Many people consider a bankruptcy in the Reno and Sparks area for the following reasons: Credit Card Debt Unaffordable, Medical Debt, Divorce, Lawsuit, Garnishment, Job Loss, Reduced Income, Foreclosure and Unexpected Expenses.
If you are in one of these boats, bankruptcy can provide almost immediete relief and help you get back your financial life. We actually wrote an article titled, “How Chapter 7 Bankruptcy Can Help You Save For Retirement” because it actually can.
Filing Chapter 7 bankruptcy in Nevada might give you the debt relief you need while protecting your property from being foreclosed, seized, or levied to pay the debts. However, filing bankruptcy in Nevada is not something to take lightly. Before deciding to file for bankruptcy relief, learn as much as you can about Chapter 7 and Chapter 13 bankruptcy cases in Nevada.
In this article you should get a better idea of what it looks like to file Chapter 7 Bankruptcy in Nevada, but you can check this article out here to see what the costs to filing bankruptcy are in Nevada.
Nevada Means Testing for Chapter 7
How Does the Means Test Impact My Bankruptcy Case? One of the first things to consider about bankruptcy in Nevada is whether to file Chapter 7 or Chapter 13. The Means Test is one of the most important factors in that decision.
The Means Test was added to the Bankruptcy Code in 2005. Adding an income requirement for Chapter 7 was intended to reduce or prevent bankruptcy fraud. The income requirement helps ensure that a person who has sufficient income to repay debts files under Chapter 13 instead of Chapter 7. Therefore, the first step in deciding to file bankruptcy in Nevada is to complete the Means Test.
Calculating Current Monthly Income for Means Test in Nevada
The first step in completing the Means Test is to calculate your current monthly income or CMI. You need to gather evidence of all income received during the past six months. Income for CMI includes, but is not limited:
- Income from work, including salaries, wages, overtime pay, commissions, and bonuses
- Net income from rental property or operation of a business
- Unemployment and workers’ compensation benefits
- Private disability income
- Retirement, dividends, interest, and royalty payments
- Income regularly contributed by a non-filing spouse, family member, domestic partner, roommate, or another person for household expenses
- Child support and alimony payments
Generally, all household income is included in CMI except for income received under the Social Security Act. To determine CMI, total your income for the past six months and divide by six. Feel free to use this average income calculator to estimate your average income.
Bankruptcy Qualification Calculator
If your median income exceeds the median income for Nevada, you must complete the second part of the Means Test. The second part of the Means Test determines your disposable income. If you “failed” the median income test for a Chapter 7 case, your disposable income could help you qualify for Chapter 7. If your disposable income is low enough, you can still receive a bankruptcy discharge under Chapter 7.
Disposable income is also used in a Chapter 13 case. A debtor (the person who files for bankruptcy relief) must include all disposable income in a proposed Chapter 13 plan if the plan does not pay unsecured creditors in full, which is very rare. Unsecured creditors generally receive a small percentage of their debts.
The expenses you can deduct from CMI to calculate disposable income can be limited. Some expenses are based on national standards, such as expenses for wearing apparel, personal items, household supplies, transportation costs, and out-of-pocket healthcare expenses.
You can use our free Means Test calculator to find out if you might qualify for a Chapter 7 bankruptcy discharge, which can be found below.
Chapter 7 Bankruptcy Nevada income limits
CMI is used to calculate annual median income. Annual median income determines if you “pass” the first part of the Means Test to qualify for a bankruptcy discharge (debt forgiveness under Chapter 7. It also determines whether you can propose a 36-month plan instead of a 60-month plan in Chapter 13.
Furthermore, the figures for the Means Test are based on IRA and Census Bureau data. The figures are adjusted every few months to reflect the current household income in Nevada. You must use the most current figures for the Means Test.
The current median income for Nevada for various household sizes for cases filed on or May 15, 2021, are:
|# of People||Annual Income|
Nevada Bankruptcy Exemptions
Bankruptcy exemptions are laws that allow you to keep specific property when you file for bankruptcy relief. They protect the equity in property from being liquidated by a Chapter 7 trustee to pay your unsecured creditors. In a Chapter 13 case, bankruptcy exemptions help keep your Chapter 13 plan payment lower because the exempt equity is not used as a factor in calculating the Chapter 13 payment. The federal Bankruptcy Code describes the bankruptcy exemptions enacted by Congress in 11 U.S.C. §562.
However, debtors in Nevada must use state-specific bankruptcy exemptions if they have lived in Nevada for two or more years before filing their bankruptcy case. If they have not lived in Nevada for at least two years, they must follow the exemption laws for the state in which they lived for the better part of 180 days before the two years.
Nevada State Bankruptcy Exemptions
The Nevada bankruptcy exemptions are more generous as compared to federal exemptions and other state exemptions. For example, the federal bankruptcy exemptions for your home is only $25,150. However, the Nevada homestead exemptions allow debtors to protect up to $605,000 in the equity in their homes when they file for bankruptcy relief. Spouses can double this exemption. NOTE: Federal exemption laws limit the homestead exemption if you have not lived in Nevada for at least 1,215 days before filing for bankruptcy relief. Other popular Nevada bankruptcy exemptions include:
- Motor Vehicle $15,000
- Wildcard exemption for personal property $10,000
- Household goods, clothing, furniture, appliances $12,000
Most of the Nevada bankruptcy exemptions are found in the Nevada Revised Statutes §21.090. The above figures are current as of the date of this article. However, bankruptcy exemptions may be revised periodically. You should also check to make sure that you are using the most current figures for bankruptcy exemptions. A bankruptcy lawyer can help you determine if any of your property might be at risk of being sold in a bankruptcy case. You can read more about how exemptions work in our blogs about cash exemptions and homestead exemptions.
Chapter 7 vs. Chapter 13 Bankruptcy in Nevada
Bankruptcy filings can get rid of most, if not all, of your unsecured debts. Unsecured debts that are generally eligible to be discharged in bankruptcy include:
- Medical debts
- Credit card accounts
- Personal loans
- Judgments and deficiency judgments
- Some old income tax debts
- Old utility bills and rent payments
However, some debts are not dischargeable in bankruptcy. Most tax debts and debts owed to the government are not forgiven in bankruptcy. Student loans are also generally not dischargeable. Restitution, alimony, and child support obligations are not eligible for a discharge in bankruptcy.
Secured creditors have liens on collateral, such as a car loan or a mortgage. Even though the debts can be forgiven in bankruptcy, the bankruptcy filing does not remove the lien. You must pay the secured loan payments to keep the property, or you can surrender the property to get rid of the debt.
After calculating the Means Test and reviewing applicable Nevada bankruptcy exemptions, you must decide whether to file under Chapter 7 or Chapter 13. If you “failed” the Means Test, you may not have a choice but to file under Chapter 13 to receive a bankruptcy discharge.
There are several benefits of filing under each chapter of bankruptcy.
Filing Chapter 7 in Nevada
Chapter 7 is referred to as a liquidation bankruptcy because the Chapter 7 trustee can seize non-exempt property to sell on behalf of the debtor’s unsecured creditors. However, most Chapter 7 cases filed in Nevada are no-asset cases. Debtors keep all property in a no-asset case.
Some of the advantages of a Chapter 7 case include:
- May be able to get rid of debts in just four to six months after filing bankruptcy.
- Less expensive to file Chapter 7 than it is to file Chapter 13.
- Can voluntarily surrender collateral to satisfy secured debts in full – the creditor cannot pursue a deficiency judgment.
- Not required to repay any portion of discharged debts.
You can find more information about Chapter 7 in our Chapter 7 Guide.
Filing Chapter 13 in Nevada
Chapter 13 is a repayment plan. Through Chapter 13, you reorganize your debts in a three or five-year bankruptcy plan. Payments are made each month to a Chapter 13 trustee. Chapter 13 offers some advantages that are not available in a Chapter 7 case:
- Avoid foreclosure by paying past-due mortgage payments through the Chapter 13 plan.
- Spread out past-due mortgage payments for up to five years.
- Include car loan payments in the Chapter 13 plan to spread out the payments and potentially lower the amount owed on the secured lien.
- Pay non-dischargeable debts over time, such as tax debts, child support, alimony, and restitution.
- Get rid of unsecured debts for a percentage of what is owed on the accounts.
- Defer student loan payments until the Chapter 13 case is complete.
If you are interested in Chapter 13 in Nevada, use our free Chapter 13 calculator to estimate your payment in Chapter 13. Our Chapter 13 Guide also provides more information about filing Chapter 13. You can also take the Chapter 13 calculator below to estimate your Chapter 13 plan payment.
Nevada Credit Counseling and Debtor Education Courses
Each debtor who files bankruptcy in Nevada must complete two bankruptcy courses as part of the bankruptcy process. A Credit Counseling Course is required to be completed within 180 days of filing a bankruptcy petition. The course is available online for a small fee and can be completed in about two hours. Some debtors qualify for a waiver of the fee for bankruptcy courses. Check with the provider for requirements to waive the fee. You must complete a Debtor Education Course after you file your bankruptcy case. The Debtor Education Course is also available online for a small fee.
Failing to complete both bankruptcy course results in a denial of your bankruptcy discharge. You must choose a bankruptcy course provider approved by the United States Trustees Office. A list of approved providers for Nevada bankruptcy courses can be found on the UST’s website.
Bankruptcy Courts and Trustees for Nevada
All bankruptcy cases filed in Nevada are filed in the United States Bankruptcy Court for the District of Nevada. There are two locations for Nevada bankruptcy courts:
- The Las Vegas office is located in the Foley Federal Building at 300 Las Vegas Boulevard South.
- The Reno office is located in the C. Clifton Young Federal Building at 300 Booth Street.
Even though debtors must follow federal bankruptcy rules and use federal bankruptcy forms, Nevada also has local rules and local bankruptcy forms that all debts who file in the District of Nevada must use.
Bankruptcy trustees administer individual cases filed in Nevada. At this time, three Chapter 13 trustees handle bankruptcy cases in Nevada, Kathleen Levitt, Rick Yarnall, and William Van Meter. Currently, there are nine Chapter 7 trustees in Nevada.
Alternatives to Filing Chapter 7 Bankruptcy in Nevada
In some cases, filing bankruptcy in Nevada may not be the best debt-relief option for someone. Each person’s financial situation is unique. A person could benefit from debt management options to get out of debt.
For example, our Savvy Debt Payoff Planner helps many people manage their finances and pay off debts without filing bankruptcy. The Savvy Method uses the best elements of other debt payoff methods to help you create a debt payoff plan that works for your specific financial situation.
Some people choose to settle their debts with their creditors outside of the bankruptcy system or use a debt consolidation plan that does not involve a Chapter 13 case. However, debt relief options have pros and cons. Check out our Debt Settlement and Debt Consolidation articles for more information about these methods of debt relief.
Are You Ready to Explore Chapter 7 Bankruptcy in Nevada?
If you want more information about bankruptcy in Nevada, the Savvy Debt Payoff Planner, or other debt-relief options, contact Ascend at 833-272-3631 to speak with a representative. We can also help you locate a bankruptcy lawyer in Nevada. Most bankruptcy attorneys offer free consultations.