A lot of misinformation is being circulated about bankruptcy. Here are the answers to some of the most common questions we receive.
Q. What is bankruptcy?
A. Bankruptcy is the legal discharge of your debt. Like the freedoms of speech and religion, bankruptcy is a right guaranteed by the United States Constitution. If you have taken on more debt than you are able to repay, the law allows you to eliminate most and often all of your debt in a special court. This has the effect of providing most people with a new start in life. However, bankruptcy law is complicated and is constantly changing, so extreme care must be taken in preparing a bankruptcy petition.
Q. What is the difference between a Chapter 7 and a Chapter 13 bankruptcy?
A. There are several different ways to file for bankruptcy protection and each of these ways is described by a different chapter of the U.S. Bankruptcy Code. Individual consumers usually file either a Chapter 7 or a Chapter 13 bankruptcy.
Chapter 7 bankruptcy is a liquidation. This means that debtors who qualify for a Chapter 7 filing do not have to go on a payment plan. All of their eligible debts are discharged and they get a "fresh start" after the court approves their bankruptcy petitions. Debtors usually benefit the most if they qualify for a Chapter 7 bankruptcy.
Chapter 13 bankruptcy is a reorganization plan. Like a Chapter 7 bankruptcy, a Chapter 13 filing offers protection from collection, repossession, or foreclosure during the term of the bankruptcy. It is also sometimes possible to discharge all or a portion of some debts in a Chapter 13 filing. A debtor who qualifies for a Chapter 13 bankruptcy goes on a payment plan and makes one monthly payment to the bankruptcy trustee. The trustee then pays the debts according to the terms of the plan. Chapter 13 bankruptcies are more complicated than Chapter 7 bankruptcies, but they can be very helpful to debtors who need them.
Q. Does the change in the law that took effect in October, 2005 mean that I will not qualify for bankruptcy protection?
A. Bankruptcy reform does NOT make it more difficult for most people to qualify for bankruptcy protection. Many of our clients have been told by bill collectors that bankruptcy is "illegal" under the new law. This is simply NOT TRUE. We have filed hundreds of cases since the law changed.
The truth is that many of the changes to the bankruptcy law are procedural changes that do not change qualification requirements-they just add some work to the process. Come in for a FREE CONSULTATION and find out how the changes in the law affect you.
Q. Should I file for bankruptcy protection?
A. The answer to this question depends on many factors. Our experience indicates that about a fourth of the people we meet in our initial consultations should not file for bankruptcy protection. If a bankruptcy won't help our clients, we tell them so-it doesn't do either us or our clients any good to file an unnecessary bankruptcy petition. Whether you decide to retain us or not, we strongly believe that any debtor should decide whether to file for bankruptcy only after consultation with a qualified attorney.
Q. Do I need credit counseling before I file for bankruptcy protection?
A. Under the new law, credit counseling is almost always required before a debtor may file a bankruptcy petition. Of course, credit counseling works for some people. However, our experience has shown that many "credit repair" or "credit counseling" organizations are merely out to get even MORE of your money. It is very common to find huge, hidden "administrative fees" with some of these outfits. Before using one of these organizations, you should ask yourself if you honestly believe that you will be able to repay your debts without bringing an intolerable burden upon yourself or your family. Many of our clients have attempted to use these credit counseling agencies, throwing hundreds and even thousands of dollars away while they kept falling behind the whole time, only to find the plan to be unworkable in the end. There is no good reason to set yourself up for failure.
We have arranged with a reliable, independent credit counseling agency to provide the required counseling in our office. We will discuss this counseling with you at your free consultation.
Q. What about my credit rating after bankruptcy?
A. The truth is that by the time most people start to consider filing bankruptcy, their credit is already about as bad as it can be. Many of our clients find that their ability to obtain credit actually IMPROVES after filing bankruptcy. If you have a good credit rating, bankruptcy may lower it. Most of our clients, however, have nowhere to go but up as far as their credit rating is concerned. We have found that within two years of filing bankruptcy, our clients are receiving credit offers. While the law allows credit agencies to report bankruptcies for 10 years instead of the 7 years debts are reported, it is also true that bankruptcy wipes away most debts. The fact that a potential customer has eliminated a debt burden and had acted to improve his or her financial circumstances can be attractive to a lender.
Q. Do you have a payment plan?
A. Yes we do! Learn more here.
Q. Will I lose my home or other things I have worked for?
A. Almost certainly not! Bankruptcy laws almost always allow you to keep your home if you wish. Also, most of our clients keep all of their personal belongings. Of course, you should schedule a free, no risk, initial consultation to have your particular situation evaluated by a qualified attorney.
Q. If I decide to file for bankruptcy protection, how much will it cost?
A. Our fees are very, very reasonable and straightforward. To view the current costs and fees, in addition to a wealth of other information, please create a free account and login.