Frequently Asked Bankruptcy Questions

Bankruptcy FAQ's

Need to know the basics of bankruptcy?  Visit the federal courts website for just that.

 

What are the main differences between Chapter 7 and Chapter 13 bankruptcy? 

A chapter 7 bankruptcy usually only lasts about 3 months from start to finish.  Usually, if we can meet these two goals, we will file a Ch. 7: 1) keep the property you want to keep and 2) get rid of the debt you want to get rid of.  Our goal is that you can keep your property and simply get rid of the credit card debt and medical bills that are piling up without paying a single dime (0%) towards this unsecured debt.  Ch. 7's are filed about 70-80% of the time in our office, with the rest being Ch. 13's.

A chapter 13 is totally different in that it lasts for 3 years (36 months) or 5 years (60 months), for most people 5 years, and during that time a monthly payment is made to the Ch. 13 Trustee who then uses that money to pay back some portion, if not all of your debts.  Several different factors control how much of your debt will be required to be paid back.  People usually file a Ch. 13 for three major reasons: 1) higher than average income based on family size and county (in this situation, the court may not allow you to file a Ch. 7 whereby you would pay back 0% of your debt); 2) being substantially behind on your mortgage and/or car loans (In this scenario we use the 3 or 5 years to catch up what you are behind); or 3) you have substatial equity in real estate or some other asset that we simply can't protect under the bankruptcy exemptions.  Bankruptcy exemptions are state laws that allow us to protect a certain amount of assets when you file bankruptcy.  

Which bankruptcy option will allow me to keep my property?

In short, a Ch. 7 and Ch. 13 can both accomplish this goal.  One of the primary reasons for filing bankruptcy is to protect YOU and YOUR PROPERTY.  

Can I choose which type of bankruptcy to file? How do I choose the right one?

Many people do have a choice between which bankruptcy to file.  Most of the time there is a clear and obvious answer as to which bankruptcy willl provide the most benefit.  On rare occassions, the pros and cons are about the same and a client will have to decide after careful consideration.  Lastly, there are situations in which clients do not have a choice.  This may be due to circumstances (high income), past filings (there are limitations on how often you can file) or because of goals in the bankrupcty (at times we can accomplish in one bankruptcy something we cannot in another).  

Tired of trying to figure it out on your own?  Call or email The Carr Law Group and let a professional bankruptcy attorney guide you through the process.

Which bankruptcy chapter should I file?

Unless you practice bankruptcy law day in and day out, this is a tough one to figure out on your own.  There are a multitude of factors to consider and only after consulting an experienced bankruptcy attorney should you even try to determine which bankruptcy is right for you.  Our goal is for you to be able to make an educated decision for yourself and your family by the time our free consultation ends.  

Is there a minimum amount of debt required to file for bankruptcy?

No.  There are no debt requirements in bankruptcy.  Nor do you have to be behind on your payments.  You just have to be struggling to make ends meet or anticipate struggling to make ends meet in the near future.  Know your options before you drain your 401K and/or liquidate your assets!!!!  I have had too many clients say that they wish they had consulted me days, months, and years before.  Often, we could have preserved our clients 401K, substantial cash and assets had they met with us sooner.

What will happen in my chapter 7 case after I file the bankruptcy petition?

After you file, all collection efforts stop immediately.  That means phone calls, letters, pending litigation, garnishments, scheduled repo's, scheduled foreclosures and evictions....everything!  It willl be quiet for about a month, which is when you will attend the Meeting of Creditors (a/k/a 341 meeting).  This is an informal meeting with the Trustee, whereby you answer some basic questions that we will have gone over in our consultations.  This meeting typically lasts less than 5 minutes.  Only in the more complex cases (multiple businesses and/or real estate parcels) will you see it go over this time period.  After your hearing, about two months (60 days) must go by before your case closes.  During this time period some paperwork will be completed, but otherwise there is very little work to be done.  

Can I obtain bankruptcy protection again if I have filed a bankruptcy in the past and am now falling behind in payments again?

It is rare that there is absolutely no bankruptcy solution.  Yes, sometimes we are limited based on past filings, but an experienced bankruptcy attorney can normally figure out some type of bankruptcy solution.

Tired of trying to figure it out on your own?  Call or email The Carr Law Group and let a professional bankruptcy attorney guide you through the process.

How much does it cost to file bankruptcy?

We handle some cases "pro bono" (free) every year in extreme situations.  But, the average fee for a Ch. 7 is around $1,500.00 total and the average for a Ch. 13 is around $3,000.00.  However, we quote fees on a case by case basis.  The more work involved, the higher the fee. The other good news is that we typically do not require all fees to be paid up front.  In a Ch. 13 for example, most people are only required to pay $510.00 before we file the case.

Do I have to "qualify" for bankruptcy? How will I know if I am eligible?

There are certain qualifications to file bankruptcy.  This question normally comes up in two areas: 1) income; and 2) prior bankruptcies.  To file a Ch. 7 your "disposable" income has to be below certain levels.  Most people are surprised at how much money your family can make and still qualify for bankruptcy.  If you have unusually high family expenses (insurance/child care/child support/medical), this can also offset higher than average income and allow a person to "qualify" when they may not without those high expenses.  If you have filed bankruptcy in the last 8 years, this can also create issues in "qualifying" for certain bankruptcies.

What is a reaffirmation agreement and how does it work?

A reaffirmation agreement is a document about 5-10 pages in length that deals specifically with a specific debt while in a Ch. 7 bankruptcy.  They do not exist in Ch. 13 bankruptcies.  By signing this agreement, you are agreeing to be held personally liable for repayment of the debt beyond your bankruptcy discharge and bankruptcy ending.  Thus, if you fail to make the payments beyond the bankruptcy, that specific lender would have the right to sue you for any remaining balance on the loan.  Reaffirmation agreements are usually only signed with regard to car loans and house loans, when clients want to keep their car or house.  The benefit of signing is that it will allow the loan to continue to report on your credit, which can aid in rebuilding your credit after the ch. 7 bankruptcy.  It also allows you to have online access to your account, which is often shut down by lenders after the bankruptcy is filed.  If your income is not stable, we do NOT recommend that you sign a reaffirmation agreement.

What must I do to prevent foreclosures and repossessions?

Assuming you can not simply get current on your own, you may want to consider filing for bankruptcy relief.  By filing a Ch. 7 or Ch. 13, the repo and foreclosure are temporarily or permanently stopped.  In a Ch. 7, it only delays the foreclosure by a couple of months.  To keep the property you must figure out a way to get current or have the bank agree to a modification of the loan.  In a Ch. 13, you can permanently prevent a foreclosure or repo so long as you can keep up with the regular payments and also pay back what you fell behind over the 36 or 60 month plan period of the Ch. 13.

Tired of trying to figure it out on your own?  Call or email The Carr Law Group and let a professional bankruptcy attorney guide you through the process.

How much property can I keep after filing?

More than you might think.  The only property at risk when you file bankruptcy is property that has equity.  A car worth $10,000.00 that has $10,000.00 still owed on it will not help the bankruptcy court pay back credit card debt by selling it.  Same thing for a house worth $150,000.00 with a $150,000 mortgage loan balance.  If there is property with equity, we either have to protect all of it with bankruptcy "exemptions", or agree to pay back some if not all of your debts to keep the court from wanting to sell it.  You can find more information about Georgia bankruptcy exemptions with a simple google search.  This is the only area of bankruptcy law that is "state" specific and not "federal" law.  So long as you have lived in Georgia for the last 2 years, then Georgia "exemptions" are applicable.  If you just moved here from another state it gets more complicated.  Call for a consultation and we will figure it out together.

Will I lose my home if I file for bankruptcy?

We hope not.  Unfortunately, some people do.  The reality is that we must be able to afford our home in order to keep it,  If you cannot keep up with the regular mortgage payments, then it may be time to figure out another place to live and make the tough decision to surrender your residence.  We may still want to file bankruptcy though, just to buy more time in the home, especially if a foreclosure is imminent.  

Bankruptcy can help people keep their homes!  This is because it can help folks resolve other unnecesary and non-priority debts, thereby allowing homeowners to focus their money on what's important...their homes!  Also, a ch. 13 can help people who have fallen behind temporarily (think temporary job loss or illness) and just need some time to make up the payments.  A ch. 13 allows the person 36 or 60 months to pay back whatever amount they are behind.  Are you $6,000 behind?  Divide that by 60 months and you will see that for $100/mo you can be current on your mortgage through a Ch. 13 plan over 60 months.  Of course, during this time, you must start back and continue making your regular mortgage payment so you don't fall further behind.

What are the long-term effects of bankruptcy? Will I ever be able to get a loan again?

Bankruptcy is a negative mark on your credit.  However, for most facing bankruptcy their credit has already taken a hit or the writing is on the wall.  We call bankruptcy putting a period at the end of a negative sentence that has usually been going on and on.  Once you file bankruptcy, especially a ch. 7, you stop the negative information that has been chasing you (missed payments/foreclosure/lawsuits/repossessions/collections) from continuing to report month-after-month on your credit.  Now, you can finally distance yourself from these negatives.  As you move forward in life, it falls further behind, having less and less of an impact on your credit.  In the meantime, you establish a few positive lines of credit and maybe even continue your car and house loan beyond the bankruptcy.  Anything you can do to create positive reporting will help to rebuild your credit.  You can do it!

Do I have to file bankruptcy on all the accounts I owe, or can I keep some?

This question comes up often in meetings.  Bankruptcy law requires that we tell the court about every debt we have...no exceptions.  That also means that every creditor is to receive notice of your bankruptcy filing in the mail at the address you provide the court.  However, some accounts you CAN keep, such as car loans and house loans.  Some accounts you can simply agree to pay, such as your pediatrician bill, dentist bill, and/or general doctor or specialist.  There are some people you simply can't afford to not pay back and the bankruptcy court never says you can't pay someone back.  Bankruptcy just means you do not HAVE to pay them back.  It is your choice.

Tired of trying to figure it out on your own?  Call or email The Carr Law Group and let a professional bankruptcy attorney guide you through the process.

Can I remove judgment liens (a/k/a Writ of Fi.Fa.) from my primary residence if I file bankruptcy? What about my second mortgage?

It is possible to do both.  Judgment liens can be removed, but there are special requirements surounding the amount of equity in your property above and beyond the balance of your first mortgage and allowed bankruptcy homestead exemption.  This is something we look at in every case to determine whether we can use the tool to free up your property from any unwanted liens.  Second mortgages can only be "stripped" from your primary residence in a Ch. 13, and not in a Ch. 7.  Again, there are special requirements about how much equity you have in your property.  Let The Carr Law Group help you determine whether this is something that can be done in your situation.  

How is debt consolidation different from bankruptcy?

Debt consolidation generally refers to companies that help you reach agreements with various creditors so that you can make a single payment to the debt consolidation company each month to address all of the debts at once.  Ideally, your payment to this company would be less than is required of you to meet your minimum obligation on each card collectively.  This company will typically take out their fee from each payment.  

In our opinion, bankruptcy is usually a better option for many reasons.  First, creditors do not have choice in bankruptcy.  In debt consolidation programs they can change their minds, sell the debt, or decide not to participate at all.  Second, you can possibly rebuild your credit faster after a ch. 7 bankruptcy.  Ch. 7 is short and sweet, where debt consolidation is usually based on a 36 month or longer repayment plan.  Third, bankruptcy may mean that you pay 0% of your debt back.  In a debt consolidation plan, you are usually paying the entire balance or a high percentage (you might be able to stop interest though).  

Tired of trying to figure it out on your own?  Call or email The Carr Law Group and let a professional bankruptcy attorney guide you through the process.

What questions will I be asked at the Meeting of Creditors (a/k/a 341 Meeting) in a Ch. 7 case by the trustee?

  After identifying yourself and being sworn in, you will be asked some variation of the following:

   1) Did you provide the information contained in your bankruptcy petition to your attorney?
   2) Is your petition still true and correct?
   3) Did you review it and sign it?
   4) Do you own real estate?  When did you buy it?  How much did you pay for it?  Any major upgrades since purchase?  Have you refinanced the loan or taken a 2nd mortgage?  IF so, when and did you pull any cash out?  What was the new money, if any, used for?  Do you plan on keeping or surrendering this property?
    5) Do you have any claims against anyone or are you currently suing anyone?  Have you been injured in a car wreck or slip and fall accident where you could sue someone?
    6) Have you ever received an inheritance?  Do you anticipate receiving an inheritance in the near future (i.e. has someone recently died, leaving you something)?
    7) If you have owned any businesses in the last 5 years, you may be asked about those businesses and whether they own any assets.
    8) Have you owned any non-retirement stocks, bonds or cd’s in the last 5 years?
    9) Have you transferred any property valued over $5,000 to anyone in the last 2 years, including your spouse, if any?
    10) Why are you filing bankruptcy?  (Often easily answered, by stating that you simply could not afford to repay all of your debts).