We are a federally designated Debt Relief Agency under the United States Bankruptcy Laws. We assist people with finding solutions to their debt problems, including, where appropriate, assisting with the filing of petitions for relief under the Bankruptcy Code.
Bankruptcy is a legal proceeding designed to allow individuals to get a handle on out-of-control personal debt and to stop harassment from creditors. In essence, bankruptcy is the means by which the court system will look at all of your assets and work out a plan to settle your debts. The type of plan the court chooses will depend on which type of bankruptcy proceeding you choose to file. In general, an individual may file either a Chapter 7 or Chapter 13 bankruptcy.
2. What can filing for bankruptcy do for me right now, and in the future?
In the short term, filing for bankruptcy will stop creditors from harassing you and from using unethical tactics to try and bully you into deals that are very lucrative for them, but can be disastrous for you or your family. Once they are put on notice that you have filed for bankruptcy they are forbidden by law from contacting you any further and are forced to abide by whatever decision the court makes. Even if you are in the middle of a foreclosure, filing for bankruptcy will stop that proceeding and give you a little breathing room to work out a solution.
You should know that federal law (Fair Debt Collection Practices Act, 15 U.S.C. § 1692) prohibits collection agencies from harassing you in certain ways, regardless of whether you are in bankruptcy or not. Collection agencies may not call you at an unreasonable time (before 8 am or after 9 pm is presumed unreasonable) or call you at work, or use abusive language.
In the long term, bankruptcy can often provide a fresh start for many people. It is a path out from overwhelming debt and allows you to move forward in a responsible manner.
3. What is the procedure for filing for bankruptcy?
While sometimes very clear-cut, bankruptcy can also be very complex which is why it is always important to consult with a licensed bankruptcy attorney. Any errors made in the bankruptcy procedure are grounds for a court to discharge the case and deny the use of the bankruptcy option.
First, under federal law, you ALWAYS need to consult with a credit counseling professional before considering bankruptcy. Your local bankruptcy attorney will be able to refer you to a reputable counselor or you could find accredited professionals online.
Secondly, you need to choose which bankruptcy proceeding to file under; for most individuals this is either Chapter 7 or Chapter 13.
In addition to any attorney fees, there are separate filing fees, payable to the court, for each type of bankruptcy that vary from year to year:
Chapter 7 - $299
Chapter 13 - $274
The timeline for a typical bankruptcy proceeding can vary depending on how truthful you are as to your debts and assets and if your creditors object to what the court intends to do. Usually the court will order a so-called “meeting of the creditors” within six weeks of filing to analyze your case on a debt-by-debt basis. Most cases are resolved within six months of filing.
Filing bankruptcy under Chapter 7 involves a fairly straightforward liquidation of your assets. The bankruptcy court will take stock of all of your assets, subject to several exemptions, and use those assets to pay off your creditors in a predetermined order that is mandated by federal law. Two key advantages to Chapter 7 are that debts are often settled for less than the full amount and, following the bankruptcy proceeding, almost all of your debts will be completely discharged (some debts such as student loans may not be completely discharged, depending on your situation).
Not everyone may file for Chapter 7 bankruptcy. In fact the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it more difficult for individuals to discharge their debts in this manner. To qualify you must either have a monthly income below the median income in your state for a family of your size, or have less than a specified amount of disposable income, as calculated over a five year period. An actual calculation of disposable income is a complex formulation but in general, if you have less than $6,000 of disposable income over a five year period you WILL qualify for Chapter 7, and if you have between $6,000 and $10,000, you MAY qualify depending on your expenses.
Chapter 13 is different from Chapter 7 in that you will not be discharged from paying all of your debts. Under Chapter 13, the bankruptcy court looks at your assets and your disposable income and attempts to restructure your debts into a manageable payment plan, payable under an extended time period of up to five years. The key advantage to filing under Chapter 13 is that you may not have to liquidate any of your assets under the payment plan, depending on your situation.
Again, under the federal laws you will have to meet certain requirements to qualify for Chapter 13 treatment. First of all you must have the disposable income available to meet the payment schedule mandated by the court. A failure to make a required payment could result in the court ordered sale of assets. Finally, your total amount of secured debt must be below a certain threshold. If you are in too much debt a Chapter 7 liquidation may be more appropriate.
6. Why would I choose Chapter 7 over Chapter 13, or vice-versa?
This is a very personal choice and the answer will depend on your situation. In general, an individual will often choose Chapter 7 if they are suddenly confronted with an extremely large and unexpected expense, such as a medical bill, or are have fallen on tough times and are out of work and simply cannot pay their bills. Chapter 13 is often preferable if you have a consistent stream of income but have accumulated enough debt to the point where you are no longer moving forward with your financial future. However, there are many more reasons why it might make more sense in your situation, to go one way or the other. It is even entirely possible that bankruptcy might not be the best solution for you. That is why it is so important to seek the advice of a bankruptcy attorney or other similar professional.
7. Will I lose my home, or any other assets if I file for bankruptcy?
The simple answer is not necessarily. Regardless of which Chapter filed under, there are numerous rules that exempt certain property from a bankruptcy proceeding and place them outside the reach of your creditors. For example, if you are married your primary residence is exempted if you have less than $75,000 in equity (this amount is increased to $150,000 if you are over 65). This means if your home’s fair market value is less than $75,000 more than the amount of debt owed on the home, your home is exempt from bankruptcy. There are many other limited exemptions for various items such as jewelry, family heirlooms, and even your car.
Even if some of your assets are not exempt, they still may not have to be sold. Through advice from an attorney you may be able to negotiate with your creditors to “reaffirm” your debt to them and privately work out a deal, outside of the bankruptcy, where you would be allowed to keep the asset.
8. How will my credit be affected by filing for bankruptcy?
The bankruptcy will show on your credit report for anywhere from seven to ten years, depending on your situation. However, you can start rebuilding your credit immediately after filing. Often this is accomplished using a secured credit card where you provide a set amount of money to a credit card company that becomes your maximum limit on the card. Over time, as you meet payments, your credit score will improve and within 2-3 years, people are often able to qualify for a home loan on the same terms as someone who has not gone through bankruptcy. In short, while your credit will be affected, it is not impossible or even uncommon to be able to rebuild your credit score to a pre-bankruptcy level within a relatively short amount of time.
9. Will my spouse be affected by my filing for bankruptcy?
Not necessarily. Bankruptcy concerns the debts personal to you and can be completely separated from your spouse or family. However, if your spouse has co-signed on one or more of the debts you are seeking to discharge, your spouse may need to be brought in to the bankruptcy so that he or she is protected from creditors.