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Chapter 7 bankruptcy could be an option for you if you live in Florida and are struggling with debt. There is no guarantee that you will be discharged, but the chances are high. So, what is the success rate of Chapter 7 bankruptcy? Continue reading…
In the US, approximately 99% percent of Chapter 7 bankruptcy filers have their debts discharged. This is a high percentage. This excludes cases that have been dismissed or converted.
Why Would a Chapter 7 bankruptcy be dismissed?
In many cases, bankruptcy courts will issue discharge orders very early on in the process, unless there is a complaint filed to object to the discharge. The majority of Chapter 7 cases end in the successful discharge of debts. It’s important to remember that every case is different and the outcome may vary depending on your circumstances. Consult a qualified lawyer to determine whether Chapter 7 bankruptcy is right for you or not.
Chapter 7 bankruptcy can be dismissed due to a variety of reasons. But, do you know what Is the success rate of Chapter 7 bankruptcy? These can be grouped into two broad categories: dishonesty by the debtor or honest mistakes.
Dishonesty
Dishonest debtors, who try to hide information to avoid paying their debts in full or part, can be blamed for some dismissals of Chapter 7 cases.
A debtor’s case will be rejected if they try to conceal their income, file bankruptcy to avoid paying a creditor back, transfer assets prior to filing bankruptcy, or engage in any other dishonest activity. Hiding assets, lying about finances, or keeping insufficient financial records can lead to a dismissal of the bankruptcy case.
To avoid legal penalties, it’s important that individuals who are considering bankruptcy be honest and transparent about their filings.
Technical Reasons
Even if the debtor has filed a Chapter 7 bankruptcy in good faith, his or her case may still be dismissed due to technicalities. Technicalities are usually the reason for 1% of Chapter 7 cases being dismissed.
Failing Means Test
This test compares a debtor’s household income with the median income of similar-sized households in the state. If the debtor has an income above a certain level, their bankruptcy case may be dismissed.
Failure to Attend Mandatory Credit Counseling
The counseling is designed to help educate debtors about credit and how to avoid similar issues in the future. The debtor will receive a certificate of completion that can be filed with the court along with other bankruptcy documents. It’s crucial to select a credit counseling agency that is approved because the certificate will not be accepted by the court if it’s not.
Failure to Provide All the Necessary Supporting Documents
Documents such as bankruptcy petition schedules and tax returns may be required. Also, information about debts, pay stubs, and other documents that are specific to a person’s situation will be included. To avoid dismissal, ensure that all documents are current and submitted.
Failure to Attend Creditor Meetings
The meetings are compulsory and give creditors the opportunity to ask questions, and for debtors to provide proof. In the event that a debtor does not attend these meetings, his or her case could be dismissed. Attendance at all mandatory meetings with creditors and trustees is essential to avoid dismissal.
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Trends in Bankruptcy Filing
In the early 2000s bankruptcy filings were around or just above 1.5 million per annum. Most of these filings were Chapter 7 cases. In 2005, mainly due to concerns over changes in the U.S. In October 2005, the Bankruptcy Code came into effect. Personal bankruptcy filings increased to over two million. This rush was triggered by the Bankruptcy Abuse Prevention and Consumer Protection Act. The BAPCPA introduced new requirements, such as pre-filing counseling for credit cards. It also made it more difficult for some consumers to file bankruptcy.
In the following year, bankruptcy filings fell dramatically. In 2006, less than 600,000 cases of bankruptcy were filed across the nation.
Who Files for Bankruptcy in the United States?
Only a small number of bankruptcies are filed by businesses each year. According to the American Bankruptcy Institute, only 5.1% of bankruptcy petitions were filed in the calendar year 2019. 718,553 out of 757,497 filings for bankruptcy in the United States were not business filings.
Researchers have had difficulty gathering accurate and complete bankruptcy data. They also came to different conclusions as to who files bankruptcy and why. The Center for Economic Studies conducted a more detailed examination of bankruptcy filers and found that:
- The bankruptcy rate is higher among those who have worked in the past year.
- Self-employed individuals are less likely to be in the general population than other workers
- Veterans are more likely to be veterans than the general population
- Divorced, separated, or widowed people are more likely to be in this category than the general population
- Immigrants are less likely to be in the general population than other people
Other than veterans, people who are separated, divorced, and widowed have a higher bankruptcy rate, while immigrants and self-employed people are less likely to file for bankruptcy.
Research Shows
The CES survey also revealed that over 80% of those who filed for bankruptcy had completed high school and around half had some college education.
The Kaiser Family Foundation (KFF) has released separate data showing that white Americans, black Americans and those of Hispanic or Asian descent are all over-represented.
A recent study revealed that bankruptcy was becoming more common among older Americans. Among the key statistics are:
- In the United States, the average age of bankruptcy filers increased from 44.4% in 2007 to 48.5% less than 10 years later
- One in seven Americans aged 65 and older file for bankruptcy
- Between 1991 and 2016, the bankruptcy rate of those aged 65 to 74 has increased by over 200%
- In 1991, the bankruptcy filings of people over 75 years old accounted for only 3%; in late 2010, this group represented 3.3%.
In 1991, Americans aged between 25 and 34 filed for bankruptcy in the highest numbers. In 2001, the 35-44 age group had taken over. People aged 45-54 are most likely to file bankruptcy between 2013 and 2016. In the same period, bankruptcy rates for those aged 25-34 and 18-24 have fallen dramatically. Shortly, bankruptcy is less common in younger generations and more prevalent among middle-aged people and retirees.
Why Do People File for Bankruptcy?
Each bankruptcy case is unique. There are some common causes of bankruptcy. Some of the life events that often lead to bankruptcy include:
A study by the Federal Reserve Board showed that households are about 2.5 times more likely to declare bankruptcy the year after a job loss.
- Medical debt: According to a report by Harvard Law Professor Elizabeth Warren, in 2007, 29% of respondents said that medical bills were the cause of their bankruptcy and 57% reported having problems with medical debt.
- Illness: Responding to a different question, over 40% of respondents in the same survey reported a loss of income as resulting from illness.
- Divorce: Several studies, such as the CES report, have confirmed a link between bankruptcy and divorce. However, experts are divided on whether or not there is a causal relationship, and if so which event triggers the relationship.
Student Loan Debt Is Another Factor That May Impact Bankruptcy Filings
Student loan debt has been less studied when it comes to bankruptcy because this type of debt is not dischargeable. The increased financial burden from student loan debt may still be enough to trigger personal bankruptcy.
LendEDU analyzed data in 2019 from more than 1,000 U.S. customers who used Up-solve for Chapter 7 bankruptcy cases. Researchers discovered that 32% were filing Chapter 7 bankruptcy with student loan debt. Student loan debt accounted for nearly half of the total amount owed by those filing Chapter 7. This Student loan debt was the largest percentage of debt among all bankruptcy filers. Student loan debt totaled more than twice as much as auto loan debt. It was also triple as large as debts in collections and five times larger than total medical debt.
Chapter 7 v. Chapter 13 Bankruptcy Statistics
The Administrative Office of the U.S. Courts provides bankruptcy filing statistics monthly, quarterly, and annually. About 62.4% are Chapter 7 bankruptcy cases and 37.5% are Chapter 13. The rest are Chapter 11 bankruptcy cases.
The percentages vary from one state to another. In Alaska, the state with the lowest number of bankruptcy filings per year in the United States, Chapter 7 filings account for more than 79%. In the U.S. Bankruptcy Court of the Northern District of CA, 41.6% of consumer bankruptcies are filed under Chapter 13
Why Hire a Bankruptcy Lawyer From Bruner Wright, P.A.?
It is possible to avoid your case being dismissed by seeking legal counsel. Legal assistance should be sought for unique cases. Bruner Wright, P.A. can help. Before proceeding, you can speak to a bankruptcy attorney. Many of our experienced lawyers provide free consultations, which can improve your chances of getting a favorable outcome. You may still have options if you are one of the 1% who had their Chapter 7 case dismissed. Now do you understand on what Is the success rate of Chapter 7 bankruptcy?
In Summary
Chapter 7 bankruptcy is a viable option for Austin residents who are struggling with debt. A high percentage of debtors have their debts discharged. Each case is different, and the outcome may vary depending on your circumstances.
A dismissal can be triggered by dishonesty or even honest mistakes. Dishonest creditors who try to hide information can have their cases rejected. Technical reasons, such as failing a means test, not attending mandatory credit counseling not providing all required supporting documents, paying applicable fees, or failing to attend meetings with creditors, may also result in dismissal.
For those considering bankruptcy, it is essential that they are honest and transparent with their filings. They should also consult a qualified lawyer to determine whether Chapter 7 bankruptcy would be the best choice for them. Contact Bruner Wright P.A. today!
Hope this information about on what Is the success rate of Chapter 7 bankruptcy in the United States helps you.
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