Bankruptcy Laws and Procedures in Connecticut
Bankruptcy is a way for individuals burdened by debt to seek protection from creditors. Once you enter into the bankruptcy process, you will be protected from receiving harassing phone calls from creditors and you will be protected from accumulating interest and late fees. Generally speaking, everything related to the outstanding debts covered by your bankruptcy will be paused, while you and the bankruptcy court develop a liquidation plan and/or repayment plan to reorganize and pay back as much debt as possible.
Depending on what part of Connecticut you live in, you will be required to file in one of three federal courts located in Hartford, Bridgeport or New Haven. It is also important to note that, even though bankruptcy happens in federal court, Connecticut residents will be affected by local Connecticut bankruptcy rules.
Chapter 7 and Chapter 13 Bankruptcy in Connecticut
In the vast majority of cases, individuals filing for bankruptcy in Connecticut will file under Chapter 7 or Chapter 13. In some respects, Chapter 7 is the easiest type of bankruptcy -- if you qualify for it -- but it can also be the most traumatic. Indeed, under Chapter 7 you will have to relinquish ownership of many of your possessions, investment and cash to the court. The court will liquidate these assets and use the proceeds to repay as many of your debts as it can.
Fortunately, in Chapter 7, you will not have to relinquish all of your assets. A lot of them (particularly the ones necessary for daily life) will be exempt from bankruptcy and a skilled attorney will exempt as many of your assets as possible. To qualify for Chapter 7 in Connecticut, your monthly income must be at or below Connecticut's median monthly income, or you will have to pass the stringent criteria of a special means test.
Those who cannot qualify for Chapter 7 will likely need to complete the Chapter 13 process, also known as reorganization. However, others may also wish to file for Chapter 13 depending on their debt situation. Under Chapter 13, the court will help you negotiate with creditors to reduce your debts and create a debt repayment schedule. The repayment schedule will typically be subjected to a 36-month time frame for those who fall under Connecticut's mean monthly income, but in limited circumstances payment plans are extended to as long as 60 months. For those over Connecticut's mean, a 60-month repayment plan will generally apply.
How Can I Keep from Losing All My Property?
Connecticut bankruptcy filers will not lose all of their property in their Chapter 7 proceedings. Indeed, some of your property will be exempt from being possessed and liquidated by the court. In Connecticut, you can choose between using Connecticut's exemption list and the federal exemption list (but you cannot use a mix of both).
The following is exempt under the Connecticut statues:
- Appliances, clothing, household items, jewelry, health aids and other personal items
- Retirement and life insurance accounts
- Child support and alimony
- Items you need for your job
- Social Security, disability assistance, public assistance and other kinds of benefits
- Real estate occupied by the owner up to $75,000 in value ($125,000 if the bankruptcy involves hospital debts)
- One motor vehicle up to $3,500 in value
Do You Need Bankruptcy Assistance?
A bankruptcy attorney's assistance can be invaluable during bankruptcy proceedings. An attorney will help you decide if your debt situation warrants bankruptcy in the first place. In some situations, less involved debt management programs could be a more appropriate match. An attorney can help you decide which is better, Chapter 7 or Chapter 13. Your attorney will also help you protect as many of your assets from being possessed by the court as possible.
Additional Bankruptcy Articles
- How much does it cost to file for bankruptcy in Connecticut? How can I pay for filing for bankruptcy?