Frequently Asked Questions (FAQ)
BANKRUPTCY FAQ
- Why should I file bankruptcy?
Anyone can experience dire circumstances—the loss of a job, family and medical emergencies—and suddenly, you cannot make all your monthly payments, you receive calls and letter from creditors, collection agencies, and attorneys, or a creditor might try to repossess your car or foreclose on your house. During our free consultation, we will advise you whether you should consider filing bankruptcy given your circumstances. Although filing bankruptcy can make you feel embarrassed, sometimes making a clear cut and dealing with your financial problems can provide you with the break you need and will allow you to experience what bankruptcy is about: a fresh start!
- How do I get started if I want to file bankruptcy?
You can call me to set up a free consultation at 469-4300. However, before we can file a bankruptcy petition on your behalf, you will have to obtain a Certificate of Credit Counseling (we can help you with that) and you will have to bring the following documents: the most current federal tax return (you also must have filed your tax returns for the previous 4 years); all pay stubs for the previous 6 months; if possible, a current credit report (get yours free at www.annualcreditreport.com) ; if possible, an appraisal or tax assessment of any real estate (house, condo, land) you own; copies of lawsuits or judgments in which you are involved; statements of insurance policies with cash surrender value and any retirement accounts, and credit card and bank statements.
If you have a certificate of credit counseling and provide us with all requested information, we should be able to file your bankruptcy at the end of your first and only office visit.
- How much does filing bankruptcy cost?
You will have to pay attorney’s fees (as agreed upon with your attorney) and filing fees for the Bankruptcy Court. The filing fees for a chapter 7 bankruptcy are currently $299 and for a chapter 13 bankruptcy, they are $274. Usually, the filing fees have to be paid when you file bankruptcy. In certain circumstances, the filing fees can be paid in installments or be waived.
- How can I afford to pay an Attorney for my Bankruptcy?
First, we are more affordable than you think. Second, it will cost you more in the long run to not have an attorney. While chapter 7 requires an up-front payment of the attorney’s fees, you can speak with us about payment options for a chapter 13 bankruptcy.
- Which Chapter of Bankruptcy is right for me?
Chapter 7 (“Liquidation”):
While both chapter 7 and 13 provide you with a “fresh start,” which chapter is right for you depends on your circumstances.
In general, chapter 7 is appropriate for you if you have no or insufficient income and only have unsecured debts, for example, credit card debts, medical bills, etc. “Unsecured” means there is no item securing the debt. “Secured” means the creditor gave you the money either (1) on the condition that the creditor has a right in the secured property or (2) specifically to purchase the item. Typically, a loan for a house is secured by a mortgage and a loan for a car is secured by a lien (the creditor’s name is listed on the title). Usually, at the end of a chapter 7 bankruptcy, all unsecured debts are discharged, which means you do not have to pay back these debts.
Chapter 13 (“Reorganization”)
Chapter 13 is usually the right choice for you if you have regular income, you are behind with your mortgage and car payments, and simply cannot afford to make all your payments. Frequently, chapter 13 filers have too many bills (credit cards, medical bills, etc.) in addition to the important mortgage and car payments and they simply need a break. Chapter 13 will permit you to make your monthly mortgage and car payments and, in addition, you will make one monthly payment to the chapter 13 trustee, who will in turn distribute the money to your creditors. The trustee will pay your secured creditors (arrears on house, cars) in full and will pay only a percentage of your outstanding bills to unsecured creditors. For example, if you have $20,000 in credit card bills and $30,000 in outstanding medical bills, although you owe a total of $50,000, you may pay the unsecured creditors only $5,000 during your bankruptcy, if the unsecured creditors are paid back at 10%.
Feel free to complete the bankruptcy questionnaire or to call us for your free initial consultation at 469-4300. Every case is different and requires a careful analysis so we can advise you how you should proceed under your specific circumstances.
Chapter 11 – For businesses and individuals with substantial assets
Chapter 11 is mostly used by businesses. However, because people who own real estate which they would like to keep might not qualify for chapter 13, chapter 11 might be an alternative. Currently, if you have unsecured debts exceeding $336,900 or secured debts exceeding $1,010,650, you do not qualify for chapter 13.
- When does my bankruptcy actually begin and how does that help me?
As soon as we file your bankruptcy petition electronically with the court, your bankruptcy has begun. By law, an automatic stay is now in place, and most of your creditors can no longer contact you or try to collect from you. You can inform any creditors (particularly collection agencies) that you have filed bankruptcy and provide your case number-they will not call again. And by filing bankruptcy, you can even stop other lawsuits against you.
There are a few exceptions: for example, the automatic stay does not affect true domestic support obligations (alimony, child support). For more details, please call our office.
- How long does my bankruptcy take?
A chapter 7 bankruptcy usually takes 3-6 months. A chapter 13 bankruptcy takes 3-5 years.
- So, what happens at the end of my bankruptcy?
At the end of your bankruptcy, you will receive a discharge. A “discharge” in bankruptcy is a court order that eliminates your personal liability for certain debts. Some debts are not dischargeable, e.g.: money or property obtained by fraud; child support and alimony; most taxes; most student loans; criminal fines, penalties, and restitution payments; and personal injury or death caused by driving drunk are the most common examples.
- Will Bankruptcy affect my Credit?
If you file bankruptcy, it will appear on your credit report and may affect your credit score. But if you are behind on payments (mortgage, car loan, credit cards), your credit score is already severely affected and your credit score will continue to decline. Filing bankruptcy is your opportunity to improve your credit score. In time, you will become more credit worthy than you are now.
- Do I need an Attorney to file Bankruptcy?
No—under the law, you can file without an attorney (“pro se”). But it is a good idea to have an attorney. Why? Although hiring an attorney will cost some money, an attorney can help you to avoid costly mistakes and to comply with the complex new bankruptcy laws, which now are more rigid and have many deadlines for certain actions. Filing bankruptcy has become more technical and most pro se debtors have a difficult time to comply with all requirements and risk that their case is dismissed. In addition, neither the bankruptcy judge nor the trustee can give you legal advice and if either one points out to you that something is amiss or problematic, it might be expensive or too late to fix a problem.
And remember one very important thing: Hiring a lawyer to fix problems is more time consuming and expensive. The sooner you get help the easier and cheaper it will be.
DISCLAIMER: The information provided is only general, educational information and not legal advice. Each debtor’s situation and case is different and requires individual analysis. For more information or a free consultation call us at (808) 469-4300.
