Find below information on various bankruptcy-related topics.
- Introduction to Bankruptcy
- Specific Debtor Concerns
- Lawsuits/Foreclosures/Repossessions
- Student Loans & Support
- Taxes
| INTRODUCTION TO BANKRUPTCY | .mp3 audio* |
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| New Bankruptcy Law Effective October 2005
In April 2005 President Bush signed a new bankruptcy law that makes it much more difficult to file. Since the new laws have taken effect, we have filed cases and have secured Chapter 7 and Chapter 13 bankruptcies with no complications and great success for our clients. Some of the issues related to this new law are credit or debt counseling service, an education class to receive discharge from your debts, and you will need to meet more stringent criteria to qualify for the bankruptcy. Our office provides guidance and assistance on all these issues. |
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| Bankruptcy & electronic filing
Bankruptcy is one of the oldest legal rights in our system of law and is required to be filed electronically with the federal courts. It is designed to free people from a hopeless financial situation that may or may not have been their fault rather than make them suffer the rest of their life. There are several types of bankruptcies for different situations. You may have heard of Chapter 7, Chapter 11, or Chapter 13. These are the most common types of bankruptcy. One of the most important aspects of a bankruptcy is the automatic stay or court order that immediately takes effect upon filing. This court order stops employer garnishments, creditor harassment, repossessions, IRS & Bank levies, lawsuits and foreclosures and gives a person time to try to retain as many assets as possible. Bankruptcy is complicated, so it is important to seek the advice of an experienced bankruptcy attorney.
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| When should bankruptcy be considered?
Deeply in debt and harried by creditors? No other viable option for your accumulated debt problems? This means you can no longer pay your creditors in a timely manner and also realizing nothing is being paid on the principal portion of your debt. Bankruptcy may be the solution. |
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| How long does it take?
Upon filing the case you get immediate relief. The amount of time bankruptcy takes for a hearing & discharge is approximately 90 to 120 days for both Chapter 7 and Chapter 13 filings. This time may differ depending on the complexity and size of your estate. |
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| Can I file more than once?
Currently there is no limit on the number of bankruptcies you can file. However, you can only receive one Chapter 7 bankruptcy discharge every 8 years. There are limitations and restrictions time wise on the number of Chapter 13 bankruptcies you can file. If you file too many times the court may begin to question the “good faith” nature of your filings. But, the court does recognize that there are times when you must file more than once. This is accomplished by the attorney with a separate motion to the court for a hearing. |
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| Attendance of court hearing
Generally speaking, you and your filing spouse have to go to court only once. This hearing takes place about a month after the case is filed and is a mandatory hearing by both attorney and client(s). At this hearing you are questioned by the trustee about the information stated in the schedules. At this time the creditors also have the right to appear, but in most Chapter 7 cases, no creditors exercise this right. In Chapter 13 cases, this is the time when the Trustee will set your payment plan. The hearing process usually takes approximately fifteen to twenty minutes once you are called. |
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| Fees & costs for bankruptcy
Filing for bankruptcy is not a free process and requires two fees. A court filing fee, and separately, the attorney fees. The court filing fee is $335.00 for a Chapter 7 Bankruptcy and $310.00 for a Chapter 13 Bankruptcy. The attorney fees will be charged as a flat one time fee, and can be paid in installments. The more complex the filing, the more cost you will incur. Most other attorneys charge by the hour for their time and will add office expenses to the bill as they arise. |
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| What is Chapter 7?
Chapter 7 bankruptcy will provide relief from unsecured debts (such as credit cards, medical bills, miscellaneous signature debt, deficiency balances). Chapter 7 will stop foreclosures, repossessions, garnishments, most utility shutoffs, and debt collection activities. After discharge, student loans, alimony, back child support, fines, some tax issues and any debt willfully based on fraud are still collectable. Chapter 7 will also provide exemptions that permit most individual debtors to keep their assets, such as equity in their home, vehicles, personal property, and retirement accounts. Exemption amounts for your property will vary from state to state. Your bankruptcy attorney will assist you on exemptions as this is their area of expertise. Bankruptcy may help clean up a bad credit record and will be part of this record. |
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| What is Chapter 11?
Chapter 11 of the bankruptcy code, generally speaking, is the section of the code used for the reorganization of businesses. This chapter may be used for either companies or individuals who are in business. We usually hear about it when it involves very wealthy individuals, airlines, oil companies or other large businesses.
However, it is also commonly used by medium-sized and small businesses. Chapter 11 allows a business or business person to reorganize its debts. Most publicly held companies will file under Chapter 11 rather than Chapter 7 because they can continue doing business in times of cash flow shortages and still run their business and control the bankruptcy process.
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| What is Chapter 13?
Chapter 13 bankruptcies are commonly referred to as wage-earner repayment plans. Chapter 13 bankruptcy involves a reorganization of an individual’s financial affairs. The debts are consolidated and a plan for creditor repayment is established. The federal bankruptcy court appoints a trustee who administers the case. A Chapter 13 bankruptcy stops foreclosures, repossessions, wage garnishments, tax levies, and IRS seizures. The trustee monitors a court-enforced repayment plan to restructure secured and unsecured debts, including mortgage arrearages on their home, automobile payments, co-signed debts, tax issues, back child support and student loans, generally over a period of time. This action helps to reduce monthly payments to an affordable amount, and allows the person to keep their property. For more in-depth information about wage-earner repayment plans, consult a bankruptcy attorney. |
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| What is a secured / unsecured creditor?
Secured debts require some kind of collateral. Examples are: Home mortgages and vehicle loans. Unsecured debts may only require written contracts of promise, the promise to pay the debt back under certain terms agreed upon. Examples are: credit cards, medical bills and signature loans. |
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| SPECIFIC DEBTOR CONCERNS | .mp3 audio* |
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| Should both spouses file?
In the case of bankruptcy, both spouses do not have to file. Neither spouse can commit the other to a bankruptcy without their knowledge and consent. For more information about bankruptcy and whether or not both spouses should file, consult a bankruptcy attorney because laws differ from state to state, and each case has its own provision. |
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| Do I have to list all of my debts
When you file for bankruptcy you have to list all debts and all assets. Listing all assets gives you protection and exemption through bankruptcy from the creditors. You should tell your attorney so that he or she can advise you on what debts you should continue to pay and what debts will be discharged. Some clients want to keep a relationship with a non-secured creditor. This would be under the advisement of the attorney. |
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| Should I dispose of my possessions before I file?
You should never dispose of your property before you consult with an attorney. With appropriate bankruptcy planning, you may be able to keep property you would otherwise lose. Transferring property right before filing bankruptcy may be detrimental to your case. Additionally, paying money or giving property to a friend or a relative before filing may also hinder the case. In many cases you may have been able to shelter that money or your property if you had merely kept it and followed the advice of your lawyer. If you have already started or completed this process, we can still solve the situation. |
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| Will my employer be notified?
It would be extremely unusual for your employer to be notified of your bankruptcy in a Chapter 7 Bankruptcy unless your employer must be notified to stop a wage garnishment or unless your employer is also a creditor. However, in a Chapter 13 Bankruptcy your employer, usually through the payroll department, will probably become aware of the bankruptcy. This is because in a Chapter 13 Bankruptcy a portion of your pay may be withheld and paid as a wage order deduction to the Chapter 13 Trustee if you choose this option. It is illegal for your employer to discriminate against you for having filed for bankruptcy relief. |
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| Do I get to keep my assets?
In a Chapter 7 or Chapter 13 procedure, most assets are usually protected. Bankruptcy may provide total protection for a home, car or other vital property. The amount of property that debtors can protect from creditors through exemptions in bankruptcy is, in many states, far greater than the amount that they can protect under the state law. If the value of the property does not fit within the bankruptcy law exemptions, then the difference would become part of the bankruptcy estate. Please consult an attorney for further clarification. |
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| What debts cannot be eliminated?
Filing for bankruptcy does not automatically discharge every debt that you owe. Whether bankruptcy is the right choice depends, for the most part, on the type of debt you have. There are two main types of debts: secured and unsecured. Bankruptcy WILL discharge most unsecured debts, but NOT secured debts unless you decide to surrender the collateral and rid your liability. It is important to know the difference between the two. Debts that are non-dischargeable through Chapter 7 bankruptcy include alimony, child support, student loans, fines and court ordered restitution, as well as debts incurred through fraud. In some circumstances you may restructure some of the defined debts in a Chapter 13 bankruptcy. Some taxes may be dischargeable in a bankruptcy. You should consult with an attorney regarding your specific tax concerns. Dischargeable debt in a Chapter 7 and Chapter 13 bankruptcy include credit card debt, signature loans, most utility bills, wage garnishments, medical bills and deficiency balances on surrendered collateral. Before deciding to file for bankruptcy, it is wise to review what part of your debt is dischargeable, versus what is not-dischargeable. Contact an attorney to find the differences in non-dischargeable and dischargeable debt in your specific case. |
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| Can I protect my co-signers?
If you file a straight bankruptcy (Chapter 7) then the creditor can proceed not only against your co-signer, but also any other co-debtor, co-maker, or guarantor according to the terms of the debt agreement. Most times, creditors on co-signed debts will continue to accept payments from the debtor. If, however, you seek relief to repay your debt under a Chapter 13 bankruptcy, an individual co-debtor is afforded protection under bankruptcy law to the extent the plan proposes to repay the debt, and if the debt is a consumer debt. |
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| What is the effect on my credit rating & can I re-establish my credit after I file?
Anything you do concerning payment of your debts is a part of your credit record. Your credit record is like a camera taking a picture of your credit history, usually for a period of 7 to 10 years. Eventually, everything drops off your credit report. Bankruptcy, like prompt payment, slow payment, foreclosure, repossession, charge-offs or any other manner of handling your debts, is reported on your credit record. How your credit history will affect you depends on how the person reviewing your credit report wishes to interpret it. On one extreme, a prospective creditor may refuse you if you have had a bankruptcy of any kind. The creditor may not consider what circumstances caused you to seek relief in bankruptcy, over-extension of credit, loss of job, serious illness, unexpected major expense, such as major hospital bills, car repairs, death, divorce, etc. On the other hand, a prospective creditor may consider all of these factors and decide whether or not to extend credit to you based on these considerations plus others, such as your future ability to repay. Bankruptcy is a rebuilding process which begins immediately after filing. Typically, you should be able to purchase a vehicle after your discharge, and to purchase a home two years after your discharge, and many lenders may approve your loan sooner. |
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| Should I have an attorney?
Yes, bankruptcy is a complex matter with laws constantly changing, and you need to be sure you protect the assets you have and have properly prepared paperwork for the courts. The penalty for making a false statement or concealing property could result in up to $500,000.00 in fines or imprisonment for up to 5 years or both. Usually, the cost for a bankruptcy attorney is very reasonable and is a small cost to pay compared to the amount of debt you may be able to discharge. |
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| LAWSUITS/FORECLOSURES/REPOSSESSIONS | .mp3 audio* |
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| Can home foreclosures be stopped?
Home foreclosure can be stopped by either Chapter 7 or Chapter 13 bankruptcy. The bankruptcy needs to be filed before the sheriff’s sale date or a contract cancellation. Chapter 7 will allow time to become current on back mortgage payments. Chapter 13 allows you to take the amount of mortgage arrearages and make a structured payment over a period of time to cure the back mortgage payments, while paying your on going current mortgage payments. |
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| Can I stop my vehicle from being repossessed & what can I do if it has been repossessed?
Yes, you can stop your vehicle from being repossessed by either Chapter 7 or Chapter 13 bankruptcy. Under a Chapter 7 procedure, you would need to make up the delinquent payments and the creditor may ask for a reaffirmation agreement. Under a Chapter 13 procedure, there would be a structured payment plan.
If your vehicle has already been repossessed, under the Chapter 7 procedure, you cannot get your vehicle back, but when the creditor sells the vehicle at auction, any deficiency balance would be a dischargeable debt. Under the Chapter 13 procedure, many times you can get your vehicle back and set up a structured payment plan.
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| Can creditor harassment be stopped?
Yes, creditor harassment can be stopped. Once your bankruptcy case is filed and notice is served, creditors are, by law not allowed to contact you. All calls should be directed to your attorney’s office.
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| What can I do about lawsuits & judgments?
Filing of a bankruptcy prevents any lawsuits from being filed or judgments taken against you. If you filed bankruptcy and a lawsuit against you is pending, it can go no further. If a judgment has been taken, its enforcement can go no further. If the judgment has placed a lien on your assets, such as your home, in most cases it stops them from collecting the money, but a separate action is needed in order to remove the lien from title. If lawsuits or judgments are either a threat or a real problem, it is good idea to file a bankruptcy before the judgment is rendered. |
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| Can bankruptcy stop garnishments if they are already in place?
Yes, bankruptcy can stop garnishment already in place. Once your bankruptcy case is filed your employer and also the creditor will be notified to cease the garnishment. |
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| STUDENT LOANS & CHILD SUPPORT | .mp3 audio* |
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| Effect on student loans
Student loans are a non-dischargeable debt in a Chapter 7 bankruptcy. The principal and interest would need to be paid in full in a Chapter 13 procedure to receive a discharge. Chapter 13 can stop legal action and protect you for 3-5 years but after that you will need to pay the unpaid balance plus interest. You should consult an attorney for more detailed information regarding student loans. |
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| Effect on child support
Chapter 7 Bankruptcy cannot stop a current child support action, nor can it discharge current or back child support obligations. However, a Chapter 13 Bankruptcy can provide relief with regard to lowering the amount you are paying monthly in back child support. You should contact an attorney with experience in dealing with these issues for a more detailed explanation. |
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| TAXES | .mp3 audio* |
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| What if I have not filed tax returns?
A Chapter 7 bankruptcy needs to have verification of earnings up to the time of your filing. You do need to have your tax returns completed. A Chapter 13 bankruptcy requires all tax returns to be filed in order to receive confirmation of your payment plan.
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| Can I eliminate or reorganize tax debts?
Taxes that are more than three years old may be dischargeable. However, you must have filed the tax returns more than two years prior to filing the bankruptcy. Many times, after discussing these issues with an attorney, taxes can be discharged. Because this is a complex area of law you should consult with an attorney before filing bankruptcy and discuss your tax concerns. |
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| Will bankruptcy stop a tax levy?
Taxes and levies can be avoided. However, there are specific and technical timing issues. You absolutely should consult with a knowledgeable attorney regarding any tax issue. |
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