Consumer Bankruptcy

1. What is the cost of filing a bankruptcy petition?  

The Bankruptcy Court filing fee for a Chapter 7 bankruptcy case is presently $299.00. The filing fee is $274.00 for a Chapter 13 case. The legal fee is determined after the initial consultation, or can be estimated over the telephone. In a Chapter 13 case, much or all of the legal fee can be paid through the Chapter 13 plan.

2. Is the initial consultation free of charge?  Yes.

3. What is the difference between the different chapters of bankruptcy (Chapter 7, Chapter 11, etc.)?  

Most individuals file under Chapter 7 or Chapter 13. Chapter 7 is designed for individuals with limited income and assets who wish to discharge unsecured debts, such as credit cards, personal loans, car loans/repossessions, and medical bills. Chapter 13, which is a monthly payment plan used to repay some amount to creditors, is used when the assets and/or income of the debtor(s) is/are in excess of what is permitted under Chapter 7. Unsecured creditors are seldom entitled to full payment through a Chapter 13 plan and in most cases, they receive only a small percentage of the amount owed. A Chapter 13 is often used to stop a foreclosure action, which can be done as late as the time of the Sheriff’s sale (although we prefer as much advance notice as possible) and cure a mortgage arrearage through the Court-administered payment plan. Chapter 11 is for corporate reorganizations, and Chapter 12 is designed specifically for family farmers who need to reorganize their debts.

4. Does my spouse have to file bankruptcy?  

If the debts which need to be discharged are primarily or entirely in the name of only one spouse, both spouses usually do not need to file. Both spouses may nevertheless wish to be present at the initial consultation in order to hear for themselves what effect, if any, their husband’s or wife’s bankruptcy may have on them.

5. Will I be able to retain my home in bankruptcy?  

A home can be retained in Chapter 7 as long as the owner(s) do(es) not have too much equity ($20,200.00 if the home is owned by one person and $40,400.00 if the home is owned by two people) and the mortgage payments are current. There are also special protections for homes owned by married couples if only one spouse is filing, in which event there may be unlimited equity in the home. The mortgage may be in arrears on the date of the filing of a Chapter 13 bankruptcy petition, and indeed often is, and there can be more equity in the home than is permissible under Chapter 7. However, mortgage payments must be resumed once the bankruptcy petition is filed and any pre-existing mortgage arrears and/or excess equity must be satisfied through the payment plan.

6. How long does a bankruptcy take?  

Chapter 7 cases usually take five (5) months from the date the petition is filed until the discharge is issued. A Chapter 13 case lasts for as long as the payment plan, which by law is a minimum of 36 months and a maximum of 60 months.

7. How long will the bankruptcy remain on my credit report?  

A bankruptcy can be expected to stay on a credit report for the duration of the bankruptcy case plus a period of 10 years from the date of the discharge. However, credit is often available to those who have filed bankruptcy, and a normal automobile loan rate can usually be secured only two (2) years after the discharge. An ordinary mortgage loan rate can normally be secured only four (4) years following the discharge. (Please note that these time periods presume that income is sufficient to support the loan, as would ordinarily be required by the lender, and good credit has been maintained since the bankruptcy filing).

8. If I file bankruptcy without my spouse, will it affect his or her credit rating?  

Bankruptcies and other negative credit references are ordinarily tracked by social security number, and thus should not show up on your spouse’s credit report. Please note, however, credit reports often contain inaccurate information. We can provide you with instructions for correcting any misinformation which turns up on the credit report of your wife or husband.

9. Will my creditors still be able to call me? 

Once we are retained, we instruct you to refer all telephone calls to us. When you advise a creditor you are being represented by an attorney, the creditor may not call you back (unless the attorney advises the creditor he/she is in fact not representing the obligor or you do not follow through with the bankruptcy filing). A creditor can be sued if it continues to call a debtor after the creditor has been notified that the debtor is being represented by an attorney.

10. What information will I need to bring with me to the initial consultation?  

Recent paystubs or other proof of income, tax returns for the last two (2) years, recent invoices for your credit cards, recent bank statements, recent mortgage statements and auto loan statements, legal complaints and other court documents, and a list of your monthly expenses (mortgage payment, rent payment, electric bill, telephone bill, food, etc.).

11. Will I be able to retain my vehicle if I file bankruptcy?  

Yes. The law has specific provisions permitting debtors to retain vehicles. If you have an automobile loan, you will simply need to continue making your loan payments.

12. May I surrender a house or automobile in bankruptcy?  

Yes. Bankruptcies are often used by individuals who are losing or have lost their home in foreclosure, or have had vehicles repossessed. The bankruptcy will discharge any remaining debt on the mortgage and/or auto loan. If you are currently living in a house which you would like to surrender, you may be able to remain in the home until the Sheriff’s sale, which likely won’t be held until many months after you stop making mortgage payments.

13. Are taxes dischargeable in bankruptcy?  

You might expect the government would protect its right to collect taxes even if an individual has filed bankruptcy. Although this is indeed the case, there are exceptions which permit certain income tax debts to be subject to discharge in bankruptcy, particularly those over three (3) years old. Real estate taxes cannot be discharged if the debtor wishes to keep his or her home. For business owners, sales taxes and employee withholding taxes are not subject to discharge in bankruptcy.