Bankruptcy Frequently Asked Questions
Houston bankruptcy attorney Vicky Fealy, one of a limited number of Texas Board Certified Consumer Bankruptcy attorneys in Houston, provides answers to many consumer and business bankruptcy questions about IRS issues, foreclosure, credit card debt, repossession, chapter 7 bankruptcy, chapter 11 bankruptcy, liquidation, debt collection or chapter 13 bankruptcy. Remember that the information provided here is a general overview and should not replace a consultation with a knowledgeable bankruptcy attorney.
"IMMEDIATELY CONTACT THE FEALY LAW FIRM
AT (866) 751-1087 FOR AN
UP FRONT, NO-HIDDEN-COST, ESTIMATE"
- WHAT IS BANKRUPTCY?
- WHAT IS THE BANKRUPTCY CODE?
- DO I QUALIFY FOR BANKRUPTCY RELIEF?
- HOW CAN FILING BANKRUPTCY HELP ME?
- WHICH CHAPTER SHOULD I FILE?
- WHAT IS A CHAPTER 7?
- WHAT IS A CHAPTER 11?
- WHAT IS A CHAPTER 12?
- WHAT IS A CHAPTER 13?
- DO I GET TO KEEP ANYTHING?
- CAN FILING BANKRUPTCY STOP FORECLOSURE?
- WHAT IS THE AUTOMATIC STAY?
- WILL FILING BANKRUPTCY STOP HARASSING PHONE CALLS FROM CREDITORS?
- WHAT ARE SECURED DEBTS?
- WHAT IS DISCHARGE?
- WHAT DEBTS ARE NOT AFFECTED BY BANKRUPTCY?
- DO I NEED AN ATTORNEY TO FILE BANKRUPTCY?
- HOW SHOULD I CHOOSE A BANKRUPTCY ATTORNEY?
- IS MY FIRST CONSULTATION FREE?
- WHAT IS THE COST OF BANKRUPTCY?
- WHAT INFORMATION WILL I NEED TO PROVIDE TO FILE BANKRUPTCY?
- HOW CAN I RE-ESTABLISH MY CREDIT RATING AFTER BANKRUPTCY?
- AFTER I FILE CAN I OBTAIN NEW CREDIT?
- WILL MY BANKRUPTCY APPEAR ON MY CREDIT REPORTS?
WHAT IS BANKRUPTCY?
Bankruptcy is a federal court process designed to help consumers and businesses eliminate, reorganize or repay debts under the protection of the bankruptcy court.
WHAT IS THE BANKRUPTCY CODE?
THE BANKRUPTCY CODE REFERS TO TITLE 11 OF THE UNITED STATES CODE. (11 U.S.C. 101-1330). This is the federal law that provides bankruptcy relief.
DO I QUALIFY FOR BANKRUPTCY RELIEF?
New bankruptcy laws were passed in October 2005. These laws were passed with the intent to make it more difficult to file for bankruptcy protection, specifically Chapter 7. Under the new laws, if you have above- median income for a family your size, then an analysis must be done to see how much, if any, of your debt can be repaid in a Chapter 13. It has been my observation that most people who qualified for Chapter 7 before the new law passed still qualify for Chapter 7 today. Even people with above-median income may qualify due to circumstances such as debt load, unforeseen circumstances, family size and budget. Those that do not qualify for Chapter 7 due to disposable income or non-exempt assets can still qualify for Chapter 13 relief. The question of which bankruptcy chapter is right for you, of course, depends on many factors specific to your case and can only be answered after a full consultation with an experienced attorney. At this time your budget, debts and assets will be analyzed to see for which Chapter you qualify. Often the most important question is should you file for bankruptcy at all? Again this is a question best answered after a consultation and review of your particular circumstances. However, if you have fallen behind on house, car, or credit card payments, if you have delinquent IRS or property taxes, if you are borrowing from your retirement plan, if you are taking cash advances, if you are taking out "pay day" loans, or if you find yourself "robbing Peter to pay Paul", you should definitely seek professional advice.
HOW CAN FILING BANKRUPTCY HELP ME?
There are many potential benefits to filing bankruptcy. The most obvious of these is the discharge or reduction of your debts. Other benefits include preventing foreclosure, preventing repossession, preventing or satisfying judgments, discharging liens, stopping creditor harassment, dealing with IRS or other tax issues. Perhaps the less obvious benefits include the peace of mind that a fresh start affords you and the ability to protect your assets. A qualified attorney is the best person to help you determine if filing is in your best interest. You should know all of the benefits and consequence of filing bankruptcy before making such a momentous decision.
WHICH CHAPTER SHOULD I FILE?
You must be aware of and evaluate every option before deciding which, if any, type of bankruptcy relief to request. Filing for the wrong type of bankruptcy relief can have severe repercussions, including failure to get a discharge, dismissal of the case, or even a loss of assets you are trying to protect. For these reasons, it is advisable to have a full review and evaluation of your financial situation by an attorney experienced in bankruptcy prior to making any decisions. The more information you have, the better equipped you will be to formulate a decision. Not all people who qualify for bankruptcy relief should file bankruptcy. Advice should be sought by a Board Certified Bankruptcy Attorney before deciding if to file bankruptcy, when to file bankruptcy and which type of bankruptcy to file.
WHAT IS A CHAPTER 7?
Chapter 7 is often called the "fresh start" or liquidation type of bankruptcy. If a person, married couple or business qualifies, their unsecured debts are discharged (wiped out). In exchange for the discharge of debts, the business's assets or the consumer's nonexempt property is sold (or "liquidated"), and the proceeds are used to pay creditors. Many assets such as homesteads, vehicles and retirement accounts may be exempt, meaning they will not be liquidated. Certain debts cannot be discharged. An attorney should be consulted to determine which debts may remain and which assets are exempt. Qualifying for a Chapter 7 bankruptcy is income sensitive and not all debtors will qualify. A "means test" must be completed to see if you qualify for a Chapter 7 bankruptcy if your income is over the median income for a family your size in your geographical area. Individual debtors without non-exempt property typically receive their discharge within 4-6 months of filing the case. You may usually keep your house and car when you file, but you must continue to pay for them. If you choose, you may also surrender secured merchandise such as vehicles, property and appliances without facing deficiency balances.
WHAT IS A CHAPTER 11?
Chapter 11 is a reorganization proceeding, typically for corporations or partnerships. Individuals, especially those whose debts exceed the limits of Chapter 13, may file Chapter 11. In Chapter 11, the debtor usually remains in possession of his assets and may continue to operate any business. The debtor proposes a plan of reorganization which, upon acceptance by a majority of the creditors, is confirmed by the court and binds both the debtor and the creditors to its terms of repayment.
WHAT IS A CHAPTER 12?
Chapter 12 is a plan of reorganization for family farmers or fishermen. Chapter 12 is similar to a Chapter 13.
WHAT IS A CHAPTER 13?
Chapter 13 is often called a wage earner plan, reorganization, or "debt consolidation". It allows debtor(s) to catch up on delinquent house, vehicle or other secured payments. Chapter 13 can also help resolve tax issues. If a debtor does not qualify for a Chapter 7, a Chapter 13 can be beneficial in restructuring debt to a manageable payment, eliminating or reducing interest and in stopping creditor harassment. In a Chapter 13, the debtor(s) propose a plan of reorganization to repay creditors all or a portion of the debt owed. Some debt will be repaid in full and depending on circumstances; some creditors may receive only a partial payment of the debt. Some debts are paid interest and some are not. The amount paid to creditors is dependent on several factors, including type of debt, amount of debt, assets, and disposable income of debtor(s). Debtors are often able to keep assets and prevent foreclosure or repossession by filing a Chapter 13 bankruptcy
An individual, a married couple or small, unincorporated businesses who qualify may file Chapter 13. Debtors must have regular income and secured debt of less than $1,010,650.00 and noncontingent, liquidated unsecured debt less than $336,900.00. Depending upon the circumstances, debtors may keep property and repay debts over the life of a three to five year plan. Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Again, it is important to consult an experienced attorney to determine if you qualify for Chapter 13 and to explain how a repayment plan would be fashioned for your specific circumstances. Filing a Chapter 13 can be a complicated process and it is important to have a knowledgeable attorney to represent your interests.
DO I GET TO KEEP ANYTHING?
When you file for bankruptcy relief under Chapter 7 (liquidation), a bankruptcy trustee is appointed to administer your non-exempt assets. If you have non-exempt assets, the Trustee can sell them and pay your creditors. However, this does not mean you cannot keep assets. Under the bankruptcy code and Texas law, certain assets are exempt, meaning they are yours to keep unaffected. Which exemptions to use and how they are applied is critical to the completion of a bankruptcy. It is best to consult an attorney to know your rights, but briefly: certain amounts of equity in your homestead, vehicles, personal assets and retirement plans are often exempt. The majority of people who file for Chapter 7 do not have non-exempt property to liquidate. If you do have non-exempt property you wish to keep or protect, it may be possible to do so by filing a Chapter 13 reorganization.
CAN FILING BANKRUPTCY STOP FORECLOSURE?
Yes, but there are exceptions. For example, if you have filed multiple bankruptcies you may not be entitled to the automatic stay which stops judicial proceedings, repossessions and foreclosures without first seeking approval from the court. Filing Chapter 13 allows you to reorganize your debt and repay your mortgage arrears over time, thereby stopping the foreclosure. Chapter 7 may temporarily stop foreclosure, but will not protect you long term from foreclosure if you do not immediately become current on your mortgage.
WHAT IS THE AUTOMATIC STAY?
The automatic stay is an injunction which goes into place with the filing of a bankruptcy (unless it is a multiple bankruptcy within a year). The automatic stay stops all creditor activity to collect on debt while the stay is in place. All creditors must cease contacting you. While the stay is in place, creditors may not:
- Call you
- Send you bills
- Threaten you
- File a lawsuit
- Continue with an ongoing lawsuit
- Continue with a foreclosure proceeding
- Continue with a repossession
WILL FILING BANKRUPTCY STOP HARASSING PHONE CALLS FROM CREDITORS? YES, ONCE WE FILE YOUR BANKRUPTCY THE "AUTOMATIC STAY" GOES INTO EFFECT. The automatic stay prohibits virtually all creditors from taking any action to collect the debts you owe them unless the bankruptcy court lifts the stay and lets the creditor proceed with collections. Once you have retained the Fealy Law Firm, P.C. (regardless of filing), the creditor will be referred to your attorney, and then, by law, the creditors will cease their harassing calls.
WHAT ARE SECURED DEBTS?
Secured creditors normally retain the right to seize their loan collateral, even after a discharge is granted. The debtor must decide whether to keep the asset. If a debtor returns the collateral, and if a discharge is granted, in most cases, the debtor will have no further liability to the creditor. If you surrender collateral outside of bankruptcy, you may still have liability on the debt and the creditor may seek a deficiency judgment against you.
A debtor wishing to keep the asset, such as an automobile or a house may "reaffirm" the debt or redeem the property in a Chapter 7 bankruptcy. . A reaffirmation is an agreement between the debtor and the creditor in which the debtor promises to pay all or a portion of the money owed in order to retain the asset. The reaffirmed debt will still be owed after the discharge In a Chapter 13 bankruptcy; most secured debts may be reorganized .
WHAT IS DISCHARGE?
Under the federal bankruptcy law, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent injunction directing the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
WHAT DEBTS ARE NOT AFFECTED BY BANKRUPTCY?
Bankruptcy doesn't discharge f all debts. In most instances you are still responsible for:
- Alimony
- Child support
- Recent back taxes
- Student loans
- Recent large purchases
- Fines or penalties of government agencies
- Fraudulent debts
DO I NEED AN ATTORNEY TO FILE BANKRUPTCY?
Federal law does not require you to have an attorney unless you are a corporation. You are allowed to file pro se, that is, on your own without an attorney. However, without the assistance of an attorney, it is extremely difficult to do so successfully. There are many documents which must be produced timely, schedules which must be filed, creditors which must be properly noticed and negotiated with and strict deadlines which must be adhered to. For these reasons, hiring a competent and experienced bankruptcy attorney is highly recommended.
HOW SHOULD I CHOOSE A BANKRUPTCY ATTORNEY?
Outside of deciding whether or not to file bankruptcy, this is perhaps the most important decision you make in the bankruptcy process. You must feel comfortable with the attorney and firm you hire to represent you. Some of the things you should consider:
- Does the attorney clearly explain your options and the law;
- Does the attorney spend enough time with you to answer all of your questions;
- Does the attorney give you candid advice including whether bankruptcy is your best option;
- Does the attorney communicate the pros and cons of filing bankruptcy;
- Is the attorney Board Certified in Bankruptcy by the Texas Board of Legal Specialization;
- After reviewing your specific circumstances, does the attorney fully explain what your attorney fees and court costs will be;
- Is your consultation with an attorney and not a paralegal;
- Is the attorney experienced in bankruptcy law?
IS MY FIRST CONSULTATION FREE?
Yes. The Fealy Law Firm, P.C. does not charge for a no-obligation initial consultation with a highly experienced attorney. You will have the opportunity to ask the attorney any questions you may have.
WHAT IS THE COST OF BANKRUPTCY?
The cost to file bankruptcy depends on many factors:
- which chapter is filed,
- the type and number of creditors,
- the type and amount of assets you own
- the existence of any lawsuits,
- whether there are tax issues,
- whether you own a business or are self-employed,
- whether you are keeping or surrendering secured collateral,
- whether bankruptcy litigation is necessary.
These are some, but not all of the factors that determine how complicated your case will be. Because there are so many variables, we cannot quote you an exact fee until after your free initial consultation. In an attempt to minimize costs, we offer fixed fees whenever possible. We will quote you an exact fee at your initial consultation after reviewing your specific circumstances. That quote will specifically outline what is or is not covered. We understand that clients facing bankruptcy are in financial hardship. Therefore, we make every effort to work at minimizing your fees and will work with you to establish payment arrangements. Under the law, a contract outlining your fees must be provided to you before any work is done on your file. All bankruptcy attorney fees must be approved by the Court. While some law firms may quote you a fee without meeting you or analyzing your case, you must be certain of exactly what the fee quoted covers and that there are no hidden costs. This is why most firms will want to meet you before quoting an exact fee.
WHAT INFORMATION WILL I NEED TO PROVIDE TO FILE BANKRUPTCY?
You will need to fill out our Client Intake Sheet (hyperlink) at your initial consultation. You may review it on our website or print a copy to fill out. If you wish, you may fill this out and bring with you to your first interview. Do not worry if you do not have all this information before your first meeting with our attorney. Still come to your initial consultation and we will help you gather the information needed. For your initial consultation it will be helpful, but not necessary, if you bring a recent paycheck for you and your spouse and a list of your creditors. We can run your credit report for you if you wish for a nominal fee ($30.00 for an individual, $50.00 for a couple). You do not have to have your credit report run, but it will be helpful to insure all of your creditors are listed and evaluated. The only thing absolutely necessary at your initial consultation is you. The more information Ms. Fealy has, the better able she will be to advise you as to your options.
Before your case is filed, you will need to provide all the information asked for in our Bankruptcy Worksheet. You may review it on our website or print a copy to fill out. Eventually you will need to provide most of the information listed below, but do not worry about it for your first visit.
- A list of all your creditors, including addresses, account / loan numbers, and the amounts and description of each debt. We can pull your credit report if you wish, but you will still be responsible for making sure all of your debts are accurately listed;
- For secured debt, such as car loans, mortgages, or debt for furniture, jewelry or appliances:
- a. Copy of the latest statement showing the balance due on the debt;
- b. Copy of the loan or deed of trust for each secured debt.
- Income tax returns for the last four years, including W-2, 1099, and K-1 information;
- Copies of all pay stubs and copies of bank statements for the last 6 months ;
- A detailed list of yours monthly living expenses. A form is included in the Bankruptcy Worksheet ) to help you complete your budget;
- If self-employed, copies of monthly profit-and-loss statements for the past six months. Again, a form is included under Operating Reports to help you complete your business budget ;
- Copies of any lawsuits or judgments, regardless of you are the a plaintiff or defendant; and
- Copies of any family trusts, divorce decrees or prenuptial agreements.
CREDIT
HOW CAN I RE-ESTABLISH MY CREDIT RATING AFTER BANKRUPTCY?
First of all, it is important to remember that if you are contemplating bankruptcy, there is a good chance your credit has already been impacted or is about to be impacted. Having said that, bankruptcy is a factor that affects your credit worthiness, but it is not the only factor. Creditors consider many variables such as amount of credit, number and length of delinquencies, and number of creditors when rating your credit.
The best way to rebuild your good credit over time is by making payments every month without fail. A bankruptcy followed by a good payment record is often more desirable than a continued history of unpaid bills. Creditors also may be willing to work with you because you are prohibited by law from filing Chapter 7 bankruptcy again for a significant period of time and most of your debt will have been discharged. Your bankruptcy can stay on your credit report for 10 years. It becomes less significant as time passes from your discharge.
AFTER I FILE CAN I OBTAIN NEW CREDIT?
Yes. The decision of whether to extend you credit belongs to each particular lender. While some potential creditors will reject your application for credit simply because you have a bankruptcy on your record, others will grant you credit because you have no other debts left and have the ability to pay a new loan. Remember that the purpose of filing bankruptcy is to give you a fresh start and relief from your credit burdens. Therefore, while the effect on your credit may be one of the factors to consider when contemplating bankruptcy, it should not be the only one.
If necessary, you may obtain credit while in Chapter 13 Bankruptcy if Court and Trustee approval is obtained and certain rules are followed.
WILL MY BANKRUPTCY APPEAR ON MY CREDIT REPORTS?
Yes. Your bankruptcy can be listed in credit reports for a period of up to 10 years. Again, this does not necessarily mean that you have bad credit for ten years. You should discuss your specific situation with your attorney.
If you or your business in Texas needs the assistance of an experienced Houston Bankruptcy Attorney , call The Fealy Law Firm, P.C. today at 866-751-1087 or complete the contact form provided on this site to schedule your free consultation.
"IMMEDIATELY CONTACT THE FEALY LAW FIRM
AT (866) 751-1087 FOR AN
UP FRONT, NO-HIDDEN-COST, ESTIMATE"
We serve: Harris, Fort Bend, Brazoria, Montgomery, Chambers, Galveston, Matagorda, Colorado, Wharton, Fayette, Austin, Waller, Brazoria, Grimes, Madison, Walker and San Jacinto.
The Fealy Law Firm is a Debt Relief Agency. We help people file for bankruptcy relief under the Bankruptcy Code and have done so proudly since 1992.
By submitting a question, you agree
to our terms and conditions.
