We represent individuals in a wide range of financial situations. Our clients' financial issues extend from outstanding taxes to mortgage foreclosures to credit card debt to medical bills. These clients are able to file a bankruptcy petition under Chapter 7 or Chapter 13 of the Bankruptcy Code. This enables them to retain assets, pay off past due secured debts and priority debts and/or discharge obligations.
What is the difference between Chapter 7 and Chapter 13?
A Chapter 7 Bankruptcy is also called an asset liquidation case. This means a debtor does not have sufficient income to pay his or her creditors and any non-exempt or excess assets are liquidated for the benefit of the creditors. In most cases, there are no excess assets to be liquidated, so the debtor does not lose any property. . A Bankruptcy Petition filed under Chapter 13 of the Bankruptcy Code is also called a wage earner plan. This means the debtor has sufficient income to pay all or a percentage of their debts over time. A common Chapter 13 plan requires the debtor to pay a monthly sum to the Trustee over three to five years. Chapter 13 can also be used to pay mortgage arrears and allow a home-owner to avoid foreclosure.
Who determines what chapter I should file?
Most of the time, a debtor and his or her attorney can determine what chapter is best for the debtor. However, the Trustee will review your case and analyze the information to determine how the debtor should be treated under the code. This is why it is extremely important to tell your attorney everything, even if you think it is not important or relevant.
Will I lose my property?
In most cases, no. The law sets limits as to how much property a person can keep if he or she wants to discharge some or all of their debts. These limits are not meant to leave the debtor destitute but to ensure the debtor does not have excess assets that could be sold to satisfy some or all of the debtor's creditors. Of course if you have a house that has a mortgage, or a car that has a loan, you must continue to pay that lender in order to keep the collateral, regardless of a bankruptcy filing.
Will I have to pay my creditors?
It depends. The Bankruptcy Code looks at all aspects of your finances to determine if you should pay anything to your creditors. People with high income or a lot of assets typically have to pay something back to their creditors. People with lower than average income and few assets typically pay little or nothing back to their creditors. Consulting a bankruptcy attorney is the only way to know how you would be treated under the Bankruptcy Code.
What does the Bankruptcy process involve?
A potential debtor must compile all his financial information and documents and prepare a petition to file with the court. Typically an attorney completes and files the petition. The debtor must take a credit counseling class prior to filing and a debtor education class after filing. After the petition is filed, the case is assigned to a Trustee who reviews the petition and holds a hearing with the debtor and creditors, if the creditors appear. The creditors are given an opportunity to object after which the debtor receives a discharge if he otherwise complies with the code.
Who is the Trustee?
The Trustee is an attorney or other individual appointed by the United States Trustees Office to oversee the administration of your case. You will meet your Trustee at your meeting of creditors, commonly called a 341-A Hearing. In a Chapter 13 case, the Trustee will also collect funds from the debtor and distribute the funds according to the debtor's court approved plan.
Can I keep my favorite credit card?
No. Even if you have faithfully paid the credit card bill, you must disclose all of you debts on your bankruptcy petition under penalty of perjury. Once you decide to file for bankruptcy protection, you should stop using all credit cards and incurring debt of any kind. You will find that once you file for protection, most creditors will automatically close your accounts.
Can I discharge my student loans?
Generally, no. Simply filing a Bankruptcy Petition is not enough to discharge student loans. It will “stay” their repayment, however. A debtor must file a suit against the creditor, called an Adversary Proceeding, to determine dischargability of student loans. The standard for discharging student loans is very high. Your attorney can give you advice on your specific circumstances as to whether you might meet this standard.
What is credit counseling?
Credit counseling under the Bankruptcy Code is a prerequisite for filing a Bankruptcy Petition. It is simply a one-time class a debtor must attend in person, over the phone or over the internet that assesses the debtor's financial situation and gives alternatives to filing bankruptcy. Some services also offer helpful financial advice and a budget analysis. The certificate of completion must be obtained before your attorney can file your case. You can get more information at http://www.usdoj.gov/ust/eo/bapcpa/ccde/index.htm
What is debtor education?
Debtor education, under the Bankruptcy Code, is a prerequisite to receiving a discharge. This is another one-time class a debtor can take in person, over the phone or over the internet. The main purpose of debtor education is to give the debtor the information they need to avoid financial pitfalls in the future. Think of the credit counseling and the debtor education as two parts of the same program. You can get more information at http://www.usdoj.gov/ust/eo/bapcpa/ccde/index.htm.
I don't want to file bankruptcy. How do I know if I can avoid it?
Most people that file bankruptcy do not want to file. It is their last resort. A foreclosure on a personal residence, money judgments or imminent repossession may be reasons a person is forced to file a Bankruptcy Petition. Low income or large unsecured debt may also force a person to file for bankruptcy protection. The alternatives to bankruptcy include selling assets, invading retirement accounts, returning collateral or reducing expenses. Anyone who is considering filing bankruptcy should consult an attorney experienced in bankruptcy law who can advise them of the law and how it would affect them.
What if I filed before?
If you have filed before there are restrictions on your ability to file again. There must be eight years between chapter 7 filings and four years between chapter 13 filings. Other restrictions apply to specific circumstances, so consult your attorney.