This page gives a list of questions often asked by individuals or couples considering bankruptcy. There are three categories of questions asked. The first concerns questions about Bankruptcy in general. Other questions about the Cost of filing for bankruptcy are frequently asked. The third topic is about Workouts & Credit Rating.

Bankruptcy

Question:
When I’m in debt trouble, what are my options?

Answer:
There are two main options to consider. The first option is working out your debt problems with your creditors. The second is setting up a bankruptcy through the federal government with the intention of assisting debtors to make a new start, to assist creditors in collecting, and encouraging people to take risks to improve their financial situation. The bankruptcy program has four main parts.

  • Chapter 7 Liquidation
  • Chapter 11 Business Reorganization
  • Chapter 12 for Farmers and Fisherman
  • Chapter 13 Reorganization

Question:
Can I file for bankruptcy?

Answer:
In 2005, congress passed a new bankruptcy act limiting bankruptcy to those who qualify under an income test and who take an hour-long course to review debt repayment options. Almost everyone qualifies for one form of bankruptcy or another.


Question:
Do I need an attorney to file bankruptcy?

Answer:
Yes. Debt problems generally come from other legal problems and it is difficult to determine where one problem ends and another begins. Generally, debt problems occur along with medical problems, injuries, marital problems, temporary or long-term income losses, or significant unexpected expenses. Treating the symptoms without addressing the problems can make the problem worse in the long run. Bankruptcy is a legal procedure requiring filing of schedules and documents with the court system as well as communications with a trustee and attorneys for the creditors. These procedures require an attorney.


Question:
The lawyer I talked to wants a lot of money to file my case. Can’t I just fill out the forms myself?

Answer:
Please don’t! Filing bankruptcy on your own can be a disastrous move. You may unknowingly submit incomplete information, you may miss a deadline, you may not claim all property as exempt to which you are entitled thus not protecting it from creditors, or you may attempt to file under the wrong chapter. New forms required by bankruptcy reform are more complex and less-straightforward than some of the older forms, and require deep knowledge of the law. If you don’t completely adhere to or understand the law and procedures, your case could be dismissed without debts being discharged.


Question:
If I file for bankruptcy, will I go to court?

Answer:
You will go to a meeting in front of a trustee similar to a court hearing. In addition, you may have objections to your discharge or litigation involving your creditors or evaluation hearings. The vast majority of these issues are resolved without requiring your testimony.


Question:
If I file for bankruptcy, will I lose my house?

Answer:
No. You will not lose your house if you can keep up regular mortgage payments and pay back the amount you’re behind in a reasonable period of time.


Question:
Will bankruptcy erase all my debt?

Answer:
No. The bankruptcy does not discharge student loans, some tax debts, and a series of debts your attorney will discuss with you on an individual basis.


Question:
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!

Answer:
Many people in this country who are affected by job loss, divorce, high medical and energy bills, and loans with high rates of interest find themselves in deep financial trouble and in need of help. Your situation is not unique — in 2005, over 2 million consumers filed bankruptcy in America.

The bankruptcy system was put in place to allow people to have their debts wiped out and start again. Bankruptcy Reform went into effect in the fall of 2005 which changed the process somewhat, requiring you to submit more information, obtain credit counseling, and fill out a “means test” form to see whether a certain amount of debts can be repaid. But rest assured — despite all of the changes, the bankruptcy system is still firmly in place to allow people who are in trouble financially to get a fresh start.

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 people with the impression that bankruptcy would be difficult or impossible to file. However, a ground-breaking study by Best Case Solutions in July, 2005, showed that the vast majority of consumers who filed bankruptcy under the old law would still have been able to file under the new law.

Bankruptcy Reform was designed to stop people who could repay a significant portion of debt from filing bankruptcy under chapter 7, a legal process that wipes out debt. But as it turns out, most people who file bankruptcy are in real financial trouble, and can’t pay back debts. They weren’t filing bankruptcy to get out of paying — they simply couldn’t pay.

If you can’t pay your bills and are in real financial trouble, consider meeting with a bankruptcy attorney. You may be eligible to file a Chapter 7 bankruptcy where most debts are discharged, or a Chapter 13 repayment plan, where part or all of your debts are repaid with future earnings over a 3- to 5-year period. An experienced bankruptcy attorney can examine your financial situation and discuss alternatives with you, and determine whether you are eligible to file and under which chapter.

Cost

Question:
How much is an initial consultation?

Answer:
The initial consultation is $50 which is applied toward your attorney fees if you elect to proceed further.


Question:
How much does it cost to file bankruptcy?

Answer:
We are a law firm which reviews your situation on an individual basis. Each individual or couple has a unique situation. The cost can only be determined after consultation. Filing fees are set by the court at congress. Presently the filing fee is $274 for a Chapter 7 bankruptcy and $299 for a Chapter 13 bankruptcy. For a Chapter 7 bankruptcy, attorney’s fees range from $800 – $1,500 in general. For a Chapter 13 bankruptcy, attorney’s fees are either charged at a hourly rate and approved by the court or are set in advance by the court. In either situation, they are paid monthly over the lifetime of the reorganization. Businesses can vary from $1,000 to many thousands of dollars depending on the size of the business and financial difficulties.

Workouts & Credit Rating

Question:
What is a workout?

Answer:
Workouts include debt consolidation, lowering interest payments, and negotiations to pay a reduced lump sum to satisfy a debt.


Question:
What is the effect of a bankruptcy or workout on my credit rating?

Answer:
Each individual or couple has a unique situation. The results of a bankruptcy or workout can only be determined after consultation. We often find people with excellent credit because they have borrowed from credit cards, friends, relatives, and pay day loan companies to make the payments to the companies reporting to credit agencies. If your creditors are aware of your the true picture, your credit rating would be poor. If an individual or couple is in financial difficulty, eventually the difficulty will surface and eliminate their ability to borrow money. A Chapter 7 bankruptcy or a Chapter 13 discharge shows your true credit situation to your creditors, but it allows you to reestablish your credit over the next few years. We generally find people can reestablish their credit by paying their post bankruptcy debts in a timely fashion or maintaining a good work record over a two-year period.