(Frequently Asked Questions)
(Frequently Asked Questions)
Caution: Bankruptcy Law is a complicated area. The answers to the "Frequently Asked Questions" below are generally true, but there are twists and turns and exceptions to almost every one of these answers. This may sound self-serving, but only a lawyer trained in bankruptcy law can advise you on your particular situation.
1. Can a husband file bankruptcy without his wife filing, or must both spouses file?
Either spouse can file on his or her own. It is not required that they both file.
No, your children are not filing bankruptcy, so their clothing, toys, Christmas and birthday presents, and items they bought with their own money are normally left untouched in your bankruptcy case. However, if you have transferred property to your children for the purpose of safeguarding it from your creditors, your children cannot keep those items and you may seriously harm your chances of a success in bankruptcy court.
3. If I file a Chapter 7, am I allowed to keep some of my assets?
Yes, the property you are allowed to keep is called your "exemptions." Exemptions vary from state to state. In Florida, some of the exemptions (property you get to keep) are:
- Your home ( if you keep up the mortgage and tax payments ) if your land up to 1/2 acre inside the city limits and up to 160 acres outside the city limits.
- The mobile home you live in, even if you rent the lot ( you must keep up the installment payments ).
- 401(k) plans
- IRA's
- Cash surrender value of life insurance
- Wages of the head of family
- $1,000 worth of motor vehicle (for each spouse if they file together)
- $1,000 worth of anything else except land (for each spouse if they file together)
- Annuities
- Future social security benefits
- Other exemptions
4. Is it true that if I file for bankruptcy I can never again own anything?
No, I have heard this old wives' tale many times. In a chapter 7, for example, anything you buy with money you earn after you file bankruptcy is yours to keep.
5. What is this going to do to my credit reputation?
This is probably the most commonly asked question. The honest answer is that bankruptcy is a huge black mark on any credit report. Bankruptcy can be reported for 10 years after which time it must come off the credit report. On the other hand, consider that most people who ask me this question have a credit reputation that is already heavily damaged and perhaps has no pulse at all. If you have repossessions or judgments on your record, and you are heavily in debt, do you think that you can obtain a bank loan if you don't file bankruptcy? Also keep in mind that credit is not your friend. Credit is the reason people end up filing for bankruptcy. Credit means debt.
6. I can't live without a Visa card, what am I going to do?
First realize that for many people, credit cards cause more harm than good. They lead to impulse buying and they mask the real pain of paying cash or even writing a check. Many people think they cannot live without a Visa card, but anthropologists have dug up some ancient bones and discovered there was life before Visa. Even today, many establishments continue to accept cash. For those who find themselves constantly needing to reserve hotel rooms and rent cars at airports, there is such a thing as a secured credit card. Basically, you give the bank $500 to hold in a savings account you can't touch and they offer you a Visa with a $500 limit. The bank can't lose. Not every bank offers secured credit cards, but they are available if you hunt for them. Resist the urge to get back into the credit card game! Resist!
7. I am current on all my payments. I have never been late on a payment. How can bankruptcy be appropriate for me?
I have many clients that are drowning in debt , but they appear to be "making it" because they have depleted their savings, then they have transferred the debt from one credit card to another (people really do pay their MasterCard bill with Visa) always in search of temporary low interest rates and pre-approved credit cards. Ask yourself what your total monthly credit card and loan debt is. Then ask yourself if you have enough income left over each month after paying normal living expenses to pay the minimum payment on all that debt. If you can't, then you are traveling backwards, even though you haven't defaulted on a loan - yet. The handwriting, however, is on the wall and it is only a matter of time until the house of cards collapses.
8. I am an honest person and I cannot stand the thought of not paying my debts, it's like cheating to me. How can I live with that?
Bankruptcy does not change your moral obligation to repay your debts, it only changes your creditors' abilities to use the legal process to force you to pay them. If you feel obligated to pay your debts, the law welcomes you to voluntarily pay your debts even after bankruptcy has forgiven them. And, if you pay a little bit towards a debt that has been legally forgiven in bankruptcy, that will not re-ignite the old debt, it remains extinguished. You would be free to pay any of your old creditors, in whatever order you wanted, however much you wanted, and when you wanted to do so. You could, for example, pay Visa $5 one month and then skip three years before paying again. You could pay back your friends and relatives before you get to the big banks.
9. I only want to file against some of my debts. I want to continue paying others is that OK?
Yes, you can continue to pay debts, even after a Chapter 7 bankruptcy. If the debt has collateral, then you can formally agree to be bound to that particular contract (like a vehicle or home purchase agreement) in what is called a Reaffirmation Agreement. If there is no collateral for the debt (cash loan from your parents or a friend) then you can continue to pay the debt on a voluntary basis. In either case, however, you must list in your bankruptcy papers all your debts, even the debts you intend to continue to pay.
10. How long does bankruptcy take?
A normal Chapter 7 takes about 3 1/2 months, but the relief is granted the moment your bankruptcy papers are filed. A Chapter 13 is usually a 36-60 month payment plan and is over about the time you make your last payment. See timeline.
11. How much does your firm charge for a bankruptcy?
There are two parts of the expense, (1) the filing fee required by the court and (2) the attorney's fee charged for the work and representation. At this time the filing fee for Chapter 7 is $200 (same for one person or a married couple) and for Chapter 13 is $185. The attorney's fee we charge depends on how simple or complicated your case is. Chapter 7 cases are almost always less expensive than Chapter 13 cases. After we have reviewed your situation at the free consultation, we will have a good idea of how much work we are looking at and will quote you a fee at that time.
12. Do you have payment plans?
We used to. However, we believe that Congress is about to significantly change the bankruptcy law. Until that situation clarifies we have suspended payment plans, i.e., don't pay us a penny until you have the entire fee ready. The reason is that we don't want to accept one half of your fees, and then do half the work, and then see the law change which might increase only to see the law change our work significantly or make our arrangements obsolete. You might not even be permitted to file a chapter 7 under the new law. We don't want disagreements with clients about work that may have become useless. The simplest way of handling fees until the law changes is to simply take no fees at all until the client can pay all the fees. Then we can work full steam ahead to finish the work ASAP.
There is an exception in Chapter 13 cases, we will sometimes, even now, be willing to accept some portion of our fees after you have filed from the monthly payments you make to the Court. That depends in part on how regular and predictable your income is. For example, if your work at the post office, your income is very steady, and we would be more inclined to accept our fees as part of your monthly bankruptcy payment than we would be if your income was subject to ups and downs, like a water softener salesman, for example.