if it was suspended because you failed to pay court-ordered damages for a driving accident .
- Eliminate the legal obligation to pay most or all of your debts. This is called a discharge of debts.
Don’t Miss: How Do You Know Your About To Start Your Period
The Bankruptcy Trustee Can Undo Certain Financial Transactions That Occurred Before Your Bankruptcy Filing
The Chapter 7 bankruptcy trustee, the official assigned to administer the case, has certain “strong-arm” or avoiding powers that allow the trustee to reach back and undo certain transactions before your Chapter 7 bankruptcy filing. Among these are “avoidable preferences” or payments that unfairly favor one creditor over others.
Read on to learn how to recognize avoidable preferences and the trustee’s process to undo those transactions or read more about the bankruptcy trustee.
- Get answers to questions about bankruptcies.
What Is Considered A Preferential Transfer
A preferential transfer occurs when, prior to filing Chapter 7 bankruptcy, the debtor pays off a particular creditor or group of creditors. This explanation may seem strange at first as the goal of bankruptcy is to pay back your creditors, but paying only one or a select few creditors prior to bankruptcy shows âpreference.â Many times this arises when the debtor wants to pay back a relative first or a business she has been going to for a long period and has a relationship with, such as a family physician. This shields the money from the rest of the creditors, resulting in the pool of creditors getting less during the bankruptcy. The trustee does not differentiate between transfers or payments made in good faith and transfers made fraudulently. However, fraudulent transfers will likely come with their own legal repercussions.
The good news is debtors donât have to panic worrying about if the money they gave to their cousin Jim two years ago will be considered a preferential transfer. Only transfers made within a certain time period leading up to filing Chapter 7 bankruptcy will be considered preference. A preferential transfer subject to clawback will typically fall into one of two categories:
Recommended Reading: How Long After Period Are You Fertile
Florida Homestead Bankruptcy Exemption Protection And More
If youve been living in Florida for two years or more, Florida bankruptcy laws will apply to your case, so lets jump in and see what were dealing with. Florida is an opt-out state, meaning federal exemptions are not available. As a practical matter, this is not a huge issue because Floridas exemption laws are fairly generous. In fact, Floridas unlimited homestead exemption has become famous as a result of high-profile cases, like O.J. Simpson, who moved to the state to shield assets from creditors. However, if you have ideas of moving to Florida to file for bankruptcy and pull an O.J., think again.
The Florida Constitution grants all Floridians the right to unlimited homestead protection against judgment creditors, regardless of the length of residency. The bankruptcy system works differently.
In bankruptcy, the Florida homestead exemption allows a primary residence of unlimited value to be protected from creditors as long as the debtor has lived in Florida for 40 months or more, and the property is not larger than half an acre in a municipality or 160 acres elsewhere. If the 40-month residency requirement has not been met, the homestead exemption is capped at $160,375 per federal law.
So the bottom line is this: in bankruptcy, you dont get the unlimited Florida homestead exemption unless youve lived in the state for 40 straight months. If youre newer to the Sunshine state, the still generous $160,375 exemption will apply in your case.
Florida Bankruptcy Laws Wont Automatically Apply Just Because You Live In Florida
Choice of exemption laws is determined by state of residence however, youll need to have lived in Florida for two years before its laws will apply to your bankruptcy case. This residency requirement was put in place to prevent debtors from forum shopping and moving to a state with favorable exemption laws. If youve recently moved to Florida, your case will borrow its exemptions from the state that you spent the most time in for the 180-day period preceding the two-year look-back period.
In other words, go back two years. Now ask yourself where you spent the majority of the six months that led up to that two-year period. That state is your exemption state.
You May Like: What Happens If My Period Is Late