Bankruptcy FAQs

Commonly Asked Bankruptcy Questions

What is the difference between a Chapter 7 and Chapter 13 bankruptcy? Chapter 7 takes three months to receive a discharge; Chapter 13 takes 3 to 5 years to complete; most persons want to file Chapter 7 rather than Chapter 13. Chapter 7 discharges all unsecured debt, other than student loans and taxes incurred within 3 years of filing bankruptcy. To file Chapter 13, you must have disposable income (money over and above what you need to live on), which you pay into the Chapter 13 Plan every month for 3 to 5 years. There are 7 main reasons for filing Chapter 13: you owe significant taxes (can pay off through the Chapter 13 Plan); you owe student loans (can pay all or part through the Plan); you want to cure a mortgage default through the Plan; you do not have enough equity in your residence to cover a second mortgage and want to strip the second mortgage lien off the property, thereby making the second unsecured and dischargeable; you own too much non-exempt property and want to keep it (must pay the non-exempt value through the Plan); you filed Chapter 7 within 8 years; you are over the income cap for Chapter 7 (income cap dependent on gross income for 6 months prior to month of filing, annualized (x 2) and number of family members) and cannot pass the "means test".

Can I keep my car and house in a Chapter 7 bankruptcy? Yes, as long as you are current on your loan payments, and the equity in the property is under the exemption amount (for house $75,000, or $105,000 if over age 60; for vehicles, $7,500 per individual or $12,500 if over age 60).

What is Chapter 7 procedure? Chapter 7 normally lasts 3 months - when filed, automatic stay created, freezing debt during pendency of bankruptcy; 1 month after file, go to hearing - purpose of hearing to collect any non-exempt assets (hopefully none); 2 months after hearing (3 months after filing), discharge enters, freezing debt permanently.

How much does filing bankruptcy cost? Average cost for filing Chapter 7 is $1,500, including $335 filing fee; bankruptcy mills charge as low as $499 to $600, plus filing fee (personal service limited); high-end attorneys charge as much as $2,500, including filing fee; for Chapter 7, I charge from $800 to $1,000, depending on number of creditors and financial circumstances, plus filing fee. For Chapter 13, the going rate is $3,500 plus the $315 filing fee; I charge from $2,000 to $2,500, depending upon your financial circumstances, plus filing fee."

When can I stop collection suits and garnishments? Can only stop by filing the bankruptcy; can often stop collection calls and threats of suing by retaining bankruptcy attorney and referring collection calls to him/her.

Do I have to go to court? Only have to attend one hearing in Chapter 7 cases (341 hearing) and normally only 1 hearing (341 hearing) in Chapter 13 cases - not with judge, but with trustee (bankruptcy attorney hired by Justice Dept. to collect non-exempt assets and distribute to creditors after taking a cut).

Will I lose personal property or wages/bank accounts/tax refunds subsequent to filing? Bankruptcy only covers debts and assets from date of filing backwards; any assets acquired after filing (except inheritances and lottery winnings received within 6 months of bankruptcy filing) are safe.

Do I have to close my bank account? No - as long as you are not screwing the bank (i.e. discharging line of credit, overdraft or credit card with bank, other than debit card), bank will not freeze account and take money in it.

How will filing bankruptcy affect my credit? My clients tell me their credit scores have rebounded within 1-2 years of receiving discharge.

When can I buy a house or car after filing bankruptcy? My understanding is FHA regulations require lenders to go back 2 years after Chapter 7 bankruptcy filings for good interest on house loans. Interest rates on a new car purchase will be high initially (15-18%), but you should be able to negotiate step reductions in your interest rate, over time.

If I fail to list a creditor in my bankruptcy, will that creditor still be covered by the bankruptcy? Practically, if you have a no-asset bankruptcy (no assets distributed to creditors), the unlisted creditor should be covered by the bankruptcy, since no creditors received any assets from the bankruptcy. To make entirely certain, the bankruptcy pleadings can be amended to add the creditor, during the pendency of the bankruptcy, or the bankruptcy can be reopened, if it has been completed, to add the creditor.

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Call me today at 303-763-5286, 303-456-6633 or toll free at 888-663-6408 to schedule a free initial consultation. You can also contact me via e-mail through the contact form. We can schedule appointments in convenient locations, at flexible times, and arrange a payment plan that fits your needs.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.