1.
"What do the upcoming changes in Bankruptcy Law
mean for me?"
See our answers
to common questions about upcoming changes in Bankruptcy
Law.
2.
"What are the different bankruptcy chapters?"
They refer to different parts, called chapters, of
the bankruptcy law. Individuals may use Chapter 7
or Chapter 13. Chapter 7 gives you a fresh start by
discharging your unsecured debts (such as credit cards
and medical bills). It is sometimes called liquidation.
Businesses may used Chapter 7 to liquidate or Chapter
11 to reorganize their business and repay their debts
over a period of years under a “plan.”
Business that wish to continue as going concerns must
use Chapter 11.
3.
"What are common mistakes that people make in bankruptcy?"
- Waiting until they are too short of cash to afford
the lawyer's fees.
- Pulling money out of exempt assets like their house
or their 401k in an attempt to get their heads above
water, and then having to file anyway. If they had
left those assets untouched and filed earlier, they
could have kept those assets.
- Continuing to make payments on credit cards, medical
bills, or other dischargeable debts after it has become
clear that they are going to have to file. They could
have held onto those payments and just filed sooner.
- Going to debt counseling services.
- Waiting too long to consult an attorney. Consultations
are free, so I really don’t understand this
one.
- Taking cash advances of $1,000+ or buying luxury
goods or vacations costing over $1,000 shortly before
filing.
- Filing before their situation has stabilized and
they have found another job. When this happens, they
continue to incur debts even after they have filed,
but the new debts are not discharged in the bankruptcy.
4.
"What do you think of debt counseling services?"
I think many of them are scams. If you are on the
line of being able to claw your way out of debt, they
may be useful, but choose with care. If you are so
underwater that you are not realistically going to
dig your way out, give up and file bankruptcy before
you "throw good money after bad" trying
to service credit card debt that is just too overwhelming.
5.
"If I file bankruptcy, what can I keep?"
Individuals may keep their “exempt assets.”
In Texas you can choose to use the Texas
or the federal
list of exempt property. Generally speaking, you can
keep your house and its furnishings, your car, and
your retirement accounts. You can not keep “extras”
like a boat, vacation home, a second home that you
rent out to tenants, expensive gun collections, etc.
Businesses generally do not have exempt assets.
6.
"How does the bankruptcy process work?"
You file your bankruptcy petition which lists all
of your assets, debts, sources of income for the past
two years, etc. A trustee will be appointed to examine
your case for non-exempt assets which may be seized
and distributed among the creditors. About 30 days
later, you have your 341 meeting with the trustee.
(This meeting is named after a section of the bankruptcy
code). At this meeting your creditors can appear to
challenge your Petition and tell the trustee about
your secret Swiss bank account.
7.
"What if I am behind in my mortgage payments but
I want to keep my house?"
You should file a Chapter 13 bankruptcy. This will
give you several years to catch up on your arrearages.
Under a Chapter 13, a plan for the repayment of debts
is created by you and your attorney and, with the
approval of your creditors, confirmed by the Court.
The process of creating the plan and getting it approved
by creditors and confirmed by the court takes about
9 months. Upon successful completion of the plan,
the bankruptcy is discharged.
8.
"Can I discharge my student loans in bankruptcy?"
Student loans are not dischargeable in bankruptcy.
See
here for a list of other types of debts that can
not be discharged.
9.
"How soon can I stop my creditors from harassing
me?"
As soon as you hire a bankruptcy lawyer, you can
direct them to call your lawyer instead of you. Then
upon the filing of your bankruptcy Petition, their
collection activities must cease.
10.
"How will bankruptcy affect my credit?"
Bankruptcy will be on your record for 10 years, and
obviously it is a negative factor on your credit report.
However, some people are actually better credit risks
after they file bankruptcy (esp. a Chapter 7) because
(i) they have a lot less debt and so they are better
able to repay their new debts, and (ii) they can’t
file a Chapter 7 again for another 6 years. Two years
after you file you are eligible to apply for a mortgage
on the same terms as someone who has never filed bankruptcy.
11.
"Will I be able to keep my tax refund?"
Tax refunds are assets of your bankruptcy estate
and are not exempt, so probably not. However, under
the federal exemptions, if the equity value of your
home is low enough, you can exempt up to about $9,000
worth of any property, including cash from a tax refund.
12.
"Can I be fired because of my bankruptcy?"
No, but it's not hard for an employer to find a reason
to fire an employee. Also, employers can deny employment
to an applicant based on their credit report. But,
generally speaking, firings and refusals to hire because
of bankruptcy are rare.
13.
"Can I be denied access to student loans because
of my bankruptcy?"
No. But you still must meet all requirements of the
student loan program.
14.
"What are the most common reasons for filing bankruptcy?"
Loss of job, business failure, medical bills, and
divorce.
15.
"Should I feel guilty about filing for bankruptcy?"
Unless you are abusing the system, you should absolutely
not feel guilty about it. The bankruptcy laws are
there for a reason. Life is risky, and if you get
in over your head, you need to hit the reset button
and start over. It’s perfectly normal, and it’s
perfectly necessary sometimes. See the question immediately
above. These things can happen to anyone.
16.
"Can a collection agency add interest to my debt?"
Yes. The Federal Debt Collection Practices Act allows
a collector to add interest if your original agreement
calls for the addition of interest during collection
proceedings or the addition of such interest is allowed
under state law. Every state authorizes the collection
of such interest.
17.
"A collection agency sued me and won. What collection
measures can it now take against me?"
Before obtaining a court judgment, a bill collector
generally has only one way of getting paid: demand
payment. This is done with calls and letters. However,
once the collector (or creditor) sues you and gets
a judgment, the law allows it to take further steps
to collect the debt. The collector may try to seize
bank or other accounts of yours. If you own real property,
the collector may record a lien against it, which
will have to be paid when you sell or refinance your
property. Even if you're not currently working or
have no property, the judgment won't disappear. Court
judgments last for years, and in many cases can be
renewed. If a collection agency files suit against
you or wins a judgment against you, contact an attorney
immediately. You may need to consider a prompt bankruptcy
filing to preserve the rest of your assets.
18.
"Will my spouse be affected if I file bankruptcy?"
Your wife or husband will generally not be affected
by your bankruptcy if they are not responsible (did
not sign an agreement or contract) for any of your
debt. If they have a supplemental credit card they
are probably responsible for that debt. Texas is a
community property state, and some people feel that
the concept of “community debt” exists
in Texas. I think that’s incorrect, but it’s
a more complicated issue than I can explain here.
19.
"Who will know if I file bankruptcy?"
Bankruptcy filings are public records. However, under
normal circumstances, no one will know that you filed.
20.
"Can I keep any credit cards after filing bankruptcy?"
Whether a debtor keeps credit cards after filing
bankruptcy is up to the credit card company. If you
are including the credit card in your bankruptcy,
they will cancel the card unless you reaffirm the
debt (i.e. choose to pay it). Even if you have a zero
balance the credit card company might cancel the card.
21.
"Will I ever get credit again?"
Yes! A number of banks now offer "secured"
credit cards where a debtor puts up a certain amount
of money (as little as $200) in an account at the
bank to guarantee payment. Usually the credit limit
is equal to the security deposit and is increased
as the debtor proves his or her ability to pay the
debt.
Two years after a bankruptcy discharge, debtors are
eligible for mortgage loans on terms as good as those
of others, with the same financial profile, who have
not filed bankruptcy. The size of your down payment
and the stability of your income will be much more
important than the fact you filed bankruptcy in the
past.
22.
"How do I go into bankruptcy?"
There are two ways a person can become a bankrupt.
The first and more common way is for the person to
file a Petition voluntarily. The second, and rarely
used way, is for creditors to ask the Court to issue
an order that a person is bankrupt. In both these
cases, a trustee is appointed to administer the bankruptcy.
23.
"Can I protect my co-signers from my creditors
coming after them?"
If you file a Chapter 7, no. If you file a Chapter
13, probably.
24.
"I have more questions..."
Please contact us.
|
