- Why file bankruptcy?
- What is Chapter 7?
- What is Chapter 13?
- Will filing bankruptcy stop foreclosure?
- Will bankruptcy stop repossession?
- Will bankruptcy stop garnishment or lawsuits?
- At what point will a bankruptcy begin to assist a debtor?
- Will filing for bankruptcy stop harassing phone calls?
- Will my employer be notified if I file bankruptcy?
- What types of debts are typically “wiped-out” in a bankruptcy?
- Can bankruptcy help with income tax debt?
- What is the cost of filing a Chapter 7 or Chapter 13 bankruptcy?
- How can your office help?
- How are attorney fees paid?
- What Information do I need to bring to an appointment?
- What happens after I file?
- What is a meeting of creditors?
- What can I expect during the free consultation?
- Does filing bankruptcy have to be done by both husband and wife?
- What happens to co-debtors who don’t file?
- What assets are protected when I file?
- Does filing bankruptcy put any possible future tax refunds in jeopardy?
- Does filing bankruptcy put any possible future ESOP or existing 401k plans in jeopardy?
- Do notices of bankruptcy get filed or posted in the local newspapers?
- What should I expect in the next few months?
- What does bankruptcy do to my credit?
- How can I rebuild my credit?
- Other sources for information in credit repair
- What debts are not erased by bankruptcy?
Approximately one million people or businesses file bankruptcy annually. Bankruptcy is a powerful tool to provide debt relief to those who need protection. While bankruptcy may carry a perceived negative public perception, it allows people the opportunity to remove the stress of overbearing debt problems and to get a fresh start with their lives.
Bankruptcy plays an important role in society. It relieves consumers of debts, thus enabling the consumer to live life more comfortably and to contribute to society’s economic and credit systems.
A Chapter 7 bankruptcy is the most common type of consumer bankruptcy. A Chapter 7 typically will discharge or eliminate credit card balances, installment loans, medical bills, and most other unsecured debt. In nearly all cases, a debtor will keep all his or her belongings and property. If a debtor is current with his or her mortgage and automobile payments, a debtor typically is able to continue the payments to his or her lender and to retain possession in virtually all Chapter 7 cases.
A Chapter 13 (or Wage Earner Plan) is a type of bankruptcy in which the debtor propose an affordable repayment plan to the Chapter 13 Trustee. A Chapter 13 allows individuals to retain their property and personal belongings that may otherwise not be exempt. Usually, a debtor will file a Chapter 13 Plan to retain possession of homes or automobiles that the debtor fears may be repossessed or foreclosed. A Chapter 13 can help the debtor catch up on auto or home loans that are past-due, and pay for non-dischargeable taxes, back child support and student loans.
In most instances, filing for bankruptcy will stop foreclosure on mortgages. A Chapter 13 Repayment Plan can offer a debtor a means of catching up on delinquent mortgage payments and allows a debtor to retain possession of a home.
Filing for bankruptcy typically will stop the repossession of automobiles and mobile homes. Also, a Chapter 13 Repayment Plan will allow the debtor the opportunity to become current with the automobile or mobile home loan that is delinquent.
The filing of a Chapter 7 or Chapter 13 bankruptcy will stop a creditor from continuing almost all civil legal proceedings against the debtor. The most common types of civil legal proceedings or lawsuits are those brought on behalf of credit card lenders, hospitals, clinics, and mortgage companies. The filing of a Chapter 7 or Chapter 13 bankruptcy will not stop a criminal proceeding.
Usually, a bankruptcy will protect a debtor upon the filing date of a bankruptcy petition. A petition for bankruptcy is filed when a completed petition is presented along with the required filing fee to the Bankruptcy Court. When your bankruptcy petition is filed, the Bankruptcy Court mails a notice to your creditors to discontinue any type of collection efforts, including harassing phone calls, lawsuits, foreclosure and repossessions.
Yes. Filing for bankruptcy will prohibit any type of collection effort regarding a civil debt. At our firm, we usually ask clients to begin referring harassing telephone calls to our office even before filing the client’s bankruptcy petition.
Usually, an employer does not have any reason to be notified of a bankruptcy filing. The most common instance when an employer is notified of a bankruptcy filing would be to stop a pending garnishment upon a debtor’s paycheck.
-Unsecured installment loans
-Unsecured lines of credit
The age of the tax debt and the date the tax returns were filed usually determines whether an individual can wipe out his or her tax debt. Also, a Chapter 13 Repayment Plan may be able to help debtors with back taxes that cannot be discharged in a Chapter 7.
The U.S. Bankruptcy Court will require the debtor to pay a filing fee upon the filing of a bankruptcy petition. A Chapter 7 filing fee is $335. A Chapter 13 filing fee is $310. If a debtor uses an attorney to assist him or her in filing bankruptcy, the attorney fees vary from law firm to law firm. At our office, the attorney fees vary depending on the complexity of the case.
At our law firm, we can offer you a free initial consultation with an attorney at a location nearest you. We help analyze your financial situation and advise you as to whether the filing of a bankruptcy petition will help you. Our office has the experience and expertise to help you along the way.
Attorney fees in a Chapter 13 are paid through the monthly payments made to the Chapter 13 Trustee. Attorney fees in a Chapter 7 can be paid in one of three ways. Before filing the case, our clients can pay all the attorney fees with a lump sum payment or make monthly payments to our office until the attorney fee balance is paid. Our firm can make arrangements with a third party to guaranty the payment of the attorney fees in low monthly payments. A third party guaranty allows our firm to file the Chapter 7 without having the attorney fees paid in full before filing the case.
- Monthly budget
- List of creditors (along with addresses) and amounts owed
- Previous two years’ state and federal tax returns and year-to-date gross income
- Your two most recent pay stubs or proof of other income you receive such as Social Security/Disability, pension or unemployment
- Any summons, garnishments, judgments or other similar documents
- Foreclosure or sheriff sale notice
In approximately a week and a half, the court will send you a notice of the Meeting of Creditors. The Meeting of Creditors is held approximately 30 days after you file. A Chapter 7 case typically lasts 90 days until discharge. A Chapter 13 debtor begins to make Chapter 13 payments 30 days after the filing and continues to make payments for the duration of the plan.
The Meeting of Creditors allows your creditors the opportunity to ask questions. However, creditors rarely appear. During the Meeting of Creditors, the trustee asks questions about your personal information, assets and debts. These questions are similar to those asked during the consultation with one of our attorneys. The meeting usually lasts four to six minutes.
Our experienced attorneys will go through your assets, a budget and your debts. They will review the information and ask important questions. Finally, they will advise you on all your options concerning bankruptcy and get you ready to file in a way that best protects your interests.
A husband or a wife can file, without the other if the situation warrants only one person filing. A typical situation is when either the wife or husband is the only person responsible for the debt.
However, bankruptcy court requires both parties’ income and expenses in analyzing a debtor’s ability to qualify for Chapter 7 or Chapter 13. Also, if there is joint debt, the person who does not file still will be legally responsible for the entire debt.
Co-debtors can be protected on consumer debts that are in a Chapter 13. Typically, a co-debtor will remain legally liable on joint debts after a Chapter 7.
The answer to this question is different with each individual. However, generally speaking, a debtor will keep his or her home (if current with the mortgage), automobile (if current), life insurance, tools used in a trade, typical household goods and retirement accounts. Also, depending in the specific case, a debtor may be able to keep boats, guns, computers, recreational vehicles and, depending on their value, other “toys.” The only way to determine what assets you can keep is to meet with one of our qualified attorneys.
In some instances, a debtor loses the rights to a tax refund for the year he or she files the bankruptcy case. However, the vast majority of people keep their tax refunds.
Filing for bankruptcy does not offset your future right to invest in a retirement account. For those with a current 401k, the debtor will keep the 401k because the Supreme Court has ruled that 401k accounts are not property of the bankruptcy estate. Therefore, a debtor can discharge debt and keep his or her 401k.
A debtor may have other types of retirement accounts. Most ERISA qualified retirement plans are protected. A debtor is best advised to discuss the effects of bankruptcy on his or her retirement account with one of our qualified attorneys.
Filing for bankruptcy is a public filing; however, a consumer bankruptcy typically does not get published in the newspaper. On the other hand, businesses that file for bankruptcy protection typically are published in the newspaper.
Whether you are filing a Chapter 7 or Chapter 13, the next few months will be similar in procedure. You retained our law firm’s services by paying money toward the court filing fee. Once retained, you can direct all creditor calls to our law firm. In most instances this will ease the harassing phone calls. However, you are not protected from collection effors until the case is filed.
We will prepare the bankruptcy petition once our firm receives all the information and the filing fee from you. You are required to review and then sign the petition schedules prior to filing with the court. If we mail the petition to you, please return the petition as soon as possible so we can get the case filed and provide you with the protection of the Bankruptcy Court.
The Bankruptcy Court will send you a Notice of the Meeting of Creditors about 7-10 days after your case is filed. There is a lot of information contained in this notice; please thoroughly read it. The Notice will specify the date, time and location of the Meeting of Creditors (approximately 30 days after your case is filed). You must attend the Meeting of Creditors.
The Meeting of Creditors is a relatively painless hearing. One of our attorneys will be with you at the hearing. The hearing is neither in a courtroom nor in front of a judge. The Meeting of Creditors is held before a trustee and will last approximately 10-15 minutes. The trustee will ask questions about your assets, debts and background information. You need to bring a picture I.D. and verification of a social security number. In addition, you will need to bring your most recent pay stub and bank statements from all bank accounts, showing the balance on the date your case was filed. Failure to bring these items could cause the trustee to file a motion to dismiss your bankruptcy case. If you filed a Chapter 13, you will need to bring your first Chapter 13 payment.
If you filed a Chapter 7, the next step is to complete the Debtor Education course and to wait 60 days until you receive your discharge notice. If you filed a Chapter 13, you will have to make monthly payments to the Chapter 13 office for the duration of your plan and then receive a discharge.
The credit bureaus will report your bankruptcy filing on your credit report for no more than ten years from filing date of the bankruptcy petition. However, keep in mind that what you do after your bankruptcy will determine your credit score. You will want to rebuild your credit score as fast as possible.
Bankruptcy will damage your credit if you already have stellar credit. On the other hand, if your credit report is already pretty banged up, a bankruptcy will not make your credit much worse than it already is, especially in a Chapter 7 case. Your credit can improve much faster after a discharge in bankruptcy than prior to filing for bankruptcy because your debt has been eliminated.
There can be items on your credit report worse than bankruptcy. Tax liens and judgments can be more alarming to a credit-reviewer than a bankruptcy. A tax lien or judgment is a red flag to a lender. However, once your debts are eliminated, you sometimes can take steps to clean your credit report and to begin to rebuild your credit. Therefore, a bankruptcy sometimes can improve an individual’s credit rating, rather than damage it, if the correct steps are taken after a bankruptcy.
The key to your future purchasing power after a bankruptcy discharge will be your credit rating. The way you rebuild your credit greatly will influence whether your rating remains low, increases slowly over time, or increases rapidly over time.
The best starting point for the repair process is your credit report itself. The three credit reporting agencies in this country are:
- Experian (1-888-EXPERIAN or www.experian.com)
- Equifax (1-800-685-1111 or www.equifax.com)
- TransUnion (1-800-916-8800 or www.tuc.com)
Your credit report tells you what information prospective creditors will see when you apply for credit. Potential employers and some auto insurance companies also use credit reports, so your report should be as accurate as possible.
Starting March 1, 2005, federal law entitles you to one free copy of your credit report annually. You can obtain this free credit report over the Internet at www.annualcreditreport.com or by telephone at 1.877.322.8228. An annual review of your credit report will help you determine its accuracy. If you find any errors, write to the credit bureau from which you received the report and provide correct information. Follow up in a couple of months to make sure the bureau has corrected the information. If you dispute something in writing, the credit bureau has to check the information, and it will correct the report if its investigation proves you were right.
The credit bureau may not accurately reflect your most recent discharge; therefore, you should send the bureau a copy of your discharge notice and the schedules of creditors. Furthermore, you may want to inform the credit bureau of the following information (the credit bureau does not have to add this information but often will):
- Current employment
- Current residence
- Current phone number
- Date of birth
- Checking account number
Another strategy for building your credit record is to make sure everyone you pay on time reports this information to the credit bureau. You may improve your score by asking your creditors to report timely payments. Creditors are not required to report your payment history, but any reported information must be accurate.
Once you have established that the current information on your report is as accurate as possible, your next goal is to improve your score as much as possible with new credit references. A methodical approach to credit will yield the best results.
First, establish a realistic household budget so you have a clear idea of how much debt payment your budget can handle. A budget allows you to realize how much money is coming in and how much money is going out each month. A sound budget is key to rebuilding your credit.
Second, begin to obtain credit. Evaluate the credit offers you receive based on the type of credit, interest rate, grace period, annual fees and any other terms so you know your exact obligations. This approach is essential because your application process should remain focused. If you apply to a large number of credit cards at once, creditors who would otherwise approve you may reject you. Be selective!
A starting point in obtaining credit is getting one credit card. You may only qualify for a secured card, but even so, it can rebuild your credit. Once you have a credit card, make a small purchase each month (e.g. $25) and pay it off when the bill arrives. When you pay the balance due and avoid interest charges by not carrying balances over month to month, you show prospective creditors that you can manage your account.
Once you have established yourself with the one card, you might be anxious to apply for many more cards. Don’t get too carried away. Ideally, you should carry one or two bank credit cards, possibly one department store card and one gasoline card. Try not to charge everything on your bank credit card and not to use your department or gasoline card. When creditors look in your credit file, they want to see that you can handle more than one credit account at a time. Do not build up interest charges on these cards. Rather, use them and pay the bill in full.
Another method to rebuilding credit is to apply for a small loan at your bank. After you’ve used a credit card for a time, you may decide to obtain a small consumer loan. Paying that loan on time will improve your credit score. Make sure you are on time with all of your payments, whether for a car loan, home loan, student loan or credit card. You must pay all your bills on time after a bankruptcy to build your credit effectively.
If you follow the steps outlined above, you can rebuild your credit within one to three years on average. If you aggressively build your credit after a discharge, you may be eligible for a home mortgage within three to four years.
- The Guerrilla Guide to Credit Repair: How to Find Out What’s Wrong With Your Credit Rating And How to Fix It – By Todd Bierman, Nathaniel Wice
- On Your Own For The First Time – By Jeff Bowers
- Repair Your Own Credit and Deal With Debt – By Brette McWhorter Sember
- The Credit Repair Kit – By John Ventura
- The No –Nonsense Credit Manual: How to Repair Your Credit Profile, Manage Personal Debts and Get the Right Home Loan or Car Lease – By Shaun Aghill
- The Complete Guide to Credit Repair – By Bill Kelly, Jr.
- The Insider’s Guide to Manage Your Credit: How to Establish, Maintain, Repair, and Protect Your Credit – By Deborah McNaughton
- Guaranteed Credit : A Time-Tested Program Guaranteed to Provide Clear, Step-By-Step Information on How to Repair, Restore and Rebuild Your Credit – By Arnold S. Goldstein
- Getting Out of Debt: Repair Bad Credit and Restore Your Finances! – By Rich Mintzer
- Repair Your Credit – By George Williams III
The following debts are not erased in either Chapter 7 or Chapter 13. If you file for Chapter 7, these will remain when your case is over. If you file for Chapter 13, these debts will have to be paid in full during your plan. If they are not, the balance will remain at the end of your case:
- Debts you forgot to list in your bankruptcy papers, may not be discharged;
- Child support and alimony;
- Debts for personal injury or death caused by your intoxicated driving;
- Student loans, unless it would be an undue hardship for you to repay;
- Fines and penalties imposed for violating the law, such as traffic tickets and criminal restitution; and
- Debts you incurred on the basis of fraud, such as lying on a credit application;
- Credit purchases of $1,150 or more of luxury goods or services made within sixty days of filing;
- Debts from embezzlement, larceny or breech of trust, and
- Mutual debt incurred through a divorce decree.
- Recent income tax debts and some other tax debts. This is a complicated area of the bankruptcy law, and you should consult with one of our attorneys to discuss your tax debts. You can discharge (wipe out) debts for federal income taxes in Chapter 7 bankruptcy only if all these five conditions are met:
- The IRS has not recorded a tax lien against your property. (If all other conditions are met, the taxes may be discharged. However, even after your bankruptcy, the lien remains against all property you own, effectively giving the IRS a way to collect.)
- You didn’t file a fraudulent return or try to evade paying taxes.
- The liability is for a tax return (not a substitute return) actually filed at least two years before you filed for bankruptcy.
- The tax return was due at least three years ago.
- The taxes were assessed (you receive a notice of assessment of federal taxes from the IRS) at least 249 days (eight months) before you file for bankruptcy. (11 U.S.C. 523(a)(1) and (7).