What is Bankruptcy?
Bankruptcy is a process to give debtors a financial fresh start from burdensome debts. As stated in a 1934 Supreme Court decision, "It gives the honest but unfortunate debtor...a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt," Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts.
What is the difference between Chapter 7 and Chapter 13 Bankruptcy?
Chapter 7, also known as a liquidation bankruptcy, is when a trustee takes over the assets of the debtor, reduces them to cash, and pays creditors, subject to the debtor's right to retain certain exempt property. Since there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset" cases. In most Chapter 7 cases, an individual debtor receives a discharge that releases him or here from personal liability for certain dischargeable debts. Also, if a debtor's income is in excess of certain threshold, the debtor may not be eligible for Chapter 7.
Chapter 13 is designed for an individual debtor who has a regular source of income. It enables the debtor to keep valuable assets that they may not have been able to keep in a chapter 7. It allows the debtor to propose a plan to repay creditors over time, usually three to five years. Chapter 13 is also used for debtors who do not qualify for chapter 7 due to their income. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. In a Chapter 13, you can also stop foreclosure and generate a plan to either repay the mortgage arrears over three to five years or apply for loss mitigation within the bankruptcy.
What type of Bankruptcy is better for me: Chapter 7 or Chapter 13?
This is a difficult question to answer without sitting down for a consultation to review your situation. The Chapter of bankruptcy most beneficial to you depends on your unique circumstances. Generally, Chapter 7 is a better way to deal with unsecured debt or when you want to start over. Chapter 13 is more complex in that you will have to make plan payments for up to five years, but it can allow you to save your home from foreclosure and protect your other assets. Bankruptcy laws are complicated, so you should should seek the assistance of an experienced bankruptcy attorney who can go over all your options.
What information do I need to begin filing bankruptcy?
You should bring your income information, such as several pay stubs or a profit & loss statement and your most recently filed tax return to your initial consultation. I will review with you the additional documents needed before your bankruptcy case is filed.
Can I change what chapter I filed?
Generally, you can convert your case to any other chapter you may be eligible for. The reasons for conversion vary. For the most part, you have a right to convert your case, but that does not always mean that conversion will be beneficial for your circumstances. You need to review your unique circumstances with an experienced bankruptcy attorney to determine whether to convert your case.
Is there a required amount of debt necessary to file?
Bankruptcy laws do not require debtors to have a certain minimum amount of debt to be eligible for bankruptcy relief. How much debt you have is certainly an important consideration when determining whether bankruptcy is in your best interest.
Can I file for bankruptcy without my spouse filing as well?
Yes. There are particular situations where a married couple may not need for both spouses to file bankruptcy, such as if most of the debt is only in one spouse's name, one spouse has filed bankruptcy recently affecting his or her eligibility to file again, or one spouse owns property that is not protected, which would result in losing that property if he or she filed.
Are all types of debt discharged in bankruptcy?
Not all debts are discharged in bankruptcy. You may not be able to discharge student loans, back child support or alimony or certain taxes. I can assist you in determining what part, if any, of your debt is non-dischargeable.
Do I have to give up all of my property when claiming bankruptcy?
No. When you file a Chapter 7 bankruptcy, almost all of your assets become property of the bankruptcy estate. A bankruptcy trustee is appointed and given the authority to sell your assets to pay creditors. However, filing for bankruptcy does not mean that you have to give all of your property to your creditors. Exemptions allow you to keep a certain amount of your property so that you can make a fresh start after the bankruptcy. In a Chapter 7 bankruptcy, if you can exempt an asset, the bankruptcy trustee cannot sell it to pay your creditors.
Will filing for bankruptcy stop my foreclosure?
When you file for bankruptcy, your lender is prohibited from moving forward with the foreclosure case. This is because the automatic stay prohibits most creditors, including your mortgage lender, from continuing any collection efforts without further court permission.
Can I keep my home if I file for bankruptcy?
You may be able to keep your home whether you file for Chapter 7 or Chapter 13 bankruptcy. Chapter 13 allows you to keep your home and catch up on your missed mortgage payments. In addition, if you have a second mortgage on your home, Chapter 13 may allow you to get rid of it through a process called lien stripping. In Chapter 13, you can strip a junior lien if the balance of the senior liens (such as your first mortgage) on your home exceeds the value of the property. In a Chapter, the trustee will not sell your home if you have no equity or you can exempt all of the equity in your home.
Will filing for bankruptcy stop the collection phone calls?
Yes, filing a bankruptcy petition automatically stops most collection actions against the debtor or the debtor's property. Once you submit the required paperwork to the bankruptcy court, the court issues an automatic stay. This automatic stay prevents your creditors from contacting you to recover money, seize your property or place liens on your home.
How long does a Bankruptcy stay on my credit report?
A bankruptcy can only remain on your credit for up to ten years after your filing date. But in general, this does not prohibit you from obtaining new credit and moving on with your life.
Can I get a credit card after filing bankruptcy?
Yes. Most of my clients receive credit applications in the mail shortly after their bankruptcy is discharged. However, you may have to pay higher interest rates.
I filed for bankruptcy before, can I file again?
There is a limitation on filing bankruptcy, but the time between bankruptcies depend upon which chapter was filed in the past and which chapter is being filed under this time. Filing between cases also depends upon whether the case was concluded because it was dismissed or because you received a discharge. A Chapter 7 can be filed every 8 years from a previous Chapter 7 filing, or 6 years from a prior Chapter 13 filing. A Chapter 13 can be filed 4 years from a prior Chapter 7 filing, or 2 years from a prior Chapter 13 filing.
Do I need to file against all of my creditors?
You must list all of your creditors in your bankruptcy paperwork. However, after you receive your discharge, you a free to voluntarily repay any old debt with the understanding that the former creditor has no right to try to collect from you.