Q: Can I keep my car in the bankruptcy?
A: Usually the answer is yes. Many of our clients have fallen behind in their car payments, and a bankruptcy can help reallocate funds from credit cards and personal loans to automobile loans. Depending on the circumstances, you may be able to refinance your car through the bankruptcy. Chapter 7 bankruptcy clients are able to redeem their secured personal property for fair market value at the time of filing. This means that you can choose to pay the secured creditor the fair market value in exchange for a release of its security interest. Some companies will finance this redemption for you. Many of our Chapter 13 bankruptcy clients find that they owe more on their vehicle than it is worth. They are able to cram down what they are paying to the fair market value of the vehicle. They can also extend the payments over the life of the Chapter 13 bankruptcy plan.
Q: How does bankruptcy affect my home?
A: Many bankruptcies are filed specifically to protect a debtor’s home. A home with a significant amount of equity may require that you reorganize your debt to pay it off. On the other hand, a home which is “underwater” or where the amount of debt owed on the home exceeds the value of the home can usually be retained through the bankruptcy. If you have missed payments and are facing foreclosure, a Chapter 13 bankruptcy may be an appropriate solution to allow you additional time to make up the back payments over the life of your plan. In some cases, you may owe more on your first mortgage than your home is worth. If this is the case, we may be able to help you “strip” additional mortgages from your property and treat them as unsecured debt in your Chapter 13 bankruptcy plan. If you are in the process of obtaining a loan modification, please let us know so that we can factor this in to your case planning. It is common for our clients to seek modifications, before, during and after filing bankruptcy.
Q: Will bankruptcy stop a creditor from garnishing my wages?
A: Filing a bankruptcy triggers what is often referred to as the “automatic stay”. This stay prevents most creditors from taking actions to collect on a debt. These actions usually include garnishment of wages. If you are already experiencing wage garnishment, you should speak with an attorney as soon as possible to determine your options. If you have experienced over $600 of garnishment in the 90 days prior to filing, you may be able to recover some of those garnished funds through your bankruptcy.
Q: Do I have to give up all of my belongings?
A: Bankruptcy is designed to aid the honest but unfortunate debtor. It is not intended to take all of your belongings and leave you homeless and penniless. Bankruptcy involves exemptions, which apply to a reasonable amount of personal property that remains outside of the bankruptcy and in your possession. Each state has its own exemptions, and some states allow debtors to choose federal exemptions instead. Exemptions generally allow you to retain certain amounts of equity in a home and vehicles, as well as cash, money in bank accounts, household belongings, jewelry, retirement accounts, life insurance, and other personal property. By applying exemptions correctly, you should be able to retain enough of your personal belongings to allow you get a fresh start.
Q: If I file bankruptcy, is my credit completely destroyed for 7 years?
A: Filing bankruptcy can definitely have a negative impact on your credit. However, most people who are facing bankruptcy as an option already have credit which badly needs repairing. In some cases, a bankruptcy filing can actually boost credit because of the nearly instantaneous elimination of negative reporting and reduction of debt. Your bankruptcy filing can be reported for up to 10 years by the credit bureaus. But your credit may recover much more quickly than that. In fact, it is likely that shortly after your discharge you will start receiving numerous offers from credit card companies anxious to fill the void left from all of your discharged debt. Many debtors find themselves in a position to qualify for the best rates on auto and home loans after just a few years.
Q: Is there a limit as to how much or how little debt I need to have to qualify for filing bankruptcy?
A: There is no hard and fast rule to determine how much is too little debt to file. Generally, debtors who have less than $10,000 owing in unsecured debt may have some other options that could prove to be more cost-effective or less damaging than filing bankruptcy. This should be determined on a case-by-case basis. We use our free initial consultation to help lay out your options in filing or taking other action. In a Chapter 7 bankruptcy, there is no limit as to how much debt can be discharged. In a Chapter 13 bankruptcy, Congress has set limits under the Bankruptcy Code for secured and unsecured debt. As of April 1, 2010, the limits for secured debt in a Chapter 13 bankruptcy are at $1,081,500, and limits for unsecured debt are at $360,525. These limits are scheduled to increase again on April 1, 2013. Calculating your debt under these limits can be fairly complex, and we can help you determine whether your debts fall within the limits.
Q: I already filed bankruptcy before. Am I eligible to file again?
A: Under new legislation made effective in 2005, there are minimum time periods which must pass before a debtor can be eligible for a discharge in a subsequent filing. From one Chapter 7 bankruptcy to the next Chapter 7 bankruptcy, eight years must pass from filing date to filing date. From a Chapter 7 bankruptcy to a Chapter 13 bankruptcy, four years must pass from filing date to filing date. From a Chapter 13 bankruptcy to a Chapter 7 bankruptcy, six years must pass from filing date to filing date. From one Chapter 13 bankruptcy to the next Chapter 13 bankruptcy, two years must pass to be eligible for a discharge. If you are not eligible for a discharge, you may still be able to file a Chapter 13 bankruptcy under certain circumstances.
Q: Do I have to go to court?
A: Usually not. In both Chapter 7 and Chapter 13 cases, you do need to appear in front of the trustee assigned to your case at a meeting of creditors. It is very common that none of your creditors will appear at this meeting. During the meeting, the trustee will ask you some questions about your case and the documents you provided. We will help you prepare for the questions that are normally asked, and I will be there with you at the meeting if you have any questions or concerns. Other people will be there, but the crowd will primarily be made up of other bankruptcy attorneys and other people who have filed just like you. The questions normally go on for about 10 minutes.
Q: If I am married, does my spouse need to file bankruptcy with me?
A: It is not necessary for spouses to file together, although it is possible. In some cases joint debt makes it more efficient for a married couple to file jointly. If most or all of the debt is only in the name of one spouse, it may make more sense for just that spouse to file.
Q: Will bankruptcy discharge the taxes I owe?
A: Some taxes can be discharged in bankruptcy. Generally, if the taxes are from more than three years ago, if you filed them at least two years ago, and if you have not been audited in the last months, you may be able to have your tax debt discharged in your bankruptcy. Dischargeability can be affected by whether or not you actually filed the taxes and whether any tax liens have been created. Taxes determined to be nondischargeable remain as a liability in a Chapter 7 bankruptcy, and are paid through the plan in a Chapter 13 bankruptcy.
Q: How much does bankruptcy cost? How can I afford to pay you?
A: Our fees are reasonable and vary from case to case. Once we have completed your free initial consultation, we will quote you a fee that is based on the complexity of your case and the amount of work we expect to do. We generally quote an all-inclusive rate which includes the filing fee ($306 in a Chapter 7 bankruptcy and $281 in a Chapter 13 bankruptcy), credit counseling sessions and general excise tax. In a Chapter 13 bankruptcy, it is often possible to defer a significant portion of the fee to be paid through your plan in order to reduce up-front costs. While some clients choose to pay the entire prepaid fee at once, many of our clients are on payment plans which allow us to begin working on your case now. When your last payment is ready, we will have all documents ready for you to sign and file. Once you have signed a fee agreement and made your first payment, you can immediately refer all calls from creditors to our office for handling.