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 three to five 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 three 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 three to five years. There are seven 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 nonexempt property and want to keep it (must pay the nonexempt value through the Plan); you filed Chapter 7 within eight years; you are over the income cap for Chapter 7 (income cap dependent on gross income for six 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 three months — when filed, automatic stay created, freezing debt during pendency of bankruptcy; one month after file, go to hearing — purpose of hearing to collect any nonexempt assets (hopefully none); two months after hearing (three 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 lawyers 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? You can only stop them by filing the bankruptcy; although the collection calls and threats often stop after retaining a bankruptcy attorney and referring collection calls to him/her.
Do I have to go to court? You usually only have to attend one hearing in Colorado Chapter 7 cases (341 hearing) and normally only one hearing (341 hearing) in Chapter 13 cases — not with a judge, but with a trustee (bankruptcy attorney hired by Justice Department to collect nonexempt 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 backward; any assets acquired after filing (except inheritances and lottery winnings received within six 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 one to two 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 two 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 percent), 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.
Affordable Representation Is Only a Phone Call Away
Call me today at 303-763-5286 to set up a free consultation with a Littleton bankruptcy attorney. You can also contact me via email. I 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.