Chapter 7 Bankruptcy FAQs
1. Can I keep my house if I file Chapter 7 bankruptcy?
You may keep your house if you continue to make payments. You may also surrender it and cease making payments. In that case, you will probably be able to live there without making a mortgage payment for 6 months to a year before a foreclosure sale takes place. However, you will remain liable for any HOA dues that become due or are assessed while your name is on the title to the property, regardless of whether you continue living there.
2. Can I keep my car if I file Chapter 7 bankruptcy?
Yes, you can keep your car if you file Chapter 7 bankruptcy. However, you
may have to sign a Reaffirmation Agreement to do so. You may also wish to file a Chapter 13 Bankruptcy if you are “upside down” on the car, i.e., it is worth far less than the amount owed.
3. What is a Reaffirmation Agreement?
A reaffirmation Agreement is an agreement between you and a creditor that “reaffirms” your debt to that creditor. It is used most often in the case of a car which you wish to keep. The downside to entering into a Reaffirmation Agreement is that if for some reason you are unable to live up to its terms you can be held liable for the debt or any deficiency resulting from repossession and sale of the collateral. This is contrary to the purpose of filing a Chapter 7 bankruptcy and the primary reason why reaffirmation Agreement should be entered into only as a last resort.
4. Will a Chapter 7 bankruptcy stop a garnishment?
Yes, filing a Chapter 7 Bankruptcy will stop ALL collection activities, including phone calls, account statements, lawsuits, court appearances and garnishments.
6. Will I have to pay debts to the IRS if I file Chapter 7 bankruptcy?
If you owe income taxes for a tax year from 2008 or earlier, and the tax returns were filed on time, those income taxes can be discharged in your Chapter 7 bankruptcy and will not have to be paid.
7. How do I know if I am eligible to file a Chapter 7 bankruptcy?
You are eligible if you pass the “means test”. The means test is an arithmetical computation used to determine whether your household has more gross income than the average household in the state of Colorado.
8. Can I discharge student loans in a Chapter 7 bankruptcy?
No, unless the loans are 100% private.
9. Can I keep my personal property if I file Chapter 7 bankruptcy?
Yes, although there are limits to what you can keep. State law defines exempt property. In general, you can keep retirement (IRA or 401(K) )accounts, vehicles worth less than $5,000 (more if you owe money on them and continue to pay) , jewelry, cars, clothing, furniture, tools or equipment used in your business, and equity in a home you live in up to $60,000. If you are over 60 years old or disabled you may be able to keep more. If you have property above and beyond what you are allowed to exempt under state law, that property must be turned over to the Chapter 7 Trustee. He will liquidate the property and distribute the proceeds to your creditors. This does not happen in the vast majority of Chapter 7 cases because the debtors do not have non-exempt assets. If you have non-exempt assets, you may wish to consider filing Chapter 13 so you can keep those assets.
10. Can I continue operating my business if I file Chapter 7 bankruptcy?
Yes, in general, but I would like to speak to you in further detail before giving an unqualified answer.
11. What is the cost of filing a Chapter 7 bankruptcy?
I have filed over 500 Chapter 7 bankruptcy petitions. I have never charged more than $1200.00and charged as much as $1200.00 only three times because of varying complications. In most cases the fee will be between $900.00-$1100.00. There is also a filing fee of $306.00 paid to the bankruptcy court at the time your petition is filed. The filing fee is your responsibility.
12. Do you accept payment plans?
Yes, especially if your wages are being garnished. However, you will need a friend or family member to sign a written agreement in which (s)he assume responsibility for any unpaid fees and guarantees that I will be paid within 90 days of filing.
13. How often can I file Chapter 7 bankruptcy?
You can receive a Chapater 7 discharge just once every eight years.
14. What will happen to my credit rating if I file Chapter 7 bankruptcy?
In most cases it will actually improve. That is because unless you are current and up to date on all bills your credit rating has already suffered because of late payments, judgments, or foreclosures. Filing a Chapter 7 bankruptcy will be the first step in repairing that credit rating.
15. How long does a Chapter 7 bankruptcy take?
From start to finish the process takes approximately 4 months. However, the most important date is the filing date. After you have filed all collection activities must cease.
Chapter 13 Bankruptcy FAQs
1. What is a Chapter 13 Bankruptcy?
Chapter 13 is one section of the U.S. Bankruptcy Code. It is often referred to as a reorganization and is a type of bankruptcy in which you (1) keep property which you might otherwise lose in a Chapter 7 Bankruptcy and (2) make monthly payments to a Chapter 13 Trustee. The payments you make are based upon a Plan you submit to the Court. Once that Plan is approved by the Court the Chapter 13 Trustee distributes the money you pay according to the provisions you have incorporated into the Plan.
2. What are the disadvantages of filing Chapter 13 bankruptcy?
A chapter 13 takes 3-5 years to complete. The length varies according to a number of reasons which are too varied to discuss here. During that time period the Debtor makes monthly payments to the Chapter 13 Trustee. Attorney fees are also higher for a Chapter 13, although most fees can be deferred, or paid out of the monthly payment you make to the Chapter 13 Trustee.
3. Why would I file a Chapter 13 bankruptcy if I can file a Chapter 7 bankruptcy and not pay anything back, and do so for less attorney fees?
There are a number of reasons:
(a) You may not be able to file Chapter 7 bankruptcy because of the means test, i.e., you are ineligible because you make too much money to file a Chapter 7 bankruptcy and must pay something back.
(b) Despite the disadvantages you may want to file Chapter 13 bankruptcy. Some of those reasons (advantages) are as follows:
(i) If you are behind on your mortgage, or vehicle payment, and you wish to
keep the house or car, you can have 3-5 years to catch up and keep the house. You will have to make a Chapter 13 monthly payment during that time and make your monthly mortgage or car payment from the time of filing your Chapter 13 bankruptcy going forward.
(ii) If you have more that one mortgage on your house, you can “strip off”
and not pay any mortgage which has not attached to your property. As an example if your house is worth $200K and you have a first mortgage of $210K and a second of $40K, successful completion of a Chapter 13 Plan will allow you to discharge the $40K second mortgage in addition to your other unsecured debt. You cannot do this in a Chapter 7 bankruptcy.
(iii) If someone has cosigned on a debt for you they can be afforded
protection under the provisions of Chapter 13 which do not exist in Chapter 7.
(iv) If you have property which you might have to surrender in a Chapter 7,
filing a Chapter 13 bankruptcy will allow you to make a payment arrangement whereby you can keep the property.
(v) If you owe considerably more on a vehicle which you wish to keep,
(or any other asset used as collateral for a debt) and you have owned the vehicle more that 2 ½ years, you can file a Chapter 13 bankruptcy and pay only the value of the vehicle, and not the amount owed to the creditor.
(vi) If you have student loans which are not dischargeable regardless of which Bankruptcy chapter you file you can obtain a deferment from paying the loans back during the 3-5 year period of your Chapter 13 bankruptcy.
(vii) Taxes-You may be able to discharge any penalties associated with failure to pay income taxes during the period prior to your filing the Chapter 13 Bankruptcy.
(viii) Prior filings: You may be ineligible for a Chapter 7 discharge. If you have received a Chapter 7 discharge in a case filed within the last 8 years you are ineligible for another Chapter 7 discharge. However, so long as it has been 4 years since receiving the discharge you will be eligible for a Chapter 13 discharge.
(ix) There are other reasons to file a Chapter 13 bankruptcy which we can discuss in a scheduled appointment.
1. How does my Plan get approved by the Court?
Once your Plan is filed your creditors are notified that they may object by a certain date, usually 5 days before your creditor’s meeting. If they fail to do so (and most do not object) then they lose their right. For those creditors who may object it is my job to confer with them after the creditor’s meeting in an attempt to resolve their objection. This is done before your confirmation hearing. If we are unable to agree or otherwise resolve the objection then we have a contested confirmation hearing . This happens in less than 10% of all cases filed, and if it does occur will usually take place about 4 months after filing. Your Plan will be either confirmed (approved) at the hearing or an Amended Plan must be filed and the process may begin again.
2. What happens if I become unable to make payments while after my Plan has been confirmed?
If you need to modify your Chapter 13 Plan because of circumstances which occur during the Plan you may ask the Court to do so. If for any reason your needs change during the life of the Plan you may also convert your filing to a Chapter 7 bankruptcy.
3. How do I know whether my Plan will last 3 or 5 years?
Depending upon how much income is in your household you may have to propose a Plan which last 5 years. If not, and you are eligible for a three year Plan, you may still wish to propose a 5 year so that you will be able to meet other ongoing household expenses.
4. What is the timeline for a Chapter 13 bankruptcy?
All cases are different and vary somewhat. But in the typical case you will have your creditors meeting approximately 45 days after filing. In most cases that will be the only time you have to attend any hearing. Approximately three weeks after the creditors meeting there will be a Confirmation hearing. Your attendance at that hearing will not be required. Your Plan will either be confirmed at or before that hearing, or an Amended Plan will be filed. The filing of an Amended Plan will probably extend the confirmation hearing by at least 30 days. If that Amended Plan is not confirmed at that hearing an evidentiary hearing will be scheduled in approximately 30 days at which your attendance will be required. Once your Plan is confirmed by the Court your primary duty will be to make the required monthly payment pursuant to the Trustee and otherwise adhere to the provisions of the Plan. That will remain the case until successful completion, modification because of changed circumstances, conversion to Chapter 7, or dismissal.
5. What is the cost of filing a Chapter 13 bankruptcy?
The filing fee for filing a Chapter 13 bankruptcy is $274.00. Although attorney fees are substantially more in a Chapter 13 than in a Chapter 7 bankruptcy the majority of those fees can be paid through the Chapter 13 Plan. I generally charge between $2500.00 to $3,000.00 for a Chapter 13 bankruptcy. Of that amount, $2,000.00 is paid through the Plan, so that the only money you have to pay me directly is the filing fee of $274.00 and attorney fees of $500.00, for a total of $774.00.
6. How often can I file a Chapter 13 bankruptcy?
You are eligible for a Chapter 13 discharge once every four years.
7. When do my Chapter 13 Plan payments begin?
Your first Plan payment is due 30 days after your case is filed.
8. What happens during the term of my Chapter 13 Plan?
While your Chapter 13 bankruptcy Plan is in effect it binds the creditors whom have been provided for in the plan. They cannot call you, sue you, send you bills or statements, foreclose on property or garnish you. When you have successfully completed your Plan you will be discharged from most unsecured debt.
9. What debts will the discharge not cover?
Some of the debts which the Chapter 13 discharge will not cover are student loans, child support or alimony, income taxes less than three years old, debts in which you defrauded the creditor under certain circumstances, and debts incurred by you in a fiduciary capacity are some of the debts not discharged in a Chapter 13 bankruptcy filing.