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I've heard that there are new bankruptcy laws that make it tougher
to file. I've got tons of bills I just can't pay, but I'm not sure
if bankruptcy is an option for me. Help!
What types of bankruptcy are there?
What is Chapter 7?
What is Chapter 13?
What is the automatic stay?
What about my home?
What about my car?
What about my furniture?
Do I have to go to court?
What about my credit rating?
What about attorney's fees?
I would imagine that attorney's fees can be high. Can't I just
fill out the bankruptcy forms myself?
I've heard that there are new bankruptcy laws that make it tougher
to file. I've got tons of bills I just can't pay, but I'm not sure
if bankruptcy is an option for me. Help!
- Just before the new bankruptcy law went into effect in
October 2005, there were a number of reports in the media that
didn't really tell the full story about bankruptcy reform, and
left consumers with the impression that bankruptcy would be
difficult or impossible for them to file. However, studies show
that the vast majority of consumers who filed bankruptcy under
the old law would still have been able to file under the new
law. The fact is that the bankruptcy system is still firmly in
place to allow people who are in trouble financially to get a
fresh start. Mr. Bailey can examine your financial situation and
discuss your alternatives with you, and determine whether you
are eligible to file and under which chapter.
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What types of bankruptcy are there?
- The bankruptcy laws are divided into chapters ... like the
chapters of a book. Some of the chapters relate to all
bankruptcies filed, and some of them relate only to specific
types of bankruptcies. Our office is concerned primarily with
personal or consumer bankruptcies (including individuals who own
their own unincorporated businesses) which are covered by
Chapter 7 (straight bankruptcy) or Chapter 13 (debt payment
plan). To determine which chapter you qualify for, we must
consider your income and living expenses, property you own, and
the amount and type of your debts.
Return to top of page What is Chapter 7?
- Chapter 7 is also called straight bankruptcy, and is
available to those persons who cannot reasonably make Chapter 13
plan payments. If you file a Chapter 7, essentially all of your
unsecured debts are eliminated (the exceptions are said to be
"non-dischargeable" and are described below). If you have
secured debts, then you could either keep paying the creditor on
time, sometimes work out an easier payment plan, or give up the
collateral. In some cases, the lien can be voided and you keep
the collateral without paying the loan, for example in the case
of small loans secured by household items. You are allowed to
keep certain rights you have in a home, cars, household and
personal goods, jewelry, and many other items up to a point.
These are called exemptions and will be explained to you as
needed by our office personnel. Persons filing Chapter 7 usually
do not lose anything they own. A Chapter 7 is generally
concluded within 6 months after it is filed.
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What is Chapter 13?
- The main feature of Chapter 13 is a payment plan whereby you
make a single payment each month to a person called a "trustee",
who then will pay some or all of your creditors for you. Your
payments to the trustee would be substantially less than the
total of payments you are presently making to your creditors. If
you desire, your payments can be made by an automatic deduction
from your paycheck. In most Chapter 13 cases, you are allowed to
keep possession of everything you own. We will help you draft
the proposed payment plan within the limitations of the law and
subject to the approval of the trustee and the bankruptcy court.
Through such a plan, you can stretch out short-term debts up to
60 months, eliminate interest on unsecured debts and some
secured debt, reduce interest rates on many other debts,
substantially reduce some debts if necessary because of your
budget limitations, and catch up arrearages or delinquencies on
homes, mobile homes, cars, and other debts. The Chapter 13 plan
represents your best good-faith effort to pay your creditors.
Typically, a Chapter 13 plan lasts from 36 up to 60 months.
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What is the automatic stay?
- If it is your first time to file bankruptcy, at the moment
the case is filed, you are automatically protected from your
creditors. They are no longer supposed to talk or write to you
(and in the case of a Chapter 13, any of your co-signers) about
your debts, they cannot file suit against you, all lawsuits
including foreclosures against you are stopped, and they cannot
repossess anything from you without permission from the
bankruptcy judge, among other things. If you have previously
filed bankruptcy in the recent past, then we may have to request
the bankruptcy judge to issue the protective order before it
becomes effective.
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What about my home?
- If you are behind in your home payments, then it may be
permissible to file a Chapter 13, which would allow you to catch
up your payments over an extended period of time. This is true
even if the creditors have started foreclosure proceedings,
since the bankruptcy automatic stay stops foreclosures. It is a
common practice to file Chapter 13 bankruptcies so that people
with financial difficulties will have another chance to keep
their homes. If you are current on your home payments, then you
may simply keep making them on time, and bankruptcy generally
will not interfere with your home purchase. However, whether you
are behind or current, if your home is worth a lot more than
what you owe, that makes a difference in which type of
bankruptcy you file and how you protect or keep possession of
your home. We will need to discuss this situation with you and
explain your choices.
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What about my car?
- Before you file bankruptcy, if you are behind in your car
payments, then there are circumstances whereby it would be
permissible for the creditor to repossess your car without
getting a court order first. After you file bankruptcy though,
you are under the court's protection and a creditor may not take
your car without permission from the bankruptcy judge. In
Chapter 13 cases, car payments are usually reduced to make it
easier to pay for the car. In Chapter 7 cases, you can still
keep your car only if you are current and you keep your payments
current, or you work something out with your creditor. Of
course, in either case, you have the choice of giving your car
back to the creditor to get out from under the car payments
altogether. If you don't owe anything on your car, or if it is
worth a lot more than what you owe, that makes a difference in
which type of bankruptcy you file and how you protect and keep
possession of your car. We will need to discuss this situation
with you and explain your choices.
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What about my furniture?
- Usually, people that file bankruptcy do not lose any of
their household furniture or similar personal items. The laws
are very good about letting you keep furniture and personal
belongings that have already been purchased and paid for at one
time or another. However, if you are presently buying some
furniture or other personal items of any significance, then you
may be required to continue paying in order to keep them. But
such purchase debts are frequently paid out through a Chapter 13
at much lower payments. In a Chapter 7, purchase debts are
handled by keeping the payments current, working out new
payments with the creditor, or giving up the collateral.
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Do I have to go to court?
- You will have to attend one court hearing which usually
lasts about 5-10 minutes. The trustee and your creditors have a
right at that hearing to ask some basic questions about your
income and what you own. However, most creditors do not show up
and the few questions asked are very simple ones. In extremely
few cases, more than one hearing is needed. All of the hearings
for Spartanburg, Greenville, Cherokee, Union, Laurens, Anderson,
Pickens, and Oconee counties are held on the first floor of the
Federal Building in Spartanburg. For that reason, our office
will handle bankruptcy matters for people from all of those
counties.
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What about my credit rating?
- Generally a person's credit is already bad by the time they
are thinking about filing bankruptcy, and you should certainly
expect it to be worse if you do file. However, the mere filing
of bankruptcy does not stop you from getting credit in the
future; rather, that is a decision to be made by each creditor.
Some creditors rely heavily upon your credit report to decide
whether to give you credit. Chapter 7 can show up on your credit
report for 10 years from the date you file bankruptcy, and a
Chapter 13 can be on your credit report for 7 years. By
comparison, however, a judgment against you may be reported for
10 years, and a charged-off debt or repossession may be reported
for seven years. So many people are filing bankruptcy nowadays,
a growing number of creditors are carefully looking at the
circumstances in order to grant credit to people who have filed.
For example, if you have a good income, and no longer have any
debts because of the bankruptcy, some creditors would consider
extending credit to you. We hope, though, that in the future you
will be able to avoid the use of all forms of credit.
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What about attorney's fees?
- Unfortunately, we must charge for our services. The fees,
vary from year to year, and depend upon the type of bankruptcy
and other related services which are needed. When you first
contact our office as a prospective client, we will send you a
packet which includes current price estimates for filing
bankruptcy. However, we prefer not to quote a final fee until
after the first interview, which takes about 2 hours. Limited
fee payment plans are available in most cases.
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I would imagine that attorney's fees can be high. Can't I just
fill out the bankruptcy forms myself?
- Filing bankruptcy on your own can be a disastrous move. You
may unknowingly submitted incomplete information, you may miss a
deadline, you may not claim all property as exempt to which you
are entitled, or you may attempt to file under the wrong
chapter. As a result of not completely adhering to or
understanding the law and procedures, your case could be
dismissed without debts being discharged. Mr. Bailey will guide
you through the process to make it as painless as possible for
you, and help you achieve the desired goal: to get back on your
feet again while protecting your property, wherever possible.
While the new law is not likely to change whether or not you are
able to file, it does make the process more complex. Under the
new law, there is much more information you and your attorney to
discuss and disclosed in court documents, more deadlines to keep
track of, and new provisions regarding eligibility for
bankruptcy. Mr. Bailey may need to obtain a recent credit report
for you and other paperwork to verify your debts, income, and
property. As result of the increased complexity and work
required, legal fees will naturally be higher. But the fee you
pay to Mr. Bailey is money well spent. After all, most creditors
will have attorneys representing them who know the system and
the rules - don't you want an experienced attorney on your side
to protect your rights?
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