CHAPTER 7
is a bankruptcy generally used as a means for individuals to completely wipe out most debts in a legal proceeding conducted under the jurisdiction of The U.S. Bankruptcy Court. There is a small percentage of Chapter 7's wherein a Trustee, usually an attorney, is appointed by the U.S. Trustee’s Office who will sell off non-exempt property of an individual or liquidate a business for the benefit of creditors. As a general rule, most Chapter 7's are no asset cases wherein creditors do not receive any money as payment for those debts listed in the bankruptcy schedules and the debtor is relieved from any obligation of paying back monies to creditors. However, there are certain debts which cannot be discharged in bankruptcy, including but not limited to: most, but not all government taxes; student loans without a showing in a separate legal proceeding a legal hardship (extremely difficult to establish); child support; alimony; willful injury to another's person or property; fraud or misrepresentation in obtaining goods or services; government fines and penalties and certain court-ordered restitution orders; and injury or death resulting from the unlawful driving of a motor vehicle under the influence of drugs or alcohol.
CHAPTER 13 is a bankruptcy designed
for individual debtors who have some regular flow of income
seeking an adjustment of debt. Chapter 13 is used primarily
for people with mortgage and maintenance debt or other
secured collateral who wish to keep their assets, yet need
time to stretch out these arrears or back payments in a Plan
to deal with their creditors. The time frame is generally 36
to 60 months. Chapter 13 will stop a foreclosure up until
the day and time of a sale. Depending upon your equity in
the house, some minimum payments to unsecured creditors,
credit card and personal loan debt, will also be necessary.
Chapter 13 may also be utilized to handle debts which are
not dischargeable in a Chapter 7. This may include back
taxes, student loans, child support, and even debts that
involve some type of fraud or misrepresentation on the
debtor's part in many cases Chapter 13 may also be used to
handle situations in which individuals may wish to retain
their assets, yet pay back their creditors in a more
favorable treatment than allowed by their creditors outside
of bankruptcy. Also, Chapter 13 may be used by individuals
having a cash flow problem, wherein there is some disposable
income available to pay back creditors in whole or in part,
but not a sufficient amount to satisfy creditors outside of
the bankruptcy process. The debt ceiling, adjusted for cost
of living on April 1, 2004 for unsecured debt in a Chapter
13 is $307,675.00 and for secured debt is $1,010,650.00.
CHAPTER 11 is a
bankruptcy generally for business reorganization but may be
used by individuals who cannot qualify for Chapter 13.
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2) If I file a Chapter 7, will I lose my personal property, including my car which I must have for both work and pleasure?
An equity exemption of $2,400 in a motor vehicle is allowed. Thus, to determine your equity, you must subtract any lien (car loan) attached to the car from the fair market value of the car. For example, a car with a fair market value of $10,000 with an outstanding car loan of $7,800 will yield an equity of $2,200, falling within the allowable $2,400 exemption. The fair market value is determined generally by the industry's Blue Book or a current appraisal by a dealer.
Some of the other personal property exemptions include, but is not limited to:
A. $2,500 in total for cash, savings, checking, money market and other deposit accounts, U.S. savings bonds, tax refund, provided you do not use the residential property exemption noted in item #3.
B. $5,000 for all wearing apparel and household furniture, less any amount listed in item A. Thus, with $2,000 exempted in item A, you would have only $3,000 to exempt in item B. If nothing is exempted in item A, you can use the full $5,000.
C. $10,000 in a residential property; a house, cooperative, condo, or mobile home which is your primary residence.
D. Qualified Pension, 401(k), Profit Sharing, IRA's (rollovers and traditional) or other similar Plans; Also, benefits under an Annuity Contract, and benefits under an Insurance Contract are generally exempt. Any recent contributions to an annuity will need specific legal advice.
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3) Does filing bankruptcy mean I lose credit forever?
No, it means your credit will be substantially hurt if you have good credit going into the bankruptcy and there will be a notation on your credit report for a period up to ten years. However, you can take steps to repair your credit.
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4) How can I repair my credit?
One way to assist in repairing your credit is to obtain secured credit cards. You can generally place a minimum of $100.00-$300.00 into a savings account and receive a credit line up to the value of the account or even 150% of the value of the account, in some cases. Timely payments of minimums or the timely paying off of the entire balance each month will demonstrate a new history that will enable you to better obtain future credit. After a year of timely payments, that secured credit card may become partially unsecured, or store cards may become available to you to further repair your credit history. Continuation of this disciplined approach to the use of your credit cards will result in obtaining new unsecured credit cards in a relatively short period of time. If, and only if, secured credit cards are used wisely, they may be of great benefit to you.
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5) Do I have to go to Court and see a judge?
In a typical Chapter 7 bankruptcy, there is no need to appear before a Judge. You are required to attend what is called a section 341(a) hearing in front of a Trustee who is not a judge but an attorney whose job it is among other things is to review your Petition and your financial status (asset, liabilities, income, expenses) and determine that you have complied with the Bankruptcy laws. In the typical no asset bankruptcy case, the five-ten minute hearing is generally non-confrontational and the case is closed at the conclusion of the hearing, provided all necessary documents have been submitted. You then wait approximately 3-5 months from the date of your hearing to receive formal notice in the mail that you have been discharged from your listed debts.
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6) Do I have to list all of my debts? I am current on some. I would love to keep one or two just in case there is an emergency?
You are required by law to list all of your debts. Failure to list a creditor may result in considerable difficulty with respect to extinguishing that debt. Thus, when your bankruptcy case is closed or sooner, that unlisted creditor will seek to collect on that debt. Consequently, it is vital that all creditors with their proper correspondence addresses be ascertained and listed. Failure to list a creditor can also be a double whammy. You will be pursued by that creditor and you will most probably have your credit card privileges canceled, if it is a credit card debt. To ensure that all creditors are listed, we require a current credit report.
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7) How can I obtain a credit report to protect myself against creditors?
OBTAINING A CREDIT REPORT:
The fastest and
easiest way to get a free credit report is to go to
www.annualcreditreport.com.
Once you're there, select your state,
and click on “Request Report”.
Fill out the form with the required information then
click on "Continue".
You should choose the "Experian"
and "Equifax" credit
reports. You are entitled to one free
credit report from each of the three reporting agencies.
You must go to this site to obtain the free report.
In the alternative, print the application form by
clicking on the following link and mail to the directed
address.
Click here for your
Free Credit Report by Mail or Phone.
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8) What documents are necessary to gather to bring into your office to get started?
You will need to bring in at
least 2 months of your most recent pay stubs, if working, tax returns for the last two years, if available, your bills, (one for each credit card, store card, personal loan, medical bill, car loan, mortgage loan, student loan, IRS & NYS Department of Tax bill(s), and other assorted bills, your driver’s license or non-driver’s photo identification, social security card, and $100.00 towards the retainer. It would be quite helpful if you are able to sort and organize your bills by eliminating for us all envelopes and attachments.
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9) Can you guarantee me that my bankruptcy will go through?
There is no guarantee in life about anything, other than death & taxes, they say. Your creditors have sixty (60) days from the date of the section 341(a) hearing to file an objection through the initiation of an Adversary Proceeding. It is rare for a creditor in a typical individual Chapter 7 case to file an Adversary Proceeding. However, it can occur if there has been "loading up" (going on a substantial shopping spree or taking substantial cash advances near the time of the filing of the bankruptcy with respect to any one creditor), recent substantial debt consolidation or balance transfers, the use of new credit cards or obtaining new loans with little or no repayment to that creditor, or any fraud, or misrepresentation in obtaining credit cards or loans. These problems are the extreme exception rather than the rule. Make sure that you thoroughly discuss with our office if any of these problems apply to you. Even with these problems just noted, we will be able to assist you by explaining your options if you give us full disclosure of your activities. For most creditors, once this sixty (60) deadline has passed, creditors are forever barred from collecting on this debt. There are exceptions to this, such as student loans and government taxes, which generally survive bankruptcy. Specific legal advice may be necessary to sort out any of these issues.
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10) How are government student loans treated differently than other unsecured debt?
Government-backed student loans, in whole or in part, are generally not dischargeable. As of October 8, 1998 student loans are not dischargeable unless it can be established in a separate proceeding that there is a legal undue hardship. This is a particularly tough hurdle to overcome. You must seek specific legal advice with respect to this. The previous law permitted a discharge for student loans if seven years had elapsed from the time the loan went into repayment, excluding any suspension of repayment periods. This provision has been eliminated.
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11) How are tax debts treated differently than other unsecured debt?
Tax debts are treated generally as priority unsecured debts, meaning they are not dischargeable but payable in full at the conclusion of your bankruptcy case. However, tax debts for years in which a tax return was filed on time and where there was no fraud or willful evasion to pay the tax may be dischargeable if three (3) years has elapsed from the filing due date of that taxable year. For example, a tax return filed for the 1999 tax year would be due by April 15, 2000. Such a tax debt may be dischargeable if a bankruptcy is filed after April 15, 2003, assuming no fraud or willful evasion exists. There are other rules relating to late filed tax returns, non-filed tax returns and tax assessment dates which may have applicability. Only a careful review of the particulars of your case would enable our office to determine the likelihood of discharge for your tax debts.
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12) How much does it cost to file bankruptcy and can it be paid out over time?
Our fee for a Chapter 7 is reasonable. This fee is payable over a three (3) month period. However, the petition cannot be filed until payment is made in full. The fee for a Chapter 13 will vary depending upon complexity but it is significantly more than a Chapter 7 because of the need for at least one appearance before a judge in addition to the appearance in front of a Trustee, as well as the substantial time involved in the review of creditor claims and preparation of motion(s) and order(s) for the Court.
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13) Creditors are making my life miserable. They are calling me 7 days a week and even calling my job. What can you do to help me?
Once you have come into our office, brought in the requested documents and a $100.00 retainer, you may direct creditors to contact our office to confirm or verify that we have been retained to file a bankruptcy on your behalf. We will provide you with our own office identification number for you to provide to your creditors. You are only required to give our name and telephone number pursuant to the Fair Debt Collection & Practices Act, as creditors are prohibited thereafter by law from calling you at home or work after you have retained an attorney.
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14) I just received a garnishment notice (formally known as an Income Execution Notice) from the Marshal. What is a garnishment? Can this be stopped or if they started taking money out of my check, can you stop it? Is it too late?
A garnishment is a legal device to enforce a judgment obtained by a creditor. It allows a Marshal to inform and order your employer to generally deduct 10% of your gross wages to begin to satisfy your obligation to pay back that debt. It is never too late to stop a garnishment. It can be stopped before it gets to the Marshal, after it gets to the Marshal, or even after it is actually executed by your employer. Once the bankruptcy is filed, which means all documents had been brought in and the entire fee had been paid, notification by our office will be sent to the Marshal, the Employer (if it is in that stage), and the creditor's attorney simultaneously on the same day the petition is filed or the first business day subsequent to the filing. The garnishment legally stops on the day of the filing and no future deductions as of that date may be made from your pay check. Any inadvertent deductions that occurred will be returned to you.
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15) What are the requirements of
credit counseling and debtor education?
Before you file a chapter 7 or chapter 13 bankruptcy,
you are required to obtain a credit counseling
certificate from an approved credit counseling
organization. Specific information with respect to
the procedures will be provided once you have retained
our office. It is generally done by telephone and
involve a consultation lasting of approximately one
hour. After filing a chapter 7 or chapter 13
bankruptcy, you are required to complete a debtor
education course by telephone or online for
instructional purposes only. There are no failures
involving the course. More specific details shall
be provided once you have retained our office.
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