Frequent Concerns and Questions About Bankruptcy
Will everyone know I’ve filed for bankruptcy? Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the numbers of people filing are so massive, very few publications have the space, the manpower or the inclination to run all of them.
Are all debts are wiped out in Chapter 7 bankruptcy? No. Certain types of debts cannot be erased. They include child support and alimony, student loans, recent taxes, criminal fines and restitution, unlisted debts, and debts incurred as the result of fraud, false financial statements, embezzlement and larceny.
Will I lose everything I have? No. This is the misconception that keeps people who really should file for bankruptcy from doing it. You are allowed to keep Exempt Property. In Texas, your house, your car, your retirement plan, life insurance, household goods, clothing, jewelry and tools of a trade are exempt. Most people in Texas pass through a bankruptcy case and keep everything they have. Of course you still have to keep making the payments on your home mortgage and your a car loans (like the rest of us).
What are to downsides to filing Bankruptcy? Usually the biggest detriment of bankruptcy is its negative impact on your credit score. However, this may not be an issue for many people because they already have bad credit or they soon will because they lack the ability to say current on their debts. If a person has suffered, or will soon suffer from, a home foreclosure, a vehicle repossession, or extended credit card delinquencies or write-offs, a bankruptcy may not make his credit any worse. Additionally, having a poor credit score doesn’t mean you can’t get credit. It just means that some loans will be tougher to get and you may have to pay higher interest rates on large purchases like furniture, cars and homes.
Will I ever get credit again? Although bankruptcy will appear on your credit for 10 years, it usually won’t be long before you’re getting credit card offers again. There are many companies that will provide credit to you. I don’t advise any of my clients to run out and run up the bills again, but if someone does need an automobile, they will be able to get credit in most cases. Bankruptcy can even help some people obtain credit. This is because after Bankruptcy a your Debt-to-Earnings Ratio will improve (your debts are reduced, but your income says the same). Your Debt-to-Earnings Ratio is one of the factors creditors look at when deciding to extend you credit. Many people who file for bankruptcy are eligible finance the purchase of a vehicle after six months and purchase a home after two years.
Must I bankrupt all of my Debts? No, you do not have to bankrupt your home mortgage loan or your car or furniture loans as long as this does not create an undue hardship for you. These debts must still be listed on your bankruptcy papers and these creditors must be notified of your bankruptcy, but as long as you keep your payments current, you will be able to keep your home and your vehicles. Even if a debt is discharged in bankruptcy, you case still pay the debt back if you wish and are able to do so. The choice is yours: you can repay any creditor you wish (like family members and friends for instance), but you are not required to do so. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don’t have to list it as a creditor since you don’t owe any money on it. That means you might be able to keep that card even after the bankruptcy.
Will my employer be notified? Your employer will not be notified that you have filed Chapter 7 Bankruptcy. The same is true in Chapter 13 cases, unless you decide to have your Chapter 13 Plan payments deducted automatically from your paycheck like your health insurance or retirement plan payments. In this case only the payroll department will receive notice. This should not have an impact on your employment. Under federal law employers are prohibited from terminating you or discriminating against you because of bankruptcy.
Will I be required to appear in Court? Not in most cases. In Chapter 7 cases it is rare for bankruptcy filer to have to appear in Bankruptcy Court. In Chapter 13 cases, if your case unusually complicated or if have a dispute with a creditor or trustee, you may need to appear before a Bankruptcy Judge do that he can resolve the issue or dispute. However, in San Antonio approximately 95% of Chapter 13 payment plan are approved automatically without having to appear in court.
What does a Discharge mean? When a debt is discharged in bankruptcy the debt is forgiven. You are relieved of legal responsibility for the debtor and can never be forced to pay it back. Creditors are prohibited from suing you or taking legal action to enforce the debt. They are also prohibited from calling you, sending your demand letters, or harassing you in any way. Some debts, like mortgage and car loans, are usually not discharged in bankruptcy, unless you decide don’t want to keep or can’t afford your home or your car.
Is bankruptcy unethical or immoral? Some people mistakenly believe that filing for bankruptcy relief or protection is somehow unethical or immoral or that a person who files bankruptcy is not honest or honorable. This is far from the true. The right to bankruptcy relief for someone who is unable to pay his or her debts is a right that is protected by the United States Constitution. No one should feel embarrassed or ashamed if they are forced to take advantage of a right they have as a United States citizen because their circumstances have put them in a situation that jeopardizes the welfare of their family or prevents them repaying an over burdensome debt load. Moreover, even the Bible recognizes that discharge is the recourse that is available for individuals unable to meet their obligations.
What are the different types of bankruptcy? There are several types of bankruptcy for individuals. The three most often used are Chapter 7, Chapter 13, and Cheaper 11. Chapter 7 is a proceeding that permits your to receive discharge of your debts if your lack the disposal income in which to repay your creditors. Chapter 13 is a proceeding that allows you to consolidate and restructure your debts so that your monthly payments to creditors are reduced to a manageable amount. Chapter 11 is a reorganization proceeding that is used primarily for businesses. However, it is sometimes advisable or necessary for individuals to use Chapter 11 for relief from their creditors.
What is Exempt property? Exempt property is property that you are allowed to keep after filing bankruptcy. Under Texas law, with some exceptions, married couples can keep their homes, retirement accounts and $60,000 worth of personal property, including furnishings, appliances, clothing, jewelry and tools of a trade, and motor vehicles. Under Federal law, married couples can keep $30,000 of home equity, $16,000 of furnishings, and $4,800 in motor vehicles. There are many special categories of exempt property that may apply in your particular case. We will help you to identify exempt property, and decide which exemption scheme is best for you. Even if you have property that is not exempt, you may still be able to keep it in a Chapter 13 proceeding.
If I’m married, do both me and my spouses have to file for bankruptcy? Not necessarily. It’s not uncommon for one spouse to have a significant amount of debt in their name only. However, if spouses have debts they want to discharge that they’re both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn’t file.
Is it really hard to file for bankruptcy? It’s complicated and there are traps and pitfalls for those without bankruptcy experience, even attorneys. That’s why it’s important to find an attorney who has the experience to guide you through the process and the expertise to help you make the right decisions. Some people try to file on their own, but it’s not recommended to go through the procedure without an attorney. If you are not comfortable with filling out your own tax return, you probably should not try to file a bankruptcy yourself.
What is a Board Certified Attorney? In Texas, attorneys who have achieved a certain level of expertise in particular field of law can earn certification by the Texas Board of Legal Specialization [http://www.tbls.org] recognizing their special competence in that field. The Texas Supreme Court has authorized this program. Only Board Certified attorneys have been tested at the highest level and earned the right to publicly represent themselves as a specialist in a select area of law. To become Board Certified in Consumer Bankruptcy Law, an attorney must devote a high percentage of his practice to bankruptcy cases; demonstrate his legal education in bankruptcy law and his experience in a wide variety of bankruptcy matters; receive positive evaluations by fellow lawyers and judges; and pass a rigorous day-long examination on bankruptcy law. There are about 155 Board Certified Consumer Bankruptcy attorneys in all of Texas. There are only 11 in Antonio including David T Cain who has been a Board Certified Consumer Bankruptcy Attorney in San Antonio for 19 years.
Don’t only deadbeats and failures file for bankruptcy? Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They’ve struggled to pay their bills for months and just keep falling further behind.
Can I still repay some of my debts after bankruptcy? I don’t want to include certain creditors in my filing because it’s important to me to pay them back someday and if the debt is discharged, I can’t ever repay them. Bless you for even thinking about such a thing. You’re no longer obligated to repay them, but you always have that opportunity. If your conscience won’t let you sleep nights because you didn’t pay your debts, there’s nothing in the bankruptcy code that prevents you from doing that once you’re back on your feet. But bankruptcy is an all-or-nothing deal, so you have to include all your creditors in the petition.
Will filing for bankruptcy damage my credit rating? That depends. It may not make it any worse than it already is. But even if you have good credit, bankruptcy can improve your debt-to-earnings ratio. This is the total amount of your debt in relation to the amount of your annual income. Mortgage companies and other creditors use this ratio to determine your ability to repay a new loan. After bankruptcy, most debt is discharged but income often remains the same, so the percentage (ratio) of your income to your debt increases. This may mean that even though a bankruptcy can stay on your credit for 10 years, your ability to obtain credit may improve.
Can I get rid of back taxes through bankruptcy? Sometimes you can. If you have filed all your returns and the taxes owed are at least three years old, the taxes may be dischargeable. Even income taxes owed to the IRS can be discharged if you meet the qualifications. Employment taxes however are not dischargeable although the penalties can sometimes be waived. Even if the taxes are not dischargeable, they can often be repaid in a Chapter 13, usually without interest. A Chapter 13 will also keep the IRS or the county tax collector from seizing your property or attaching your income.
Can I file for bankruptcy more than once? Yes, but you can only file for Chapter 7 bankruptcy once every eight years. However, you can file a Chapter 13 anytime after a prior bankruptcy. This may be useful if you need to stop a home foreclosure or vehicle repossession. You can even discharge debts in a Chapter 13 four years after filing Chapter 7 and two years after receiving a Chapter 13 discharge.
Can I incur debt and then file Bankruptcy? That depends. Incurring debt with intent not to repay it is considered fraudulent. Doing so before filing bankruptcy is considered bankruptcy abuse and will likely result in the debt not being discharged. However, if you incur a debt with the intent to repay it and with the ability to do so, your actions are legal.
Where do I file for bankruptcy? If you live in or around San Antonio, your case would be filed there. Cain Law Offices serve bankruptcy clients who reside in the following counties: Atascosa, Bandera, Bexar, Comal, Dimmit, Frio, Gonzales, Guadalupe, Karnes, Kendall, Kerr, Medina, Real, Wilson, Edwards, Kinney, Maverick, Terrell, Uvalde, Val Verde and Zavala, We also serve bankruptcy clients in Bastrop, Blanco, Burleson, Burnet, Caldwell, Gillespie, Hays, Kimble, Lampasas, Lee, Llano, Mason, McCulloch, San Saba, Travis, Washington and Williamson which we file in Austin.