Frequently Ask Question

Every situation is a little different, so not every bankruptcy costs
the same. This is why we offer a free consultation. We want you to figure
out exactly what bankruptcy will look like for you before it costs you a
penny.

There is no minimum amount of debt you need to file bankruptcy.

Answer: Most of the time, yes. The goal of bankruptcy is to give you a
fresh start. Being able to keep your house and car are a big part of that
fresh start. For a more in-depth discussion of this issue, please read
Article.

Chapter 7 Bankruptcy

You have 3 options for your vehicle:

• Surrender.   you can always surrender the car and walk away.  your car company will likely sell the vehicle for less than what you owe (the “deficiency”).  You won’t have to pay the deficiency  because the debt is discharged in your bankruptcy.
• Reaffirmation.  You can sign a contract to keep making car payments.   You can keep your car but you must be current and keep your payments current.   But Remember, you are still responsible for the payments.   if you miss a payment 6 months or a year from now, the car company can still repossess the car or sue you for damages if you fail to pay.  A car company will not agree to a reaffirmation agreement if you are behind on the payments- you must be current.  A reaffirmation agreement must be signed and filed before 45 days of your trustee meeting.  If it is not timely filed, your car can be picked up even while you are still in bankruptcy.

* you don’t always need to file a reaffirmation agreement to keep your car.

* See Also “Pitfalls in bankruptcy” for more information

• redemption.   if you are upside down on your car, you can pay the company what the car is worth and the car company must release the lien.  example:  If your car is worth $10k but you owe $15k, you can pay $10k and get a clear title.  Most people filing bankruptcy don’t have $10k to “redeem” a car, but there are financing options available which could save you a ton of money.

Chapter 13 Bankruptcy

• Re-amortization.   Your car payment will likely be repaid over a new 5 year term.
• Replacement.  You can’t finance a new vehicle without prior court permission in a chapter 13 plan.
• Car Wrecks.  What if I get in a car wreck and my car gets totaled?  This is the potentially the hardest thing you will go through in a chapter 13 bankruptcy.  If your car gets totaled, please call our office immediately.  We’ll need to file a motion for “substitute collateral” where we will ask to use the insurance money from your totaled vehicle to purchase a replacement vehicle.  this is a painful process, because the rental car may run out before we get court permission to buy another vehicle with the insurance proceeds.  If we work quickly, it will eliminate some of the headaches

Chapter 7 Bankruptcy

If you want to keep your house, simply continue to make the monthly mortgage payments.

• With a reaffirmation agreement.   I will request a reaffirmation agreement from your mortgage company.   you should too!  Only a mortgage company can prepare a reaffirmation agreement, because it has the exact balances owed, escrow information and repayment terms.  But mortgage companies are notorious for NOT preparing or sending reaffirmation agreements.  some mortgage companies will even say “your bankruptcy lawyer will prepare one” or “your bankruptcy lawyer should have prepared one for you”.  This is simply not true.

Having a reaffirmation agreement will allow:

• • You to refinance with the same mortgage company at a later date, and
  • The mortgage company to report your monthly payments to the credit bureaus (which can improve your credit score)

• Without a reaffirmation agreement.  A signed reaffirmation agreement must be filed before your discharge is entered.  If it is not filed before the discharge, it cannot be filed later.    .  You won’t get the benefit of your mortgage payments being reported to the credit bureaus. But don’t despair, you can always sell your house at any time and any equity is yours to keep.

Chapter 13 Bankruptcy

Chapter 13 is the best way to save your house if you are behind on your payments.  sometimes, you’ll need to make your payments through the chapter 13 trustee each month.  if you become delinquent on your plan payments or your mortgage payments, the mortgage company can file a “Motion for Relief from Stay” so it can proceed with foreclosure in state court.  So please keep those payments current!

what happens when I surrender my house?   

Remember that your bankruptcy discharge takes away any personal liability on the promissory note, but the mortgage “lien” survives.  The mortgage company will file a foreclosure.  This is the only way for the title to be moved from your name to the mortgage company’s name (or other buyer).  don’t be surprised if you are served with a foreclosure summons even after you filed bankruptcy.  Please call me and we can discuss.  (Hint: Look to make sure the mortgage company seeks a “Judgment In rem” which is only against the property.)

Most bankruptcies will go smoothly, but there can be pitfalls.  I won’t cover everything that can or will happen and these just may make you worry more than you should.  But nevertheless, here are some things you should know:

• You May Lose Your Tax Refund.  The “earned income (EIC)” portion of your tax refund is always exempt (the trustee can’t take it) but the rest is fair game.  sometimes, the trustee won’t take your refund if it isn’t very large.  But in any event, do not spend your tax refund without getting permission first.  You will have to pay it back and you may lose your discharge.  This is true for both chapter 7 and chapter 13 bankruptcies.
• You must pay for your car if you want to keep it.  Sometimes, debtors get the idea that they get a $7500 exemption and therefore they don’t have to make a car payment anymore.  This is a misconception.  Any exemption applies to a debtor’s equity, which means the value of the vehicle over and above the amount owed.
• someone may object to your discharge.  (Unlikely) There are a few reasons a creditor may object to your bankruptcy discharge, but they are limited and usually involve allegations of fraud or something similar.
• Taxes/student loans usually don’t go away.  There are exceptions, of course.  income taxes older than 3 years can be discharged
• Your car may get repossessed during bankruptcy.   If you’re behind on your car payments and don’t sign a reaffirmation agreement within 45 days of your trustee meeting, the lender can come get the car.   usually though, a lender won’t come get a car until the bankruptcy is discharged (usually 60 days after trustee meeting) unless it files a motion first.  A lender can file a “Motion for Relief From Stay” at any time to seek relief from the bankruptcy’s “automatic stay” so it can repossess the car even before the bankruptcy is over.
• Your chapter 13 plan payments may increase.  Your quoted payment is subject to change, depending on objections raised by creditors and the trustee.
• US Trustee questions.  The US Trustee Program oversees the bankruptcy process, and sometimes will ask debtors to provide additional information or documents.  Even rarer, 1 in about 4000 debtors will be chosen for an audit of their bankruptcy petition.
• Your case will be dismissed if you don’t timely complete the (Second) financial management course.  Don’t let this happen.  If you don’t complete your course on time, you will have to pay the court and additional attorney fees to reopen your bankruptcy case and get permission to file the completion certificate late.

• Initial Meeting.   I’ve met with my lawyer/paralegal, what happens next?

You’ll need to collect all requested documents and complete the initial credit counselling course.  Once you’ve paid enough to file, your paralegal will call you to set up a time to sign the bankruptcy paperwork

• Signing of Paperwork.  I’ve signed my paperwork, what happens next?

Ron Brown will file your bankruptcy schedules with the bankruptcy court and send you an email will your case number and the date you will meet with the trustee.  (if you haven’t received an email within a week of signing, please call the office to see if there is something missing causing a delay.)

• The Automatic Stay Starts.  My case is Filed, what happens next?

The Automatic Stay means that creditors can no longer collect against you. This includes lawsuits, garnishments, foreclosures and repossessions. the automatic stay is effective while the bankruptcy is active or until the creditor seeks “relief” from the automatic stay.

You will need to take the (second) credit counselling course, often referred to as a financial management course.  You’ll need your case number to complete the course.  be sure to make arrangements from your employer so you can be in attendance at the trustee meeting. You’ll need to bring your driver’s license and social security card to the trustee meeting.

• Trustee Meeting.   I’ve met with the trustee, what happens next?

Be sure and complete the second credit counselling course if you have not done so already.  Now it is a waiting game.  Creditors have 60 days from the trustee meeting to object to your bankruptcy discharge.  After 60 days has passed and no one has objected, the court will issue a discharge.  Our office will email you notice that your case has been discharged and offer our congratulations.  you’ll also receive a copy of the discharge in the mail a few days later.

• [Chapter 13 only.  Plan Payments and Confirmation Hearings.]

I will send you details on how to make your plan payments.  There will be a confirmation hearing (sometimes multiple confirmation hearings) where the court will “confirm” your chapter 13 plan.  You will continue to make payments until the terms of the confirmed chapter 13 plan are fulfilled, or sometimes earlier if all claims are paid in full.  Once you’ve made your last plan payment, we’ll call you to sign a form so we can request a discharge.]

• Discharge.  I’ve received my discharge, what happens next?

Your interaction with our law firm will be complete, except we are always willing to answer any questions that may arise.  Be sure and follow “Ron’s Rules” to make sure you stay out of debt going forward.

Thank you!   The biggest compliment a lawyer can receive is a referral to a friend or acquaintance.   Thanks for passing my name and business card along, if you choose.  It is a pleasure to serve you.

• The fresh air of post-debt freedom sure is sweet. We want to make sure that you stay out of debt. Here are some hard and fast rules to help you stay debt-free and make the most out of your finances.

  1 Live within Your Means Income > Expenses Analyze what is a necessity vs. what is a luxury	2 Furniture Leases are a Waste of Money You can always live without the item Save the money, buy used Don’t finance furniture, ever!	3 You Don’t Need a Credit Card Can be a helpful tool if used wisely If you can’t pay the entire balance each month, it is no longer helpful
  4 No Overdrafts Overdrafts add up Turn off overdraft protection     OR Switch to a pre-paid debit card	5 Never Cosign for Family Not even for a car Not even for your child They may love you, but you will be left holding the bag	6 No Paydays Loan Ever!! They are a rip-off Resist the temptation- short term help leads to long term suffering
  7 Talk About Bills with Your Spouse There are only two problems in relationships:           1) Lack of Communication           2) Unmet Expectations Get on the same page	8 “The House” Always Wins Casinos will take more than you can afford Ever wonder how they got so big and shiny? Ban yourself if necessary	9 Don’t Overspend on Your Car Cars are not an asset, they are a tool Don’t treat cars as a status symbol – you don’t need luxury