- Preparation & Filing
- Bankruptcy Litigation (Chapter 7 & 13)
- Dischargability of Debts
Preparation & Filing
Bankruptcy represents you taking steps to regain financial control. It stops harassment from bill collectors, mounting late fees, skyrocketing interest charges due to poor credit history, and above all, provides legal protection when you need it most.
For the most part, it is better to rebuild your credit after a bankruptcy than to let things keep rampaging out of control. In fact, you may be able to qualify for secured credit cards after a year and even a mortgage in approximately three years, depending on various factors including income, post-bankruptcy credit history, employment, etc.
You can erase debt with a “Straight Bankruptcy” if you meet the standards that are in effect since new legislation passed in 2005. A Chapter 7 bankruptcy will eliminate unsecured debts, such as credit cards, utility bills, medical bills, personal loans and debts owed on a repossessed car.
Debts Not Covered
A Chapter 7 bankruptcy will not eliminate secured debts, like car loans and mortgages. If you want to keep your house or car, you must continue to make those payments. A Chapter 7 will also not eliminate debts such as student loans, recent tax bills, parking tickets, child support, alimony payments, or accidents caused by drunk driving. Those types of debts can only be dealt with through Chapter 13.
The laws regarding the elimination of student loans changed in October 1998. The only way to get rid of student loans now is if you can show extreme hardship.
Generally, tax debts are dischargeable only if the debt is over three years old from the time it first became due.
Avoiding Problems when Filing Chapter 7
Because of the many nuances in Chapter 7 law, the specific terms of any filing will only become clear once the facts of a particular situation are known. However, if you are considering filing Chapter 7, there are a few things you should not do under any circumstances:
- Do not make any more charges or take any cash advances on any of your credit cards.
- Do not make any property transfers.
- Do not pay off one of your credit cards. That is called a “preference” and will make it more difficult for you to get a discharge.
The Filing Process
With a Chapter 7 bankruptcy filing, there are typically no bankruptcy court appearances necessary. You need only to appear (with your attorney) for a very informal meeting that takes place about five weeks after your case is filed. This meeting is referred to as a Section 341 Meeting. The purpose of this meeting is for a court-appointed trustee to ask you a few very brief questions to determine whether you have any non-exempt assets. Your creditors are given notice of this meeting and are permitted to question you, but usually they are not present. The meeting generally takes less than five minutes. After the meeting, all you have to do is wait about two-and-a-half months for your discharge papers to arrive in the mail.
Reorganize Your Bills
Chapter 13 is often referred to as a bankruptcy court – ordered debt consolidation. Chapter 13 will stop a pending foreclosure or car repossession. It will stop a wage assignment or wage garnishment. It will even prevent the IRS from taking any tax refunds that you are entitled to. In short, a Chapter 13 will allow you some breathing room so you can reorganize your finances.
Reorganizing Your Debts
When you file a Chapter 13, you are essentially consolidating all of your debts into one large debt. Payments are made either once a month by you to a court-appointed trustee, or are deducted automatically from your paycheck, whichever you prefer. The trustee will then distribute your money among all of your creditors according to a plan that we will help you formulate.
In a Chapter 13 you only have to pay back what you can afford. This determination is based on your income, your living expenses, the amount of your debt, your assets and types of debt you have. Chapter 13 can help you deal with recent student loans, recent tax debts, parking tickets and other debts that cannot be discharged in a Chapter 7.
The Filing Process
Filing Chapter 13 is very simple. After your case is filed with the court, you will go with your attorney to the office of the trustee. This meeting takes place about six weeks after your case is filed and is very informal. The purpose of the meeting is for a trustee to go over your case to make sure the plan that we have filed on your behalf is workable. Assuming that the trustee recommends your plan-and he/she almost always does-your case will be set for confirmation in front of a judge. You do not need to be present in court for your confirmation hearing-we will be there for you. Then, all you need to do a make your monthly payment to your trustee. If you prefer, we can arrange for your payment to be automatically deducted from your paycheck.
Dischargability of Debts
Under Chapter 7, you may claim certain of your property as exempt under governing law. A trustee may have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to pay your creditors.
The purpose of filing a Chapter 7 case is to obtain a discharge of your existing debts. If, however, you are found to have committed certain kinds of improper conduct designated in the Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you filed the bankruptcy petition will be defeated.
Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore, you may be responsible for:
- Most taxes and student loans
- Debts incurred to pay non-dischargeable taxes
- Domestic support and property settlement obligations
- Most fines, penalties, or forfeitures
- Criminal restitution obligations
- Certain debts which are not properly listed in your bankruptcy petition
- Debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drug
Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.