If you are struggling under the heavy weight of credit card and other debt, it’s hard to know what to do. You may have creditors calling and harassing you; a threat of an impending foreclosure or short sale; or even a vehicle repossession. In order to get relief, many residents in Montana have filed for bankruptcy – Chapter 7, or Chapter 13. While a Chapter 13 bankruptcy will still require you to pay back a portion of your debts, a Chapter 7 bankruptcy clears your financial slate, allowing you to start over without any debt.
How a Chapter 7 Bankruptcy Works
Also known as a liquidation bankruptcy, a Chapter 7 bankruptcy allows a debtor to discharge many, if not all of his or her debts. All unsecured debt (such as credit cards) and some secured debt (loans for a house or vehicle) can be discharged so that the debtor has nothing to owe.
The bankruptcy process for a Chapter 7 typically takes about three to six months to complete. When a debtor decides to file for bankruptcy, a Montana resident must bring all of his financial information to a bankruptcy attorney. Usually a Montana bankruptcy lawyer will ask for:
- A complete list of your creditors.
- Your last filed tax return.
- The last six months of pay stubs.
Once you have gathered this information, it is highly advised to meet with a skilled attorney who is experienced in bankruptcy law. Although it is possible to file for bankruptcy without an attorney, (termed “Pro Se” for self-filing individuals) it is not recommended. Failure to supply the correct financial information through the right process in bankruptcy court can lead to a dismissal.
After you have met with an attorney and filed your petition for a Chapter 7, you will have to go to court. This involves a short “Meeting of Creditors” otherwise known as a 341 Creditor Meeting. Your time in court will be short; a few minutes at most. Your Montana bankruptcy attorney will represent you and answer most questions.
Bankruptcy Reform Act of 2005
Filing for a Chapter 7 bankruptcy can be extremely helpful for many Montana residents, but there are still those who try to abuse the process. The Bankruptcy Reform Act of 2005 has put additional requirements in place for those wishing to file for bankruptcy. These requirements can make it harder to file; consult your attorney to see if you qualify.
Qualifying for a Chapter 7 Bankruptcy
How can you find out if you meet the requirements to file for a bankruptcy in Montana? According to the Reform Act, individuals or families who wish to file for bankruptcy must fall at or below the income level determined for their state. In Montana, for a single earner, that amount is $38,577. If a married couple or family of two are filing the amount raises to $52,412. Families of three must make less than $56,265, and families of four, $67,921. For every additional family member, a filer may add $7,500 to the base income amount.
If you make more than the median income, you may still be able to file for bankruptcy, Chapter 7 or 13. Additional financial information may be required by the bankruptcy court. Your attorney may ask for information about certain accounts, such as retirement benefits or pension plans that provide your family with income.
In addition to the median income level, all debtors wishing to file must pass a means test. This test involves a series of calculations based on your financial information which will determine whether or not you qualify. If you do not pass the means test, your case will be dismissed. It is very important that you discuss your full financial history with your attorney before you file.
Property You Can Keep after Filing a Chapter Bankruptcy
Filing for a Chapter 7 bankruptcy does not mean you will have to give up everything you own. On the contrary, Montana has a number of exemption laws that allow individuals to keep property after their bankruptcy. Some of these exemptions include:
- Home – A primary residence valued at $250,000 or less will be exempt, including 320 acres if the home is on a farm.
- Home furnishings – Up to $4,500 in value. This includes books, firearms, appliances, clothing, jewelry, pets, feed, and crop. Of a single category, no item can be worth more than $600.
- Vehicle – Up to $2,500 in value on any one vehicle.
- Farm Implements – Up to $3,000 in value, including professional books, tools or other implements.
- 100% Social Security
- 100% Disability or Illness Benefits
- 100% Child Support or Alimony
- 100% Public employees and Retired Teachers benefits
- 100% Unemployment Compensation
- 100% of ERISA benefits
- 100% Government pension plan (some contributions are not exempt with the previous year).
- 100% Group Life Insurance proceeds
- 100% Crop Insurance proceeds
- All military survivor benefit plan annuities
- Some specified retirement accounts
- Wages – Up to 75% of earned but unpaid wages. (Note, this does not include taxes.)
Additional exemptions may apply to your financial situation. It is important to remember that debtors filing in the state of Montana are bound by state law. Where other states may offer both federal and state exemptions, the only exemptions allowed in Montana are those offered by the state.
Making the decision to file a Chapter 7 bankruptcy is never easy, but it can turn your life around. With debts discharged, many Montana residents have found that bankruptcy, Chapter 7 has changed their lives for the better.
Montana Bankruptcy Courts
Mike Mansfield Federal Building and United States Courthouse
400 North Main Street, Room 303
Butte, Montana 59701
Phone: (406) 782-3354
Great Falls, Montana Ninth Circuit
Bankruptcy Appellate Panel
Missouri River Courthouse
125 Central Avenue West
Great Falls, Montana 59404
Phone: (406) 207-2093