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Frequently Asked Questions

1.  What is a filing fee, and how much is it? 

 

A filing fee is a fee paid to the Bankrupty Clerk to cover the cost of the court to administer your filing, it is not a fee for services provided by the attorney.

 

2. What is the difference between a Chapter 7 and a Chapter 13 Bankruptcy?

 

If you file a Chapter 7 bankruptcy, all of your nondischargeable debts are discharged. This means that after you file your bankruptcy, you will no longer owe any of those debts or anything on them. If you file a Chapter 13 bankruptcy, you will be required to make monthly payments  to a "plan" for 36 to 60 months payable to the United States Trustee so they can pay certain allocated debts over the term of the plan (36 to 60 months).

 

3. How long do I have to wait before I file another bankruptcy?

 

First of all, there is no limit on how many bankruptcies you can file in your lifetime. The timeframes below determine how long you have to wait to file between each chapter in order to obtain a discharge of your debts under that chapter.

 

   •You have to wait 8 years from the date of filing of your Chapter 7 bankruptcy to file another Chapter 7 bankruptcy.

   •You have to wait 2 years from the date of filing of your Chapter 13 bankruptcy to file another Chapter 13 bankruptcy.

   •You have to wait 4 years from the filing date of your Chapter 7 to file a Chapter 13 bankruptcy.

   •You have to wait 6 years from the filing date of your Chapter 13 to file a Chapter 7 bankruptcy *

          * (Exception, if in your Chapter 13 you paid back all your unsecured debt, or at least 70% of your unsecured debt

              with good faith and best efforts)

 

4.  Why would I ever choose to file a Chapter 13 bankruptcy over a Chapter 7 bankruptcy?

 

Sometimes it may be necessary for you to file a Chapter 13.  This could be due to the amount of income that your household makes (over the median income for your area in the country), or you have filed a Chapter 7 bankruptcy previously and it has been under eight years.

 

There may be times when you would elect to file a Chapter 13 bankruptcy.  One example would be when you are late on a payment to a creditor and the creditor has a secured interest in your property such as a house or vehicle.  In a Chapter 13 bankruptcy, the creditor is forced to accept late payments back over time (throughout your Chapter 13 plan) without late fees. You would then be allowed to keep your vehicle or your car, thereby "curing"  the deficiency/arrearage.  

 

Also, you might want to file a Chapter 13 if you have too many assets and you do not want to lose them in a Chapter 7 bankruptcy.  Further, you may be able to "cramdown" certain debt obligations.  In some circumstances, you can reduce the amount you owe on a vehicle, and/or reduce the interest payment.  Also, if you have two morgages on your home, and the value of your home is less than what you owe on your first morgage, you can "strip" the second morgage or get rid of it.

 

 

5. What can I do if I owe more on my house or car and I want to keep it?

 

In a Chapter 7, if you want to keep your car or your house, you will have to pay the entire amount that you owe on it to the secured creditor.

 

But there are some options in a Chapter 13 bankruptcy that are available to you. If you file a Chapter 13 bankruptcy, and you have a second mortgage on your home, you can "strip" the second mortgage.  If you owe more on the first mortgage than what your home is worth. If that is the case, that means you're second mortgage is wholly unsecured.  

 

If you have a vehicle with a loan on it and you have had the loan for more than 910 days before you file your Chapter 13 bankruptcy, you can "cramdown" the loan and pay only what the vehicle is worth.  Further, you can "cramdown" the interest rate to a level equal to the current prime interest rate plus a percent or two.

 

 

6.  Can I keep my property in a bankruptcy? 

 

In a bankruptcy, you can keep $10,250 worth of "stuff" or personal property. This would include things that you normally deal with everyday, including your car, your tools, your furniture and generally anything that can put your hands on in and around your home. If you are married, and you are filing jointly, you get this number times two that being $20,500 worth of personal property.

 

Now, the tricky part is the $400 you get for intangible personal property exemptions. Intangible property is cash, money that people owe you, bonds, checking accounts, stocks, and savings accounts, etc.  Again, if you're married and you are filing jointly, you get twice that amount, or $800.

 

For real property (your home, or other land) you get $19,300 in exemptions. If you're married, and you own a home as husband and wife, you can take an unlimited exemption called tenancy by the entireties if the debts are only owed by one of the spouses.  Otherwise, if the debts are owed by both spouses, you're entitled to the combined exemption of $38,600.

 

Anything above these amounts will be taken by the trustee and sold to pay off creditors unless you file a Chapter 13 bankruptcy and make payments on the amount owed over the life of the "plan".

 

For retirement plans to include 401(k)s, IRAs, and pension plans, etc., there is an unlimited amount you can keep in a bankruptcy. There are other miscellaneous exemptions which can be discussed in detail at your consultation.

 

7. What debts are discharged in bankruptcy?

 

All debts are discharged, unless they are considered "nondischargeable".  Credit card debts, hospital bills, debts associated with defaults on mortgages, car loans, money owed to friends, family and neighbors, past due rent and utility bills all are dischargeable.

 

The nondischargeable debts are specified by statute, but the most common are child support obligations, maintenance to a prior spouse, some tax obligations, student loans. A more detailed explanation of what is nondischargeable  will be addressed in these FAQ's.

 

8. Are income taxes dischargable in Bankruptcy?

 

Yes, income taxes can be discharged in bankruptcy, but certain conditions apply:

   • Only income taxes can be discharged.

   •As long as you did not commit fraud or willful evasion by filing a fraudulent tax return or otherwise willfully attempt to

     evade paying taxes.

   •Tax debt over 3 years old, if the return was filed in a timely fashion,and at least 3 years before you filed for bankruptcy.

   •You must have filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.

   •You pass the "240-day rule." The income tax debt must have been assessed by the IRS at least 240 days before you

     file your bankruptcy petition.

 

9. Are there debts that are not dischargeable in a Bankruptcy?

 

 Yes:

    These debts are not discharged in a Chapter 7 or 13

     Non-dischargeable Debts:

        •any debts the debtor fails to list on a previous bankruptcy petition

        •certain tax debts or debts for spousal maintenance, child support or alimony

        •debts to government agencies for fines and penalties

        •Student Loans (with rare exceptions for hardship)

        •debts for Personal Injury caused by the debtor’s operation of a motor vehicle while intoxicated

        •debts owed to certain tax-advantaged retirement plans

        •debts for certain condominium or cooperative housing fees (such as homeowners association fees)

        •attorney fees in child custody and support cases, and  

        •court fines and penalties, including criminal restitution.

 

    Debts That are Not Dischargeable if a Creditor Successfully Objects

       •credit card purchases for luxury goods owed to a single creditor and aggregating to more than $650 and incurred

         within 90 days of filing for bankruptcy

       •cash advances aggregating to more than $925 obtained by debtor within 70 days of filing for bankruptcy (again, if

         you can prove that you intended to pay this money back, then the debt will be discharged)

       •debts obtained by fraud or false pretenses, and

       •debts incurred as a result of willful and malicious injury to another or to the property of another.  

 

      Debts Discharged in Chapter 13 But Not Chapter 7 Bankruptcy

        • debts arising out of willful and malicious damage to another person’s property (but not willful injury to another

          person).

       • you can discharge debts you incurred in order to pay nondischargeable tax obligations

        •you can discharge your obligation to your spouse or former spouse for other debts assigned to you in divorce or

         separation proceedings.