Q. What is bankruptcy?
A. Bankruptcy is a form of legal protection that keeps creditors from collecting on debt while the bankruptcy court determines the case. In most cases, a bankruptcy case begins when a debtor (or usually the debtor's attorney) files a petition with the court, along with many different schedules, statements and other required documents. It ends when the case is closed by the judge.
Q. What is the difference between a Chapter 7 and a Chapter 13 bankruptcy?
A. There are different ways to file bankruptcy and each type of bankruptcy is governed by a different chapter of the bankruptcy law. The two types of bankruptcy that most individuals file are Chapter 7 and a Chapter 13 bankruptcies.
Chapter 7 bankruptcy is usually the best option for most of our clients, though there are income and asset limits that apply to Chapter 7 cases. In a Chapter 7 case, our goal is almost always to protect our client's property and to discharge our client's debts. At the conclusion of a typical Chapter 7 case, our client will retain his or her property, receive a discharge of his or her debt within four months of the initial filing of the case and will receive a fresh start free from debt. Chapter 7 cases are generally faster and cheaper than Chapter 13 cases.
Chapter 13 bankruptcy is designed to help clients who do not meet the income limits to file a Chapter 7 case or who have assets that need to be protected but exceed the value we can protect under a Chapter 7 case. We are no longer handling new Chapter 13 cases.
Q. How much does bankruptcy cost?
A. We charge $1485 (including all fees and costs) for a Chapter 7 bankruptcy. Extra fees may apply to extremely complicated cases.
Q. How does bankruptcy help me?
A. Bankruptcy gives clients instant relief in the form of a thing called the "Automatic Stay". This is a court order that goes out to all creditors after a bankruptcy filing and it makes it illegal for any creditor to make any attempt to collect on almost any typical consumer debt. Creditors can get in BIG trouble for violating the automatic stay and so such violations are very rare. During your case, creditors attempting to collect on debts cannot call clients, write them, sue them, garnish their wages or bank accounts, or foreclose or repossess any property without first getting the court's permission.
At the end of the successful bankruptcy case, debtors receive a discharge of their debts. This means that the federal court has ruled that no creditor can ever collect on these debts again.
So, in a nutshell, a bankruptcy case means instant relief and a fresh financial start.
Q. Can I keep my property after bankruptcy?
A. Yes. Our clients almost always keep all of their property. One of the ways attorneys earn their fees in handling a bankruptcy case is by carefully applying special laws in order to exempt the client's property from being turned over to creditors in a bankruptcy case. There are many different of these exemption laws and there are special requirements and limits for applying them in bankruptcy cases. There are separate laws to protect marital property, household furnishings, tools of the trades, motor vehicles, guns, etc and an experience attorney can wade through these laws to protect the maximum value possible.
The vast majority of our clients keep all of their property through careful application of the exemption laws. There are a few cases where a client owns valuable property that cannot be entirely exempted, and in these uncommon circumstances, we work with the client to protect as much of his or her property as possible.
However, the fact of the matter is that by the time our clients come to see us, most of them have exhausted their readily available assets - which means that they are unlikely to own anything at risk of loss in a bankruptcy case.
Q. Will bankruptcy get rid of all my debts?
A. Usually yes, but it depends on the type of debts you have. Some debts are generally not dischargeable in bankruptcy. For example, student loans, taxes, child support, alimony, criminal fines and restitution are types of debts that are difficult or impossible to discharge in bankruptcy. However, typical consumer debts like credit cards, personal loans, payday loans, repossession judgments, foreclosure costs, medical bills or old phone or utility bills (assuming there is no current service) - all these types of debts are generally dischargeable in bankruptcy.
Q. Will bankruptcy hurt my credit?
A. Most of our clients have nowhere to go but up in their credit ratings. While it is true that bankruptcy (like all public records) is listed on credit reports for 10 years, it is also true that bankruptcy wipes out negative accounts and collections. We find that our clients receive credit card offers soon after filing and we have had clients successfully buy houses and obtain mortgages only two years after filing.
If your credit is good when you file for bankruptcy, then the bankruptcy filing will hurt more and longer than if your credit is bad. However, by the time clients come to see us, their credit scores are usually very poor. Bankruptcy can be a lifesaver for these clients
Q. When do I go to court?
A. Never, usually. However, you do have to attend a very brief meeting about a month after your case is filed. This meeting is run by an official called a "Trustee" (a lawyer appointed by the court) whose job it is to make sure your paperwork is correct and to make sure that you do not have valuable assets that could be used to repay debt. Your lawyer will be with you at this meeting. Meetings typically last about 5-10 minutes and involve answering a few questions under oath regarding your paperwork. Before you go to this meeting, you will have reviewed all of the papers in our office and the attorney will also have carefully reviewed them. In the unlikely event that an issue arises at the meeting, your attorney will handle it for you. It is extremely rare for our clients to be required to appear before a judge in bankruptcy cases - if your appearance is required your attorney will notify you and communicate with you regarding the hearing.
Q. It sounds too good to be true. What's the catch?
A. There is no catch. There is a terrible amount of misinformation about bankruptcy circulating in the streets, but for most clients, bankruptcy protection and the discharge of their debts give them an incredible fresh start in life. There just is no downside in bankruptcy for the typical bankruptcy client.
Q. What do I have to do if I want you to help me file a bankruptcy case?
A. The first thing you need to do is to schedule a free consultation with an attorney to make sure bankruptcy is right for you. If you decide to retain us to file your case, you will need to provide some documents (these vary depending on your circumstances) and you will need to take two online or telephone classes (about an hour each). If you hire us, our staff will guide you through these requirements. You will need to come in to our office to review and sign you papers before we file them and about 30 days after filing, you will need to attend a brief meeting with your attorney and the trustee.