Salem, Oregon Bankruptcy Attorney
If you’re in need of the very best in Salem bankruptcy help, the team at Gunn & Gunn Attorneys at Law will give you the representation you need to help get you some relief with your debt. If you are an Oregon resident currently in need of some debt help, please contact us if you have any questions or needs and please peruse the following information to get a better idea on just what bankruptcy is and the steps you can take to get a fresh start.
Filing for Bankruptcy With An Attorney
The object of a bankruptcy, whether a Chapter 7, Chapter 11 or Chapter 13 is to rid the debtor of dischargeable debts. Debts (i.e. bills) can be either dischargeable or non-dischargeable. Debts that are non-dischargeable “survive” the bankruptcy and the debtor may be required to continue payment on those debts to avoid unwanted collection activity on the part of creditors. Whether a debt is dischargeable depends not only upon the type of debt, but also the type of bankruptcy filed. Also, some debts are automatically non-dischargeable, while others require an “objection” on the part of the creditor or other interested party. Examples of non-dischargeable debts are briefly discussed later.
A bankruptcy is initiated upon the filing of a petition with the United States Bankruptcy Court. The petition in essence requests that the Bankruptcy Court grant the debtor “relief” from the debts. The bankruptcy petition includes, among other information, a request for relief of the debts, a list of all creditors (debts), a list of all property belonging to the debtor, and a statement regarding the debtor’s financial affairs. This petition is a signed document, which the debtor declares to be a true and correct statement of all of the debtor’s assets and all of the debtor’s liabilities as well as a true statement of the debtor’s financial affairs. The petition and schedules are signed under oath, and the statements contained therein are made under the penalties of perjury.
Married persons can either file a joint petition (file together) or may file individual petitions (each individual filing their own). Normally, a single petition is filed for married couples. On occasion, only one spouse is liable on the bulk of the debts. In that case, it is possible for only one spouse to file a bankruptcy. If the couple has joint debts (debts on which both are liable) the filing spouse’s liability is discharged (removed) but the non-filing spouse remains responsible to pay the debt. Unmarried persons can only file an individual petition.
Individuals may file a petition under Chapter 7, Chapter 13, or in rare cases Chapter 11. Businesses (i.e. Corporations, Partnerships, LLCs) can file Chapter 7 or Chapter 11 cases. Each form of bankruptcy is briefly discussed later.
Upon the filing of the petition, the Bankruptcy Court Clerk sends a notice to all creditors listed in the petition that the debtor has filed a bankruptcy petition. Upon the filing of the bankruptcy petition, an automatic stay is created. The automatic stay acts as a barrier between the debtor and the creditors. The automatic stay prevents creditors from being able to continue all forms of collection activity. The automatic stay prevents the filing or continuation of lawsuits, the filing or continuation of garnishments, the sending of collection letters, the making of harassing telephone calls, repossession of vehicles, continuation or commencement of foreclosures, and numerous other collection activities. That stay remains in place during the administration of the bankruptcy case or until a specific creditor obtains permission from the court to continue with collection activities.
When a Chapter 7 or Chapter 13 petition is filed, the court appoints a trustee. The trustee is an individual who is appointed to manage the debtor’s assets and manage the bankruptcy case. The trustee will review the petition and will determine if there are any assets which are not exempt or if there are other matters that need to be handled. As part of the administration and management of the case, a hearing is conducted by the trustee. The hearing is normally set between 30 to 45 days after the day that the petition is filed. That hearing is called a 341(a) hearing, or the “first meeting of creditors.” The function and duties of the trustee will vary depending upon the type of case filed. In a Chapter 7 case, the trustee is responsible to take possession or control of non-exempt property and sell that property for the benefit of the creditors. In a Chapter 13 case, the trustee is primarily responsible for receiving payments from the debtor and distributing those payments to the creditors according to the Chapter 13 Plan.
When a Chapter 11 case is filed, normally the debtor remains in control of the case and acts as the “Debtor In Possession”. A DIP has many of the same powers and functions to perform as a trustee, and is responsible for the proper management and prosecution of the Chapter 11 case.
In October of 2005, Congress passed legislation that imposed significant additional restrictions on individuals electing to file Chapter 7 or Chapter 13 cases. Of note, individual debtors whose debts are primarily “consumer debts” are subject to what has been called the “means test”.
Arguably, the purpose of the “means test” is to “encourage” or “force” more individuals toward Chapter 13 filings. In other words, in order to file a Chapter 7 case, an individual must “pass” the means test, or “qualify” to file a Chapter 7. For many individuals, this is not a real concern. However, individuals with higher income levels or more complex financial situations are often “forced” to consider Chapter 13 cases because they are not eligible for Chapter 7 cases. Due to the complexity of the rules surrounding the “means test” it is not possible to give any bright line as to which individuals can file Chapter 7 and which individuals will be required to file Chapter 13 cases. However, individuals whose household income is greater than the median income for their respective state will likely need to consider filing a Chapter 13.
The median income is adjusted on a regular basis. Information regarding the median income and the “means test,” can be found at the United States Trustee’s website
Individuals who file bankruptcy are entitled to keep certain items of property. Businesses who file are not entitled to exemptions, and therefore do not claim property as “exempt.” The property that individuals are entitled to protect from creditors is often referred to as “exempt property.” If property is exempt, that means it cannot be sold or taken by creditors, the trustee or the court for the purpose of paying debts. What items are exempt varies from state to state. In Oregon, there are two sets of exemptions that individuals may use when filing for bankruptcy. First, individuals may claim the Oregon State Exemptions. Some examples of exempt property under Oregon State Exemptions are as follows:
- Homestead (House with Land) with a value to $40,000.00 in equity for an individual and $50,000.00 for a married couple
- Vehicles with a value of $3,000.00 in equity for each individual (i.e. total of $6,000.00 combined for married couple)
- Clothing, Jewelry, and other personal items with a value of up to $1,800.00 each individual
- Household Furnishings and Appliances with a value of up to $3,000.00
- A Pistol and rifle or shotgun with a value up to $1,000.00
- Books, pictures, musical instruments, art and other similar items with a value up to $600.00 each individual
- 100% of Retirement accounts, 401(k), IRA, PERS, Pensions, and other similar retirement plans
- Cash, money in bank accounts, or other similar property up to $400.00 each individual
- Tools of a business or trade to a value of $5,000.00
Some examples of property that is not exempt would include the following:
- Value in property to the extent that it is greater than the “exempt” amount
- Accounts receivable
- Cash Value in insurance policies (unless the beneficiary is other than the debtor or the debtor’s estate)
- Tax refunds, except that the portion of the refund attributable to the ECI may be exempt
- Claims for recovery of money or property unless otherwise exempt
Individuals may also elect protection of assets under the Federal Bankruptcy Exemptions. For individuals who do not own a home, or who have no equity in their home, the federal exemptions offer a much larger “wild card” exemption. Election of Federal Exemptions may allow individuals to retain significantly more value in personal property than under the Oregon State Exemptions. Some of the Federal Bankruptcy Exemptions are as follows:
- $22,975.00 Homestead
- $3,675.00 of value in a motor vehicle
- $1,550 for jewelry
- $12,250 aggregate value in household goods, furnishings and appliances, clothes, books, animals, crops, or musical instruments (up to $575.00 per individual item)
- $2,300 for tools of trade including implements and books
- Unused Portion of the Homestead exemption – “wildcard” (up to $11,500.00 each debtor)
There are also other exempt items of property as well as non-exempt property. What is exempt and what is not is best determined by consultation with an attorney.
Creditors are people, businesses, or organizations to which money or property is owed. Creditors can be divided into two categories — Secured and Unsecured. A secured creditor is a creditor that has collateral for the loan. Examples of a secured creditor would be a mortgage company, a vehicle finance company, a furniture store, and others. Unsecured creditors are all other types of creditors. For example, credit card bills, medical bills, legal fees and the like.
Creditors are treated differently in bankruptcy cases depending upon the type of claim they have. Secured creditors generally have the right to recover their collateral (i.e. the car, the computer, the house or land) or receive payment. Unsecured creditors have no right to recover property from the debtor but may receive money from the trustee if there are non-exempt items or if the trustee receives money for distribution to creditors.
Certain unsecured creditors are given special treatment in a bankruptcy. These are called Priority creditors. Among the most common Priority claims in cases filed by individuals would be alimony and child support claims, some taxes, wages owed to employees and others.