Considering Bankruptcy in Nebraska? Explore The Alternative
As of 2021, Nebraska’s total state debt was approximately $4.4 billion, according to data from the U.S. Census Bureau. This includes both general obligation debt and revenue bond debt. In terms of per capita debt, Nebraska’s debt amounted to approximately $2,282 per resident, which is lower than the national average of $3,111 per resident. According to data from the U.S. Courts, there were 2,958 bankruptcy filings in Nebraska in 2020, a decrease from the 3,226 filings in 2019. Of the total 2020 filings, 1,971 were Chapter 7 bankruptcies, which involve the liquidation of assets to pay off debts, and 950 were Chapter 13 bankruptcies, which involve a repayment plan over a period of time. Compared to other states, Nebraska has a relatively low bankruptcy filing rate. In 2020, the state ranked 44th in the nation for bankruptcy filings per capita. The most common reasons for bankruptcy filings in Nebraska include medical debt, job loss, and divorce.
Bankruptcy Laws in Nebraska
Bankruptcy laws in Nebraska are governed by federal law, specifically the U.S. Bankruptcy Code. However, there are also specific rules and regulations that apply to bankruptcy cases filed in Nebraska. In Nebraska, bankruptcy cases are heard in the U.S. Bankruptcy Court for the District of Nebraska, which has locations in Omaha and Lincoln. Individuals in Nebraska may file for either Chapter 7 or Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, the debtor’s assets are liquidated to pay off creditors, while in a Chapter 13 bankruptcy, the debtor sets up a repayment plan to pay off debts over a period of time. To file for bankruptcy in Nebraska, an individual must complete a credit counseling course and file a petition with the U.S. Bankruptcy Court. They must also provide a list of their assets and debts, as well as a statement of their financial affairs. In addition, they must attend a meeting of creditors, where they will be asked questions about their financial situation by a bankruptcy trustee.
What Types of Bankruptcy Are There For You Personally And For Your Business?
There are two main types of bankruptcy for individuals in the United States: Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy is also known as “liquidation bankruptcy” and involves the sale of non-exempt assets to pay off creditors. Any remaining debts are typically discharged, although certain debts such as taxes and student loans may not be dischargeable. Chapter 13 bankruptcy, on the other hand, is also known as “reorganization bankruptcy.” In this type of bankruptcy, the debtor creates a repayment plan that allows them to pay off their debts over a period of three to five years. At the end of the repayment period, any remaining debts may be discharged.
For businesses, the most common types of bankruptcy are Chapter 7 and Chapter 11 bankruptcy. Chapter 7 bankruptcy for businesses involves the liquidation of the company’s assets to pay off creditors. Any remaining debts are typically discharged. Chapter 11 bankruptcy, on the other hand, allows the business to reorganize its debts and continue operating. The company creates a repayment plan that allows it to pay off its debts over a period of time, usually several years. The company may also be able to negotiate with its creditors to reduce its debts or extend payment terms.
Learn More about the 3 main / types of bankruptcy
Considering Business Bankruptcy? Keep These Things In Mind
If you are considering filing for business bankruptcy in Nebraska, there are several important things to keep in mind:
- Understand the different types of bankruptcy: As mentioned before, Chapter 7 and Chapter 11 are the most common types of bankruptcy for businesses. Chapter 7 is appropriate for companies that are no longer viable and need to liquidate assets, while Chapter 11 is appropriate for companies that want to reorganize their debts and continue operating.
- Consider alternatives to bankruptcy: Bankruptcy should be considered a last resort. There may be alternatives to bankruptcy, such as negotiating with creditors to reduce debts or extending payment terms.
- Hire an experienced bankruptcy attorney: Bankruptcy laws are complex, and it’s important to have an attorney who is familiar with the laws in Nebraska and can guide you through the process.
- Understand the impact on your personal finances: If you are the owner of a small business, you may be personally liable for some of the business’s debts. Bankruptcy can have an impact on your personal finances, so it’s important to understand the potential consequences.
- Prepare to provide detailed financial information: To file for bankruptcy, you will need to provide detailed financial information, including a list of assets and debts, income and expenses, and a statement of financial affairs.
- Be prepared for the emotional impact: Bankruptcy can be emotionally challenging, especially if you are attached to your business. It’s important to prepare yourself for the emotional impact and seek support if needed.
- Stay organized: Bankruptcy proceedings can be complex, so it’s important to stay organized and keep track of all paperwork and correspondence related to your case.
What Debts Are Not Discharged in Bankruptcy?
Not all debts are dischargeable in bankruptcy. Some debts that are not dischargeable in bankruptcy include:
- Student loans: Generally, student loans cannot be discharged in bankruptcy, except in cases of undue hardship.
- Taxes: Most tax debts, including income taxes and property taxes, cannot be discharged in bankruptcy, although there are some exceptions.
- Child support and alimony: Debts related to child support or alimony payments cannot be discharged in bankruptcy.
- Fines and penalties: Debts related to fines or penalties imposed by a government agency, such as traffic tickets or court fines, cannot be discharged in bankruptcy.
- Debts incurred through fraud or illegal activity: Debts that were incurred through fraudulent or illegal activity, such as embezzlement or theft, cannot be discharged in bankruptcy.
- Debts owed to retirement plans: Debts owed to retirement plans, such as 401(k) loans, cannot be discharged in bankruptcy.
Will You Lose Your Home or Car in Bankruptcy in Nebraska?
In Nebraska, whether or not you will lose your home or car in bankruptcy depends on several factors, such as the type of bankruptcy you file, the value of your assets, and the exemptions you can claim. Under Chapter 7 bankruptcy, also known as liquidation bankruptcy, your non-exempt assets may be sold to pay off your creditors. However, Nebraska offers a homestead exemption that allows you to exempt up to $60,000 of equity in your primary residence. This means that if the equity in your home is less than $60,000, you may be able to keep your home. In addition, Nebraska offers a motor vehicle exemption that allows you to exempt up to $2,500 of equity in your vehicle. If the equity in your car is less than $2,500, you may be able to keep your vehicle. Under Chapter 13 bankruptcy, also known as reorganization bankruptcy, you may be able to keep your home and car if you can make payments under a repayment plan that allows you to catch up on missed payments and pay off your debts over a period of three to five years.
How Does Bankruptcy in Nebraska Affect Your Credit Score and Chances of Getting A Future Loan?
Filing for bankruptcy in Nebraska will have a negative impact on your credit score, and it will remain on your credit report for up to 10 years. The exact impact on your credit score will depend on a number of factors, including the type of bankruptcy you file, the amount of debt discharged, and your overall credit history. In general, a bankruptcy filing can result in a significant decrease in your credit score. Having a bankruptcy on your credit report can also make it more difficult to obtain credit in the future. Lenders may be hesitant to extend credit to someone who has filed for bankruptcy, and those who are approved may be subject to higher interest rates and fees.
How Does Bankruptcy in Nebraska Affect Tax Debt?
The impact of bankruptcy on tax debts in Nebraska depends on several factors, including the type of tax debt you owe and the type of bankruptcy you file. Generally speaking, income tax debts may be discharged in bankruptcy if certain conditions are met. The tax debts must be for income taxes that were due at least three years before you filed for bankruptcy, and you must have filed your tax returns at least two years before filing for bankruptcy. In addition, the tax debts must have been assessed by the IRS at least 240 days before you file for bankruptcy. If these conditions are met, the tax debts may be eligible for discharge in bankruptcy. It’s important to note that not all tax debts are dischargeable in bankruptcy. For example, taxes owed for payroll taxes, trust fund taxes, or taxes assessed as a result of fraud or willful evasion may not be dischargeable. In addition, even if your tax debts are dischargeable, you may still be subject to certain tax consequences. For example, if your tax debts are discharged, you may be required to report the discharged debt as income on your tax return for the year in which the debt was discharged. This can result in additional tax liability.
Statute of Limitations For Collections in Nebraska
In Nebraska, the statute of limitations for collections varies depending on the type of debt. The statute of limitations is the amount of time that a creditor has to file a lawsuit in order to collect a debt. Once the statute of limitations has expired, the creditor can no longer sue you for the debt.
Here are the statute of limitations for collections for various types of debts in Nebraska:
- Oral contracts: 4 years
- Written contracts: 5 years
- Promissory notes: 6 years
- Open accounts (credit cards, etc.): 4 years
It’s important to note that the statute of limitations does not necessarily prevent a creditor from attempting to collect a debt. The creditor may continue to attempt to collect the debt even after the statute of limitations has expired. However, they cannot file a lawsuit to collect the debt once the statute of limitations has expired.
Cons of Bankruptcy in Nebraska
There are several potential downsides to filing for bankruptcy in Nebraska, including:
- Impact on credit score: Filing for bankruptcy can have a significant negative impact on your credit score and credit history. This can make it more difficult to obtain credit in the future, and may result in higher interest rates if you are approved.
- Loss of property: Depending on the type of bankruptcy you file, you may be required to sell or liquidate some of your assets in order to pay off creditors. This could include your home, car, or other valuable possessions.
- Public record: Bankruptcy filings are a matter of public record, which means that your financial troubles will be available for anyone to view. This can be embarrassing and may also impact your employment prospects.
- Limited options for future credit: Even after your bankruptcy has been discharged, you may have limited options for obtaining credit or loans. Some lenders may be hesitant to work with you, or may charge higher interest rates due to your bankruptcy history.
- Potential for fraud: If you are not completely honest and transparent during the bankruptcy process, you could be charged with bankruptcy fraud, which is a serious offense that could result in fines and even imprisonment.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Why People Regret Filing Bankruptcy
People may regret filing for bankruptcy for a variety of reasons, including:
- Emotional distress: Filing for bankruptcy can be a stressful and emotionally taxing experience. It can be difficult to come to terms with the fact that you are unable to manage your debts and may feel like a failure. Additionally, the process of bankruptcy can involve a lot of paperwork, court appearances, and interactions with creditors, which can be overwhelming.
- Loss of assets: Depending on the type of bankruptcy filed, you may be required to sell or liquidate some of your assets in order to pay off creditors. This can result in the loss of valuable possessions, including homes, cars, and other personal property.
- Stigma: There is still a social stigma attached to filing for bankruptcy, and many people may feel ashamed or embarrassed about their financial situation. This can make it difficult to discuss the situation with friends and family or to seek help.
- Credit damage: Bankruptcy can have a significant negative impact on your credit score and credit history. This can make it more difficult to obtain credit in the future, and may result in higher interest rates if you are approved. This can make it difficult to rebuild your financial life and may limit your options for many years to come.
- Limited options for future credit: Even after your bankruptcy has been discharged, you may have limited options for obtaining credit or loans. Some lenders may be hesitant to work with you, or may charge higher interest rates due to your bankruptcy history. This can make it difficult to rebuild your financial life and may limit your options for many years to come.
What Happens If You Do Not Qualify For Bankruptcy In Nebraska?
If you do not qualify for bankruptcy in Nebraska, it may be because you do not meet the eligibility requirements for Chapter 7 or Chapter 13 bankruptcy. In that case, you may need to explore other debt relief options, such as debt settlement. There are some potential benefits to debt settlement over bankruptcy that may make it a more favorable option for some individuals.
- No BK on your credit report: Filing for bankruptcy shows on your credit report for up to 10 years. On the other hand, debt settlement does not show as a bankruptcy.
- Cost: Filing for bankruptcy can be expensive, with filing fees, attorney fees, and other costs adding up quickly.
- Emotional Impact: People report horror stories of the negative emotional impact of BK.
- With a bankruptcy for the rest of their life: Employers or lenders can ask if someone has filed BK for the rest of their life. It is much less likely to be asked if one ever used debt settlement to pay back an agreed to amount.
- Control: With debt settlement, you may have more control over the process and negotiations with your creditors, whereas with bankruptcy, a court will make the final decision.
- Less severe consequences: Filing for bankruptcy can have significant consequences, such as the liquidation of your assets, whereas debt settlement may allow you to negotiate a more manageable repayment plan while keeping your assets.
Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help
CuraDebt – An Alternative To Consider
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