Facing a mountain of debt you cannot afford can be a stressful and even embarrassing situation for anyone. Many people end up in financial distress for reasons beyond their control, such as losing a job, or suffering a serious medical issue that requires expensive treatment.
Fortunately, if you are struggling to pay your bills or make minimum payments on your debts, you can pursue a fresh start that can put you on the road to financial health and a brighter future.
For many people, bankruptcy represents the best option for dealing with unmanageable debts. At Lynch Legal Services, PLLC, we've help the people of Vermont get out of debt and rebuild a stronger financial foundation. Filing for bankruptcy can seem like a complex, scary endeavor. Let us take on those burdens for you. Our experienced Vermont consumer bankruptcy lawyer is ready to walk you through your options for dealing with debt.
We will guide you through the process when you decide that bankruptcy is the best option for getting back to financial health. Our down-to-earth approach can give you the knowledge and confidence to feel like you have finally regained control over your finances and can make the best decisions for yourself and your future.
Contact our Williston, Vermont firm today for a free, no-pressure case review to go over your rights and options. We'll discuss addressing your debts and financial issues and how we can help you get a fresh start.
The Bankruptcy Code provides for three different types of bankruptcies for individuals: Chapter 7, Chapter 13, and Chapter 12.
Chapter 7 bankruptcy is known as a "liquidation" bankruptcy because the process involves the sale, or liquidation, of most of a debtor's assets to pay off his or her debts. A person wishing to file for Chapter 7 bankruptcy:
- Must meet the means tests (which looks to see if the debtor lacks sufficient disposable income for a payment plan)
- Must not have have received a discharge in Chapter 7 in the last eight years or a Chapter 13 discharge in the last four years.
- Under some circumstances, you may have to wait to refile if you had a prior bankruptcy petition dismissed within the prior 180 days
A debtor in Chapter 7 bankruptcy may keep certain property that is exempt from creditors as a matter of law. Non-exempt property may be sold, and the proceeds are used to pay creditors, who usually only receive partial payment of debt balances.
At the conclusion of a Chapter 7 bankruptcy, most remaining unsecured debts are discharged, meaning the debtor no longer has any obligation to pay those debts. Certain debts, including mortgages, car loans, child support, certain income and property taxes, student loans, and criminal fines and restitution cannot be discharged.
A Chapter 7 bankruptcy remains on a debtor's credit report for 10 years from the date of filing of the bankruptcy petition.
Chapter 13 bankruptcy, also called reorganization bankruptcy, provides a process for a debtor to reorganize his or her financial affairs while under the protection of the bankruptcy court. In a Chapter 13 bankruptcy, a debtor proposes a plan of repayment, which lasts three to five years. During this period, as long as the debtor complies with the terms of the court-approved repayment plan, creditors cannot try to collect from the debtor.
The debtor also gets to keep his or her assets during the bankruptcy. At the conclusion of a successful repayment plan, most remaining unsecured debt is discharged by the bankruptcy court. Chapter 13 also allows debtors to restructure or become current on other debts that cannot be discharged in bankruptcy, such as mortgages or back taxes.
Chapter 12 bankruptcy involves a process similar to Chapter 13 bankruptcy, but is specifically designed for family farmers and fishermen. Chapter 12 provides additional benefits and protections over Chapter 13 reorganization, including higher debt ceilings. Farming and fishing operations owned by a partnership or corporation cannot file for Chapter 12 bankruptcy unless a single family owns a majority of the equity interest or stock.
The first step in filing for bankruptcy in Vermont involves collecting all your financial information and records. You will need all this information to properly fill out the bankruptcy petition and associated forms. On those forms, you'll detail your income, your assets, and each of your debts.
Before you can file your petition with the bankruptcy court, you are required to take a credit counseling class. This class must be completed within the six-month period before you file for bankruptcy. The class is designed to ensure you understand all available debt-relief options in addition to bankruptcy. These classes cost a nominal fee and can be taken online.
If you decide to proceed with bankruptcy, you must file your petition and all required paperwork with the federal bankruptcy court in Burlington, Vermont. Typically you must pay the filing fee associated with your petition. If you can prove that the fee presents a financial hardship you can petition the court to waive the fee.
After you've filed your petition, you must send a copy of your most recent income tax return to your assigned trustee; the trustee may also request other additional information or documents from you, such as recent paystubs, bank statements, or loan documents. You must also take another credit counseling course before the conclusion of your bankruptcy proceeding if you want a discharge.
Finally, you will attend a hearing. If you file for Chapter 7, the hearing is known as a 341 meeting. If you file for Chapter 12 or Chapter 13, you'll attend a hearing to approve or reject your proposed repayment plan.
Most unsecured debts can be eliminated, or discharged, following the successful completion of a Chapter 7 bankruptcy proceeding. Examples of debts dischargeable in bankruptcy include:
- Credit card debt
- Medical debt
- Lawsuit judgments
- Debts arising from car accidents
- Obligations under leases and contracts
- Personal loans and promissory notes
Certain debts are also dischargeable in a Chapter 13 bankruptcy, including:
- Marital debts (other than support obligations) arising from a divorce or settlement agreement
- Debts incurred to pay non-dischargeable tax debts
- Court fees
- Condominium, co-operative, and HOA fees
- Loans from retirement plans
- Debts that could not be charged in a prior bankruptcy
Any debts that cannot be discharged in bankruptcy will still be owed by you following a Chapter 7 bankruptcy, and in a Chapter 13 bankruptcy must be paid in full under the repayment plan.
Below are a few of the questions that individuals in Vermont facing financial issues have about bankruptcy and the bankruptcy process:
The primary difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy is the debtor's right to keep his or her property through the process of bankruptcy. Chapter 7 bankruptcies require a debtor to sell much of his or her property to generate cash to pay off creditors.
Conversely, in a Chapter 13 bankruptcy, a debtor establishes a payment plan over a period of several years to pay off most or all of his or her debts. He or she is usually not required to sell assets to satisfy creditors so long as the debtor can make the payments on any debts or liens on that property.
The bankruptcy exemptions refer to the property and assets that a debtor will not have to sell in a Chapter 7 bankruptcy process. Most states have a list of exemptions under state law, while the federal bankruptcy law also has its own list of exemptions. In Vermont, you have the choice between using either the federal bankruptcy exemptions or the bankruptcy exemptions under Vermont law - but you must choose one list or the other.
The federal bankruptcy exemptions include:
- Up to $25,150 in equity in your primary residence that you own
- Up to $4,000 in equity in a motor vehicle
- Up to $1,700 in jewelry
- Up to $13,400 in household goods, with an individual exemption limit per item of $625
- Up to $2,375 for "tools of the trade"
- Up to $12,625 in loan value, accrued dividends, and interest in life insurance policies
- Spousal support, child support, life insurance, Social Security benefit, an unemployment insurance benefit, veteran's benefit, disability benefit, and public assistance benefit payments
- Up to $25,150 of recovery in a personal injury claim
- Any award of loss of future earnings, recovery in a wrongful death claim for a person you relied on for support, and compensation received as the victim of a crime
- The value of tax-exempt retirement accounts, with IRAs, capped at $1,362,800
- Up to $1,325, in addition to up to $12,575 of the unused portion of your homestead exemption, which can be used as a "wildcard" exemption
The Vermont bankruptcy exemptions include:
- Up to $125,000 of the equity of your primary residence that you own
- Up to $2,500 in personal property
- Up to $700 in bank deposits
- Up to $5,000 in growing crops
- Up to $500 in jewelry, plus wedding rings
- Health aids
- Personal injury, lost future earnings, and wrongful death recoveries
- Various home appliances
- Specific amounts of coal, heating oil, and/or firewood
- Up to $2,500 of equity in a motor vehicle
- Full value of pensions and tax-exempt retirement accounts
- Up to $5,000 in tools and books used in your profession
- Up to $350 in monthly annuity payments
- Life insurance, disability, and public benefit payments
- Alimony or child support payments
- Up to $400, plus up to $7,000 of any unused dollar-specific exemptions, which can be used as a "wildcard" exemption.
The bankruptcy means test determines whether you can qualify to file for Chapter 7 bankruptcy. Under the means test, you must first list your gross income for the six months prior to filing for bankruptcy and divide by six to determine your average monthly income. If that number doesn't exceed the median monthly income for a Vermont family the same size as yours, you may file for Chapter 7.
If your income is greater than the median monthly income in Vermont, you must complete a form on which you deduct expenses from your income, including housing and utility expenses, child care, taxes, health care costs, and insurance. If after deducting expenses you do not have disposable income to make payments towards your debts, you can qualify for Chapter 7.
Certain individuals - including disabled veterans, some active duty service members, and individuals with primarily business debt - can be exempted altogether from the means test.
If you don't pass the means test, you will likely be required to file for Chapter 13 bankruptcy unless you can qualify for another form of bankruptcy.
You Are Not Required to Hire an Attorney to File for Bankruptcy. However, You Greatly Increase Your Chances of Completing the Bankruptcy Process and Obtaining a Discharge of Your Debts if You Have a Knowledgeable Bankruptcy Attorney to Guide You Through the Process.
Bankruptcy filings can seem incredibly complex for someone inexperienced with the process - making a mistake on your forms can result in the loss of various rights and options, the dismissal of your bankruptcy petition, or possibly even the imposition of civil or criminal penalties.
If you are struggling with debt, you don't have to try to fix the situation all alone. Let a Vermont bankruptcy attorney from Lynch Legal Services, PLLC help you understand your legal rights and options.
We can guide you through the process to financial health and a fresh start. Our firm can help you by:
- Advising you about all the options available to you for dealing with debts, including debt or credit counseling, debt consolidation, loan modifications, and, if necessary, bankruptcy
- Working with you to gather your financial records and information
- Correctly filling out your bankruptcy petition and related paperwork
- Responding to requests for additional information from the bankruptcy court or your creditors
- Communicating with your creditors, the bankruptcy court, and the bankruptcy trustee on your behalf
- Developing a bankruptcy plan that allows you to preserve as much of your assets as possible under the bankruptcy process you have chosen, while also resolving as much of your debt as we can
- Advocating for your rights and interests throughout the bankruptcy process until you receive a discharge from the court
Get a free, confidential, no-obligation consultation with a knowledgeable Vermont consumer bankruptcy attorney at Lynch Legal Services, PLLC today. We're ready to discuss your legal rights and options. You'll learn more about whether bankruptcy is the best tool for resolving your debts and financial problems.