Frequently Asked Questions

Can I file bankruptcy on some debts, but not others?

Will I lose some property?

At what stage in the process do I get protection from creditors? When do they have to stop calling me, sending nasty letters, taking me to court, garnishing my wages?

Are there debts that bankruptcy will not discharge?

What is the basic difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

What about wage and bank account garnishments?

Can a bankruptcy force a mortgage company to modify the terms of the mortgage on your residence?

What about future credit?

Can I own property in the future?

How much will bankruptcy cost?

Can I file bankruptcy on some debts, but not others?

If you choose to file bankruptcy, you are required by law to list every debt by name and address of creditor, and the court will send the official notification of your bankruptcy to each creditor listed. The law will then treat each creditor equally according to its priority and status of lien. You may choose to continue paying a debt secured by a lien on some property that you wish to keep, and you may continue paying a debt that bankruptcy does not discharge such as education loans, tax debts, family support obligations, and a few other special kinds of debt. Also, after bankruptcy has discharged you from debts, you may choose to pay some debt that you owed on the day of filing. However, you are not allowed to leave any debt off the bankruptcy papers.

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Will I lose some property?

If you file Chapter 13 bankruptcy, you will lose no property to the court and will lose only property that is collateral for a debt that you choose to surrender rather than pay for.

If you file Chapter 7 bankruptcy, you may lose to the bankruptcy trustee any property that is not completely covered by liens or protected by some exemption. Because of the effect of liens and exemptions the vast majority of people who file Chapter 7 lose no property to the Chapter 7 trustee. The facts of each specific case determine the outcome in that case.

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At what stage in the process do I get protection from creditors? When do they have to stop calling me, sending nasty letters, taking me to court, garnishing my wages?

The short answer for most people is one week after your second meeting with me, at which you deliver all documents and funds needed.

The moment that the initial bankruptcy papers are filed in the Bankruptcy Court initiating the official bankruptcy case the law is invoked, and most creditors are barred from taking any action to collect their debts. The Court immediately mails a notice of bankruptcy to every creditor listed. The notice bars further collection activity, with a few exceptions such as criminal fines and family support obligations. This court order prohibits telephone calls, nasty letters, repossessions, foreclosures, lawsuits, garnishments, and other forms of collection activity.

It usually takes three to four trips to my office, and most of the paperwork for the bankruptcy case to be completed, in order to file the initial papers that provide this protection. In the most typical situation, a person seeking my help to file bankruptcy will need to schedule: (1) a first meeting with me to review the situation and to make plans, (2) a second meeting in my office to deliver to me all of the required lists, documents, and funds for legal fees and costs, and (3) a third meeting about one week later to review and sign papers. Typically, the day the papers are signed the bankruptcy is filed and the protection is immediately in place.

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Are there debts that bankruptcy will not discharge?

Yes.

A bankruptcy discharge of debt frees you from the legal obligation to pay the debt forever and permanently prohibits the creditor from trying to get you to pay. A bankruptcy discharge frees you from every debt you owe on the day that you file bankruptcy (with some exceptions) if you list the debt by name and address of the creditor.

The most common exceptions are certain tax debts, court fines, education loans, family support obligations, certain debts arising out of a divorce or separation. In addition, if you owe a debt that is secured by a lien on some property such as a house or vehicle, you will need to continue paying that debt in order to keep the property.

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What is the basic difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

Chapter 7 bankruptcy is for a person who needs all of his income to pay his costs of living. A Chapter 7 bankruptcy frees the person from debts without having to set up a payment plan through the court. The case is typically over in about three months from the day of filing. There is a possibility of losing property not covered by liens and exemptions.

Chapter 13 bankruptcy is for a person who has more income than his monthly expenses but still needs protection from creditors. A Chapter 13 bankruptcy protects the person from his creditors from the day of filing and at the end of the three to five year payment plan through the court frees the person from any unpaid balances on the debts owed on the day of filing. Unsecured debt is frozen as of the day of filing, the creditors cannot try to collect the debt, and no interest can be added. Further, in many 13 cases, the payments to the court are less than the total owed. If you file Chapter 13, obtain the court's approval of your plan, and live up to the payment plan, you are then discharged from the balance of any debt not paid in full through the plan (except a few special kinds such as education loans). You do not lose any property unless you choose to surrender collateral to the secured creditor to save the cost of the payments to that debt.

The law has established a median income test to help determine which chapter a person should use.

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What about wage and bank account garnishments?

Immediately upon your filing bankruptcy the court issues an order stopping the garnishment and sends it to your employer/bank. In many cases, an exemption law permits us to recover the wages that had been withheld from you before the bankruptcy was filed.

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Can a bankruptcy force a mortgage company to modify the terms of the mortgage on your residence?

No. Under the law as it exists today (March 27, 2009), for a mortgage on a principal residence, a Chapter 13 bankruptcy will stop a threatened foreclosure and provide a mechanism for getting caught up on the payments that were in arrears at the time the bankruptcy was filed, but will not let the Bankruptcy Court force the lender, against its wishes, to change the principal balance of the loan, the interest rate, or the period of payback. Changes to this law are being considered by Congress.

Under some circumstances a Chapter 13 Bankruptcy Court can modify the principal balance, interest rate, and period of payback on loans secured by property other than a person's principal residence. For example, a vacation home, or vehicle, or business property.

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What about future credit?

The fact that you file bankruptcy will appear on your credit report for a period of ten years. However, there is no law that restricts future credit, because of bankruptcy appearing on a credit report. As far as the law is concerned, if you file bankruptcy, once the bankruptcy case is over, you are legally free to borrow, and any bank or credit card company is free to lend if it wishes. Many things will affect future credit over which you will have no control; such as the general economic condition of the country, whether credit is "loose" or "easy". Many factors in your life other than bankruptcy will affect your future credit, such as employment history, income level, and number of dependents. In fact, many people who have been in financial trouble find that their credit actually improved after filing bankruptcy, because the bankruptcy freed them from debts they could not pay.

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Can I own property in the future?

The bankruptcy law places no restriction on future property ownership. Once the bankruptcy is over, there is no legal restriction on your earnings, credit, or ownership of property because you filed bankruptcy.

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How much will bankruptcy cost?

This varies a great deal depending on each individual case, whether the case is a chapter 7 or 13, and many other factors. I usually charge $150 for the initial conference for a person/couple not engaged in business. This is then credited to any later total fee. In the first conference I am usually able to help you decide on the appropriate chapter and other options (whether to keep or surrender certain property, etc). In this conference as these decisions are made I am usually able to give a written quote for all fees and costs for the routine case being discussed, and that full amount is then due at the next conference to proceed with the bankruptcy. Usually, we are able to complete and file the bankruptcy in about one week after we receive all funds, documents, and lists needed.

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