Bankruptcy Q&A
Introduction
The following questions and answers are general and not geared to any specific debtor. However, this can be a useful guide in determining whether or not bankruptcy is right for your financial situation.The cost of bankruptcy varies because each debtor’s situation is different. However, payment plans are available and our job is to help your regain your financial freedom from debt collectors and the like. Therefore, for an in depth analysis of your circumstances, please contact us at 210-592-7525 to set up a personal consultation at no charge. If any of the following applies to you- you may want to consider Bankruptcy as an option to fix your current financial situation:
1. The creditors have stopped asking and started threatening.
2. You’re worrying that the car might not be in the driveway when you go out in the morning.
3. Maybe your mortgage holder has used the “F” word: Foreclosure. How can you save your assets?
4. IRS is threatening to levy your assets and/ or checking account for personal taxes that
are 3 years or older?
5. The stress is damaging your marriage, work performance, and other relationships.
Top 10 Common Questions and Answers for Chapter 7 and 13 Texas Bankruptcy Filers
Here are some common questions often asked by clients considering bankruptcy as a solution to their financial concerns. The answers to these questions are general and may not fit your specific situation.
1. When should I consider bankruptcy?
You should consider bankruptcy when:
- Unemployment
- it becomes evident you cannot pay your bills as they come due
- you start considering using your VISA card to pay your MasterCard
- you receive a letter from your mortgage company threatening foreclosure
- Repossession or imminent repossession of vehicle
- Garnishment
- you're considering a home equity loan to consolidate your bills; cashing in your 401(k) or your IRA
- Divorce
- Illness
- Lawsuits
- you have significant IRS debt
- You just can't take the stress any more from collection letters and phone calls
In the vast majority of cases, people who file bankruptcy keep all of their assets. In fact, assets like your home, car, pension fund and IRA are protected from your creditors if you file bankruptcy.
2. Are there alternatives to bankruptcy?
Of course. Some people have successfully managed their finances through a payment plan that can be negotiated directly with a creditor. Our office can represent you in obtaining loan extensions, compromises and workout agreements through negotiation.
Note: Texas law allows creditors to satisfy their judgments out of the debtor’s property, including bank accounts and certain personal property. If you sell real property after the judgment is filed, you will most likely have to satisfy the judgment out of the proceeds of the sale. Judgment creditors cannot, however, foreclose on your homestead to satisfy the judgment, and they cannot
garnish your wages.
3. What kinds of bankruptcy are available and do I qualify?
There are five kinds of bankruptcy.
- Chapter 7 – liquidation of credit card debt primarily with the ability to reaffirm secure debts
- Chapter 9 – reorganization for municipal entities Chapter 11 – reorganization for businesses and for individuals with excessive debt
- Chapter 12 – reorganization for family farmers
- Chapter 13 – reorganization for individuals with a regular source of income who want to save their home from foreclosure
Most individuals and couples file either a Chapter 7 case or a Chapter 13 case.
4. What is a Chapter 7 bankruptcy?
The bankruptcy laws are designed so that all debtors emerge from bankruptcy with sufficient assets to make a fresh start. These assets are called exempt property. In most cases, you receive a discharge of all dischargeable debts.
5. Who can file a Chapter 7 bankruptcy petition?
Almost any individual, partnership, or corporation can file a Chapter 7 bankruptcy petition. The debtor must reside, have a domicile, a place of business, or property in the United States. You can file a Chapter 7 bankruptcy petition regardless of whether or not you are employed. If you filed bankruptcy before, your right to a discharge may be affected.
6. What is a Chapter 13 bankruptcy?
When you file a Chapter 13 case, you agree to pay over to the Chapter 13 trustee a portion of your disposable income each month for 3 to 5 years. The disposable income is the money you have left over after your necessary expenses are paid. These payments are used to pay your creditors. Usually, your assets are not affected. Only your future income is paid to the trustee.
7. Who can file a Chapter 13 bankruptcy petition?
Individuals may file Chapter 13 bankruptcy petitions if they:
(1) reside, have a domicile, a place of business, or property in the United States, or a municipality;
(2) have a source of regular income.
Note: Corporations and partnerships may not file a Chapter 13 bankruptcy petition.
If you filed bankruptcy before, your right to a discharge in a succeeding case may be affected.
8. How long does a bankruptcy stay on your credit report?
The bankruptcy stays on your credit report for 10 years. However, the more time that passes by, the less of an impact it has on your credit score.
9. When do I get relief from creditor harassment?
Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. A provision of the Bankruptcy Code called the automatic stay prevents bill collectors from taking any action to collect debts. A creditor may be liable for court sanctions if it continues to use collection tactics once informed of the bankruptcy.
10. Will bankruptcy stop a wage attachment, foreclosure proceeding, or prevent repossession of my car?
Yes, including IRS wage attachments. If you file a Chapter 7 case, you may be able to arrange with the creditor to catch up the payments. If you file a Chapter 13 case, the past due payments can be included in the Chapter 13 and paid over time.
Note: A Chapter 13 is the better choice for debtors facing foreclosure or repossession.
Attorney Point of View: Bankruptcy Questions a potential Bankruptcy Filer should ask-
1. What kinds of bankruptcy are available and do I qualify?
There are five kinds of bankruptcy.
- Chapter 7 – liquidation of credit card debt primarily with the ability to reaffirm secure debts
- Chapter 9 – reorganization for municipal entities
- Chapter 11 – reorganization for businesses and for individuals with excessive debt
- Chapter 12 – reorganization for family farmers
- Chapter 13 – reorganization for individuals with a regular source of income who want to save their home from foreclosure
*****Most individuals and couples file either a Chapter 7 case or a Chapter 13 case.
*** Debtors are required to take a Debtor Credit Counseling class prior to filing a
Chapter 7 or 13 case.
2. Will bankruptcy stop a lawsuit?
Bankruptcy stops most civil lawsuits, including most IRS proceedings.
3. Must I list all my creditors?
Yes. If you intentionally omit a creditor from your schedules, you have committed perjury.
Note: If you accidentally omit a creditor, and the creditor does not know about your bankruptcy case, the debt owed to that creditor might not be discharged.
4. If I am divorced, will bankruptcy eliminate my obligation to pay community debts?
In general, you will be discharged from all dischargeable community debts. In some circumstances you may still be liable to your spouse if she or he pays the debt.
5. Is alimony dischargeable?
Alimony, maintenance and child support payments generally are not dischargeable. A few technical exceptions exist. In addition, the Bankruptcy Code provides that certain other divorce related obligations, such as payments to others, hold harmless provisions and property settlement obligations are not dischargeable if the debtor has the ability to pay them and the detriment to the spouse outweighs the benefit of the discharge to the debtor. In order to take advantage of these provisions, the spouse must obtain an order from the bankruptcy court declaring the debt nondischargeable.
6. Can I discharge student loans?
Generally, student loans are not discharged in bankruptcy. There are two exceptions to this general rule.
1. The student loan may be discharged if it is neither "insured or guaranteed by a governmental unit" nor "made under any program funded in whole or in part by a governmental unit or nonprofit institution." 2. The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."
Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. If a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to seek a bankruptcy court order declaring the debt discharged.
7. Can I discharge taxes?
In most instances, taxes owed to the federal government are not discharged unless they are more than 3 years old. If you have employees and owe income tax on your employees’ earnings, those taxes are never discharged. Interest and penalties on those taxes may be discharged under certain circumstances.
Taxes that are not discharged in a Chapter 7 case can often be paid through
a Chapter 13 plan.
8. Can I keep any credit cards?
Under some circumstances you may be able to keep some credit cards if the creditor agrees. There are many factors that must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt.
9. Do I have to list all of my assets?
Yes. Your assets include your personal property, any real estate you have an interest in, your right to receive something from a contract, debts that people owe you, and many other types of property.
Note: If you knowingly and fraudulently conceal an asset from the court, you have committed a FELONY and can be fined or imprisoned or both. Furthermore, the court can deny your discharge, or dismiss or convert your bankruptcy case.
10. Does my spouse have to file?
It depends on the situation of each creditor. In Texas, the spouse may still be liable for part of the debt, even though the debtor’s part has been discharged.
Note: Bankruptcy is a federal legal process for debt management available to most individuals and businesses. Successfully completing a bankruptcy case allows individuals and businesses to either eliminate or reorganize most of their debt. The bankruptcy laws are contained in 11 U.S.C. Sec. 101 et seq.
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Bankruptcy Questionaire 2008
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Your Property and the Homestead Exemption
