What can bankruptcy do for me?

Bankruptcy is a way to get out of debt when you owe more money than you can be expected to pay in the near future. We have come a long way since the time of debtor's prison when your creditors could have you jailed until you paid a bill. Today, the law allows an honest debtor to have a court "discharge" or cancel most or all of his or her debts in order to make a fresh start. This form of bankruptcy is sometimes called "straight" bankruptcy.

You can use bankruptcy to discharge your debts no matter how you got into debt as long as you were honest. Perhaps you or your spouse lost a job and have not been able to pay your rent or make your car payments for several months. Or perhaps you have been unable to make your credit card payments due to a divorce or you have medical bills as a result of an illness or injury.

Bankruptcy usually means that most, and sometimes all, of your debts will be canceled. Except for debts that you must pay (Will all my debts be discharged or cancelled?). Going through bankruptcy generally stops your creditors from "garnishing" or taking your wages. This means your employer cannot be forced to give part of your salary to your creditors to help pay off your discharged debts.

However, bankruptcy will not solve all of your money problems. If you are out of work, bankruptcy can cancel your old debts, yet you still must find a way to pay new bills and ongoing expenses.

What if I just need more time to pay my debt?

An alternative to straight bankruptcy is a Debt Reorganization Plan or Chapter 13. These plans allow you to pay off part or all of your debts over a period of time under court supervision. These Plans can be completed anywhere between three and five years.

You can use a Chapter 13 Plan if you have steady income. This means you can be a wage earner, the owner of a small business or someone who receives a pension, social security or welfare benefits.

Whether you are a wage earner or own a business, you must owe less than $922,975.00, in "secured" debts and $307,675.00, in unsecured debts. A secured debt means you have a written agreement that offers a creditor some of your property as security.

Once you file under Chapter 13, all Court actions stop and cannot proceed without Bankruptcy Court approval. Creditors also are not allowed to write or telephone you demanding payment.

Remember: Under Chapter 13 you do not have to agree to pay your debts in full. If you are unable or do not want to pay all the money you owe, the Court may approve a Plan under which you can offer less - say 50 cents on the dollar - paid over a period of five years.

If your Chapter 13 payments should become too difficult to make, it is possible to have the payments changed to a lesser amount.

What if I have a major debt problem before all my debts are paid?

You might have a long illness or lose your job. Then you can switch from Chapter 13 to straight bankruptcy. When you file straight bankruptcy, the Court may cancel some or all of your remaining debts.

How can I set up a Chapter 13 repayment plan?

We can help you write a Plan that tells how you intend to pay part or all of your debts. The Plan must be filed with a bankruptcy petition and a $189.00 filing fee in the United States Bankruptcy Court. You may file alone, or a husband and wife may file jointly. The $189.00 filing fee is the same whether you file alone or together. The attorney fee, which the Court will set, also can be paid through the Plan.

When the Court approves the Plan, it will assign a person called a "Trustee" to handle your repayments. The Trustee and your lawyer will explain how your repayments will be made.

If the Court allows you to repay only a part of your debts, "priority claims" must be paid in full unless those creditors say you can pay less. Priority claims include support obligations and any federal or state income taxes you have owed for the past three years, as well as the court costs and trustee and attorney fees involved in setting up a Chapter 13 Plan. "Secured Claims" must also be paid in order to keep the collateral, i.e., car in the example in Paragraph 2 above.

Can I file straight bankruptcy at any time?

Yes, as long as your debts were not previously discharged in a Chapter 7 less than eight years ago.

As soon as you file the proper bankruptcy documents in the Court, you can stop making payments on your old bills, except for alimony and child support. This is allowed even though your debts may not be canceled officially for several months.

This may not apply to most secured debts.

The law says your creditors are not allowed to garnish your wages, repossess collateral or sue you without court permission or bother you with letters or telephone calls asking for payment. If your creditors do not believe you have filed bankruptcy, ask them to call your lawyer or check with the Bankruptcy Court.

How do I start a bankruptcy action?

You will have to file a bankruptcy petition with the nearest United States Bankruptcy Court. The court filing fee is $274.00 for a Chapter 7 bankruptcy and $189.00 for a Chapter 13 bankruptcy.

Additionally, you must provide substantial information on the bankruptcy petition. For instance, you will need to provide information concerning your income, bank accounts, tax returns, real estate, personal property and much more. Additionally, you will be required to provide tax returns, bank statements, pay stubs, and other financial records.

For example, you must make a list of all of your "assets." These are cash, stocks and bonds, real estate (land or a house), cars, and any other property you own. You also must list your debts and creditors. The creditors who are listed with their correct names and addresses are called "scheduled creditors." Your debts to unscheduled creditors may not be canceled, and you could be subject to denial of a discharge for failing to schedule information accurately.

We can help you complete the petition and then represent you in court.

How long does it take to go through bankruptcy?

After your bankruptcy papers are filed, you can stop paying your creditors even though your debts will not be discharged for about four months (except "secured" debts that you would like to retain collateral as above discussed). However, if any creditor objects to have a debt canceled, it may take longer.

Approximately, 30 days after your bankruptcy papers are filed, a "meeting of creditors" is held. Creditors do not have to attend because they are represented by the Trustee. You must be present and testify under oath. The Trustee and any creditors who attend the meeting can ask questions about your assets. You must be honest. Your discharge may be denied if:

• You lied about your assets.
  
• You intentionally gave false information on the bankruptcy forms or to the Trustee, such as purposefully failing to list a creditor.
  
• You failed to obey a court order.
  
• You transferred or hid an asset to keep your creditors from getting paid.
  
• Failure to provide any requested documentation.

Once the judge has decided any disputes between you and your creditors your debts will be discharged within 90 days.

Will all my debts be discharged or cancelled?

This depends on the kinds of debts you have. The law says that these debts, among others, cannot be discharged even if your creditors do not object to having them canceled.

• Most income taxes and related penalties and interest.
  
• Student loans unless a Bankruptcy Judge rules that repayment will be too difficult for you or your family, the loan maybe discharged. This issue will require extensive litigation within the Bankruptcy Court.
  
• Any domestic support obligations.
  
• Debts that arise as a result of willful or criminal activity.

If my loan payments are discharged, will my co-signer have to pay?

Yes. A co-signer is a person who made a legal agreement to pay off your debt if you fail to do so. And, he or she is responsible for the debt even if you file Chapter 7 bankruptcy.

What if you have a Chapter 13 Plan? Then your creditors cannot ask your co-signer to pay off a loan as long as your Chapter 13 Plan is in effect.

What if I want to pay certain debts?

Perhaps you are making payments on a loan. Maybe you have paid $4,500.00, and owe only $600.00, more. In this case you may want to "reaffirm" or agree to pay the debt, even though it might be canceled during bankruptcy. Maybe one of your creditors asks you to continue paying off a certain debt. You can agree to "reaffirm" this debt, although you do not have to.

What happens to my property when I go through bankruptcy?

Most of your possessions will be "exempt" under the law. This means they cannot be sold to pay your creditors. We will help you make a list of your exemptions. If the Trustee or your creditors object to any items on the list, the Court will hold a hearing.

You will not have to give up any money you earn after you file your bankruptcy or anything you buy with that money. However, if you receive a refund for income taxes paid during any year before you filed bankruptcy, "hit the lottery," become entitled to an inheritance or insurance proceeds, you must inform your attorney.

Which assets will I be able to keep?

This depends on which sets of exemptions you choose. These are some, but not all, of the first "set," common throughout the country. These values are subject to change as the laws change.

• A $18,450.00, interest in a home and/or burial plot. What if you do not own a home or burial plot? You still can use the $18,450.00, exemption. In fact, you can add $975.00, to it and claim $19,425.00, worth of additional exemptions in any kind of property. Even if you do have a house and burial plot worth $18,450.00, you can claim $975.00, worth of extra exemptions in other property. You can use this exemption too, to keep a refund of income taxes that you paid before the year you filed bankruptcy.
  
• A $2,950.00, interest on one car or other motor vehicle.
  
• Any items worth up to $475.00, each in these categories; household goods, and furnishings, clothing, appliances, books, animals, crops or musical instruments.
  
• $1,225.00, in jewelry.
  
• $1,850.00, worth of books or tools that you need for your work.
  
• A life insurance policy to certain limits.
  
• Social security and veterans' benefits.
  
• Unemployment insurance proceeds.
  
• Pension and profit-sharing plans, in most instances.

If you choose the other "set" of exemptions instead, you will be able to keep, among other things:

• Between $50,000.00 to $125,000.00, equity or interest in a homestead.
  
• The household furnishings and clothing that your family needs.
  
• A car worth up to $2,300.00, more than any money you owe on it.
  
• Up to $6,075.00, in tools that you need for your work.
  
• $6,075.00, in jewelry.
  
• A cemetery plot.
  
• Pension and profit-sharing plans, in most instances.

If you are experiencing financial difficulties we would be pleased to fully analyze your situation and present you with alternative. There is no charge for this analysis if you choose not to proceed with either a bankruptcy or debt reorganization.

If you desire an appointment, or a free telephone consultation do not hesitate to call.