Frequently Asked Questions
WHAT IS “BANKRUPTCY”?
Bankruptcy is a federal law that allows debtors who owe more money than they can afford to pay to either eliminate the debt by filing a Chapter 7, or pay back a portion of the debt by filing a Chapter 13.
HOW MUCH DOES IT COST TO FILE A BANKRUPTCY?
The cost of a bankruptcy depends on its complexity. My attorney fees in a chapter 7 typically start at $600.00 plus the filing fee of $306.00. The attorney fees for a chapter 13 are typically higher since representation tends to be for a much longer period of time (three to five years); however, the majority of the fee is paid through the chapter 13 plan. In order to file for chapter 13 bankruptcy protection, attorney fees of $500.00 plus the filing fee of $281.00 are typically required prior to filing. In both cases, a credit counseling class must be taken prior to filing. These classes can be taken over the phone or online. The cost is an additional $20.00-$25.00.
WHAT DOES BANKRUPTCY FILING DO?
1. It stops creditors from garnishing immediately.
2. It stops the phone calls.
HOW DOES BANKRUPTCY DO THIS?
By the Automatic Stay.
WHAT IS THE “AUTOMATIC STAY”?
The Automatic Stay is an important feature of Bankruptcy. The Automatic Stay remains in place throughout the pendency of the case. Creditors cannot call or try to collect a debt during the pendency of the bankruptcy. In other words, it automatically stops creditors from suing, calling, garnishing or attaching bank accounts, placing liens on property or attempting to enforce any claim. The creditor’s hands are tied, unless they get permission from the Bankruptcy Court.
THINGS YOU SHOULD NOT DO PRIOR TO FILING BANKRUPTCY
1. Do not pay back loans to a family member or friend.
2. Do not transfer property out of your name.
3. Do not incur debts you don’t intend to pay.
4. Do not take out Cash Advances.
5. Do not take money from Retirement Accounts, 401-K’s, etc.
6. Do not use your 2nd Mortgage or Home Equity Line of Credit to consolidate debt.
7. Do not let a creditor get a judgment against you.
8. Do not take out Pay Day loans.
CAN I KEEP MY HOME AND CAR IF I FILE BANKRUPTCY?
Most of the time, yes. The benefit of bankruptcy is to protect your assets. The equity in your home, and whether you are behind on payments, will determine the type of bankruptcy you may file.
WHAT IS “SECURED DEBT” ?
Secured debt is debt where the creditor has a claim or interest in the property such as a car or house. If you miss a payment on a secured debt, the creditor can repossess or foreclose on this property.
WHAT IS “UNSECURED DEBT” ?
Unsecured debts are where creditors have no claim to your assets; typically credit cards are unsecured.
WHAT DEBTS ARE NOT DISCHARGEABLE?
Certain tax debts, student loans, debts incurred from alcohol related accidents, child support and certain other debts are not dischargeable.
CAN STUDENT LOANS AND TAX DEBT EVER BE DISCHARGED?
In certain circumstances, yes.
IF I FILE BANKRUPTCY, WILL MY SPOUSE BE RESPONSIBLE FOR MY DEBT? CAN IT HURT HIS/HER CREDIT RATING?
Your spouse will only be responsible for joint debt. If there is no joint debt, so long as he/she continues to make the payments on the joint debt, then it should not affect his/her credit rating.
WHAT IS THE BENEFIT OF CHAPTER 13 VS. DEBT CONSOLIDATION?
Debt Consolidation doesn’t require all creditors to participate, and therefore it doesn’t prohibit creditors from pursuing garnishment, bank attachments, liens, foreclosure, etc. Whereas the United States Bankruptcy Court has the power to force all creditors to accept the Chapter 13 plan, and the power to void 2nd Mortgages in certain circumstances, decrease the balances owed and interest rate owed on certain vehicles.