Filing Bankruptcy In Vermont

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Debtors file bankruptcy in Vermont when resolution of their debts is virtually impossible in the not too distant future, if ever. Due to unemployment and other circumstances, most debtors choose to file Chapter 7 debt relief.  Wage earners that simply have more bills than income may seek debt restructuring, to retain assets while satisfying creditors.

Options for Personal Bankruptcy in Vermont

Governed by the U.S. Bankruptcy Code under Title 11, Vermont citizens choose to file Chapter 7 for a fresh start or Chapter 13 to reduce payments and retain assets.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as straight bankruptcy.  Debtors are given a means test to verify eligibility for debt relief.  In Vermont, the median income for single residents is $40,876; a family of two earns approximately $58,480; and a household of three has $64,312 in average income.  A court appointed trustee seizes any assets to sell, so the proceeds are distributed among the creditors equally.  Then, the remaining debts that are not legally mandated are expunged.  Essentially, the debtor is free to start over, and hopefully have a brighter financial future.

Chapter 13 Bankruptcy

Chapter 13 is for the wage earner that simply cannot stretch the family budget enough to include all of the monthly bills.  Due to unexpected expenses or a reduction in pay, help is needed to lower current payments, and still retain all family assets.  So, the court will negotiate with creditors.  Generally, late and interest charges are adjusted, so the payments are significantly reduced.  Then, the court established a plan to have debts repaid within 3-5 years.  However, for the debtor to qualify for restructuring, the unsecured debt cannot total more than $336,900, and the secured debt must not exceed $1,010,650.

Filing Bankruptcy during Foreclosure

Debtors often wait too long, and file bankruptcy after foreclosure proceedings are started.  Unfortunately, it is generally too late.  While collection attempts cease, the lien holder can petition the court to lift the stay on the property, to facilitate repossession and sale, to satisfy the debt.  Therefore, the best course of action is consulting a lawyer before legal actions are taken.  Legal counsel can determine whether retaining the property is possible.

Vermont Bankruptcy Exemptions

Vermont has a list of specific bankruptcy exemptions debtors are allowed to claim.  The following chart is a partial representation:

Type of Asset(s)

Details on Applicable Exemption(s)

Homestead

Real property, mobile home, rent or out buildings worth no more than $75,000. Tenancy is claimed when one spouse owes the debt

Insurance

$350 monthly annuity, disability or illness benefits used for support, fraternal and society benefits, group life or health, $200 health benefits, life insurance benefits for beneficiary-other than insured, life insurance proceeds prohibited from paying beneficiary debts

Misc.

Property of business partnership, alimony, and child support

Pensions

IRAs and keoghs up to $10,000; municipal and state employees, teachers and other pensions

Personal Property

Appliances, goods, furnishings, etc. Worth no more than $2500; livestock and feed in limited amounts, firewood, $500 in jewellery, with unlimited value of wedding ring; bank deposit up to $700; a vehicle worth no more than $2500; injury and wrongful death compensation, etc.

Public Benefits

Aid for the disabled, blind, elderly, and general assistance; unemployment, workmen’s, and victims compensation; social security; veterans benefits

Wages

Wages of welfare recipients two months before filing, minimum of 75% of unpaid wages

Vermont Bankruptcy Court Filing Options

Use a Bankruptcy Lawyer

A bankruptcy lawyer is most beneficial during bankruptcy proceedings.  A source of moral support, the legal expert understands the complex laws associated with bankruptcy.  In addition, all of the necessary documents will be filed, applicable exemptions taken, questions answered, and legal advice given.  Self-representation is a bad idea.

Use a Filing Service

To save money, debtors opt to hire a filing service and go to court alone.  Both actions are risky.  A service does not necessarily comply with the law.  If documents are not filed, or are proved incorrect, the debtor has no legal counsel or someone else to answer for the problem.  Legal and financial ramifications are possible.

File “Pro Se”

Debtors file on their own behalf (pro se), if a lawyer costs too much.  Nevertheless, without complete knowledge of bankruptcy law, the debtor will probably miss important information, including potential bankruptcy exemptions.  Thus, it is beneficial to borrow the legal fees and have learned counsel during the stressful proceedings.

Courts and Vermont Bankruptcy Trustee Information

Vermont District Court Main Office

506 Federal Bldg
11 Elmwood Avenue
Burlington, VT 05401 

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