More than you can imagine. The following are all FALSE stories that you will hear from friend, neighbors and the guy at the next desk:
1.) You will be required to repay most debts
2.) You can't discharge medical bills or credit cards
3.) You will lose your house or car
4.) You can't stop a foreclosure by filing bankruptcy
5.) You can't discharge a debt in which a judgment has been entered against you.
In certain cases, back taxes can actually be discharged. Even if your back taxes are not dischargeable, the taxing agency will not attempt to collect during the pendency of the bankruptcy.
A discharge is the final step in a bankruptcy. It simply means you cannot be required to pay back any debt that is not secured by property unless the debt is one of the rare exceptions that is non-dischargeable. Some debts are not dischargeable. These include child support, recent income taxes, withholding taxes, fines owed to the government and most student loans.
You cannot have filed a Chapter 7 bankruptcy within the prior 8 years. You have to get a credit counseling certificate. This can be done over the telephone or on the internet. See our list of agencies authorized to provide this credit counseling. In order to do a Chapter 7 bankruptcy, your income cannot exceed what is called the median income unless you come within certain exceptions. See the tab on median income. This varies with the size of your family and, to some extent, whether you live in Iowa or Nebraska.
In most cases, no. The average bankruptcy filer attends one meeting with what is called a "Trustee", an attorney who administers the case for the Bankruptcy Court. Actual court hearings are fairly rare in Chapter 7 bankruptcy. At this first, and usually only, meeting you will be asked a standard series of questions. Eight of these hearings are held per hour.
Yes, there are several types of bankruptcy. This office does only Chapter 7 consumer bankruptcies. These are designed to provide debt relief to the average wage earner who is burdened by credit card debt, medical debt, deficiency judgments resulting from repossessions and/or foreclosures and other debts common to ordinary people. If you are engaged in business or farming or have an income above the median income provided by law, you should consult an attorney who does Chapter 11, 12 or 13 bankruptcies. Particular care should be used in choosing an attorney who does Chapter 13 bankruptcies because these require very careful crafting of the "plan" in order to be liveable.
For the average consumer, bankruptcy can give a fresh start by stopping harrassing phone calls and threatening letters, eliminating most unsecured debts, stopping most but not all garnishments, stopping most but not all lawsuits and slowing down or, in some cases, even preventing foreclosures and repossessions. This is why bankruptcy is sometimes referred to as giving a "fresh start".
Often, but not always, or at least not always for very long. The automatic stay will give you time to catch up and/or work out arrangements with secured creditors by temporarily stopping repossessions and forclosures. If you and the creditor cannot work out an arrangement in a reasonable amount of time, the creditor may move to lift the automatic stay in order to be able to proceed with the repossession or foreclosure. In addition, by stopping garnishments and eliminating the need to pay on unsecured debt, bankruptcy can free up additional income to help catch up on house and car payments.
Each state provides exemptions, property that cannot be taken to satisfy debt. Iowa and Nebraska exemptions differ considerably. Contact the office to discuss your personal situation. In the case of homes, vehicles and certain other secured transactions, you will generally have the option to reaffirm that debt. A reaffirmation is an agreement between you and the creditor for you to keep the item of property in issue and continue making payments. Although some creditors insist that you be current before they will enter into a reaffirmation agreement, many creditors will work out arrangements for you to catch up over time or will put the arrearages on the "back end". At the present time, some lenders are even negotiating better terms to make reaffirmation an attractive option.
Yes. The automatic stay, which takes effect at the time of filing, prevents creditors from taking any action to collect during the pendency of the bankruptcy. At the conclusion of the bankruptcy, most debts will be eliminated.
Absolutely not. The use of a credit card shortly before filing will often lead to an adversary action to block discharge of that debt. This office does not accept credit cards for any purpose.
Stop paying any bill that you are going to discharge anyway. Obviously, you have to buy groceries, pay the rent or mortgage (unless you are going to surrender the house), keep up the car payments if you are going to keep the car and pay certain other necessary expenses. You will not gain anything by continuing to pay on bills that you are going to discharge in bankruptcy. Use that money to pay your bankruptcy fee.
Almost certainly not. Most of these "debt settlement" companies charge rather large fees and make no payments to your creditors until they have collected their entire fee. Some of them never pay any of your debts, they just take your money. By the industry's own accounting, which it made public during recent hearings on proposed new FTC rules which will take effect October 27, 2010, as few as 30% of consumers ever achieve a settlement of any kind. But they still have to pay thousands of dollars in upfront fees to the debt settlement companies
In most cases, bankruptcy actually helps your credit rating by eliminating debt that is calculated into your income to debt ratio, a very important factor in your credit score. Credit reports compiled for use in a bankruptcy will actually show both your present credit score and your projected score one year after filing. The projected increase usually runs somewhere between 25 and 100 points one year after filing bankruptcy.
From filing to discharge usually takes in the neighborhood of 90-120 days. However, relief starts almost immediately with the mailing of the Notice Of Bankruptcy Filing by the clerk of court because creditors are then prohibited from attempting to collect.
When the bankruptcy statute was being "reformed" in 2005, there were stories about lawyers "encouraging" bankruptcy with easy payment plans - even though that was already prohibited. The law prohibits attorneys from offering post filing payment plans by wiping out the debt to the attorney when the bankruptcy is filed. Most attorneys will allow you to pay into a trust fund until the entire fee is accumulated and then file the bankruptcy.
This office does simple Chapter 7 bankruptcies for a flat fee of $1,035.00. This INCLUDES the $335.00 bankruptcy court filng fee but does not include the charge for filing notices in state court to stop the progression of any pending lawsuits and does not cover adversary actions or the removal of pre-bankruptcy liens from real estate. When calling around and comparing prices, be sure to find out whether the price quoted includes the filing fee. Some lawyers quote only the actual attorney fee then, at some later point, you find out that the filing fee was not included in the price quoted. You should also be sure to find out what other charges might be incurred, for instance reviewing documents to determine whether you are "cross collateralized". Finally, be sure what you are getting. There are non-attorney "petition preparers" who appear to be inexpensive. However, cheapest is not always best. These preparers cannot appear at First Meeings of Creditors or perform other legal services that are often essential to bankruptcy.