1. Will I need to appear in Court?
If you file Chapter 7, you will need to appear before a Bankruptcy Trustee on normally one (1) occasion. The Trustee is an Attorney appointed by the Court to review your case and make a determination as to whether you have non-exempt assets which must be surrendered or sold so that a dividend can be paid to your creditors. The Trustee will further review your Petition to determine whether everything is in order and will question you as to the completeness and correctness of the information contained in the Petition. You are required to disclose all your assets including any claims such as personal injuries, inheritances, and tax refunds. Most cases involve an appearance of approximately ten (10) minutes before the Trustee. The Trustee receives your Petition, last two (2) tax returns, pay stubs and other documentation about one (1) month before the hearing date. Often times the Trustee will call me prior to hearing date if there are questions, but for the most part, you will be questioned directly. It is important to provide accurate and complete information in your Petition so as not to subject yourself to any claims by the Trustee that you have failed to disclose assets, liabilities, income, preferential payments or any other information relevant to your case. I will work with you so that this information can be provided.
In Chapter 13, you will appear before a Chapter 13 Trustee who will similarly review your Petition, tax returns and documentation and question you as indicated above for the Chapter 7 Trustee. In addition, the Chapter 13 Trustee will review your proposed Bankruptcy Plan and determine whether or not it is feasible and whether or not there is enough money being paid in to pay your creditors an adequate dividend, Assuming the Chapter 13 Trustee approves your Plan, you will thereafter need to appear before a Bankruptcy Judge about one (1) month later who will confirm your Plan. Often times the Judge will have some questions, but for the most part, he is going to remind you of your obligations under your Bankruptcy Plan and question you to insure you know what your responsibilities are.
2. What is the difference between Chapter 7 and Chapter 13?
Chapter 7 is a liquidation case. If you have non-exempt property, it will be sold (possibly back to you), and the proceeds will be distributed to your creditors. Exempt property includes 1) home equity of $50,000.00 per debtor or cash, tax refunds, and bank accounts of $2.5 00.00 per debtor; 2) clothing; 3) furniture; 4) one television, stove, and refrigerator; 5) IRA, 401k and pension accounts; 6) a vehicle with up to $2,400.00 equity for each debtor; 7) tools valued up to $600.00; 8) wedding rings and other miscellaneous assets.
In most cases, Debtors have some exempt property but its value may be so little that the Trustee chooses to waive his interest in it so you can retain it. You are required to disclose all of your assets in your Petition. We will discuss the possible disposition of non-exempt property.
Chapter 13 is a payment plan. In Chapter 13, the Debtor agrees to pay an equal percentage to each unsecured creditor. If you are delinquent on your mortgage or taxes, you can also pay those arrears in full. This will allow you to keep your home even if it is now in foreclosure. Car loans are often paid through Chapter 13 also, although every case is different. I will be able to calculate your Chapter 13 payment after I receive all your information regarding assets, debts, income and expenses.
Your Chapter 13 Plan will run for three (3) to five (5) years. Unless you are self- employed, the payment will typically be deducted directly from your paycheck.
3. Are there debts which cannot be discharged in Bankruptcy?
Student loans, child support, criminal fines, penalties and restitution and most taxes are not dischargeable. Income taxes can be dischargeable if it has been at least three (3) years since you filed the return in question and certain other criteria do not exist. Most other debt including credit card bills, medical debt, judgments, past due rent, utilities, and consumer debt is dischargeable.
Bankruptcy will not eliminate secured debt such as mortgages or car loans, assuming you wish to retain that asset. If you give up the property, the debt will be eliminated,
4. Will Bankruptcy adversely affect my credit?
If you already have a large amount of debt which you haven't been able to pay on a timely basis, your credit has already most likely been affected. For many clients discharging high amounts of debt will probably eventually result in them having improved credit. Many clients report that they receive unsolicited offers of credit once they receive a Bankruptcy discharge. Most of those clients also indicate that they are not interested in receiving new credit, and I would encourage you to avoid using credit and live on a cash basis, except for major purchases like homes or cars.
5. Can I keep my house and car?
Debtors are allowed to retain Fifty Thousand Dollars ($50,000.00) (individual) and One Hundred Thousand Dollars ($100,000.00) (joint) in a home. Any mortgage or taxes secured by the home must be current in Chapter 7 and payments must remain current. In Chapter 13, mortgage and tax arrears can be paid through your plan but future payments must remain current.
Each Debtor is entitled to retain a vehicle with Two Thousand Four Hundred Dollars ($2,400.00) equity. If a loan is secured by the vehicle, it must be and remain current in Chapter 7. In Chapter 13, the loan balance will typically be paid through the Plan with interest at a rate determined by the Court,
6. Will I be able to purchase a home or car after I have filed Bankruptcy?
You will be able to purchase a home or car, but the real question is whether you will be able to obtain financing to do so. Any financing you obtain will likely carry a higher interest rate, which would have probably been the case even if you didn't file Bankruptcy. Prior to filing Bankruptcy, many lenders may deny your loan application depending on your debt load and how far behind you are in payments. Your Bankruptcy will be carried on credit reports for at least seven (7) years. If you are going to want to buy a home, I would encourage you to save up so that you have at least a five percent (5%) down payment along with closing costs. You should also maintain consistent employment and should avoid taking on any new debt after you file your Bankruptcy. You can contact a mortgage broker to determine what specific programs might be available to you, but hopefully you would be able to obtain financing to purchase a home within two (2) or three (3) years of filing.
With regard to a car, you may be able to obtain a car shortly after you receive your discharge. Again, you will likely have a higher interest rate, but so long as you have adequate income, you may be able to obtain financing.
7. Are co-signers affected?
If someone co-signed on a loan or credit card for you, they will continue to be liable for the debt even if you file Bankruptcy. It would be normal for the bank to pursue your co-signer, and if the co-signer does not make voluntary payments, the bank will likely sue and collect a judgment. If you continue to make the payment, none of that will happen. If you have co-signers on any of your debt, you are required to report that to the Court, and you should make me aware of that when you provide your initial information. You can protect a co-signer from being sued by filing Chapter 13 and paying 100% of the co-signed debt through your Plan, This will not be feasible in all cases because the payment will be driven higher.
8. If I am married must my spouse file with me?
No. Many clients file Bankruptcy alone, although if both you and your spouse are jointly liable for most of your debts, it is usually better to file together. You will only pay one (1) attorney's fee and one (1) filing fee if you file jointly. However, if all the debt is in the name of the client and none of the debt is in the name of the client's spouse, there is really no reason for the spouse to file.
9. If I file Bankruptcy alone will the Court consider the income of other members of my household?
Yes. The Court will require information with regard to all income earned by members of your household including your spouse or even your live-in companion, if you are unmarried. This is normally not a big issue, however, it might be if your spouse has a much higher income than you and all of the debt is in your name. That is something that we should certainly discuss further.
10. Can I keep one (1) credit card for future use?
You are required to report all of your creditors to the Court. If you have any balance due on a credit card, you need to report it. If you have credit cards without a balance, you would not need to list those. You should be aware, however, that most credit card companies will be notified of your Bankruptcy filing even if you do not list them, They will likely close your account in any event, Therefore, you shouldn't count on having the card after filing. Your best course of action is going to be to obtain a debit card which you will be able to use to pay for items on a cash basis.
11. Will the new Bankruptcy Law affect me?
The Bankruptcy Laws were amended effective October 17, 2005. Some aspects of the law affect everyone such as the requirement for a pre-filing credit counseling session as well as a debtor education class which you must attend prior to your discharge being issued. There are also many procedural changes which will largely be my responsibility. For the most part, the new law was designed to force more debtors into Chapter 13 repayment plans. As a practical matter, many clients in the Western District of New York were already required to file Chapter 13, and the new law will not change that. You will be required to file Chapter 13 if your gross household income is above the median gross income for a household of your size in the State of New York. The limits as of November 1, 2010 are as follows:
|Household Size||Median Annual Income|
12. Will Bankruptcy stop a wage garnishment?
Yes. A wage garnishment must stop immediately once your case is filed. If additional amounts are withheld in error after you file, you should receive them back.
13. When will creditors stop calling me?
Once you retain an attorney, most creditors will stop contacting you. Once your case is filed, your creditors are forbidden from contacting you.
14. Can I file Bankruptcy if I own a business?
Yes, but the type of case will depend on the form of business ownership and whether you hope to continue the business. The business assets (except tools) will not be exempt so you will likely be required to file Chapter 13.
15. Will Bankruptcy stop a foreclosure or repossession?
Yes. The filing of your Bankruptcy Petition will stop any foreclosure action, repossession, or lawsuit. If a foreclosure sale has been scheduled, it will be cancelled. If an auction of your vehicle is pending, that will be stopped also.
16. What is a preference payment?
If within the last year you have made any payment to family members or any large payment to a single creditor in the past ninety (90) days, your Trustee may be able to recover that money from the family member or creditor and distribute it evenly to all of your creditors. Once you consult with me, you should not make any preferential payments to any family members or creditors. If you have made preferential payments prior to seeing me, make sure that we talk about them so that I can determine whether or not these were made within the time frame which requires them to be disclosed to the Court.
17. Can my employer or the government discriminate against me if I file Bankruptcy?
No. It is illegal for an employer to discriminate against a person because they file Bankruptcy or because a Chapter 13 payment is being deducted from their pay. Filing Bankruptcy is not a criminal proceeding, so you will not lose any civil rights including the right to obtain a driver's license by filing.
18. How do I get started?
Call my office at 585-334-4270 for an appointment or e-mail my office with your availability, and I will attempt to schedule an appointment for you. If you wish to complete the bankruptcy information data form prior to our meeting, you can download it through the link on my home page. Please bring a list of all of your creditors and the approximate balance due as well as your most recent pay stubs to our first meeting. These will allow me to evaluate your situation and make a recommendation to you.