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690 Flatbush
Avenue West Hartford, CT 06110-1308
860
236-9350
800 856-6400 toll free 860 523-9101 fax
10 Church St, Naugatuck
203 729-6100
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Bankruptcy
Frequently
Asked Questions
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(Click
on the question for an explanation of the answer.)
(Numbers in blue refer to Bankruptcy
Code sections.)
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(1) Can
I keep any of my property if I file bankruptcy? |
Yes. Most people who file bankruptcy keep all
of their property. This is because most people who
file bankruptcy do not have much property.
If you file a Chapter
13 Bankruptcy, you will not lose any property provided
you successfully complete your repayment Plan.
If you file a Chapter
7 Bankruptcy, the law allows you to keep certain types
of property up to a certain value for each type. For
example, federal bankruptcy law allows you to keep a car
with a net worth (difference between value and loan
amount) of up to $3,225. The amount you can keep of
each kind of property is called an exemption.
The exemptions are doubled for a husband and wife who file
bankruptcy together.
Federal law and Connecticut law have different rules for
the property that you can keep. Most people use the
Federal rules. If you own a home with a lot of equity
(the difference between the value of the home and the
total mortgage debt), you probably will want to use the
Connecticut rules because the federal homestead exemption
per person is $20,200 while the Connecticut homestead
exemption per person is $75,000. Whether to use the
Federal or Connecticut rules for exemptions is a decision
that you should make with the advice of an experienced
bankruptcy lawyer.
The following are the main
exemptions allowed by federal bankruptcy law as of
December 2009: §522(d)
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Federal
Bankruptcy Exemptions
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Type of
Property
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Amount |
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Homestead
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$20,200
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Motor vehicle
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$3,225
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Household
Goods (limit of $475 per item)
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Per
Item $525
Total
$10,775 |
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Jewelry
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$1,350
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Tools
of the Trade
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$2,025 |
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Personal
Injury Proceeds
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$20,200 |
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Social
Security Benefits, Unemployment Compensation,
Public Assistance, Disability Benefits.
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Unlimited
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Alimony,
Support, Separate Maintenance.
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Amount
reasonably necessary to support debtor and debtors
dependents.
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Stock
Bonus, Pension, Profit Sharing, Annuity, or
Similar Plan or Contract on Account of Illness,
Disability, Death, Age, or Length of Service,
(Some
Restrictions Apply) |
Amount reasonably necessary to
support debtor and debtors dependents.
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| Wrongful
Death Proceeds |
Amount reasonably necessary to
support debtor and debtors dependents. |
| Accrued
Dividend or Interest or Loan Value of any
Unmatured Life Insurance Policy |
$10,775 |
| Life
Insurance Proceeds |
Amount reasonably necessary to
support debtor and debtors dependents. |
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Tax
Exempt Retirement Accounts, IRAs, Roth IRAs.
(If
Nontaxable Under Certain IRS Rules)
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$1,095,000 |
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Any
Property Chosen by Debtor |
$1,075
Plus up to $10,125 of any unused part
of the homestead exemption. |
The exemption for any property chosen by
the debtor can be used in in combination with other
exemptions. For example, you could protect a car
worth $4000 by using $3225 of the motor vehicle exemption
and $775 of the "any property" exemption.
Items that cannot be protected
under the exemption rules must be turned over to the
bankruptcy trustee. An arrangement can
usually be made to pay the trustee the value of a
non-protected item (instead of the item itself) if you
want to keep that particular item.
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(2)
Can
I save my home through bankruptcy if the bank has
filed for foreclosure? |
Maybe. Chapter 13 Bankruptcy can be used to
stop a foreclosure, as long the foreclosure
has not reached the point where title to your home has
passed over to the bank (the Law Days
have passed) or there has been a foreclosure sale and the
Connecticut Superior Court has confirmed the sale.
Under Chapter 13, a homeowner puts together a repayment Plan
to get caught up on the overdue mortgage amount by making
monthly payments. For more information, see our web
page on stopping
foreclosure.
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(3) Can
I file bankruptcy and keep my car even though I have a
car loan? |
Yes. If you are behind and file a Chapter 7
Bankruptcy, you may be able to reach a reaffirmation
agreement with the loan company. This means
that:
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You
will continue to make monthly payments on the loan. |
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The
amount and number of your monthly payments may be
adjusted for you to get caught up with the amount that
you are behind on the loan. |
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The
loan amount may be adjusted to reflect the present
value of the car if your loan is more than 2½ years
old. |
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You
will still owe the loan company the amount of the loan
despite having filed bankruptcy. |
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You
are taking a risk because if your car should be
totalled or stolen in the future, you will still have
to finish making the loan payments if you owe more
than the salvage value of the car. |
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You can also keep the car by paying the
amount you owe (called redeeming).
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You may be able to take out a new loan to
pay off your existing loan. |
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If you have had your car loan for more
than 910 days (2 ½ years) old, you may only have
to pay the value of the car rather than the full
amount of the loan. |
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You may be able to keep your car, without
reaffirming or redeeming, just by continuing to make
your payments on time. As of October 2009,
Connecticut state law provides that filing bankruptcy
shall not be considered a default of a retail
installment contract or ground for repossession of
such motor vehicle. CGS
36a-785. |
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If you are behind with your car payments, you
can choose to file a Chapter 13 Bankruptcy to get
caught up.
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If you are up to date with your payments,
you can reaffirm the car loan and keep
the car. |
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You can also keep the car by paying the
amount you owe (called redeeming).
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You may even be able to take out a
new loan to pay off your existing loan. |
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If you have had your car loan for
more than 910 days (2 ½ years) old, you may
only have to pay the value of the car rather
than the full amount of the loan. |
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You may be able to keep your car, without
reaffirming or redeeming, just by continuing to
make your payments on time. However, this
has not been settled under the new bankruptcy law. |
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If you file under Chapter 7, you must be able to protect
the net worth (difference between value and loan amount)
of your car under the exemption rules to keep your car.
If are behind with your loan payments and you file a Chapter 13
Bankruptcy, you can get caught up with your car loan
as part of your repayment Plan.
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(4) If I file for bankruptcy, does my spouse also have to
file? |
No. If most of your debts are joint
debts, then it would probably make sense for the two of
you to file bankruptcy. However, if most of the debt
is in the name of just one spouse, then only the spouse
with the debts would need to file. As other
considerations may apply, a married couple should speak
with an experienced bankruptcy lawyer before either or
both of them file bankruptcy.
Even if only one spouse files, the total household income
and expenses are used for certain purposes, including the Means
Test under the 2005 Bankruptcy Reform Act and the
income and expense calculations for any Chapter 13 Plan.
§707(b)
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(5) Can I file for bankruptcy if I filed
before? |
Maybe. Whether
you can file again or get a discharge in a second case
depends on a number of things, including how much time has
gone by, whether the cases are Chapter 7 or Chapter 13,
whether a discharge entered in the first case or whether
the case was dismissed. The following table explains
the rules for filing bankruptcy again. §727(a); §1328(f);
§109(g)
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Bankruptcy
Refiling Rules
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First Case
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New Case
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Rules
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Chapter 7
Discharge
Entered
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Chapter 7
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You
must wait 8 years after you filed your first case
before you can get a discharge in a second case.
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Chapter 7
Discharge
Entered
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Chapter
13 |
You can
file at any time but a discharge cannot enter
until 4 years after the discharge in the first
case.
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Chapter 13
Discharge
Entered
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Chapter
7 |
You can
file at any time and get a discharge if in the
first case (1) you paid all your unsecured debt or
(2) you made your best effort and paid at
least 70% of your unsecured debt.
Otherwise, you must wait 6 years after you filed
your first case before you can get a discharge in
a second case. |
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Chapter 13
Discharge
Entered
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Chapter
13 |
You can
file at any time but a discharge cannot enter
until 2 years after the discharge in the first
case. (At least one federal appellate court has held that a
discharge cannot enter until 2 years after the
date you filed the 1st case, not the date you got
the discharge.)
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Chapter 7 or
Chapter 13
Case Dismissed
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Chapter 7 or
Chapter 13 |
You must wait 180 days if the case was dismissed
for willful failure to obey court orders or to
prosecute the case.
You must wait 180 days if you asked for the case
to be dismissed after a creditor had moved for relief from stay.
Otherwise you can refile at any time. But if
the first case was pending (still going on) at any
time during the last year, to keep the automatic
stay in place you must have a hearing within
30 days and you must show that your second filing
is in good faith. |
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(6) Can
I get rid of back taxes by filing bankruptcy?
Maybe. It depends on the type of
tax and how old the taxes are. §507(a)(8);
§523(a)(1)
You can discharge income taxes (and any associated
penalties) if the following 4 things are all true:
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(1)
You did not commit tax fraud or willfully attempt
to evade paying taxes. |
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(2)
Your tax return was due at least 3 years
before you file for bankruptcy. If you
obtained a extension to file, the extension date
was at least 3 years before you file for
bankruptcy. |
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(3) If you filed the tax
return late (after its due date and any
extensions), you filed the return at least 2 years
before you file for bankruptcy. |
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(4) Any assessment by the
government was made at least 240 days (8 months)
before you file for bankruptcy. |
You can never discharge the following
types of taxes:
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Payroll withholding taxes. This
would apply if you were an employer and withheld
taxes from your employees but did not send the
money you withheld to the government. §507(a)(8)(C) |
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Sales taxes. This would apply if
you had a retail business and collected sales
taxes but did not send the money you withheld to
the government. §507(a)(8)(C) |
If the IRS has placed a
lien against any of your property, the IRS can still
go after that property even if your personal
responsibility for the taxes has been discharged.
You cannot discharge debts
from money you borrowed to pay taxes that could not be
discharged. §523(a)(14)
Whether taxes are dischargeable can be
a complicated area of law. You should talk to an
experienced bankruptcy lawyer if you owe taxes and are
considering filing a bankruptcy. |
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(7)
Will
I ever be able to get a loan in the future if I file
bankruptcy?
Yes.
There is no law that says you cannot get a loan
after you file bankruptcy.
The
following are some things you can do to rebuild your
credit:
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Get a
job, even
a part time job, to show a steady work record. |
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Keep
track of any money payments that you regularly
make on time, such as rent, utility payments and
mortgage payments. |
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Get a
credit card with a modest limit, use it and make
your payments on time. |
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Open a
savings account and make regular deposits to it
from your paycheck, even if the deposits are
small. |
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Open
and use a checking account and be careful not to
bounce any checks. |
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Get a small loan from a bank or credit
union and make your payments on time. |
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In some ways, you become a better credit risk after filing
bankruptcy because lenders know that you will not be able
to file again
for some time.
We have had clients who have bought real estate three or
four years after filing bankruptcy. They have had to
pay higher interest rates and more points but they still
were able to get a mortgage.
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(8) Do I still have to pay child support or alimony
after my divorce if I file bankruptcy? |
Yes and Probably. You must
always continue to pay child support, including past due
support owed to your ex-spouse or to the State. §523(a)(5)
Whether there is a chance that you can avoid paying
alimony depends on whether you file a Chapter 13
Bankruptcy or a Chapter 7 Bankruptcy.
If you filed under Chapter 13 Bankruptcy, you may be able
to stop paying alimony if you can prove to the bankruptcy
judge that the alimony order is not really for your
ex-spouse's support but is part of a property
division. This is not an easy thing to do and would
require the assistance of an experienced bankruptcy
attorney. In deciding whether the alimony is support
or property division, the judge can consider your and your
ex-spouses' health, education and earning power, whether
payments stop or are reduced upon remarriage or a
child turning 18,
and whether there was a need for support at the time of
the divorce. If, as is often the case, the alimony
order is designed to provide for your ex-spouse's support
and maintenance, then you must continue to pay the
alimony. §1328(a)(2)
If you filed under Chapter 7
Bankruptcy, you must continue to make all the payments
you owe your ex-spouse as part of the divorce, including
whatever you owe as part of a property division. §523(a)(15)
Filing bankruptcy will not
stop a court case for a divorce, to establish paternity,
or to collect child support or alimony. §362(b)(2)
If you file a Chapter
13 Bankruptcy, your repayment Plan
cannot be confirmed (approved by the Bankruptcy Court)
unless your child support and alimony payments are
current. Failure to confirm a plan will
result in the case being converted to Chapter 7. §1325(a)(8)
For further information, see the Bankruptcy
& Divorce page.
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(9) Will I still have to pay some of my
debts if I file bankruptcy? |
Maybe. It depends on whether you pass
the Means Test, whether you have secured
debt (such as a mortgage or car loan) and you want to
keep the collateral (the house or the car) that
secures the debt, and on what kind of debt you have.
Alimony and child support
obligations cannot be discharged. §523(a)(5)
You cannot discharge recent taxes or
money borrowed to pay those taxes. §523(a)(1); §523(a)(14)
If you do not pass the Means Test, you cannot file a Chapter
7 Bankruptcy
but will have to file Chapter 13 Bankruptcy and make a
repayment Plan to pay a certain percentage of
your debts. §707(b)
For further information, see Chapter
7 non-dischargeable debts and Chapter
13 non-dischargeable debts.
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(10) Do I have to go to court when I file
bankruptcy? |
Probably Not. If you file a Chapter
7 Bankruptcy
you will need to go to the building where the court is and
be interviewed by the bankruptcy trustee
but most people who file Chapter 7 never need to appear in
court before the bankruptcy judge. You will only
need to appear before the judge for certain exceptional
circumstances, such as if a creditor objects to the
discharge of a debt, a reaffirmation agreement has to be
approved by the court, or you are filing a second
bankruptcy case and need to have the automatic stay
extended.
If you file a Chapter
13 Bankruptcy, you will need to appear before the
judge to have your repayment Plan
confirmed (approved by the court). §1324; §1325
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(11) Can
people go to jail if they do not pay their debts? |
Absolutely not.
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(12) Will my employer know that I filed for bankruptcy? |
Probably Not. If you file a Chapter 13
Bankruptcy, your employer's payroll department will be
notified because your Plan
payments will be deducted from your paycheck.
Otherwise, unless your employer reads The Commercial
Record, he or she will probably never know you filed
bankruptcy. Never heard of The Commercial Record?
Neither have most people. It is a newspaper
published in Hartford with a very small circulation that
is usually only read by people involved in the lending
business.
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(13)
Can
I do something about my debts besides filing for
bankruptcy?
Maybe. This are some things you
could consider:
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Do
nothing.
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This
only makes sense if you are judgment proof,
that is, you do not have any assets (such as a
house or a car) that a creditor would want to
attach and you do not have a steady job with
wages that could be garnished. |
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We
are not telling you to run up debt that you do
not plan on paying back. We are telling
you that if you have nothing, than your
creditors can collect nothing. |
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Make
lump sum settlements with unsecured creditors such
as charge card companies.
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This
may make sense if you cannot file Chapter 7 Bankruptcy
because you do not meet the Means Test or you have filed before and not
enough time has passed to file again. |
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Unsecured
creditors may agree to take much less than you
owe if you can pay them all at once and they
believe it would be hard for them to collect. |
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If
you have equity in your home, you could raise
the money to make these lump sum settlements
by refinancing or taking out a second
mortgage. Be aware, however, that many
financial advisors would not recommend this
because you are trading unsecured debt for secured debt. |
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You
may have to pay income tax on the amount of
debt that is forgiven. You should
consult a tax advisor about this. |
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If you are behind in your
mortgage payments, reach a workout arrangement
with your mortgage lender's loss mitigation
department.
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This
usually involves stretching out your payments
or making additional payments each month to
get caught up. |
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Your
lender will require you to provide them with
documents showing your income, expenses and
other financial circumstances. |
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If
your lender has started a foreclosure, be
aware that the foreclosure case does not stop
while your lender is deciding whether to
approve the workout arrangement. Make
sure that deadlines do not pass that would
make it impossible for you to stop
foreclosure by filing Chapter
13 Bankruptcy. |
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Use the Protection
from Foreclosure process available under
Connecticut law (Conn. Gen. Stat. 49-31e), if you
qualify.
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If approved, you will have 6 months
to get caught up with your mortgage, including
late charges and any amounts you owe for the
bank's attorneys fees. |
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You must file a motion asking for
protection with the Superior Court no later
than 25 days after the foreclosure case's
"Return Date" (written in on the top
right side of the foreclosure papers; usually
2 to 4 weeks after you receive the papers). |
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You must show that during the last 6
months the total earned by all the owners of
your home is (1) less than $50,000 and (2)
averages less than 75% of the homeowners'
average earnings during the last two years. |
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You cannot have filed for mortgage
protection before. |
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You must have lived in your home for
2 continuous years. |
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Sell
your home rather than risk losing any equity you
may have in your home.
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Attorneys
fees and court costs incurred by your mortgage
lender in a foreclosure action or bankruptcy
court get added to the amount you owe on your
mortgage. These fees and costs, plus
interest and late charges, can quickly eat up
the equity in your home. |
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If
you are far behind in your mortgage payments,
the amount you may have to pay in a Chapter
13 Bankruptcy (the Plan payments, which
include a 10% fee to the Trustee, plus your
regular mortgage monthly mortgage payment,
plus property taxes) may be too much in
comparison to what your home is worth and what
you will still owe on your mortgage after
completing the Plan payments. |
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Rather
than making Plan payments for 3, 4 or 5 years,
you can save up the money and use it toward a
deposit on a home after you have reestablished
your credit. |
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Your
realtor may be able to find you a home, condo
or large apartment that you can rent.
People renting out such property look for
stable tenants with good work histories.
If you were able to qualify for a mortgage,
you will probably be an attractive tenant to
these property owners. |
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Get
fooled by companies who promise that they have
sure-proof ways to save your home from
foreclosure.
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Such
schemes usually involve you selling your home
to a person or company who will then lease the
home back to you until you can manage to buy
it back. What often happens is that the
lease is written in such a way that you cannot
keep up with the payments or other
terms. An eviction action is then
started. As a tenant, Chapter
13 Bankruptcy cannot help you. |
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Remember,
if something sounds too good to be true, it
almost always is not true. |
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(14)
Can cancel my student loans by
filing bankruptcy? |
Probably Not. You can only discharge a
student loan by proving to the bankruptcy court that it
would be a hardship to pay back the loan.
There is no specific definition of hardship in the
bankruptcy law. Courts generally consider whether
paying back the loan would keep the debtor from
maintaining a minimum standard of living, whether the
debtor took out the loan with a good faith belief that he
or she would be able to pay it back, and whether the
debtor has made a reasonable effort to pay back the
loan. Establishing hardship is quite difficult and
generally requires proof of a disability that is expected
to last for some time. §523(a)(8)
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(15) Can I
cancel my electric, gas and other utility bills by
filing bankruptcy? |
Yes. However, the utility company may refuse
to continue service if, within 20 days of filing
bankruptcy, you do not provide a security deposit or
other assurance of making future payments. You can
request a court hearing if you believe the security
deposit required by the company is too high. The
company can also apply against your old bill any security
deposit you gave the company before you filed
bankruptcy. §366
When You Need a Connecticut Bankruptcy
Lawyer,
Rely on Us for Skill,
Determination and Experience.
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Connecticut
Debt
Relief By Filing Bankruptcy
Congress
has designated Serrano & Serrano, LLC a debt
relief agency.
We help people file for debt relief
under the Bankruptcy
Code. |
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Please note that our law firm's website is designed to provide only
general legal information.
This information is not intended to be legal advice for your
individual situation.
If you have a legal matter, you should speak with and hire a
Connecticut attorney to handle your specific case. |
Serrano & Serrano, LLC
Connecticut Attorneys
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