What is bankruptcy?

Bankruptcy law is federal law. The United States Constitution grants the federal government the exclusive right to make bankruptcy laws. Pursuant to this authority, the federal government created the bankruptcy code. The bankruptcy code creates types (categories) of bankruptcy known as chapters. The three most common forms of bankruptcy are chapter 7, chapter 13, and chapter 11.

Will bankruptcy stop creditor harassment?

YES! Filing the bankruptcy petition in the bankruptcy court automatically stays (stops) all of the listed creditors from trying to collect the money owed them. There are some creditors (such as secured creditors on your house, car, etc.) that you will need to pay, if those creditors have a valid lien on your property, and you want to keep that property. In addition there are certain types of creditors, which are not discharged in bankruptcy and may have to be paid (for examples of debts that are not discharged see the chapter 13 or chapter 7 sections of this web site).

Do I have to be behind on my bills to file bankruptcy Chapter 7, Chapter 13, or Chapter 11)?

NO! Often people file bankruptcy before they are seriously delinquent on their monthly debts. If you can barely make the minimum payments required on your credit cards, or if it appears that you will not be able to make payments as they come due, it may be better for you to file bankruptcy rather than let your situation deteriorate.

Does filing bankruptcy stop foreclosure?

YES! A federal injunction (automatic stay) goes into effect immediately when a person files bankruptcy, which stops the foreclosure. A chapter 13 bankruptcy allows you to catch up on delinquent mortgage payments over (typically) a three- to five-year period, paying out the delinquent amount in small additional payments. You must also make all your house payments that come due from the date you filed bankruptcy onward.

Will I be fired for filing bankruptcy?

NO! Federal Bankruptcy Law specifically prohibits discrimination based solely on an employee’s filing for bankruptcy.

Does filing bankruptcy stop creditors from calling?

YES! A major benefit of filing bankruptcy is the protection of the automatic stay that goes into effect once the bankruptcy is filed. The automatic stay, with relatively few exceptions, stays or stops all creditors’ actions to collect a debt, including phone calls and foreclosures.

How long does it take before creditors quit calling?

After your bankruptcy is filed, the Bankruptcy Clerk sends a notice to all of the listed creditors. It usually takes about two weeks from the date of filing before creditors are officially notified by the Court. The debtor can personally notify creditors immediately after filing. Creditors who continue to attempt collection of a debt after being notified of a bankruptcy may be liable for sanctions by the Federal Court.

Does filing bankruptcy stop creditor wage garnishments?

YES, with very few exceptions (for example, it will not stop child support garnishments).

Why do people file bankruptcy?

The most common reasons for bankruptcy are often beyond the control of the individual:
• medical bills
• being laid off or losing your job
• marital problems
• unexpected expenses
• overextended credit
• failure of a business due to economic conditions
• behind on house or auto payments (chapter 13)
• behind on taxes (chapter 13)

Can I file a Chapter 7 bankruptcy?

If you are able to make any meaningful payments (even a relatively small percentage of payments) to your unsecured creditors (in addition to your normal living expenses), you will probably be required to file a chapter 13 bankruptcy instead of a chapter 7 bankruptcy. In order to qualify for a chapter 7 bankruptcy (using court-approved standards for expenses), your income and monthly living expenses (not including the types of debts that you are trying to discharge such as old MasterCard, Visa or medical bills) must balance out. For example, if you have normal monthly take-home income of $2,000 and normal monthly living expenses of $2,000 (once again, not including the types of debts that you are trying to discharge in bankruptcy), then chapter 7 bankruptcy may be an option for you.

What does a Chapter 13 bankruptcy offer?

It is a repayment plan over 3 to 5 years to allow you to save your house from foreclosure and cure any mortgage arrearage in the Plan. It also allows you to stop creditor collection or repossession actions and repay all or part of your debts, including debts to the IRS.

What are the advatages of Chapter 13 over Chapter 7?

Filing a chapter 13 bankruptcy has several advantages over a chapter 7 liquidation. A chapter 13 bankruptcy allows you to discharge a few more types of debts than does a chapter 7 bankruptcy. If you own an unincorporated business and your business is not a partnership, you can continue to own and operate the business under a chapter 13 plan. Under a chapter 7 liquidation, a bankruptcy court may order that your business or its assets be sold. Also the automatic stay of a chapter 13 bankruptcy protects any co-signers of consumer debts to the extent that the debt is paid in full through your plan, whereas chapter 7 offers only very limited protection (almost no protection) of others who may share the debtor’s obligation. Finally, in a chapter 13 bankruptcy you can pay out past due taxes and past due payments on your mortgages and/or automobiles.

Does filing bankruptcy stop a civil judgment?

YES! Filing bankruptcy stops most all civil judgments.

Does bankruptcy damage my credit rating?

Declaring bankruptcy can seriously damage your credit rating, making it difficult to establish credit or take out loans in the future. However, if you are behind on your bills now (slow payments and/or late payments), your credit rating most likely has already been seriously damaged making it difficult for you to take out loans. The Federal Fair Credit Reporting Act allows the reporting of your bankruptcy discharge no longer than 10 years from the date of that discharge. If you don’t file bankruptcy, continued slow or late payments could damage your credit report indefinitely.

Can I transfer property to avoid losing it in bankruptcy?

NO! Some transfers that are valid outside the context of bankruptcy are invalid in bankruptcy. The bankruptcy code empowers a bankruptcy trustee to invalidate certain transfers made prior to a bankruptcy filing. Additionally transfers of this nature could be a crime. Such crimes are investigated, then pursued by the FBI.

How much does it cost to file bankruptcy?

Attorneys’ fees vary greatly from case to case, based on many factors, because of that we never quote a fee until we have had a chance to sit down with you and carefully examine your particular financial situation.

Do I have to hire an attorney to file bankruptcy?

No. But remember – you get what you pay for. If you file a case without an attorney, you may make mistakes that no attorney could repair at a later date. Without an attorney you could make mistakes that may lose your home, other property, or retirement plans. Such losses could happen just by your filling out the paperwork improperly. There are certain exemptions which must be properly claimed, other paperwork which must be properly filled out, deadlines which must be met. Without the proper assistance in a bankruptcy you may save yourself a few dollars in the beginning, but lose substantially more in the long run.

Is my Student Loan dischargeable?

Generally speaking, no.

Where do I send my Chapter 13 Plan Payments?

Most of our clients have the Chapter 13 plan payments deducted directly from their paycheck. In the Eastern District of Texas, if for some reason you need to mail your payment directly to the Trustee, Carey D. Ebert, her address is:
Standing Chapter 13 Trustee
P.O. Box 628
Tyler, TX 75710
The payment must be either a cashiers check or money order made payable to “Standing Chapter 13 Trustee”. Make sure you print your name, case number and SSN on the check.

What information do I need to have for the attorney?

Bring your paystubs and most recent tax return plus an estimate of the amount of credit card or tax debt, student loans or mortgage arrearages.