Answers to Your Bankruptcy Questions

Bankruptcy can bring foreclosure proceedings to a halt, end harassment from bill collectors, and give borrowers time to make up missed payments and reorganize their finances. In some cases, bankruptcy can also help mortgage borrowers save their homes permanently.

In Chapter 13 bankruptcy, if the lender has not repossessed your car and you file for bankruptcy, the automatic stay prevents the lender from repossessing your car until the bankruptcy judge approves your repayment plan.

Then, if your Chapter 13 repayment plan deals with the back payments (the arrearage) on your car loan, the lender cannot repossess your car during and after the bankruptcy (assuming you stay current on your payments).

Under the Fair Debt Collection Practices Act, creditors are prohibited from contacting you once they are made aware of the fact that you have hired a bankruptcy attorney to handle your debt situation. If creditors violate this Act, they can be sued in Federal or State court with attorney’s fees, actual damages and sometimes punitive damages awarded to the Plaintiff.

If you have an unpaid bill, a creditor or collection agency might threaten garnishment. Garnishment is a legal procedure to take your money, for example from your bank account or your wages. However, garnishment is not allowed until a court has determined that you owe the money. A creditor can not garnish any of your income until it first sues you and gets a court judgment.

When you file bankruptcy, an automatic stay goes into effect that prohibits and stops most collection activities by creditors. This means that wage garnishments are also stopped as long as the bankruptcy stay is in effect. If a creditor wants to resume collection efforts, it must ask the court to lift the stay. The court will lift the stay only if the creditor has a valid reason for doing so. An unsecured creditor such as a credit card company simply wishing to resume a wage garnishment is not a valid reason for the court to lift the stay.

Chapter 7: Known as a “straight bankruptcy” offers bankruptcy help which focuses on “liquidation”. Liquidation essentially means that the Bankruptcy Court is willing to WRITE OFF MOST OF YOUR DEBT if you liquidate your assets first. John will help you to determine what assets you can protect from bankruptcy proceedings. Ultimately, Chapter 7 is a good option for those without significant assets.

Chapter 13: Often called the “wage earner’s” or “reorganization” bankruptcy offers bankruptcy help which best suited for those who do have sufficient income and/or assets but are unable to meet their debt obligations. Filing for relief under Chapter 13 may benefit you because it stops all collection activities and foreclosures for a minimum of thirty days. Additionally, it allows you to manage your debt by setting up a payment plan for a portion of your debt, with a potential discharge of the remainder.

The Chapter 13 plan is a 3 to 5 year plan to pay off and retain items you want to keep (home, car, etc…) and be debt free. Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, IRS debt, student loans, credit card debts and other unsecured debts. You can now “strip” 2nd mortgages or equity lines from your home. IRS Debt can be paid over time without penalties and interest and sometimes eliminated altogether as unsecured debt.

The process for Chapter 7 bankruptcy typically only lasts 3-5 months whereas the Chapter 13 bankruptcy and repayment plan typically lasts 3-5 years.

Married debtors have the option to file bankruptcy jointly with a spouse, or to file an individual bankruptcy without including their spouse.

About 30 to 40 days after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but a person appointed by the United States Trustee to oversee bankruptcy cases.

At the First Meeting of Creditors, the trustee will ask you questions (under oath) about your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask you questions. However, usually creditors do not attend these meetings if you have filed for Chapter 7 bankruptcy.

If you file for a Chapter 7 Bankruptcy, you normally do not need to return to court. If you filed for a Chapter 13 Bankruptcy, you may need to return to court for a confirmation hearing before the bankruptcy judge.

After the bankruptcy petition is filed, the court mails a notice to all the creditors listed in the schedules. This usually takes a couple of weeks.

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.

However, some of your creditors may have a “security interest” in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. Contact Attorney John Hicks (810) 232-2223 to learn more.

A bankruptcy is reported on a credit report for 10 years, but that does not mean you cannot rebuild good credit during that time. The law allows a lender to loan money whenever the lender wants to, and nothing in bankruptcy prohibits a lender from making a loan after bankruptcy. Good credit is a history of paying bills on time and that is your goal after bankruptcy.

You cannot borrow any money without court permission IF you file a chapter 13 bankruptcy while your chapter 13 bankruptcy payment plan is still operating, so the answer for that specific time frame would be NO.

However, if you file a chapter 7 bankruptcy, then you may keep any credit card you have if the bank issuing the credit card will allow it.

The short answer is yes, you will. While it will take patience and diligence to rebuild your good credit standing, you should be able to get some level of credit almost immediately after filing, regardless of whether you have opted for Chapter 7 or Chapter 13 bankruptcy.

Congress overhauled the bankruptcy laws in 2005. Under the new law, virtually all retirement account and pension plan funds are exempt from creditors, meaning you get to keep them if you file for Chapter 7 bankruptcy. In Chapter 13 bankruptcy, because your retirement accounts are exempt, they won’t affect how much you must repay unsecured creditors.

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.

No employer — government or private — may fire you because you filed for bankruptcy. Nor may an employer discriminate against you in other terms and conditions of employment — for example, by reducing your salary, demoting you, or taking away responsibilities — because of your bankruptcy. Call Flint Bankruptcy Lawyer John Hicks today and get all you questions answered.