What Is Bankruptcy?
Bankruptcy is a legal proceeding in which a person with debt problems can get a fresh start. Once you file a Chapter 7 or 13 bankruptcy, your creditors are legally prevented from taking action to collect on the debts owed. Even after the 2005 Bankruptcy Act, bankruptcy is a powerful remedy against your creditors. While no one wants to file bankruptcy, if you have serious debt problems, particularly with credit cards, filing bankruptcy can make a significant positive difference in your life.
Will Filing Bankruptcy Stop Creditor Harassment?
Yes. Filing bankruptcy results in court-ordered protection which in turn prevents your creditors and bill collectors from contacting you in any manner. In addition, creditors cannot initiate or continue any lawsuits, wage garnishments or other collection proceedings against you.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, sometimes called a "straight liquidation", is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. Among the debts which are typically not dischargeable are some taxes, some student loans and alimony or child support. There are some other exceptions to the discharge, depending on the case. In the vast majority of cases, the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start".
What Is Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy is significantly different from a Chapter 7. It is a repayment plan lasting three to five years, depending on your income level. You pay off your debts in full or in part, based on your ability to pay. At the end of the case, all the balances on your debts are discharged, even if they have been only partially satisfied, except your mortgage, student loans, child support, and some other exceptions. Most Chapter 13 cases are partial payment cases. Normally, you continue paying your house and care payments. The rest of your debts are put into the Chapter 13 plan. This means you do not normally lose anything you own.
You should consider filing Chapter 13 if:
- Your are behind on house or car payments, and need time to catch up;
- You are behind on other debt payments, and need time to catch up;
- You have valuable property you would lose in a Chapter 7 and instead can make
payments to your creditors over time. You can call our office now to find out whether Chapter 13 would work for your situation.
How Difficult Will It Be to File Chapter 7 Under the New Bankruptcy Laws?
There has been a great deal of doom and gloom reporting regarding the bankruptcy means test under the new laws and how much more difficult it is now to file a Chapter 7 case and to be discharged thereunder. It is true that there are more hoops to jump thorough under the new laws and that the means test will result in some people being required to file Chapter 13 versus 7. However, for the great majority of filers, Chapter 7 is still available with very little extra effort.
Do I Need An Attorney?
Some people try to file their own bankruptcies, but often encounter difficulties as they proceed. The filing procedures and bankruptcy laws are complicated and difficult for those not familiar with them. Most people would rather have representation throughout the entire process and the additional expense is not that great. It does cost money to file, but our firm's costs are very reasonable and competitive. Please call us and we would be happy to discuss our rates.
If I Am Overwhelmed With Debt, Should I Go To A Credit Repair Company Prior to Talking to An Attorney About My Problems?
Usually No. Everyday, companies nationwide make appeals to consumers with poor credit histories. They promise that, for a fee, they can clean up your credit report so you can get a car loan, a home mortgage make other such purchases. The truth is, very few of them can deliver. Oftentimes people pay them hundreds or thousand of dollars in fees only to get little or no improvement in their credit report. Many of them are good at taking your money, but not so good at delivering a result. The truth is that no one can legally remove accurate and timely filed negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete, but everything a credit repair company can do for you legally, you can do for yourself at little or no costs.
Should I Feel Bad If I Am Considering A Bankruptcy Filing?
No. You might be interested in knowing that Congress named Chapter 7 after the seven-year debt forgiveness rule contained in the Old Testament of the Judeo-Christian Bible. The King James Version reads:
At the end of every seven years, thou shalt make a release. And this is the manner of the release: Every creditor that lendeth ought unto his neighbor shall release it; the shall not exact it of this neighbor, or his brother, because it is called the Lord's release.
Deuteronomy 15-1, 2
This passage was written over 3000 years ago. This means the idea forgiving debt on a period basis has been around for a long time.
Each year more than 1.5 million Americans file for bankruptcy as well as thousands of companies. Good or bad, it is an accepted part of our economic system. If you have made conscientious efforts to meet your debts demands and they are simply overwhelming, bankruptcy is designed to give you a fresh start. Seductive credit card pitches and easy credit installment payment availability lure many innocent victims into a trap. To feel ashamed or guilty about not paying the companies that trapped you in the first place is unnecessary and unwarranted.
What Are The Most Common Reasons For A Chapter 7 Bankruptcy?
The most common reasons are:
1. Unemployment: Large medical expenses; Seriously overextended credit, marital problems and;
2. Other large unexpected expenses.
A Harvard Study reported that half of US bankruptcies were caused by medical bills.
Who Will Know I Filed Bankruptcy?
Bankruptcy filings are public records. Nevertheless, under normal circumstances very few will know that you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years.
Can Your Boss Fire You For Filing Bankruptcy?
No. U.S.C. Section 525 prohibits any employer from discriminating against you because you filed bankruptcy.
Will I lose any property if I file Bankruptcy?
Everyone who files for bankruptcy is allowed to keep and maintain a certain amount of property, including personal possessions, auto, bank accounts, retirement accounts and real estate. This property is said to be "Exempted" from the bankruptcy. The vast majority of people who file for bankruptcy keep all of their property. An attorney from our firm can help you evaluate what property you will be allowed to keep and help you know the risks of losing any property if you file.
What Don't I Keep?
In bankruptcy, assets in excess of your allowed personal exemption, or non-exempt assets such as certain real estate, automobiles and boats will be liquidated by the trustee.
If I am behind on my car payment or my house payments, can Bankruptcy help me?
Yes. Chapter 13 is the solution. It allows you to keep your car and/or house. It allows you to repay past due mortgage payments and car loans over a three to five year period. These payments are made to a Chapter 13 Trustee who in turn makes payments to the creditors. Chapter 13 stops repossessions and foreclosures. Talk to a member of our firm concerning how Chapter 13 can protect your property.
If I owe past due taxes, can Bankruptcy Help me?
Yes. This is another area in which a Chapter 13 filing can offer a solution. Chapter 13 generally stops garnishments and levies by the IRS and the Arizona Department of Revenue. In many cases, tax debt can be restructured or even eliminated in Chapter 13 proceedings.
I Filed Bankruptcy Before. Can I File It Again?
A person can file Chapter 7 again if it has been more than 8 years since he or she filed previously. With regard to Chapter 13 filings, the answer is more complicated. Call us for assistance.
If I File, Will I Ever Get Credit Again?
Yes. A number of banks now offer "secured" credit cars based upon a debtor putting up a certain amount of money (sometimes as little as $200.00) in an account at the bank in order to guarantee payment. Ordinarily the credit limit is equal to the amount of security given and is increased as the debtor performs and proves his or her ability to pay the debt. Two years after the bankruptcy discharge, many mortgage companies are willing to extend loans to debtors on terms which are as good as those offered to others with the same financial profiled who have not filed bankruptcy. In these cases, the size of your down payment and the strength and stability of your income will be more important than the fact you have previously filed bankruptcy. In spite of the fact your bankruptcy filing stays on your credit report for ten years, you may bolster your credit worthiness through good performance.