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FREQUENTLY ASKED QUESTIONS
How much does a bankruptcy cost? What are the pros and cons of bankruptcy? What are the differences between Chapter 7 and Chapter 13? Can I keep my home and car in a bankruptcy? What debts cannot be discharged? Can I file bankruptcy against some creditors but not others? How soon can I get credit after bankruptcy? I want to get out of debt but I don’t want to lose my assets. Can I hide them?
No. Under the new law, which took effect on October 17, 2005, many people can still eliminate their debt by filing Chapter 7 bankruptcy. The new law does make it harder, though. In both Chapter 7 and 13 cases, it imposes many new requirements such as credit counseling, means test and debtor education, and requires the submission of many more documents such as tax returns and paycheck stubs. Some debts are no longer dischargeable, and certain repeat filers receive less or no protection.
How much does a bankruptcy cost?
How much does a surgery cost? The truth is, it depends. A case involving five properties, three cars and two lawsuits will likely cost more than one without any of these things. We honestly don’t know how much your case will cost without knowing the facts. We don’t want to mislead you. We will thoroughly evaluate your situation based on a detailed analysis of the facts, and then quote a reasonable fee based on it before you decide to hire us.
What are the pros and cons of bankruptcy?
One of the most powerful provisions in bankruptcy law is called the automatic stay. When you file bankruptcy, it triggers an automatic court order prohibiting all creditors from taking actions against you or your property, including lawsuits, garnishments, foreclosures, repossessions, or harassment. “It gives the debtor a breathing spell from his creditors . . . It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy” (Notes of Committee on the Judiciary, Senate Report No. 95-989). Keep in mind, however, that there are certain exceptions; also, the court may remove the protection under certain circumstances.
The ultimate advantage of bankruptcy is discharge. It is a court order that legally forgives any debt of yours that can be forgiven, meaning you don’t have to pay it back. A creditor may not collect a discharged debt. Basically, you get a “fresh start.”
The major downside of bankruptcy, of course, is that it messes up your credit. However, people who are overwhelmed by debt typically already have a rather low credit rating. Remember, besides bankruptcy, collection, lawsuit, judgment, garnishment, foreclosure and repossession are reported to the credit bureaus, too. Sometimes, even owing a lot of debt by itself reduces your credit rating (lenders call it “excessive obligations”), even if you are current on their minimum payments. If you are already faced with any of those things, bankruptcy probably won’t make your credit much worse.
We understand bankruptcy is a difficult decision, and we don’t recommend bankruptcy unless it’s either the best alternative or last resort. Our experienced attorneys will thoroughly analyze your financial situation and explain your options, so you can make an informed decision.
What are the differences between Chapter 7 and Chapter 13?
First, let’s talk about the similarities. They are both types of bankruptcy. They both trigger the automatic stay. And, if successful, they both result in a discharge. Beyond that, they work very differently, each yielding its own advantages. Please click here to find out more about Chapter 7. Click here for more details about Chapter 13.
Can I keep my home and car in a bankruptcy?
It depends. Many people can and have. No two cases are the same. Please consult your attorney to find out if you can. Our goal is to help you structure your case to take the maximum advantage of the law and get the debt relief you need while keeping as many of your assets as possible.
What debts cannot be discharged?
The Bankruptcy Code has a long list of nondischargeable debts. Typical examples include certain income taxes, alimony, child support, student loans, governmental fines (such as parking tickets), and debts incurred by fraud. Also, some debts may be nondischargeable in Chapter 7 but are dischargeable in Chapter 13. Ask an attorney whether your debt is dischargeable.
Can I file bankruptcy against some creditors but not others?
If by “file” you mean listing it in your bankruptcy, the answer is no. Bankruptcy law requires you to list all creditors, meaning everyone you owe money to. That includes a personal loan from a friend, money your employer lent you, or that $1,000 you borrowed from a Martian during your vacation in Puerto Rico three years ago—you get the point. Keep in mind that listing a debt is one thing, what you want or can do about it is another. List everything first.
Bankruptcy law does not say you cannot pay your debt. You are free to pay any or all of your debt, even though a debt is discharged in bankruptcy. All the law says is that, if you cannot afford to pay certain debts, you don't have to.
How soon can I get credit after bankruptcy?
The law neither prohibits lenders from giving you credit nor does it require them to do so. All the law says is that, if a credit bureau chooses to keep the information about your bankruptcy (and they always do), it can only do so for up to 10 years. What to do with that information is up to lenders. If a bank’s policy is that they don’t want to do business with people who filed bankruptcy, that’s OK. If a mortgage company is willing to finance your home in spite of your bankruptcy, that’s fine, too. In reality, bankruptcy does make it harder, but not impossible, for you to get credit. You may have to make a larger down payment, pay higher interest, or get a cosigner. Also, we have information about certain lenders who we know have issued mortgage loans for people who have filed bankruptcy. If you want to buy a house, many mortgage companies ask you to wait a year or two after you receive your bankruptcy discharge before they consider your loan application. Many car dealers will not help you with the financing of a vehicle until you receive your discharge.
Another thing to keep in mind is that, some more sophisticated lenders, although not required by law, are more willing to deal with people who filed Chapter 13 than those who filed Chapter 7, because those people have paid back some debts through their Chapter 13 plans.
I want to get out of debt but I don’t want to lose my assets. Can I hide them?
NO, NO, NO. Bankruptcy is only for honest people. Bankruptcy fraud is a federal felony that carries a penalty of up to five years in prison or $500,000 in fines, or both. Obviously, your debts would not be discharged, either. You are much better-off by discussing your concerns openly and freely with us (remember, all communications between you and our firm are confidential and will not be disclosed without your permission unless required by law) and letting us advise you as to how to accomplish your goal legally.
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