Filing for bankruptcy can be daunting, especially when you thought "it could never happen to me." The unfortunate reality is, bankruptcy is more common than people think. However, contrary to popular belief, this doesn't mean all is lost. With the help of a skilled and experienced bankruptcy attorney in Nebraska, you can get your (financial) life back on track sooner than you may think.
In fact, bankruptcy is a great way to deal with overwhelming debt. There are two main consumer bankruptcy options – Chapter 7 and Chapter 13 bankruptcy. The different chapters are located in separate sections of the United States Bankruptcy Code. Below, we will dig into both of these options in more detail to give you a better idea of which filing option is best suited for you. But first, let's discuss who qualifies for bankruptcy, when you can file and of course, why choose bankruptcy.
Who Qualifies for a Bankruptcy?
According to our Nebraska bankruptcy attorney, you can qualify for a Chapter 7 bankruptcy if you are unemployed or meet certain income requirements based on average income and expenses in the state of Nebraska. In general, most people prefer to file a Chapter 7 bankruptcy. To confirm that you qualify for a Chapter 7, your best option is to call our office at 308-872-8327 for a free consultation.
With a Chapter 13 bankruptcy, you do not have to meet any income requirements, and this is likely your best option if you do not qualify for a Chapter 7 bankruptcy. However, you must be employed in some capacity so you can make monthly payments.
While there are very rare cases where a person won’t qualify for a Chapter 7 or a 13, most generally, an individual will qualify for one or the other.
When Can You File for Bankruptcy?
You must wait 8 years between filing Chapter 7 bankruptcies. However, if your first bankruptcy was a Chapter 7, you may file a Chapter 13 bankruptcy after just 4 years. If you have filed a Chapter 13 bankruptcy previously, you are required to wait 6 years before you can file a Chapter 7. Learn more about the waiting time between bankruptcies, here. If you don’t fit into these time frames, the law does allow you to file a Chapter 13 to take advantage of the automatic stay, and later, when you meet the required waiting period, you can dismiss the first Chapter 13 and file another bankruptcy when you’re eligible to receive a discharge. To discuss your options if you don’t meet the required waiting period, call our office at 308-872-8327 for a free consultation.
Why Choose Bankruptcy?
The first step in making a decision to file bankruptcy is to take a close look at your finances. How does your income compare to your debt? Are you struggling to pay for basic necessities because of the amount you have to pay to creditors each month? Are your monthly payments to creditors just meeting the minimum payments, and nothing more? Are you receiving collection calls, or have you been sued? Are you worried about a garnishment or repossession? Overwhelming debt and struggling to pay indicates you should probably look into filing for bankruptcy.
So, why bankruptcy versus another solution (i.e. debt settlement)? In most cases, bankruptcy will be a cheaper, quicker and more ideal situation for you. It will erase most, if not all, of your debts, and get you back on the right track financially. Not to mention, it will dramatically reduce, and usually eliminate, your financial stress. You might consider debt settlement in a few specific instances. It might be a better option for you if you are expecting a significant inheritance soon or have a lump sum that could pay off about 60%- 80% of your debt.
If debt settlement is your preferred option - we can help you with that too!
What Are the Major Differences Between a Chapter 7 and a Chapter 13 Bankruptcy?
There are distinct advantages to both types of bankruptcy. A Chapter 7 bankruptcy can be completed in 100 days and erases most debt that you are unable to pay. It’s generally cheaper, with a one-time fee that is paid prior to filing.
A Chapter 13 bankruptcy is essentially a 3-5 year payment plan that allows you to pay a portion of your debt based on your income and expenses. This type of bankruptcy allows you more flexibility to stop foreclosures, pay off back taxes, and erase medical and credit card debt from a divorce order by making payments for three to five years. Your monthly payments will be based on your income, expenses, and in some cases, is based on how much you owe your creditors. The payments will always be much less than what your total creditor payments are now, typically $130 to $200.
An advantage to filing a Chapter 13 bankruptcy it can help you keep your car and your home, even if you are behind on the payments. It allows you to reduce the interest rates you are paying on your car loan. It can also extend your car loan to the duration of the bankruptcy. For example, if you had 2 years left on your auto loan and you file a Chapter 13 bankruptcy, you will finish paying off your car through the bankruptcy, and you’re allowed 3 to 5 years to pay it off. This results in a lower monthly car payment.
Another advantage to a Chapter 13 bankruptcy is that it can erase debt obligations you were ordered to pay in a divorce decree. It protects you from your ex-spouse taking you back to court to get you to pay those debts. A Chapter 7 Bankruptcy doesn’t provide the same protection.
How Do You File Bankruptcy?
We know it seems impossible to take time off of work to meet with a lawyer to get out of these financial difficulties. That’s why we are committed to providing you services without you ever having to step foot in our office! Simply call our office and we will do an intake to see which type of bankruptcy you can file, get some basic information so we can get started on your case, and answer your important questions. We are able to do everything over the phone, Zoom, or email: gather information, prepare and sign paperwork, answer your questions, and even collect payment.
Exemptions You Can Take Advantage of When Filing for Bankruptcy
Below, we discuss 9 exemptions that local residents can take advantage of when filing for bankruptcy in Nebraska.
1) $5,000 Vehicle Exemption:
- In Nebraska, each individual filing a bankruptcy (both spouses in a joint case) is allowed to exempt, and keep equity up to, $5,000 in a vehicle. Does this mean that a person can only keep a vehicle worth $5,000? No, exemptions only apply to “equity”. “Equity” is determined by how much the vehicle is worth on the market (usually determined through a Kelley Blue Book “private sale”, value), less how much is owed on that vehicle. For example, if someone has a pickup worth $10,000, but owes $8,000 to the bank on that vehicle loan, that person has $2,000 in equity in the vehicle. Because there is only $2,000 in equity, (less than the maximum allowed - $5,000), this person’s vehicle would be considered exempt, and they would be able to keep that vehicle.
2) $5,000 General Personal Property Exemption (“Wildcard” Exemption)
- This exemption can be applied to any “personal” property item (all property except real estate). That is why it’s called a “Wildcard” exemption. It can be used to exempt everything from money in the bank, to money in mutual funds, cash, guns, boats, or that portion of a person’s tax refund that is not already protected. The value of this exemption is $5,000 ($10,000 for joint spouse filers). In addition, this exemption may be applied to excess equity in another form of personal property with its own exemption. For example, excess equity in a vehicle, beyond the $5,000 vehicle exemption. If your vehicle is valued at $6,000, and has no loan against it, you could use $1,000 of your “wildcard exemption” to make up the exemption difference needed.
3) $60,000 Homestead (Home) Exemption:
- Another very important exemption is the homestead exemption. In Nebraska, all individuals are allowed to exempt, and keep, $60,000 in equity in a home in which they live. Once again, we are only concerned with exempting the equity a person has in a home. For example, if a person filing bankruptcy has a $120,000 home, is current on the payments, owes $80,000 to the bank on the home, then that person can keep their home when filing bankruptcy. Why? Because the $60,000 exemption exceeds their equity ($120,000 value less $80,000 loan = $40,000 equity).
4) Social Security Exemption:
- If someone receives Social Security Disability checks, or money from other government sources (Social Security, veterans benefits, SSI), then that money is 100% exempt. If part of your money is from these sources, please discuss where to deposit this money with your Nebraska bankruptcy attorney. When treated correctly, money from these sources is 100% exempt. For example, a personal filing bankruptcy could have several thousand dollars in the bank from social security and shield all of that money, so long as it is not commingled with money from another source.
5) $3,000 Household Furniture and Appliances Exemption:
- Personal property that is commonly used in any home is exempt up to the amount of $3,000 per bankruptcy filer. This means that each person filing bankruptcy can exempt, shield and keep $3,000 in goods and furnishings that are convenient or useful in a person’s home. Items such as stoves, washers and dryers, household appliances, tools used around the house, one shotgun and one handgun per individual, furniture, mowers, and snow blowers are all items that would fit within this category.
6) “Earned Income Credit” Tax Refund Exemption:
- This exemption can be used to shield and keep all of your tax refund designated as “Earned Income Credit”. You can find this figure in IRS Form 1040 on line #64 (although the line number is subject to change over time). Here again, part, or all, of your “wildcard exemption” may be used to protect the remainder of your tax refund.
7) “Injury Settlement” Exemption:
- Any settlement proceeds which you might receive in an injury case (personal injury or workman’s compensation) are 100% exempt. These funds must, however, be deposited in a segregated account to remain exempt.
8) $5,000 Tools of Trade Exemption:
- As the name implies, this exemption applies to “tools” used by the Debtor for his or her work. A contractor or mechanic, for example, can claim this exemption for tools used for work. The term “tools” has a broad definition by law, and can even apply to a horse, saddle, and tack, if you’re employed as a ranch hand and required to ride a horse. The value of this exemption is also $5,000 in equity. This exemption can’t be used to exempt a vehicle.
9) Retirement Accounts:
- Money held in a 401k, traditional IRA, or Roth IRA’s (and similar retirement accounts) are 100% exempt.
There are numerous other exemptions, but those described above are probably the most common ones. In some cases, special steps must be taken to protect and claim an exemption. We advise that you review your circumstances with our experienced Nebraska bankruptcy attorneys.
How Will Bankruptcy Affect My Credit?
If you have more than one past due credit card or loan, a few collection accounts, or repossessions, your credit score is probably in a bad spot already. Yes, the bankruptcy will show up on your credit report, however, filing bankruptcy will wipe the bad debt away. A month or so after your bankruptcy is over, your credit report will show that you no longer owe those debts. This will give your credit a chance to improve and you will start building good credit by paying off your bills, now that you are no longer saddled with overwhelming debt.
Contact Our Nebraska Bankruptcy Attorneys for a Free Consultation
If you or someone you know is interested in taking back your financial freedom by filing for bankruptcy in Nebraska, there is no more experienced firm in the state than Steffens Law Offices. Our attorneys filed more bankruptcies in 2021 than any other firm, and we have the experience to help get your fnances back on track.
To schedule a free consultation with our Nebraska bankruptcy attorneys, call 308.872.8327 or fill out our convenient online form now.