|Q: So, I heard the
laws changed and you can't file bankruptcy anymore. Is it even
A: Yes, bankruptcy is still an
option. The changes in the law affect a small percentage of
people. Even if you are one of those few, it may limit your
options, but most people can file bankruptcy. That said, it may
be that bankruptcy is not your best option — not everyone should
file. Every case is different. The only way to find out for sure
is to come in and let's figure it out.
Q: Okay, let's cut to the chase —
can I keep my stuff? You know, my house, my car, my furniture,
A: I know you want a clear,
straight answer, but the only answer to that question is it
depends. It depends on a number of things — what your property
is worth, what you owe on it, how long ago you bought it, and
what kind of bankruptcy you want to file. In order to tell you
what will happen to your stuff when you file bankruptcy, I have
to ask you a lot of questions. Once I know what your situation
is, we can find a way to address the issues that are important
to you. And we can usually give you an idea of what will happen
if you do file bankruptcy, and what may happen if you don't.
Q: What does it cost?
A: Sorry, but again, it depends.
Fees are based on the amount of time that I estimate it will
take to complete your case, and that depends on what kind of
bankruptcy we decide on, and how complex your finances are. But
there is usually no charge for an initial visit, and I can
usually tell you at that time what the fees will be and discuss
payment arrangements with you.
Q: What is the difference between
Chapter 7, Chapter 13, and Chapter 11?
A: Chapter 7 is
a liquidation bankruptcy. The Bankruptcy Court appoints a
trustee whose job is to determine whether the debtors have
anything that can be sold or used to pay your creditors. In
return, the debtor receives a discharge, which is a court order
that prevents creditors from trying to make you pay. Most debts
are dischargeable in bankruptcy. Only a few categories of
debts, like taxes, student loans, and debts for alimony or child
support, are not discharged, and survive bankruptcy.
A Chapter 13 bankruptcy is a
repayment plan. A trustee is also appointed in Chapter 13, but
her function is different. A Chapter 13 trustee collects
monthly payments from the debtor and distributes that money to
creditors according to a repayment plan approved by the court.
The amount a Chapter 13 debtor will be required to pay will
depend on several factors, including income and expenses and the
amount of equity in property. A Chapter 13 is often used where
mortgage payments are behind, because it gives a debtor a chance
to catch up mortgage payments and avoid foreclosure.
A Chapter 11 is a business
reorganization; though individuals and small businesses may
qualify for relief under Chapter 11, the expense of such a case,
as well as the administrative burden, may make it impractical,
except for larger businesses.
Q: How do I decide which kind of
bankruptcy to file?
A: For many
people, that decision is determined by your financial
situation. For example, if you are behind on mortgage payments
and want a chance to catch up, you probably want to try to set
up a payment plan in Chapter 13. On the other hand, if you are
out of work, or have become disabled, it may not be feasible to
do a payment plan, and you may prefer a Chapter 7 liquidation.
Factors to consider are income and expenses, the amount of
equity in property, and the amount of debt you owe. Changes to
your situation in the immediate future should also be
considered—are you expecting to retire, or expecting another
child, for example. An analysis of your entire financial
picture is necessary to make that choice, and your attorney’s
guidance will be important. In many cases, however, you can
change your mind. A Chapter 13 case can be converted to one
under Chapter 7, and vice versa, if your circumstances change.
Q: Will I ever be able to buy a
house or a car on credit if I file bankruptcy?
A: Most people
will see a bankruptcy affect their credit for a period of time,
but will be able to finance a house or car within a few years.
A Chapter 7 bankruptcy can appear on your credit report for 10
years, and a Chapter 7 can appear for a maximum of seven years.
Those are maximums; bankruptcy may not appear on your credit
report for that long. During that time, other factors may help
you improve your credit score. If you are retaining collateral
such as a home or a car, and make those payments on time, that
will help improve your score. Bankruptcy improves your debt to
income ratio, so that will help improve your score. Finally,
your income will also influence your credit-worthiness. With a
bankruptcy on your credit record, you will almost certainly pay
higher interest rates than someone with good credit. For most
people the question is not whether they can get credit, but
whether they can afford to pay those higher rates.