Frequently Asked Questions about Bankruptcy
What kind of dog is that on the commercial?
That is a Doobie – also known as a European Great Dane! He weighs about 150lbs now but he is just a baby. He will get up to about 200 lbs. We just got a second dane, named Hannah, and everyone will meet her later.
How many dogs does Angie have?
Eight!! Two Great Danes, a Beagle, A daschund wannabe, and four miniature daschunds. Their names are Baby, Boogie, Goose, House, Birdie, Hannah, Doobie, and Honey. Honey, Hannah, Baby, and House are all rescues.
What is a Chapter 7 Bankruptcy?
A chapter 7 bankruptcy is a way to get a “fresh start” By that I mean you wipe out your obligation to pay all of your unsecured debts. If you want to keep your property that is secured you must pay for it. Or, you can surrender these secured items. Here is an example:
Dick is buying a car that he has had for about two years. His car payments are $700.00 per month. Dick wasn’t having a problem making those payments until his wife, Jane, lost her job. Now they are on the verge of not being able to make that payment and pay all the credit card debts that just don’t seem to be going down. Jane broke her foot on the while walking their Great Dane and now they have another $4000.00 in medical bills. The dog’s name? Spot, of course. Anyway, Dick and Jane bought a house at the height of the housing boom. They financed $200,000.00 and the house is only worth $150,000.00 now. They were able to make the payments early on because they had a variable interest rate. Now that rate has gone up 3% and their mortgage payment has almost doubled. They are about six months behind. What to do? If they file a Chapter 7 they will walk away from all of the unsecured debts, medical and credit card bills, and continue to pay on their car. They can keep that. Dick and Jane will take this opportunity to walk away from their home too. There is no equity and no reason at all to keep it. They will get a “fresh start.” Plus, they get to keep the dog!
What is a Chapter 13 Bankruptcy?
A chapter 13 bankruptcy is a way to consolidate your bills. It is helpful if your secured debts are delinquent and you want to keep the collateral secured by these debts. In other words, you will make a payment to the trustee and continue to make your house payment. You will also continue to pay your regular monthly bills like utilities, phone, insurance – stuff like that. Your Chapter 13 payment pays all of your credit card bills and other secured debts like car, boat, furniture, etc. The Chapter 13 payment will also cover back taxes owed and amounts you are behind on your mortgage. Here is an example – and yes the math is right:
Lisa is paying on a car she has had for about three years. The amount owed is about $10,000.00. When she purchased the car she rolled in some negative equity from an old car that was financed so the amount owed is almost $17,000.00. Her car payment is $450.00 per month! Lisa is four months behind on her house payments of $975.00 each because her husband was recently out of work for a few month. She doesn’t really have any equity in her home but she does want to keep it. The big dummy wrecked his dirt bike and tore up his shoulder. She has about $45,000.00 in credit card debt that she just can’t seem to pay down because they keep increasing the interest rates. That debt was incurred years ago when she was looking for a husband and had to look her best. She also owes about $19,000.00 is misc. medical bills. No, it wasn’t from cosmetic surgery. Recently she had to take out some payday loans because her daughter brought home three stray beagles. But, what do you do – you treat the injured dogs! (She found a husband and had two children). I would put Lisa into a Chapter 13 bankruptcy. She would begin making mortgage payments the month after we filed and the amount she is behind would be cured through her payments to the Chapter 13 trustee. Her Chapter 13 payment would include her missed mortgage payments, her car payment, her medical bills and her credit card debt. Her payment to the trustee will be $350.00 per month for 60 months.
What is the difference between secured debt and unsecured debt?
In bankruptcy a creditor cannot be secured unless they have “perfected” their lien on collateral. I’m sure that cleared things right up!
When you buy your car the creditor who financed it records that fact on the “certificate of title.” They are secured. So, if don’t make my car payment the lien holder can come and repossess my car. Other examples of secured creditors include your mortgage company, the title pawn company and the creditor that finances your furniture or your jewelry. Unsecured creditors include most finance companies, medical bills and credit card bills. Pay day loans are unsecured too. You might think that the finance company is secured because you told them about your 8 track player and your ironing board, But, they usually are not. Typically you have been charged a fee for “non filing” insurance which is insurance in lieu of perfection. What that means is they cannot come repossess the washer and the dryer. Sorry folks – you won’t get out of doing laundry by filing bankruptcy! A line of credit secured by your house is – yes, you guessed it, secured.
What do I need to begin the process?
This is the WORST PART because it includes paperwork! You will have to fill out an intake form which you can download on this website. Also, we need about three to six months of bank statements, at least sixty days worth of pay check stubs (or other proof of income such as a letter from the social security office.) And, we need a list of your creditors with the account numbers, mailing address, and approximate balance, Better yet, bring us the bills! Before you start all of this gathering you need to call and set up an appointment. If you have a scanner we may can do this first part over the phone, But, in person visits are better because we may discover you have a right to sue someone. Talking face to face is usually better, but we realize being at work may be more important.
Can you explain what a trustee does?
A trustee represent the unsecured creditors and the court – sort of. In a chapter 7 he or she sits down with us (yep, one of the three partners is always there with you) and asks a lot of questions. They are really just spot checking your petition to see if we listed everything correctly. We will give you a list of questions before you get there. Your hearing make take as much as five whole minutes! In a chapter 13 the trustee does the same thing – asks a lot of questions that you have already answered in your petition. Why? Because that is his job and he needs to earn his keep. We let you know the questions ahead of time. Then, they file some objections to your case (again, they have to earn their keep). Rarely are these objections a surprise. If we aren’t making the trustee object to something then we aren’t doing our jobs! The United States Bankruptcy Court is paperless. You know what that mean – they love to use paper. I think the paper industry is behind the whole system. Before we became “paperless” we used a lot less paper. In any event, the trustee is there to help us help you and make sure the attorney is doing their job and you are doing yours.
What happens if one spouse files bankruptcy and the other does not?
Not much. We need to know if you have any joint debts so we can protect the non filing spouse but that is basically it. When we do your budget and income we include all household income and all expenses. But, we don’t need their social security numbers, account names or anything like that. Just some basic numbers. If you don’t like your spouse we can always try and help you figure out a way to get your creditors to call them!
Does a divorce protect me from creditors if my x spouse was ordered to pay them?
No. A domestic judge, no matter how powerful they think they are, cannot alter the contract you made when the debt was incurred. Let us know if you have been through – or are in the middle of – a divorce. We will want the specifics on what debts you were ordered to pay and which ones you were not.
If I use a credit counselor will I get a better credit rating than if I file bankruptcy?
Probably not but I’m guessing. Credit bureaus are very secretive about what drives your score up and down. With that said a credit counselor cannot force creditors to play ball. And, if one creditor is uncooperative the best of repayment plans won’t work. You want to be sure you are comfortable filing a bankruptcy. So, if you think that you should try credit counseling first then by all means do so. This is your financial future so you need to be the one doing everything you think you can to feel good about that future and the choices you have made.
Can I keep my credit cards?
Will my creditors stop harassing me?
Yes, as soon as you file your case. A lot of times as soon as you tell them we are representing you. If they don’t we send them a “nasty gram.” If they bother you after that I will sue them. Yeah! Typically I don’t get many chances to do that because they all know we mean business when they get our “nasty gram.”
How do I find an approved credit counselor for my bankruptcy counseling?
Yes, you must do this before you file your case. But, the good news is that it can be done on line or over the phone! We will give you a list of the cheapest and most accessible.
Can I be fired for filing bankruptcy?
No, there is a federal law that prohibits your employer from firing you because you filed bankruptcy.
Can I keep my car?
Usually yes! However, if it is an old clunker you can give it back too.
Can filing bankruptcy eliminate child support payments?
No. But it can keep you from going to jail by including your child support arrangements (amounts owed when you file) in your Chapter 13 payments.
Can student loans be erased in bankruptcy?
No, but we can hold them off (stop collection activity) for about five years. Hopefully the economy will be better by then. Plus, after you complete your Chapter 13 you will have money to pay them.
Who will know?
Whomever you tell. While it is a public filing not many people from the general public go to the bankruptcy court and look at the list of who filed. You may, however, run into a few people you know when you go to court. But, if you keep their secret I bet they will keep yours. THERE IS NOTHING TO BE EMBARRASSED ABOUT. You are taking charge of your financial future and fixing your debt problems. That is a lot more admirable than sticking your head in the sand and ignoring the problem. At least you are hanging out with your butt in the air and your head in the sand.