“BANKRUPTCY LAW FAQs”

1. Will I lose everything I own?

Bankruptcy laws are designed to help debtors keep their property through “exemptions.”  In most circumstances, debtors can exempt their property (including automobiles, pensions, and certain amounts of home equity).  A thorough review of your debt situation by an attorney would be necessary to see what property qualifies as exempt.

2.  Will it stop the calls from creditors?

Yes, once the Bankruptcy Petition is filed, creditors are required to stop collections activity.

3. What is the difference between a Chapter 7 and Chapter 13?

a. In Chapter 7, you can keep certain property that falls under the exemptions. You discharge (or cease to be legally liable for) all unsecured debt; i.e., debt that is not secured by property such as a house or car. No payments are made to the unsecured creditors, but you have to keep paying for the secured debts such as homes or cars if you keep the property. Chapter 7's usually last less than 6 months, and are much less expensive than Chapter 13's.

b. In a Chapter 13, you usually can keep all your property, but you make "Chapter 13 plan payments" over a five year period. In Chapter 13's, I create a plan for you to repay the unsecured creditors a portion of what they are owed. Plan payments vary from as little as $100 per month or more and depend on your income and expenses. More court appearances are required in Chapter 13's than in a Chapter 7, and Chapter 13's are much more complicated.

People often file a Chapter 13 when they are behind on house payments. In these cases, you must make your house payment plus the plan payment, which includes paying back the amount you are behind, over the five years of the Chapter 13. In other words, you spread out the mortgage arrearage over five years and then are totally caught up.

People sometimes file a Chapter 13 to catch up on taxes. You have to pay back all past due taxes during the five years of a Chapter 13 plan, and this is sometimes a good way to deal with state or federal taxes.

4. Do I have to go to court?

You have to attend a § 341(a) Meeting of the Creditors in both Chapters. These usually last less than one hour in Chapter 7 bankruptcies, but are longer in Chapter 13's. You must also attend a confirmation hearing in a Chapter 13, which can last half a day.

5. What happens at the § 341(a) Meeting of the Creditors?

In the § 341(a) Meeting of the Creditors, some creditors may show up and ask about the property you bought from them. There is a trustee who reviews your bankruptcy petition and determines if you have any assets to give the unsecured creditors in Chapter 7's. I often intervene on my clients' behalf with creditors at these meetings. More detailed information is required in a Chapter 13 § 341(a) Meeting of the Creditors.

In the Confirmation Hearing of a Chapter 13, the Chapter 13 trustee tells the judge whether or not you have made all the plan payments.  Confirmation means that the plan is accepted and no creditors can later object to it. It also means that if you complete the five years under the plan, all unsecured debts are discharged.

6. Do I really need an attorney?

Chapter 7 - For Chapter 7's, that depends on your experience in reading forms, interpreting statutes in general and the U.S. Bankruptcy Code specifically, and talking under pressure. For most people, an attorney is necessary. Attorneys do more than fill out the forms. They also attend the Meeting of the Creditors, negotiate with the creditors, advise clients about exemptions, offers to take or reject, and give legal advice in general. A document preparation service can fill out the forms, but cannot represent the client in court, give legal advice about how to fill out the forms, or what the law says about a particular situation.

Chapter 13 – Chapter 13 plans are quite complicated and very detailed.  I do not recommend that

7. What are the costs?

a.  Filing Fees charged by the Court (payable to the Court, not to the attorney):

Chapter 7:   $299.00
Chapter 13: $274.00

b.  Online pre-filing counseling:  Approximately $50

c.  Online pre-discharge education:  Approximately $45

d.  Attorney fees:  Fees vary depending upon the complexity of your case.  The filing fees, pre-filing counseling, and pre-discharge education fees must be paid independently from the fees that I charge.

8. Will I lose my house or car?

Not if you keep making all your payments on them. Keep in mind that people often file Chapter 13's to keep their house when they are behind in house payments. In that case, you must make your house payments and the plan payments to keep your house.

9. What is a bankruptcy petition?

That is a form, usually about 30 plus pages long with the schedules, that describes your income, assets and debts in great detail. You have to list ALL assets and ALL debts.

10. What if I accidently leave out some information?

Your petition may be amended, but there is a risk of triggering a criminal bankruptcy fraud investigation.

11. How long do bankruptcies take?

In a Chapter 7, you attend the § 341(a) Meeting of the Creditors approximately one month after I file your bankruptcy petition. You then receive a Notice of Discharge in the mail three to six months after that.

In a Chapter 13, you attend the § 341(a) Meeting of the Creditors approximately forty-five days after I file your bankruptcy petition. The Confirmation hearing may be between seven and forty-five days after the § 341(a) Meeting of the Creditors, depending on where your petition is filed. Once your plan is confirmed, you make your payments for five years and then receive the discharge.

12. Am I a candidate to file bankruptcy?

The “Means Test” is used to determine eligibility for Chapter 7.  If you do not qualify for Chapter 7, then a Chapter 13 plan may be feasible.

13. Can I discharge taxes?

Generally, tax debt is nondischargeable. Some can be discharged in very specific, narrowly defined circumstances. Dischargeable taxes must be from tax returns you filed at least three years ago. There are other rules which also apply. Do not attempt to discharge taxes without consulting an experienced bankruptcy attorney.

14.  Can I discharge student loans?

Most student loans are not dischargeable.

15. I am behind on my house payments. Can bankruptcy help?

In a Chapter 13, the lender is forced to accept your payments and allow you to repay the amount you are behind over a five year period. You have to be able to make both the house payment and the Chapter 13 plan payments.

The filing of a bankruptcy petition will stop a foreclosure up to the day of the sale.  However, the circumstances of the individual case will determine whether you can (or should) keep the house.

16. A creditor is threatening to take my wages-can they do that?

Creditors can garnish your wages after obtaining a judgment against you. Filing bankruptcy can stop the wage garnishment and in most circumstances eliminate the debt that led to the garnishment.

17. How does bankruptcy affect my credit?

Bankruptcy hurts your credit score.  Bankruptcies stay on your credit reports for up to 10 years.  The current economy has caused credit to become more difficult to obtain even by those with good credit.  Most people that file for bankruptcy have already damaged their credit.  The date of the discharge is the first day toward improving your credit score.  In many circumstances, the bankruptcy actually makes you a better credit risk because creditors see that you have little or no debt afterward, and you cannot file for bankruptcy again for another 8 years.

22. What is the process after I retain you?

I provide you with a list of documents that I need, an instruction to obtain a pre-filing counseling certificate, and I give you forms to fill out. You fill them out and give them back to me. This is where you provide me with information about your assets and debts.  You MUST include ALL assets and ALL debts. That can take about two weeks on average, depending on how any questions you may have about the process. Once I have everything I need from you, usually takes me about anywhere from one to two weeks to get your petition ready to file, depending on how many follow up questions I may have for you. Once I have all the information I need, including pay stubs for the last 6 months, tax returns for the last last two years, and the pre-filing debtor counseling certificate, we schedule an appointment for you to come in and sign your petition.