My clients have many questions when they come to my office. They want to know what is going to happen to them if they can’t pay all their bills any longer. They ask about every aspect of filing a bankruptcy case; how it will affect their home, car, job, retirement funds, credit score, etc. Any form of bankruptcy has a significant impact on your financial life; mostly for the good.
This page is devoted to answering the most common questions we receive about filing a Bankruptcy case.
After Bankruptcy | Alimony | Bankruptcy | Chapter 13 | Chapter 7 | Child Support | Co-Signed Debts | Credit Reports | Cross-Collateralization | Debts | Divorce | Exempt Property | Fees & Costs | Forgot a Debt | Garnish Wages | Home Ownership | Inheritance | IRS | Judgement Liens | Medical Bills | Own a Business | Pension IRA | Personal Property | Protect | Public Notice | Reestablish Credit | Secured Creditors | Student Loans | Taxes
After Bankruptcy
What Happens After Bankruptcy?
What is life like post discharge?
Bankruptcy affords you a fresh start, either under Chapter 7 or Chapter 13.
Your fresh start essentially begins the day you file your case although it is not officially permanent until you receive your order of discharge some 3 months later for Chapter 7, or some 36 – 60 months later for Chapter 13.
Your debts are suspended at the moment we file your case. Your creditors are prohibited from trying to collect any debt from you. They also cannot repossess items or go through with real property foreclosure. Every debt you owe on the day we file your case is going to be included in your case and will possibly be discharged. As we have discussed in other sections some debts can not be discharged such as taxes, obligations due to an ex-spouse, and student loans being the most common examples.
The Discharge only applies to the debts you owe on the day we file your case. If you incur new debts through an accident and a trip to the hospital those are new debts and they are not included in your bankruptcy case. You need to let us know that something like that has happened so we can make special provisions in your case
Once you have received the Order of Discharge you will know your bankruptcy has been concluded, your debts have been discharged, and you now have a fresh start. Further, your creditors are ordered to never bother you again regarding these debts. They cannot report anything to your credit report about these debts nor can they sell them to a third party. If they do any of these things they are in contempt of court. As a result, we do not see these things very often.
What is the Effect of a Bankruptcy and your Credit Reports?
Post Discharge Credit Reports
A DISCHARGE IN BANKRUPTCY STARTS THE REHABILITATION OF YOUR CREDIT REPORT AND CREDIT SCORE
A discharge in bankruptcy has a significant impact on your credit report.
Your bankruptcy will appear on your report for the next 10 years.
Any debt discharged will show a zero balance.
All discharged accounts are closed.
No more reports will be made about your payment histories.
You must file a dispute if a discharged debt is still being reported despite being discharged. If the debt is not removed then you must report that to your bankruptcy attorney. Any creditor that refuses to remove the information can be punished by the Bankruptcy Court. through the court.
Your discharge starts the rehabilitation of your credit score. The effect of bankruptcy on your credit score is not what you think would happen. The majority of clients file for bankruptcy with a credit score in the 400 – 500 range. Because you have no debt and no more negative reports, the longer your credit report stays healthy and you avoid future financial problems, you will see a large improvement in your score, maybe over 100 points within the first 18 months post-discharge.
You will become a car loan and car sale solicitations magnet. Once my client receives a discharge they receive offers to buy or finance cars, and get offers of credit cards and loans.
Bankruptcy does not destroy your credit score or damage your credit report. Bankruptcy is a known way to improve your credit score.
How Can I Reestablish My Credit?
Post Discharge Reestablishing Credit
After you exit the bankruptcy process you may want to borrow money for a car, or refinance a home. The question is “what kind of credit can I get if I have been through a bankruptcy.”
The first thing to remember about credit for big items, like homes and vehicles, is that it is largely individualized and depends deeply on your income at the time of seeking a loan.
When our clients go through bankruptcy they become prospects for vehicle loans. You will be contacted by dealers, and finance companies soliciting you to buy a vehicle. They want your business because you have discharged all of your debts and you are beginning your fresh start.
We do not normally recommend you consider those due to the loan’s high-interest rate. If you can wait a year or more you will most likely be able to rebuild your credit score enough to buy a car with a much lower interest rate. But if you need a vehicle while in a bankruptcy case, or shortly after concluding your case, there are many sellers.
Homes are quite different. A new home loan applicant may face up to a 2 to 3-year waiting period after completing your bankruptcy case. This is not true for all home mortgage lenders. Each situation is individualized and we can not predict if you could buy a home or refinance a home.
You will be offered credit cards and other types of loans after your discharge, and we discourage taking these offers. We do not find it necessary to take on debt in order to prove you have reestablished yourself.
Please avoid new debt if you can: You have gone through a hard experience because you had a problem with debt. We recommend you avoid using credit unless it is necessary, for as long as possible.
What If I Forgot Someone I Owe?
Post Discharge Unlisted Creditors
“They are Toast, but don’t know it yet.”
One question we answer frequently is, “What if I owed someone money and they were not listed in my papers because I forgot about them?”
It isn’t likely that we miss any of your creditors. When we try to find your creditors we pull all your credit reports, we review the bills and statements you bring us, and we probe your memory as to who you might owe.
If despite those efforts we can not find one of your creditors it is not our fault nor your fault. It was the creditor’s fault. If they are not sending bills or reporting to your credit report and we have no way of locating them then that’s their problem.
In that case, the creditor’s debt has been discharged; they just did not know about it at the time.
After your discharge, if you receive a bill or letter that you owe a creditor that was not listed in your bankruptcy, all you need to do is send us the letter or bill and we will get rid of the creditor for you. Once notified, they know their debt has been discharged, and any attempt to collect the debt will be a contempt of court charge.
What About My Possesions?
Exemptions aka Exempt Property
During the course of the videos, you have heard me refer to exempt assets or exemptions. Exempt property is property and possessions you get to keep when you file a bankruptcy case.
In a bankruptcy case, you get to keep the property up to a limit. If you have more possessions than you claim as exempt then the “surplus” property could be sold by a Bankruptcy Trustee to raise money to pay on your debts.
As a rule, a large majority of our clients can protect all their homestead and personal assets.
Exempt property is divided into two categories: a Homestead which is the real estate that is your home. This is not an unlimited exemption, and it is different for different people. Our Tennessee clients have a limit on the amount of homestead they can claim ranging from $5,000 to $50,000. Our Virginia clients can claim a homestead exemption ranging from $5,000 to only about $20,000. If you do not own the land where your home is, for example, a mobile home on a rented lot, then you do not get to claim a homestead exemption.
All your other possessions are called personal property. This includes anything that you claim to own; such as your vehicles, recreational vehicles, mobile homes, furniture, appliances, bank accounts, work tools & equipment, your interest in recovery in a pending lawsuit or class action claim, and even retirement savings.
There are many factors that determine how much of your home and which of your possessions we can protect. Tennessee has fairly generous exemptions, and Virginia has fewer. Pension plans are almost always protected from creditors but there are some exceptions that can cause a client to lose his pension accounts. We have to go through every asset that we own and classify the assets to determine if we might lose something.
Is There Any Help If I Owe The IRS?
What Debts are Included – Tax Debts
“Yes, Sometimes you can Discharge Income Tax Debts”
If you owe income tax debts you have a problem. The IRS is the world’s most aggressive and powerful collection agency. There is little they cannot do in order to collect a debt from you. There are even criminal penalties associated with this debt in extreme cases. Some states have their own income tax.
However, it is a widely misunderstood belief that you cannot discharge tax debts in bankruptcy. In some circumstances, you are able to discharge income tax debts.
This is not available for all types of tax debts. Taxes owed under Form 941 are not dischargeable.
Even with Income Taxes – There are limitations on which income tax debts can be discharged and others that can not.
We will be able to tell you whether a particular tax debt can be discharged. This requires an investigation of that debt and the circumstances around it.
Is My Bankruptcy Made Public?
There is very little public notice of a bankruptcy case unless you are a big company or a celebrity.
This information is not printed in any local newspapers. It is not available on a random search through the google search engine. Of course, all of your creditors are notified. The fact that you have filed a bankruptcy case will appear on your credit report. As a general rule, the public does not know you filed a bankruptcy case.
Alimony, Child Support & Divorce
What About Child Support & Alimony?
What Debts are included – Domestic Support & other Marital Debts
A domestic support obligation is child support or alimony you pay someone. It is an obligation that contributes to the support of another. These obligations cannot be discharged in any form of bankruptcy.
If you owe a domestic support obligation the Bankruptcy Code gives you no relief and you will still be obligated to pay it. Filing bankruptcy does not stop child support or alimony enforcement proceedings.
In Chapter 7 this applies even to other types of obligations, such as an Order or Agreement to pay certain debts for the spouse or to pay some money in the future.
In Chapter 13 you still have to pay your domestic support obligation. But if you owe any other obligation to an ex-spouse that may be called a property division, or debt division; those debts may be partially discharged in a Chapter 13 case.
It is important for your bankruptcy attorney to know the details of any divorce or property settlement agreement you have signed.
What About Child Bankruptcy & Divorce?
Bankruptcy and Divorce
If you are in a divorce or are contemplating filing for a divorce you should get a free consultation at Dean Greer & Associates if you already have financial problems.
A divorce is a wrenching process. It affects so many things and so many people. Divorce also has serious financial implications. It is impossible to divide one household into two households, with the same incomes, and not have a whole new level of financial stress for both of you.
You should not settle financial issues until you know how they will impact you. If you make an agreement about your debts before you consult us then we cannot help you. Essentially, the debts you agree to in a divorce case can not be discharged in a Chapter 7 bankruptcy case. A small number of divorce debts may be discharged in a Chapter 13 bankruptcy case. Each case is different.
If you are thinking about a divorce or have already filed for a divorce you need to get expert advice about the consequences of your decisions.
Bankruptcy
How Does Bankruptcy Protect Me?
The Protection Given to You in Bankruptcy
One of the most beneficial aspects of filing a bankruptcy case is the “Automatic Stay,” a federal law in the United States Bankruptcy Code that protects you from the moment you file a bankruptcy case.
In my office, we would prepare a lengthy number of documents for you to file a bankruptcy case. After you sign those documents we email those to the bankruptcy court and you have filed a case. You will have a bankruptcy case number, and at that point, you and your possessions are protected by federal law; which is backed up by a federal court.
- Creditors are prohibited from taking any action to collect a debt from you.
- They are prohibited from filing or continuing lawsuits.
- They are prohibited from repossessing anything.
- They are prohibited from initiating or concluding any foreclosure sale.
- Garnishments must cease.
- Letters and phone calls have to stop.
Outside of enforcing child support orders and criminal court proceedings everything another debt collection action is required to stop. If someone violates the Automatic Stay they can be punished by the bankruptcy court.
From the time you are in bankruptcy, your creditors can not take action against you. At the end of case, you receive an Order of Discharge. An Order of Discharge is a permanent injunction to your creditors ordering them to never try to collect your debt again. If your debt is discharged in bankruptcy you have a court-ordered injunction to protect you from that debt forever. This can also be enforced in the Bankruptcy Court by way of Contempt of Court proceedings against the creditor.
As a result, we see very few intentional attempts to collect a debt that a creditor knows has been discharged. If it happens to you, call us right away!
What About Payment Of Fees & Costs?
Attorney’s fees are like auto shop charges; your fee is directly related to the complexity of the job.
We do not have a single fee for all bankruptcy cases. “Costs” are expenses we pay for services provided by others, such as credit reports and the required credit counseling.
At the initial appointment with your attorney, you will be given a written quote of our fee for handling your bankruptcy case. Many of our clients cannot pay the full fee immediately; therefore we offer a payment program. You can make a down payment on your fee and we will represent you for 6 months, standing between you and your creditors, while you finish payments on your fees and costs. If you are unable to pay your fees within 6 months we reserve the right to charge extra because we are doing more work than expected.
Once your fees and costs are paid your case will be filed promptly. We can not file a case before the fees are paid because we can not be a creditor.
During the time you are gathering your fee and costs, we work as a team to discourage creditors from harassing you. Once you have retained us as your attorney I do not want you to talk to your creditors, I want all creditor inquiries to be funneled through my office. All you do when contacted by a creditor is to tell them you are going to file a bankruptcy case and then give them my name, address, etc. I want them to call me. After that, you are instructed to ignore all calls or communications from creditors.
The effect is most creditors stop trying to collect money from you if they know you have retained an attorney to file a bankruptcy case.
What Is Debt Relief?
What Is Debt Relief?
If you’ve gotten behind in your bills, or are about to become behind in your bills, you are going to enter the debt collection process very quickly. Initially, you will be contacted by the creditor asking why you’ve missed a payment. But if you don’t have a way to make up those payments, those calls will become increasingly shrill and frequent.
Once you miss payments, that starts showing up on your credit score very quickly. If you’re missing payments to more than one creditor, then the problem is getting worse even faster.
After you have missed multiple payments, you are likely to be turned over to the collections department. These are individuals who are not as nice and are intent on collecting this debt – that’s their job.
The in-house debt collectors are not the worst problem. What happens next – if your debts are not caught up, you are likely to have your case referred to an outside debt collector, or possibly have the account sold to a debt buyer. These individuals are much more aggressive about collecting. They will call constantly, and threaten lawsuits – they want to be paid, and they want to be paid now. You will find that it is very difficult to deal with them, because the main thing they are wanting to get is payment on the account, and they want the account brought current. It is very difficult to work out payment plans unless they are much to the creditors’ advantage.
As bad as debt collectors are, they are not the worst. The worst thing that can happen to you in the debt collection process is that you get sued by one of your creditors. That means they’ve hired an attorney, prepared and filed a lawsuit in a court, and had that summons served upon you.
What they are seeking is judgment, the most powerful tool a creditor has to force you to pay money. Before they have a judgment, they cannot make you pay them, take things from you, garnish your wages, or seize your possessions (though a creditor can repossess your car if you don’t make car payments).
What I mean by a judgment is that the creditor has appeared in court with their attorney and has proven to a judge that you owe the money. Once a judge has certified that debt, the court itself will help the creditor collect the debt through wage garnishment, seizure of bank accounts, and even the placing of a judgment lien on your home.
Of all the collection activities I experience through my clients, wage garnishment is probably the most devastating. The creditor can take as much as 25% of your pay after some deductions – that is a large amount of your pay. Most of my clients cannot pay hardly any of their bills after having that much money removed from their checks. If you are threatened by a garnishment or are being garnished, you need to consult with us as soon as possible.
What Debts Are Included?
“All of them!”
In any kind of bankruptcy case, you are going to be required to disclose everything about your financial condition including all of your assets, debts, your income and expenses, and much additional information.
I am frequently asked: “Do I have to list all of my creditors?” Yes, you do.
The law requires you to report all creditors. Listing all of your creditors means you must report your medical bills, mortgage loans, car loans, and all others. Every creditor has to be listed and notified.
Next, what is important is how that particular debt is going to be treated. Whether you keep a debt or discharge the debt is mostly up to you. You can repay creditors, in whole or in part, after a discharge.
What Is a Judgement Lien?
Judgment Liens on Real Property
If you have a judgment lien on your real property you have a serious problem. We have the tools and resources to resolve that problem and remove judgment liens from the property.
One way a creditor can try to collect a debt from is to file a judgment lien against your real property. After a creditor receives a judgment in court, the judgment document can be recorded in your County’s Register of Deeds or another clerk’s office that records these. This is the same document that a creditor can use to garnish your wages or bank accounts. A judgment lien means that if you sell, try to borrow on, or refinance the loan on your home or other real estates the creditor holding the judgment lien may have to be paid in full. It is effective for 10 YEARS, and it can be extended for multiple 10-year periods.
A judgment lien is what I call a “stealth collection.” You do not have to be notified that a judgment lien has been filed. Many people do not know their real property is subject to a judgment lien. They find out when someone reviews the public records specifically to see if there is one.
A recorded judgment lien attaches to every piece of property you own in that county. A judgment lien can be recorded in multiple counties. In essence, a judgment lien ties up every piece of real property you own.
Most of our clients first discover they have a judgment lien on their real property at the initial meeting with one of our attorneys. Before your meeting look for any judgment liens. If you have been sued and a judgment has been entered against you there is a good chance a judgment lien has been placed upon your home or other property.
THE GOOD NEWS: In a bankruptcy case, most all the time, your bankruptcy attorney can have the Bankruptcy Court remove the judgment lien on your house partially or completely.
THE BAD NEWS: Bankruptcy law does not allow you to avoid a judgment lien on real property that is NOT your home. We will have to review with you other techniques to resolve that problem.
What About Co-Signed Debts?
What Debts are included – Co-Signers
Sometimes a friend or relative has co signed a loan for our client.
In Chapter 7 bankruptcy, if you have a Co-Signer you can voluntarily continue to make that payment to protect your cosigner. If you do not pay the debt then your Co-Signer will be obligated to pay it. If you do voluntarily pay it then the payment history goes on your Co-Signer’s credit report; which may affect their credit score if you are late or miss payments.
You may be able to “reaffirm” the debt. That is a process where you sign documents that are filed in the bankruptcy court that reestablish this as one of your debts after your discharge. However, your cosigner’s obligation exists regardless of whether you reaffirm the agreement or not. If you reaffirm the debt and have a good payment history you will be rebuilding your creditworthiness.
In Chapter 13 bankruptcy, the law actually allows you to protect that cosigner by paying the debt in full; even if other unsecured creditors don’t. This is not always available and can be determined only by careful consideration of all the facts in your case with your bankruptcy attorney.
What Is The Effect of a Bankruptcy & Your Credit Reports?
Post Discharge Credit Reports
A DISCHARGE IN BANKRUPTCY STARTS THE REHABILITATION OF YOUR CREDIT REPORT AND CREDIT SCORE
A discharge in bankruptcy has a significant impact on your credit report.
Your bankruptcy will appear on your report for the next 10 years.
Any debt discharged will show a zero balance.
All discharged accounts are closed.
No more reports will be made about your payment histories.
You must file a dispute if a discharged debt is still being reported despite being discharged. If the debt is not removed then you must report that to your bankruptcy attorney. Any creditor that refuses to remove the information can be punished by the Bankruptcy Court. through the court.
Your discharge starts the rehabilitation of your credit score. The effect of bankruptcy on your credit score is not what you think would happen. The majority of clients file for bankruptcy with a credit score in the 400 – 500 range. Because you have no debt and no more negative reports, the longer your credit report stays healthy and you avoid future financial problems, you will see a large improvement in your score, maybe over 100 points within the first 18 months post-discharge.
You will become a car loan and car sale solicitations magnet. Once my client receives a discharge they receive offers to buy or finance cars, and get offers of credit cards and loans.
Bankruptcy does not destroy your credit score or damage your credit report. Bankruptcy is a known way to improve your credit score.
What If They Garnish My Wages?
Wage Garnishment or IRS Wage Levy
The most effective and devastating tool that a creditor has to collect a debt from you is to garnish your wages. If you owe the IRS it is called a “levy.”
The information below also applies if your bank account has been levied.
IMPORTANT: A CREDITOR CAN NOT GARNISH YOUR INCOME; ONLY A COURT OR THE IRS MAY DIRECTLY GARNISH WAGES. A creditor has to have gone to a court and previously been awarded a judgment against you in order to get the court to issue a wage garnishment. You should have been served a court process before that happens.
IF YOU HAVE ALREADY BEEN SUED AND YOU EARN WAGES, YOU ARE IN DANGER OF A WAGE GARNISHMENT! Call us immediately!
Not all income is subject to garnishment.
Protected income: Social Security benefits, retirement benefits, annuities, military or veterans benefits, workers compensation, or some other similar benefit, your income cannot be garnished before you receive it or after it is in your bank account.
Exposed income: Wages, commissions, and 1099 contractor payments. If you earn your income by these methods then your income can be garnished. In Tennessee and Virginia, the Court takes 25 percent of your take-home pay.
Garnishments are devastating; they blow your budget out of the water. They are very difficult to recover from. They must be stopped quickly!
OUR LAW FIRM CAN STOP A WAGE GARNISHMENT. Filing a bankruptcy case stops a garnishment. But if you have not filed a bankruptcy case yet we know the law and the techniques to stop a wage garnishment, even before you file a bankruptcy case. Garnishments are not easy to stop. It requires a dedicated bankruptcy lawyer, the cooperation of the creditor and its attorney, the court clerk that issued the wage garnishment, and your employer.
GOOD NEWS! OFTEN WE CAN RECOVER YOUR MONEY! There is some good news in the garnishment world though. One of the things you may be able to do in a bankruptcy case is to recover the money that has been garnished from you. The basic formula is that if, in the previous 90 days a creditor has received over $600 of your garnished wages we are able to demand a refund of all garnished wages in the 90 days prior to filing your case. We cannot recover garnished wages paid to the creditor more than 90 days before you file a bankruptcy case.
What About Bankruptcy & Inheritance?
Your assets in a bankruptcy case: Inheritance and Life Insurance received before your case is filed.
INHERITANCE BEFORE YOU FILE: In any chapter of bankruptcy one of the questions we will ask is whether or not someone has passed away before we file your case, and if you have received or will receive an inheritance or life insurance proceeds. This is life insurance money, inherited IRAs, or your share of an estate. Anything that you have inherited before you filed your case is considered one of your assets. This is an asset that can be used to pay your debts.
It does not matter that the land or buildings are still in the deceased owner’s name. It also does not matter if there is an ongoing probate case that has not concluded so you do not know what you will get yet.
The law is that if someone has passed away before you file a bankruptcy case, what you will receive from that estate is part of your bankruptcy estate and can be used to pay your debts. We see this frequently; when someone has died and their land has never been divided or sold. The home, mountain land, or farmland still belongs to the family.
Here at this office, we can advise you on how these assets may be protected.
Inheritance and Life Insurance are to be received after your case is filed.
INHERITANCE AFTER YOU FILE: Within 180 days of the time you filed your bankruptcy case; if someone passes away and you will receive life insurance benefits, money or accounts of any kind, an interest in land or buildings, or possessions; then that inheritance is part of your bankruptcy case and it can be used to pay your debts. If this happens you need to notify us immediately so we can determine how this terrible event affects your case.
What About Medical Bills?
A common concern among my clients is that they owe the hospital, pathology, labs, or their doctor a bill and they are afraid that they are not going to be able to receive medical service in the future if they discharge those debts.
When it comes to medical debts, it’s important to keep in mind that there are 2 categories:
The first we call the Provider Debts. The actual hospital bill is in that class. People who provide medical services for you, lab work, radiology, anesthesiology, and other services cannot be denied to you in the future if you discharge those debts. If you show back up at the hospital and have discharged debts to them, they will treat you. You will have your X-rays taken, and your blood will be sent to the lab.
If you owe your personal doctor or your dentist a bill and you discharge that debt, they do not have to continue treating you. Before you do that, if that doctor is important to you, we suggest you go to his office and talk to someone in his office about the fact that you are filing bankruptcy and if that will affect your treatment.
If it will, you can voluntarily pay that debt during or after your bankruptcy case. One of the principles of bankruptcy is that you are allowed to repay any of your past debts. If you wish to continue repaying your doctor in order to continue your treatment, that’s fine. However, if your doctor demands payment on certain terms or schedules, we need to talk about whether or not you should consider keeping that debt.
Whether or not you owe a debt to a medical provider or a doctor is an important consideration and you should not make that decision without contacting us and obtaining a consultation.
What About IRAs & Pensions?
IRA’s, 401k’s, Annuities, other Retirement Plans and Pensions
THESE ARE PROTECTED ASSETS – PROTECT THEM
Many of my clients have earned retirement pensions through their employment or other efforts. It could be an IRA, a 401k, a 403b, a “defined benefit” plan, or some other pension plan that you have earned.
Some clients are tempted to use these funds to pay off debts.
We recommend that you do not use or borrow against any 401k or other pension plans to pay debts.
You should almost never use pension funds toward debts. The main reason is that these assets are protected, with very few exceptions. Your pension plan cannot be taken from you by a creditor, in a bankruptcy case.
Most 401k’s and pension plans are too small anyway, and you need them for when you retire. If you take them out now you are seriously damaging your ability to provide for your needs after you retire.
We recommend you consult with us to determine if your pension plan is protected, and what options you have to deal with your debts, including your bankruptcy options.
What Are Secured Creditors?
What is a Secured Creditor?
In any chapter of bankruptcy, you may have a secured creditor. A secured creditor is one that has collateral that backs up (“secures”) your debt. “Collateral” can be your home, your car, or home furnishings. These are secured debts.
I want to keep my car! Even in bankruptcy, secured debts have to be paid if you want to keep the collateral, whether it is your car, home, boat, equipment, or other types of collateral. It is best to be current before you file a bankruptcy and while you are in a bankruptcy case. If you are behind we can make recommendations on how to fix that.
Finance Company Loans. You can keep the collateral and discharge the debt. In many finance company loans, consumers fill out a list of household possessions that secure the debt. In most cases, you can discharge these debts in your bankruptcy and keep the household items. Each case is unique, so this should be determined in consultation with your bankruptcy attorney.
I want to get rid of the car/home! In this case, you “Surrender” the collateral. If you do not want to keep your home or car, possibly because the payment is too high or you owe too much it can be surrendered. Your bankruptcy attorney will advise you as to when to stop making payments, and arrange for the orderly surrender of the collateral. Afterward, you have no further requirement to make payments and cannot be held responsible for the debt.
Surrendering collateral does not mean you immediately have to turn in the car or move from your home. How to surrender is handled in your case should be determined in consultation with your bankruptcy attorney.
What About Student Loans?
What Debts to Include – Student Loans
“Not much good news”
One category of debt we receive numerous questions about is student loans. Unfortunately, under the current bankruptcy law, it is very hard to discharge a student loan. The standard requires you to be under extreme financial distress now and for the foreseeable future. There are additional requirements that make it unrealistic in all but the most extreme case to win a discharge of student debts.
There are programs through the U.S. Department of Education that are of more assistance.
In certain circumstances, you may qualify for a deferral of the requirement to make a payment of the loan for a period of time.
Another kind of assistance is in the payment per month. If you have high student loan payments you can contact the lender and ask for the various repayment plans.
Don’t forget to ask about the Income Contingent Repayment Plan, where the payment is set based on your income, and the amount can be very small if you have a low income.
Chapter 13 Bankruptcy
What Is Chapter 13 Bankruptcy?
What Are My Options – Chapter 13
A Chapter 13 bankruptcy is a long-term repayment plan to repay some or most of your debts. A Chapter 13 repayment plan has to last at least 3 years or up to 5 years. It may be a shorter plan if you’re able to pay off all your debts in less than 3 years, but essentially you’re required to devote as much income as you can to the repayment of your debts for the next 3-5 year period.
Some individuals referred to as high-income earners, are limited to a 5-year plan that they must file and make 60 consecutive payments to their creditors.
The basic difference between Chapter 13 and Chapter 7 is the length of time. In Chapter 13, it will be several years before you receive a discharge of your debts and a fresh start. It is clearly going to be more expensive because you are paying back some amount of money to your creditors.
Even though a Chapter 13 bankruptcy is more expensive and will last longer than a Chapter 7 bankruptcy, there are provisions that allow for things to happen that cannot be done in Chapter 7.
One of the most important uses of Chapter 13 is to help a homeowner get their mortgage caught up and back on track. In a Chapter 13 bankruptcy, if you are behind on your mortgage, you can schedule an extra amount to be paid along with your regular mortgage payment that will eventually get your loan caught up and current, so you can no longer be in default on your mortgage. If you are behind on a car, you can completely reorganize the car loan. If you owe taxes, you can use this as an opportunity to put your taxes in a repayment plan.
There are many good reasons to consider filing a Chater 13, but they are normally restricted to people who have special circumstances that fit that profile. As a result, most cases we file are under Chapter 7, and for those who do need reorganization or have special problems, we use Chapter 13.
What Debts To Include
What Debts Are Included?
“All of them!”
In any kind of bankruptcy case, you are going to be required to disclose everything about your financial condition including all of your assets, debts, your income and expenses, and much additional information.
I am frequently asked: “Do I have to list all of my creditors?” Yes, you do.
The law requires you to report all creditors. Listing all of your creditors means you must report your medical bills, mortgage loans, car loans, and all others. Every creditor has to be listed and notified.
Next, what is important is how that particular debt is going to be treated. Whether you keep a debt or discharge the debt is mostly up to you. You can repay creditors, in whole or in part, after a discharge.
What Are My Options?
What Are My Options?
“I’ve tried everything I can except to call a lawyer”
Why not? We offer a free consultation; we wish you wouldn’t wait until you have tried everything else first before contacting us.
In the event that your attempts to resolve your financial problems without resorting to bankruptcy have failed, then bankruptcy options should be considered.
Bankruptcy is a very effective solution to a severe problem. Reasons:
Your rights are established by federal law and are backed up by a federal court.
You know what to expect when you file a bankruptcy case.
The certainty of your outcome. If you file a bankruptcy case we can predict with a high level of accuracy what is going to happen in your case, when it will happen and when it will be over.
You will learn the process in advance. We help you through every step in the process.
If you are considering your bankruptcy options there are several kinds of bankruptcies. We will explain the effects of chapters 7, 11, 12, and 13 and the different types of relief available.
Generally, most people file Chapter 7 cases. Next are Chapter 13 cases. Chapter 11 is mainly for corporate or sole proprietorship reorganization. This is usually used by businesses, but it is not limited to businesses Chapter 12 is limited to farmers and fishermen.
To find out the best bankruptcy alternative for you call and arrange a free consultation today.
Chapter 7 Bankruptcy
What Is Chapter 7 Bankruptcy?
What are my options – Chapter 7
The most common type of bankruptcy nationwide is Chapter 7.
Chapter 7 is a relatively short proceeding, lasting under four months. The main requirement for a Chapter 7 bankruptcy is that you must give up your “Surplus Possessions” if you own more than you are allowed to keep. You can not remain wealthy and have a lot of valuable possessions while seeking a discharge of your debts.
The possessions you are allowed to keep are called “exempt property.” Most people do not lose any of their possessions in a chapter 7 bankruptcy proceeding. Whether you would lose any possessions requires an in-depth consultation with one of the bankruptcy attorneys.
Whether or not you lose possessions in a chapter 7 bankruptcy case is only one of many considerations that have to be evaluated before we would recommend that you file a Chapter 7 case.
Chapter 7 ends with an Order of Discharge that protects you from all discharged debt in the future.
Many people keep car loans, home loans, and other debts. This is no problem. To be legally accountable for a debt after bankruptcy you must reaffirm the debt, which is a form you complete and file with the court. Often we make other arrangements with a creditor that allows my clients to keep possessions subject to a lien, like a car, home, or mobile home, and continue to make payments on them.
You can repay any debt that has been discharged after your Discharge voluntarily, in whole or in part.
There are many other FAQs and videos that we have on our website and posted on YouTube that I invite you to read and watch that discuss in more detail aspects of a bankruptcy case.
What Debts To Include
What Debts are Included?
“All of them!”
In any kind of bankruptcy case, you are going to be required to disclose everything about your financial condition including all of your assets, debts, your income and expenses, and much additional information.
I am frequently asked: “Do I have to list all of my creditors?” Yes, you do.
The law requires you to report all creditors. Listing all of your creditors means you must report your medical bills, mortgage loans, car loans, and all others. Every creditor has to be listed and notified.
Next, what is important is how that particular debt is going to be treated. Whether you keep a debt or discharge the debt is mostly up to you. You can repay creditors, in whole or in part, after a discharge.
Cross-Collateralization
What Is Cross-Collateralization?
What is Cross-Collateralization?
This is a special class of secured debts. This is a common clause found mainly in Credit Union contracts. I have not seen this type of clause in bank or auto finance loans.
Cross collateralization means that if you have a loan with collateral, such as a car, then the car is collateral for any other loans at the Credit Union, such as a credit card or personal loan. This does not apply to a home loan.
Most people are unaware that their loans are cross collateralized. This means that if you default on the personal loan or the credit card your auto loan is also considered to be in default and your car may be repossessed even if the payments on that loan are current.
If you file a bankruptcy and want to keep your car you may have to pay other loans outstanding at the Credit Union.