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Frequently Asked Questions

1. Does everyone in financial trouble like mine have to file bankruptcy?

Answer: No, however by the time most individuals contact us for assistance in their financial difficulties, a bankruptcy is going to significantly help them on the road to financial recovery. Sometimes, we are able to "work out" the debt outside the bankruptcy, however this is, unfortunately rare.

2. Will bankruptcy stop the creditors from harassing me at home and at work?

Answer: Yes, the "Automatic Stay" provision under the bankruptcy law stops the creditors or stays the creditors from contacting you at home, work, or wherever. If the creditors violate this, then we can bring the matter before the court for the judge to consider whether there has been a violation of the law.

3. What kinds of bankruptcy are there?

Answer: For consumer debtors, Chapter 13 and Chapter 7 are the two most common types of bankruptcy. However, individuals and businesses can file Chapter 11, farmers can file Chapter 12, and municipalities can file Chapter 9.

4. What is Chapter 13?

Answer: Chapter 13 is commonly referred to as the "wage earner plan" in which you may keep some or all of your property and pay some or all of your unsecured debt. Your past due house payments and your car payments are usually included in the Chapter 13 Plan, while you pay the next house payment direct to the mortgage company.

Chapter 13 lasts from 36 to 60 months and is a wonderful tool to use to try to preserve your house or car, especially if those payments are behind. It is also helpful to file Chapter 13 in the event that you owe a substantial amount of taxes as these taxes can be put into the Plan and paid over a 3 to 5 year period. The interest and penalties are frozen at the time of filing.

The Chapter 13 payments are calculated based on the amount of debt owed.

5. What is Chapter 7?

Answer: Chapter 7 is "straight" bankruptcy or liquidation bankruptcy, however very few people who file Chapter 7 lose any property whatsoever. If your house payments and your car payments are current, you may keep those payments current and you will be able to keep your house and your car. You may also be able to keep other types of property as well. Generally, most debtors only lose their unsecured debt in a Chapter 7. Some types of debts are not discharged following a Chapter 7, such as student loans and many kinds of taxes. Chapter 7 can be a great relief, especially if you are current on your house and/or car payments.

6. Can I get my house payment reduced or my interest rate on the mortgage lowered?

Answer: No, not without negotiation with the mortgage company. Generally, mortgage companies do not change either the payment or interest.

7. Can we keep our home? Car? Other items?

Answer: Probably. In a Chapter 13 you may keep all your property and all your items, however you must continue to make payments on those. If it's a home, the home payment needs to be paid outside the plan in most cases, while car payments and other secured payments are made through the Chapter 13 Plan. Any other items may be kept, as long as they are "necessary for an effective reorganization" under Chapter 13.

In Chapter 7, if you are current on your home payment, car payment, or other payments for other items, you may keep them, as long as you do not have too much equity in those items.

8. Once the phone calls and letters stop, aren't we done?

Answer: No, you must attend the Section 341 Meeting "First Meeting of Creditors" which is usually 4 to 6 weeks after the filing of the bankruptcy. Generally, this is the only time that you have to go to Court. However, if you are in a Chapter 13, other issues can come up in the Court, specifically if you fail to make your Chapter 13 payment to the Chapter 13 Trustee or if you fail to make your house payment, it is likely that the Creditor or the Trustee will file a motion to bring you before the Court to determine why these payments aren't being made. It is less frequent in a Chapter 7 that a debtor has to appear before the judge.

Eventually you will receive your discharge in bankruptcy and a final decree, as long as you have followed the rules of the bankruptcy court.

9. What is a discharge? (And how is it different from dismissal?)

Answer: The discharge is a release of your debt. If you file a Chapter 13 and get a discharge, you have paid out the required amount by law under Chapter 13 of the Bankruptcy Code. This is generally done 3 to 5 years after you have filed your bankruptcy.

If you receive a Chapter 7 discharge, that means that your bankruptcy went through and this is typically within a 4 to 6 month period after the filing of the bankruptcy. This is different from Chapter 13 since there are no required payments under a Chapter 7. Keep in mind, that Chapter 7 works best when you are current on your house and/or car payment.

Discharge is different from dismissal in that a discharge releases you from your debt that you brought into the bankruptcy. The dismissal means that either you have voluntarily decided not to be in your bankruptcy, or particularly in a Chapter 13, the Chapter 13 Trustee has stopped receiving payments from you and is "putting you back out on the street" with regard to your bankruptcy. Following a dismissal, you have no further bankruptcy protection and you are not discharged from your debts.

10. Will I ever get credit again?

Answer: While we can make no guarantee or representation about credit, the chances are good that you will be able to rehabilitate your credit following a bankruptcy. The best thing you can do to help yourself is to keep your secured payments current at all times during the bankruptcy. In other words, if you have a home and you are making home payments, if you can make those payments on time, every time, you will be assisting in rebuilding your credit. For most people who have filed a chapter 7, the creditors will look beyond the bankruptcy if you have made your payments current on houses and/or cars for a period of two years following the discharge. However, again there are no guarantees that you will receive credit again.

Please keep in mind that it will probably be easy for you to get credit, but it is difficult to get "good" credit. This means credit which has a single digit interest rate and is usually given to the better customers of a financial institution. So, you can get credit from many sources which is very expensive, but you don't want to do that if you can possibly help it.
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