The laws and regulations surrounding bankruptcy are both complicated and constantly evolving. Finding the help of an experienced bankruptcy attorney is crucial. The attorneys John B. LaRue, Corinne Erwin and Kimberly Gilbert have the experience to wipe out unsecured debt and protect you against foreclosure. A lot of people are scared of bankruptcy and its implications for their future – they shouldn’t be! Eliminating debt and improving your ability to take care of your family and future is the most responsible thing someone in financial trouble can do.
Common Questions About Bankruptcy
Bankruptcy is filed to afford a client with relief from their debts and the creditors and collection agencies or attorneys who are seeking to collect on those debts. The ultimate goal is to “discharge” the debt. The debt may be discharged either through a Chapter 7 case, in which it is likely nothing will be paid toward the debt; or through a Chapter 13 in which some portion of the debt may be paid over time before it is discharged.
A bankruptcy filing affords the client with IMMEDIATE relief from the creditors through an AUTOMATIC STAY ORDER; that is an Order issued by the Federal Bankruptcy Court which automatically stops any and all collection processes (including lawsuits, foreclosures and garnishments) upon the FILING of the case.
Bankruptcy is not something to be entered into without great consideration. We pride ourselves upon being diligent in the review and preparation of all pleadings, petitions and schedules that are required in the bankruptcy process. In order to prepare these correctly many records and documents will be requested; many will have to be updated during the process so please bear with us!
It is always advisable to seek out counsel as early as possible and to not wait until the week prior to a garnishment being placed on your paycheck or your home going to sheriff’s sale.
Once we have all of the necessary information we will normally require 7-10 business days to prepare your bankruptcy petition and schedules. Once you have reviewed and approved the documents filing can usually be accomplished within 1-2 business days. Once filed you will be under the protection of the Federal bankruptcy Court and Laws.
In both cases a successful discharge will eliminate your debt.
Simply stated a Chapter 7 case is a streamlined filing that has limitations as to the amount of income and assets a person or debtor may have. The Chapter 7 case does not provide us with as many “tools” to use in working on your case. Of course, most cases do not require the extensive tool set available in Chapter 13 and are adequately dealt with in Chapter 7.
A Chapter 13 case is normally filed where the clients have income which exceeds their current monthly living expenses but is not enough to pay their entire medical, credit card and other debts. It might also be filed in those situations where the clients have a considerable amount of equity in their home, other real estate or personal property that is not exempt from claims of the creditors. A chapter 13 case is essentially a debt repayment plan that is governed by federal law. Unlike the debt consolidation programs advertised on TV and the internet this plan is governed by Federal Law and puts control in your hands. A creditor might be repaid in full (100% plan) or might receive a small percentage of what is owed to them depending upon how the final plan is calculated. Plan calculation is based on the client’s income, current expenses and other allowed deductions. It will also take into consideration the value of assets which, in a Chapter 7 case, would be non-exempt. We will review your assets, their values and the allowable exemptions to determine whether Chapter 7 or Chapter 13 is most appropriate to provide you with the proper and necessary relief from your creditors.
In order to evaluate your situation we will need a list of your assets and their current fair market value, debts, last year’s tax returns and recent pay stubs. We will also want to learn about your current expenses and determine if you are current on car loans, mortgages and other secured debt.
Implemented with the change in the Bankruptcy Code in 2005, a person filing for bankruptcy now has to go through “Means Testing”. We will request the previous six months’ pay stubs/advices or records of income and expenses for self-employed debtors and will calculate your average gross earnings which will then be compared with the statistics for persons of a similar household size in your county of residence. Depending upon how you compare further testing/calculations which take into account allowable deductions and expenses may be required. Persons who “pass” the Means Test may file under Chapter 7; those who don’t must file under Chapter 13. Of course, not all who pass the test and are eligible to file under Chapter 7 end up filing Chapter 7, as other factors may indicate their situation is better served by a Chapter 13 filing.
After we have reviewed all of your information and run the necessary calculations for the Means Test we will advise you as to which Chapter we believe best suits your needs.
The most emotional of properties we will ever own is our home. Decisions regarding the home and the finances which envelop it must be made with a clear head and in an unemotional way. In most instances our clients, whether in Chapter 7 or 13, will be able to retain their home and continue to make payments on the mortgage. In those instances where the debt or the monthly mortgage payment is simply too large the clients will be advised to “walk away” from the debt, but to remain living in the home (without further payments) until they receive a vacate notice. This period of “free rent” will often times allow the clients to save up enough money to find even better living accommodations free of the big debt and problems associated with the old residence.
If you are simply behind on your monthly mortgage payments we can often times catch up the missed payments in a Chapter 13 case. We can spread out those missed payments over a period of up to five years (60 months) during which time the mortgage lender cannot implement foreclosure proceedings so long as you remain current in your bankruptcy. At the end of your Chapter 13 plan, the Court will go through a process to establish that any arrearages that existed when you filed have been paid and that your mortgage is current so that you are assured of your Fresh Start!
Just because you file bankruptcy does not mean you will lose your car. Similar to homes, most clients will retain their automobiles and, if they have an auto loan, will continue to make payments (if they so choose) until the car is paid off.
If a client is simply behind a few payments we can “catch up” those payments in a Chapter 13 and then continue to make the current payments during the life of the Chapter 13 case. In some instances we can “cram down” the balance owed on the auto loan so that it is equal to the current value of the auto. Likewise, we can sometimes reduce the interest rate on an auto loan to several percent over the prime rate!
To make these determinations we will review your car loan documents and seek out a current valuation on your automobile.
Your credit rating during and after you bankruptcy will ultimately be based upon the opinion of the parties who review your credit record; that is your payment history. There is significant information available as to how your scores are computed, but beware there is no quick fix to a low credit score. Bankruptcy will eliminate debt which is one consideration in establishing a score, especially the debt vs. income ratio. A bankruptcy will be reported for 7 to 10 years depending upon the policies of the particular agency.
These and many other debts are considered unsecured debts which are subject to discharge in Chapter 7 and 13 cases. In a no-asset Chapter 7 case, an unsecured creditor will receive nothing, whereas in a Chapter 13 they will receive a portion of the money paid through your plan. When your case is discharged they are not permitted to puruse you or make any claim for any unpaid balances.
A bankruptcy filing, whether under Chapter 7 or 13 will STOP a foreclosure so long as it is filed BEFORE the Sheriff’s Sale. As noted above, Chapter 13 allows you an opportunity to catch up missed payments if you so choose. Other refinance options may exist depending upon the creditor and your specific situation which we will review in detail.
The relief which is available will be dependent upon how the business has been organized. If the business is incorporated relief will be limited to Chapter 7 or Chapter 11. We will not only want to consider the debt owed by the business, but also the extent of any personal guarantees. Often times a small business bankruptcy is filed in conjunction with a personal bankruptcy to ensure total debt discharge.
The cost of bankruptcy includes professional/attorney fees, filing fees ($310 for Chapter 13, $355 for Chapter 7) and a three bureau credit investigation ($54.00). Professional Fees for a Chapter 7 case range from $700.00 and up. Professional Fees for a Chapter 13 are generally set by the Courts. A portion of the Professional Fee in a Chapter 13 may be included in the monthly plan so it is not required “up front”. Each case is unique and until we can properly evaluate your situation it is not possible or wise for us to quote a fee.
We offer a free consultation to prospective bankruptcy clients. These consultations usually run 30 -45 minutes. We request that you come prepared to the consult with a fully completed worksheet and all requested documentation in an organized fashion. It is preferred that you provide us this information and documentation several days in advance so we can review it before you arrive thereby making our time together more productive.
Have any questions about your financial situation ... contact us!