1. I’ve never filed bankruptcy. Where do I begin?
If you have substantial debts, or are faced with a repossession or foreclosure, or creditors are suing you, you may be a candidate for bankruptcy. The first step is to assess what debts you have, and how much, and to get an idea of your monthly income and expenses. Next, schedule an appointment with our office for a free evaluation so that an attorney can review your financial information.
2. I work during business hours. When and where can I meet with an attorney?
We can accommodate your schedule! Whether it be an evening or weekend appoint that you require please contact us immediately to schedule a free evaluation at a time that is convenient for you!
3. How much debt do you need to file a Chapter 7 or Chapter 13?
There are no minimum amounts of debt you must have in order to file either a Chapter 7 or a Chapter 13 bankruptcy.
Chapter 7 bankruptcies are sometimes filed for as little as $1,000.00 of debt although generally if your debts are less than $8,000.00 we can offer alternative solutions to your problems. While there are no minimum amounts to file Chapter 7 or Chapter 13 bankruptcy, there is a maximum amount for a Chapter 13 bankruptcy.
A Chapter 13 bankruptcy, or more commonly referred to as a ‘wage earner’s plan’, is limited to a debtor who owes less than $307,675.00 of noncontingent, liquidated, unsecured debts and not more than $922,975.00 of noncontingent, liquidated, secured debts. As this restriction does not normally come into play, it need not be worried about.
4. Does the bankruptcy have to go in the newspaper?
No. However, once a bankruptcy is filed with the Bankruptcy Court, the information is public information and the newspapers have equal and unlimited access to the bankruptcy documents. Ordinarily, the media is not interested in publishing the names of bankruptcy debtors. However, a bankruptcy filed by a high profile individual or corporation may be deemed newsworthy for media outlets.
5. Does your employer get notified of a bankruptcy?
Your employer does not get notified through the bankruptcy proceedings. Your employer may get notice through a letter from our office if your wages are currently being garnished and we need to take steps to stop the garnishment. The employer may also be notified if you file a Chapter 13 bankruptcy and are required by the Court to have the monthly payment to the Bankruptcy Trustee deducted from your wages. This usually occurs only after a debtor has failed to make payments on their own when given the opportunity.
6. How does a Chapter 13 work?
A Chapter 13 Bankruptcy is more commonly referred to as a ‘wage earner’s plan’. Under a Chapter 13 plan, you make regular payments to the Bankruptcy Court and a Bankruptcy Trustee appointed by the court distributes the payments to your creditors. The typical length of a Chapter 13 Bankruptcy is 3 years, but can be extended to 5 years if necessary. Ordinarily all of your excess income over your monthly expenses is paid to the Bankruptcy Court.
The typical situation in which a Chapter 13 Bankruptcy is utilized is where a person’s residence has a mortgage which is about to be foreclosed upon. In such a case, a Chapter 13 Bankruptcy can be filed to stop the foreclosure action. The Chapter 13 then provides that the arrearage amount on the mortgage is caught up over 3 to 5 years and the regular mortgage payment is paid by you outside of the Chapter 13 plan as part or your regular monthly expenses. This example also applies when a person is behind in their car payments.
Another situation where the Chapter 13 plan is used is where a person has previously filed a Chapter 7 Bankruptcy preceding within the last 8 years. In that case, another Chapter 7 cannot be filed until after 8 years; however, a Chapter 13 can be filed to protect you even though 8 years have not elapsed.
7. How are the attorneys’ fees paid?
In a Chapter 7 Bankruptcy, the attorneys’ fees and court filing fee have to be paid in full prior to filing the bankruptcy.
In a Chapter 13 Bankruptcy, the court filing fee has to be paid prior to filing the bankruptcy; however, you are not required to pay the attorneys fees prior to the bankruptcy. Attorneys fees will be paid as part of the Chapter 13 Plan.
8. I can’t pay my bills. How can I afford to file bankruptcy?
Our fees for bankruptcy will vary depending on the complexity of your case in addition to other factors concerning the amount of debt incurred and your current income situation. Should you need to file, our attorneys will quote you a fee appropriate for your situation and discuss payment arrangements.
9. Can a student loan be discharged in a bankruptcy?
Student loans are generally NOT discharged unless the debtor can prove a severe undue hardship. This is extremely difficult to prove. Moreover, the definition of a student loan includes any debt owed to an educational institution, whether there is a loan agreement in place or not.
10. Can I keep my home and/or car?
The Bankruptcy Law allow a single person filing bankruptcy to keep up to $20,000.00 in equity in a house. For a husband and wife filing a joint bankruptcy, they are allowed to keep up to $40,000.00 in equity in a house. Equity is that amount of value in the house that is in excess of all debts owed on the house. For example, John and Jane Doe have a house that could be sold for $140,000.00. John and Jane have a $110,000.00 mortgage outstanding on the property. Therefore, John and Jane have $30,000.00 worth of equity in the home ($140,000.00 less $110,000.00). Accordingly, they may keep their house as they are within the $40,000.00 exemption limit allowed by the Bankruptcy Law. (This assumes they are filing a joint bankruptcy.) If, however, instead of a $110,000.00 payoff balance on their mortgage on the house, John and his wife have a $80,000.00 payoff balance on their mortgage on their house, they then have $60,000.00 of equity; approximately $20,000.00 too much or in excess of the $40,000.00 bankruptcy exemption amount. In such a case, the Bankruptcy Trustee could sell the house, assuming that the house sells for $140,000.00, the first mortgage of $90,000.00 would then be paid off, John and his wife would be entitled to their $40,000.00 exemption, and the remaining $10,000.00 would then be paid to the John and Jane’s creditors in pro rata shares, minus expenses associated with the sale of the house.
With regard to vehicles, a single person filing a bankruptcy is entitled to keep up to $2,400.00 of equity in a vehicle (or vehicles). In a joint husband and wife bankruptcy, the husband and wife are allowed to keep up to $4,800.00 equity in a vehicle (or vehicles) if the vehicle(s) is titled in both names. Equity in a vehicle is the same as equity in a house.
11. How soon can a bankruptcy be filed?
A bankruptcy can be filed within 24 hours of your appointment. This assumes, of course, that you have supplied us with all of the necessary information to file the Bankruptcy Petition; that is, a full list of creditors, addresses, account numbers, amounts of bills, income information, asset information, attorneys’ fees and the court filing fee, and most importantly, a court approved pre-bankruptcy consumer credit counseling certification of completion issued during the prior 180 days.
12. How will a bankruptcy affect co-signers on my loans?
If you file a Chapter 7 bankruptcy and decide not to reaffirm and repay a loan, the lender can then go after the co-signer for payment. In a Chapter 13 bankruptcy, however, the co-signer is protected and the lender cannot go after the co-signer. There is, however, a provision which allows a creditor to file a request with the Bankruptcy Court in a Chapter 13 bankruptcy asking the Court to allow the creditor to pursue the co-signer for payment if the creditor’s property is not being adequately protected.
In the event that you reaffirm the loan and agree to repay it, the lender will most likely refrain from seeking payment from the co-signer.
13. Do both a husband and wife always both have to file together?
No. A husband and wife are generally liable for the debts incurred by the other during the marriage if the debts were incurred jointly or if those debts were incurred for items necessary for the two of them. As an example, all medical bills incurred by one spouse during the marriage are the responsibility of both the patient and their spouse.
14. How will bankruptcy affect my credit?
Both a Chapter 7 and a Chapter 13 bankruptcy will affect your credit in a negative way. However, your credit is most likely already in bad shape because of your current debt problems. In some cases a client’s credit is so bad that bankruptcy actually improves their credit!
The length of time that your credit will be affected varies anywhere from two to ten years. However we will provide you with information on how you can repair your credit as quickly as possible. In most cases a bankruptcy debtor will be eligible for auto loans and low limit credit cards immediately after bankruptcy or even sooner.
15. Will filing bankruptcy stop any pending wage or non-wage garnishments?
Except for divorce related and child support garnishments, filing a Chapter 7 or 13 bankruptcy will stop all pending wage and non-wage garnishments. In the event that a Turn-Over Order has been signed by a judge ordering your employer to turn over withheld wages to a creditor, then that money cannot be recovered for you. If a Turn-Over Order has not been signed by a judge, you are entitled to the amount withheld as long as it is within your bankruptcy exemption amounts.
16. If I sign a reaffirmation agreement and then change my mind, am I still bound by the agreement?
You may change your mind or reverse a Reaffirmation Agreement at any time prior to the date of your bankruptcy discharge. Therefore, if a Reaffirmation Agreement is signed and filed with the court, it does not prevent you from changing your mind and rescinding or getting out of the Reaffirmation Agreement. However, the time period in which to do so is limited and we must be notified of the change immediately, and notification of rescission must be in writing.
17. Will I get to keep my furniture and clothing?
All clothing that is considered to be necessary wearing apparel is exempt and you are entitled to keep the clothing without having to pay anything into the Bankruptcy Court. The key term here is ‘necessary wearing apparel.’ For example, you would not be able to keep a $5,000.00 mink coat because the Bankruptcy Court would not consider it to be necessary wearing apparel. The mink coat would have to be surrendered to the Bankruptcy Trustee to be sold and the amount recovered would be paid to your creditors.
Furniture is considered a miscellaneous asset and falls within the general exemption amount of $4,000.00 for an individual person and $8,000.00 for a joint bankruptcy petition filed by a husband and wife. The way that furniture is valued is by replacement cost taking into consideration age and condition.
18. Can I include a personal loan from a friend?
Yes, however, if you still want to pay your friend back, you are free to do so (as is the case with all debts) after the bankruptcy. It is just that you are no longer obligated by to law pay the debt. More importantly, the law requires that you report all debts owed to all creditors, regardless of whether you want to include them or not. Failure to report any single debt could be viewed as a perpetrating a fraud on the court.
19. What is the difference between a secured debt and a non-secured debt?
A secured debt is one where a person, in exchange for receiving money to purchase something, says to the creditor: ‘If I do not pay this amount, you have a right to have this item back.’ Basically, the item that was purchased is the security, meaning the creditor has some sense of security in knowing that he will either get money for the item or he will actually get the item back. This is what is referred to as a Purchase Money Security Interest (PMSI). When purchases of major ticket items are bought with credit cards, especially department store cards, a purchase money security interest is ordinarily given to the seller. A non-secured debt is one where the creditor only has the option to recover the money and not the actual item sold.
Another example of a secured debt is an automobile loan where the seller retains the title to the automobile and will transfer title when the total amount of the purchase price has been paid. An example of a non-secured debt is a personal loan which is not secured by any collateral (more commonly referred to as a ‘signature loan.’) Also, an unsecured debt is ordinarily any debt that has been created for purchases of gasoline, services, and miscellaneous items such as perfume, clothing and toys.
20. Do I have to list all my creditors or just the ones I want to discharge?
Yes, the Bankruptcy Law requires that ALL of your creditors be listed. However, you always have the option to go ahead and pay the debt even though the debt was included in your bankruptcy.
21. What happens if I forget to list a creditor and we have already filed the bankruptcy?
Your bankruptcy can be amended to include the omitted creditor. However, if your bankruptcy needs to be amended more than three days after the original filing date, an additional court filing fee is required. Accordingly, we strongly suggest that you do your best to get us a list of all of your creditors before your bankruptcy is filed.
22. Can I change my mind if I have already filed the bankruptcy?
In a Chapter 13 Bankruptcy, you can always decide to dismiss your bankruptcy case. However, under a Chapter 7 Bankruptcy, you do not have the absolute right to dismiss your bankruptcy case.
23. How long after I file a Chapter 7 bankruptcy can I file again?
A Chapter 7 Bankruptcy can only be filed once every eight (8) years.
24. Do the Chapter 13 payments have to be deducted from my wages or can I pay them directly myself?
The Bankruptcy Trustee ordinarily allows Chapter 13 payments to be made directly by the debtor. However, if the debtor misses payments the court may require a wage attachment be put in place to ensure the payments going forward. In the event a wage attachment is required, the debtor will always have the opportunity to dismiss the case if they prefer.
25. What is the 341 First Meeting of Creditors and what happens there?
The Section 341 Hearing is an informal hearing conducted by a local attorney who has been assigned to your case as a Bankruptcy Case Trustee. Hearings are set every hour with approximately ten to fifteen hearings per half hour. Therefore, each hearing ordinarily takes 5 to 7 minutes. At the 341 Hearing, the Bankruptcy Case Trustee asks you some of the same questions that we asked you prior to filing your bankruptcy case. The questions are aimed at determining if there are any assets which the trustee may be able to seize and sell to generate money for the creditors.
Your creditors also have an opportunity to attend the hearing and ask you questions. The only creditors that usually show up are those who are holding secured debts such as a car loan or a house mortgage.
26. How many hearings will I have to go to? Will I have to talk or will my attorney do all the talking?
In a typical case, there will only be one hearing for you to attend. You are required to answer the questions that the Bankruptcy Trustee asks you – typically, simple yes/no type questions and answers. The attorney’s job at the hearing is to attend and insure that nothing goes wrong and that if a problem does arise that it be taken care of as best as possible.
27. Is there any extra fee for the creditors hearing?
No, not for the Section 341 hearing. Additional hearings that may be required are billed on a need to attend and/or your desire for representation basis.
28. How long does the initial meeting in your office take?
Typically the length of the initial meeting in our office is about one hour.
29. Can I pay my family doctor even though I am filing bankruptcy?
The family doctor’s bill may be discharged through bankruptcy. However, the Bankruptcy Law provides that you are allowed to pay back any debt that you want to pay. However, you are not obligated to make such payments. Therefore, in a family doctor situation, if you want to keep the family doctor, the family doctor can be listed in the bankruptcy and you can then inform the doctor that you intend to pay the account in full. In the event that you are unable to pay that account, then the doctor would not be able to sue you on the account.
30. Can I file on past due taxes?
Although there are some exceptions, you are ordinarily required to pay your Federal and State Income Taxes even though you file bankruptcy.
31. Can I file on back child support or alimony?
Back child support and maintenance (commonly referred to as alimony) are not dischargeable in bankruptcy. At times there is a question as to whether a payment to an ex-spouse is maintenance or whether it is part of a property settlement. In the event that the payment is determined to be a part of a property settlement, that amount is dischargeable. However, if the amount is determined to be maintenance, the payment is not dischargeable. In making that determination, the Bankruptcy Court will look to the substance of the payment and not to the label attached to the payment in the divorce decree.
32. Will I still get my tax refund or will they take that?
In the event that you owe back income taxes, the Government will most likely take that income tax refund and apply it toward your delinquent taxes. That is a matter outside of the bankruptcy case. If you are entitled to a tax refund and do not owe back taxes, you will be entitled to keep your tax refund as long as the amount of the tax refund does not total more than your allowable personal bankruptcy exemption taking into consideration all of your other property. You can keep all of a refund which is due to Earned Income Credit (EIC) or the Child Tax Credit.
33. If I lose my job and have to go on unemployment, will the Bankruptcy Court take my payments out of the unemployment checks?
A Chapter 13 Bankruptcy cannot be filed for a person who is on unemployment. A Chapter 13 can only be filed by a person with regular income. Unemployment compensation is exempt under a Chapter 7 Bankruptcy and the Bankruptcy Court will not take any payments out of any unemployment checks.
34. If I have life insurance policies, how do they decide which policies I can keep?
Life insurance policies are considered a personal asset and therefore are limited by the personal exemption amounts. Life insurance is valued at the cash value that the holder of the policy could receive if the policy was cashed in. Term life insurance policies normally do not have any cash value.
35. How much can I keep in my checking or savings accounts before they will ask me for the funds?
Checking and savings accounts are considered a personal asset and fall within your personal exemption amounts. If you file bankruptcy on your own, the personal exemption amount is $4,000.00. If you file bankruptcy with your spouse, the personal exemption amount is $8,000.00.
36. What do I tell my creditors when they call before I file bankruptcy? After I file?
If you hire us to file your bankruptcy case and one of your creditors calls you prior to your case being filed, you are not obligated to talk to the creditor. This, however, does not prevent the creditor from attempting to contact you again. Once your retainer has been paid to our firm you may direct all creditors to call us and we will handle them. We encourage you to get us all of the necessary information as quickly as possible so that we case get your case filed. Technically, a creditor can contact you at any time prior to the actual filing of your bankruptcy case but once the case has been filed the calls must stop.
After your bankruptcy has been filed, your creditors are prohibited by the Bankruptcy Law from contacting you in any way. In the event that you are contacted by a creditor after your case has been filed, you should tell the creditor that you have filed bankruptcy, give them your case number, and tell them that they should contact our office.
37. I want to file bankruptcy but I have a personal injury case pending and I believe I am going to get a big settlement from that case. What will happen to my settlement?
If you have a personal injury case pending that will be settled after you file your bankruptcy, you are entitled to keep up to $15,000.00 of net proceeds that you receive directly from your injury settlement.
For example: Mark is injured in an automobile accident and, after he files bankruptcy, his injury case is settled for $100,000.00. Mark’s medical bills are $30,000.00 and the lawyer’s fees are one-third of the settlement ($33,000.00). Upon receipt of the settlement check of $100,000.00, $33,000.00 is paid to the attorney and $30,000.00 is paid to the medical providers. Mark would ordinarily be entitled to the remaining $37,000.00. However, because Mark has filed bankruptcy, Mark would only be entitled to $15,000.00 of the $37,000.00, and the Bankruptcy Trustee would then take the remaining $22,000.00 and pay the money to Mark’s creditors. However, if Mark owed his creditors less than $22,000.00 when he filed bankruptcy, he would get whatever money is left over after his creditors have been paid.
38. What happens if I inherit money after I have filed bankruptcy?
If you inherit money or expect to inherit money in the six months after the date of filing of your bankruptcy, the inheritance is considered a part of the bankruptcy estate and is subject to the exemption amounts for miscellaneous assets, which are $4,000.00 for an individual person and $8,000.00 for a joint bankruptcy filed by a husband and wife.
39. I just got married and I have debts that were incurred before I got married. If I file individually, and my spouse does not file, how will my bankruptcy affect my spouse’s credit?
Because creditors and the law view a husband and wife basically as one person, where one spouse has filed a bankruptcy, it will affect their ability to obtain credit jointly. The new spouse’s credit as an individual, however, will not be affected.
40. What do I do if creditors keep calling me and writing to me after I have filed bankruptcy?
In the event that creditors continue to contact you after the filing of your bankruptcy case, you should contact our office and forward to our office the correspondence received from the creditor so that we can notify the creditor not to have any further contact with you. Be careful to keep all written collection notices and any voice messages threatening collection so that we can use them if we have to file a separate lawsuit against the creditor.
41. What if I file bankruptcy and then have a bad accident or illness soon thereafter and accumulate a lot of bills again, can I add those bills to my bankruptcy?
No. All bills accumulated after the date of the filing of a bankruptcy cannot be added to your bankruptcy. However, you may be eligible to file a Chapter 13 bankruptcy on the later accumulated medical bills and take care of the bills through the Chapter 13 bankruptcy.
42. After I file bankruptcy, when will the first hearing be scheduled?
The First Meeting of Creditors is typically scheduled anywhere from 6 to 8 weeks after the filing of your bankruptcy case. Your creditors will receive notice of the date and time of the First Meeting of Creditors approximately 7 to 10 days after the date that you file your bankruptcy case. You will receive notice from both the Bankruptcy Court and from this office as to that date. If you are under threat of a utility shut-off, a wage garnishment, or a notice to appear due to a lawsuit within 10 days of filing, you must ask us to forward emergency notice to the appropriate creditor.
43. If I file bankruptcy, how will that affect my ability to get student loans in the future?
It is up to the individual creditor or potential lender as to whether you will receive student loans in the future. As student loans are non-dischargeable through bankruptcy, the student loan lenders are usually more willing to lend money for student loan purposes to a person who has filed bankruptcy.
44. Can I file bankruptcy on traffic tickets or other fines?
Traffic tickets, fines, penalties and other punitive payments to cities, states and/or the federal government are generally not dischargeable in a bankruptcy.
45. How long do I have to have lived in this area before I can file a bankruptcy case here?
The residence requirement for filing bankruptcy is that you have to have lived in the area where you are filing for the better part of 180 days. In other words, you must have lived in the area where you will be filing for more days out of the past 180 than in any other area. Also, the exemptions to be applied to your property will be calculated according to the state exemptions where you have resided for the better part of the past two years.
46. Can I include my past due water bills, utility bills, cable bills, etc.?
Yes. However, the utility companies will require a sizeable security deposit before the services will be continued.
47. If I own tools for my job, can I keep my tools?
You are entitled to an exemption in the amount of $1,500.00 for tools used as a part of your employment.
48. Can I file a Chapter 13 on back child support?
Yes, you can pay back child support through a Chapter 13 Plan, as long as it is paid in full through the plan.