David Posey, Attorney at Law, is no longer handling bankruptcies but provides the following information as a service to you. You need to be careful when selecting an attorney for bankruptcy to make sure they have the education and experience to properly handle your bankruptcy for you. Beware of do-it-yourself services (including services on the internet) that say that they will prepare your bankruptcy schedules for you. Many of them cost you more than hiring a bankruptcy attorney AND many times they cost you even more in lost assets that a bankruptcy attorney could save for you.
Don't wait until your wages are being garnished; don't wait until your house has been foreclosed on; don't wait until your car has been repossessed to seek advice.
See below for answers to frequently asked question.
The filing of a bankruptcy petition is designed to result in a discharge of most of the debts you listed on your bankruptcy schedules. A discharge is a court order that says you do not have to repay your debts, but there are a number of exceptions. Debts which may not be discharged in a chapter 7 case include, for example, most taxes, child support, alimony, and student loans; court-ordered fines and restitution; debts obtained through fraud or deception; and personal injury debts caused by driving while intoxicated or taking drugs. Your discharge may be denied entirely if you, for example, destroy or conceal property; destroy, conceal or falsify records; or make a false oath. Creditors cannot ask you to pay any debts which have been discharged. You can only receive a Chapter 7 discharge once every eight (8) years. Other bankruptcy chapters have different rules for what debts are discharged.
The fact that you filed bankruptcy can appear on your credit report for as long as 10 years. Thus, filing a bankruptcy petition may affect your ability to obtain credit in the future. Also, you may not be excused from repaying any debts that were not listed on your bankruptcy schedules or that you incurred after you filed bankruptcy. Whether a particular company will give you credit after you file a bankruptcy is up to each individual company. As a practical matter most major companies won't consider giving you credit for a period of about two years after your discharge and may charge you a higher interest rate. Beware of companies that say that bankruptcy doesn't matter to them. For example there are used car dealers who will sell you a car even while you are still in bankruptcy but the either charge very high interest or jack up the price of the car.
After you file your petition, a creditor may ask you to reaffirm a certain debt or you may seek to do so on your own. Reaffirming a debt means that you sign and file with the court a legally enforceable document, which states that you promise to repay all or a portion of the debt that may otherwise have been discharged in your bankruptcy case. Reaffirmation agreements must generally be filed with the court within 60 days after the first meeting of creditors.
Reaffirmation agreements must not impose an undue burden on you or your dependents and must be in your best interest. If you decide to sign a reaffirmation agreement, you may cancel it at any time before the court issues your discharge order or within sixty (60) days after the reaffirmation agreement was filed with the court, whichever is later. If you reaffirm a debt and fail to make the payments required in the reaffirmation agreement, the creditor can take action against you to recover any property that was given as security for the loan and you may remain personally liable for any remaining debt.
The Four Chapters of the Bankruptcy Code Available to Individual Consumer Debtors
Chapter 7: Liquidation ($220 filing fee, $39 administrative fee, $15 trustee surcharge: Total fee $274)
1. Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts. Debtors whose debts are primarily consumer debts are subject to a “means test” designed to determine whether the case should be permitted to proceed under chapter 7. If your income is greater than the median income for your state of residence and family size, in some cases, creditors have the right to file a motion requesting that the court dismiss your case under § 707(b) of the Code. It is up to the court to decide whether the case should be dismissed.
2. Under chapter 7, you may claim certain of your property as exempt under governing law. A trustee may have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to pay your creditors.
3. The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts. If, however, you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you filed the bankruptcy petition will be defeated.
4. Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore, you may still be responsible for most taxes and student loans; debts incurred to pay nondischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drugs. Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.
Chapter 13: Repayment of All or Part of the Debts of an Individual with Regular Income ($150 filing fee, $39 administrative fee: Total fee $189)
1. Chapter 13 is designed for individuals with regular income who would like to pay all or part of their debts in installments over a period of time. You are only eligible for chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code.
2. Under chapter 13, you must file with the court a plan to repay your creditors all or part of the money that you owe them, using your future earnings. The period allowed by the court to repay your debts may be three years or five years, depending upon your income and other factors. The court must approve your plan before it can take effect.
3. After completing the payments under your plan, your debts are generally discharged except for domestic support obligations; most student loans; certain taxes; most criminal fines and restitution obligations; certain debts which are not properly listed in your bankruptcy papers; certain debts for acts that caused death or personal injury; and certain long term secured obligations.
Chapter 11: Reorganization ($1000 filing fee, $39 administrative fee: Total fee $1039)
Chapter 11 is designed for the reorganization of a business but is also available to consumer debtors. Its provisions are quite complicated, and any decision by an individual to file a chapter 11 petition should be reviewed with an attorney.
Chapter 12: Family Farmer or Fisherman ($200 filing fee, $39 administrative fee: Total fee $239)
Chapter 12 is designed to permit family farmers and fishermen to repay their debts over a period of time from future earnings and is similar to chapter 13. The eligibility requirements are restrictive, limiting its use to those whose Income arises primarily from a family-owned farm or commercial fishing operation.
The question of whether you should file a bankruptcy is a complicated and important decision. Before making that decision you should contact an attorney who is knowledgeable of current bankruptcy law. In order help you make the right decision the attorney needs to have complete information concerning you debts, your assets, your income and your living expenses. Bankruptcy should usually be filed as a last resort.
Generally, if you file bankruptcy you will have the option to keep your house or car (or other secured property) and continue to pay for it. You will also have the option to give the secured property back and get rid of the debt. People considering bankruptcy sometimes believe that they should put their property in the name of a relative or friend to avoid losing the property. This is generally a bad idea because (1) it may be illegal, (2) you lose your exemptions for that property, (3) transferring property in anticipation of bankruptcy may have the opposite effect (You could lose it because of the transfer) and (4) doing so could make you ineligible for bankruptcy. So, please don't make any transfers of your property before discussing it with an attorney first.