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Below you will find answers to some common questions we regularly receive from our clients.
What is Bankruptcy?
Bankruptcy a legal preceding that allows an individual who cannot pay his or her bills to obtain a financial fresh start. The right to file for bankruptcy is FEDERAL LAW, and all bankruptcy cases are filed in Federal Court. The filing of a bankruptcy petition immediately stops all creditors from seeking to collect debts while the Court assesses your financial situation and determines if your bankruptcy shall be granted.
What is a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a section of the United States Bankruptcy Code that deals with debt elimination and liquidation. In a Chapter 7, you may be able to protect all your assets, including but not limited to your home and personal property up to certain dollar amounts depending on the property. About 20-40 days after filing, clients must attend a meeting of creditors where testimony is taken by the trustee appointed by the bankruptcy court to administer your case. Approximately 90-110 days after your meeting of creditors, clients receive a discharge, which releases a debtor from all dischargeable debts and orders creditors to forever stop their attempts to collect the discharged debts.
When a debt is discharged, an individual is forever relieved of the obligation to pay that debt. Please be advised, not all debts are dischargeable. Non-discharged include certain taxes, alimony, child support, student loans, criminal restitution, debts that have not been listed in the Chapter 7petition, and debts which have been incurred as a result of either an intentional tort or the defrauding or misleading of a creditor.
What is a Chapter 13 Bankruptcy?
Chapter 13 is a section of the United States Bankruptcy Code designed primarily for the hard-working individuals who desire to repay their debt. Chapter 13 clients include individuals, residential homeowners, debtors with certain nondischargeable debts, and individuals with substantial personal assets. A Chapter 13 bankruptcy allows a person or married couple to pay off all, or a portion, of their debts under the supervision and the protection of the U.S. Bankruptcy Court in exchange for a monthly payment.
Chapter 13 is designed for working people, with steady incomes, who are overwhelmed with debt, including overdue credit obligations, repossessions, judgments, lawsuits, garnishments and other financial concerns. Along with a petition and schedules, clients submit to the bankruptcy court a proposed plan to fully or partially repay their creditors over 3-5 years.
Oftentimes, a Chapter 13 is utilized to save a client’s home or delay a foreclosure sale so the client can sell his or her home on their own. In a home-saver Chapter 13 case, a Chapter 13 Plan is primarily used to repay mortgage arrears, and a percentage, or all, of the money owed to any other creditors, over a 3-5 year period.
Chapter 13 can also be used as an alternative to credit counseling, wherein an individual can repay their credit card debt over a 3-5 year period without the accrual of additional interest charges.
Like the Chapter 7 case, an “automatic stay” goes into effect upon filing a Chapter 13 and creditors are prohibited from undertaking any collection efforts outside of bankruptcy. Additionally, creditors must accept plan payments after the plan has been confirmed in a Chapter 13. Any individual or married couple, even if self-employed, can receive Chapter 13 relief if they owe less than $250,000.00 in unsecured debt and less than $750,000.00 in secured debt.
Upon the successful completion of a Chapter 13 repayment plan, the debtor receives an official discharge and certificate of completion, which extinguishes all obligations to make further payments on unsecured debts, even though these creditors may not been paid in full. In fact, many people in Chapter 13 pay their unsecured creditors no more than 10, 20 or 30 percent of the total amount owed.
Can I protect my home and personal property in bankruptcy?
Lawmakers have determined that, even if you owe a substantial amount of debt, you are still entitled to protect and retain certain assets such as home and car equity, and specified amounts for home furnishings, clothing, claims, bank accounts and numerous other assets. This property is called “exempt property”, which means that you will not lose any property in your bankruptcy provided all property’s value is less than the exemption amount. Protecting your property in bankruptcy greatly depends on the value of the property and all property should be disclosed to us prior to the filing of your bankruptcy case.
In the event the value of your property exceeds the exemption amounts, this property may be liquidated by a Chapter 7bankruptcy trustee to repay your creditors. It is thus of vital importance to fully disclose all assets to us, so we can properly protect your belongings.
Will the filing of a Bankruptcy stop my bill collectors from suing me, calling me or otherwise taking action against me?
When you file for bankruptcy protection, an automatic stay is immediately imposed upon your creditors that preclude them from taking any further action against you to collect a debt, including calling you, filing a lawsuit against you, prosecution of court judgments, wage garnishments and repossession. For example, if you have been served with a summons by one your creditors to appear in court regarding the repayment of a debt, the bankruptcy filing will immediately stop this lawsuit and the creditor, and its attorney, must abide by the requirements of the bankruptcy law.
Can I keep any credit card accounts after bankruptcy?
The law requires a debtor to schedule all outstanding debts that are owed by the debtor as of the date of the filing of a bankruptcy petition. If you have a credit card account that has a zero balance as of the time you file your petition, this account does not have to be scheduled in your bankruptcy petition as, technically, the lender or servicing agent on this card is not a creditor, and thus will not be discharged in bankruptcy.
Even if you have an outstanding balance when you file, you may still be able to keep your account. In order to do this, you usually must agree with the creditor to repay part or all of your outstanding balance as of the time of filing. When you make an agreement of this nature, you and your creditor will execute a document known as Reaffirmation Agreement that, in most cases, requires the approval of the Bankruptcy Court before taking effect.
How are my creditors notified that I have filed for bankruptcy?
Within 7-10 business days of the filing bankruptcy petition, the Bankruptcy Court mails a notice of the bankruptcy filing to all creditors listed in your bankruptcy petition and schedules. Sometimes, it may be necessary for you to contact an individual creditor directly to obtain immediate relief and supply that creditor with your case number and the date of the filing of your petition. Once a creditor has been notified of your filing, they must immediately stop all collections efforts against you.
How long does a typical bankruptcy case take?
A Chapter 7 bankruptcy case normally lasts between 4-6 months. Once your bankruptcy petition and schedules are filed fully and accurately, your only duty as a debtor (besides complying with the bankruptcy trustee) is to appear at court one time. A Chapter 13 bankruptcy case takes anywhere between 3-5 years to complete and requires the debtor to make regular payments to the bankruptcy court.
Will I have to go to Court?
In a Chapter 7 proceeding, the only Court appearance that is required is your appearance before the Court appointed Trustee at your Meeting of Creditors. This meeting usually takes place between 20-40 days after a petition is filed.
In a Chapter 13 case, you are also required to appear at a Meeting of Creditors with your Chapter 13 trustee. In addition, your appearance may also be required at the hearing in which the Bankruptcy Court considers final approval of your plan of repayment. This hearing, called a Confirmation Hearing, usually takes place approximately 3-6 months after a Chapter 13 petition is filed. In most cases, debtors are not required to appear at the Confirmation Hearing.
What is a Meeting of Creditors?
Section 341 of the United States Bankruptcy Code affords creditors the right to meet with the debtor to determine if a discharge or a reorganization of debt is appropriate based upon the facts and circumstances presented by a debtor in their bankruptcy petition. While creditors do technically have the right to attend these proceedings and to question the debtor, creditors rarely appear at these proceedings.
In a Chapter 7 proceeding, the Meeting of Creditors serves two important purposes: (A) the Court, through examination by the Court appointed Trustee, verifies that all of the representations contained in your bankruptcy petition are true and correct to your best of your belief and knowledge. In addition, the Bankruptcy Court Trustee also utilizes this meeting to verify on behalf of the Court that there are no assets that maybe considered non-exempt, which could be sold by the Trustee to repay part, or all, of your debt. A typical meeting of creditors in a Chapter 7 proceeding takes approximately 5-10 minutes to complete.
In Chapter 13 proceeding, a debtor is also required to appear before the Chapter 13 trustee. In a Chapter 13 case, the meeting of creditors serves a slightly different purpose. In addition to verifying that all of the representations made by a debtor are true and correct, the Chapter 13 trustee will also verify that the debtor has the financial ability with which to make the payments proposed in the proposed Chapter 13 plan.
Verification of a debtor's ability to make payments in a Chapter 13 case is based upon both the debtor testimony at the meeting and various documentation, usually tax returns and/or pay statements, that must be presented to the Chapter 13 trustee to verify the representations made in your Chapter 13 petition. As in a Chapter 7 case, a typical meeting of creditors in Chapter 13 case takes between 5-10 minutes to complete.
How many years will a bankruptcy filing show on my credit report? How long will it take me to obtain new credit after I file for bankruptcy?
Under the provisions of the Fair Credit Reporting Act, the filing of a bankruptcy petition shall remain on an individual's credit report for 10 years, but only 7 years if a debtor is successfully in completing his or her Chapter 13 plan.
With respect to obtaining new credit after the filing of a bankruptcy petition, the decision to grant credit in the future is strictly up to an individual creditor and varies from creditor to creditor and state to state depending on the type of credit requested. While there is no law that prevents an individual from extending credit to you immediately after obtaining a discharge in bankruptcy, you should anticipate a period of time in which you would have to establish credit. In most cases, the easiest manner in which to reestablish credit is to obtain a secured credit card from a major grantor of credit after you obtain your discharge.
How often can I file for protection under Chapter 7?
An individual debtor can obtain relief under Chapter 7 every eight years. Please note however that the 8-year period does not run from the date of the filing of the first petition, but rather from the date the court issues the bankruptcy discharge. If you have filed for Chapter 7protection in the past, you can file a second Chapter 7 petition so long the applicable time period have past since the issuance of the discharge in your prior case.
Can utility bills be discharged in a bankruptcy proceeding, and if so, will my utility services be terminated?
Obligations to utility services can be listed in a bankruptcy petition. In addition, it is a violation of Public Service Commission regulations for a utility service to terminate the service to a bankrupt on a basis of their filing a bankruptcy petition. However, a utility may, and in most cases, will, require that you pay a security deposit to that utility to guarantee that post petition obligations shall be paid in a timely fashion.
Can my employer discriminate against me because I have filed for a bankruptcy?
Absolutely not. Federal law prohibits governmental units and private employers from discriminating against you because you file a bankruptcy petition or because you have failed to pay a dischargeable debt.
To receive a free consultation regarding your (or your friend or family member’s) debt problems, please contact us today.
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