Declaring bankruptcy is a major life decision that most people may not ever need to think about, but when harsh circumstances cause people to look at bankruptcy as a serious option, they will likely have a lot of questions. Below, we answer some of the most frequently asked questions about bankruptcy.
While filing for bankruptcy might lower your score, the truth is that in most cases your post-filing score will INCREASE. This is because as most poor debtors are buried so deep that their creditworthiness is near rock bottom. Once the debtor files, and a discharge takes place, the debtor (who is now debt free or nearly debt free) becomes more credit worthy and thus the credit score quickly begins to increase. Therefore, bankruptcy is commonly referred to as a “FRESH START”. After filing, the only thing holding you back from your credit score steadily increasing is you! Just budget your expenses, don’t buy more than you can afford, and timely pay your bills, and your credit will be great!
In addition, Throop Law has recently implemented a new program for Chapter 7 debtors. This program allows a debtor to file a case with NO ATTORNEY FEE UP FRONT. The debtor can enter into a payment plan ($49 per week for a maximum of 49 weeks, until paid), which is reported to the 3 credit bureaus. This new option not only allows for a quick filing with only your costs to file paid up front ($375), but also starts rebuilding your credit before your case is even concluded!
This is HIGHLY unlikely. We can protect your home from adverse action, foreclosure, and unlawful detainer virtually 100% of the time. Keep in mind that this generally does not apply to matters already adjudicated in court on property that has already been foreclosed on. It is very important to contact a bankruptcy attorney as soon as possible if there is a pending foreclose action on your home. Do not wait until the last minute and think the attorney can perform a miracle by dropping everything to work on your case. The more time an attorney has to review and analyze your case, the better off you will be.
Chapter 7 cases: For clients considering a Chapter 7 case, it is important to remember that the information you give your attorney be very accurate. Being less than truthful about assets or income could seriously prejudice your case and cause you to potentially lose more than you gain. For instance, a Chapter 7 trustee has the power to sell the house and pay your creditors if you have sufficient equity or have transferred the property to another person within a certain period of time. For these reasons, be sure to be honest, truthful and forthcoming with your attorney about all your financial matters in the beginning. Remember, we are on your side and here to help YOU!
While Virginia law only allows a homeowner to exempt up to $5,000 in home equity per homeowner, it’s possible that a more favorable federal exemption may apply depending on your circumstances. A brief analysis by your attorney will determine the most advantageous exemptions for your case. In addition, seniors and disabled veterans generally qualify for additional exemptions.
Chapter 13 cases: While most debtors are better served filing a Chapter 7 case, not all debtors will qualify. An analysis of your income and assets by your attorney will determine if you qualify for a Chapter 7. In a Chapter 13, the debtor(s) enter an affordable monthly payment plan, approved by the court, to repay certain creditors certain amounts.
Though it’s usually in the debtors’ best interest to not have to repay creditors (Chapter 7), sometimes a Chapter 13 makes more sense. For instance, a debtor may be several months behind on car or house payments, which will not be “cured” by a Chapter 7. On the other hand, a Chapter 13 debtor can “cure” those late payments by incorporating them into the plan, which gives the debtor a longer timeline to stabilize finances and begin paying into the plan.
While a bankruptcy can stay on your report for up to 10 years, what’s important to remember is that what creditors mostly care about is your score; in other words, how credit worthy are you today! Gone are the days when a person needed a credit card to function and bankruptcy ruined people’s ability to conduct every day personal matters for years to come. This is the era of debit cards; and almost everyone either has or can obtain a debit card to use for things such as hotel and other travel reservations, car rentals, or automatic drafts. Even those who do not qualify for a traditional debit card (Wells Fargo, Bank of America, etc.) can easily obtain a prepaid VISA or other similar style card at most retail stores (Walmart, etc.).
While this is possible, it is HIGHLY unlikely. The thing to remember here is to be as up front as possible with your attorney regarding your assets and finances. I have never had a client lose a car, home or other property they wanted to keep simply because they filed for bankruptcy. Don’t take this to mean that you can keep certain property, however, without paying for it. While I can “save” property from foreclosure, seizure, etc., it does not mean the debtor gets a windfall; to retain “secured” property, debtors must pay for the property after the bankruptcy case is filed or forfeit it.
Bankruptcy discharges most debts, but not all. Under a Chapter 7 bankruptcy, most unsecured debts are discharged, but there are certain exceptions.
The following unsecured debts are almost always non-dischargeable:
In comparison, certain unsecured debts that would be non-dischargeable under Chapter 7 are dischargeable under a Chapter 13 discharge, such as:
Sometimes. Certain income tax obligations can be discharged, but your attorney will need to advise you in this matter after a review of your case.
Certain taxes not based on income, however, are generally not dischargeable under a Chapter 7 bankruptcy, including:
Unlike a Chapter 7 bankruptcy, priority taxes and secured tax debts can be repaid over the course of your 3 to 5 year Chapter 13 repayment plan. Your attorney can discuss which option is best for you based on the circumstances of your case.
In general, Chapter 7 bankruptcy involves selling your property to repay your creditors. In contrast, Chapter 13 bankruptcy involves organizing and adjusting your debts over the course of a 3-5 year repayment plan, and does not involve liquidating your assets. Contact our Richmond Chapter 7 & 13 Bankruptcy Attorneys for more information.
Repayment plans generally last 3-5 years. The terms and duration of your repayment plan depend on your income and assets. If you regularly earn more income than the median monthly income for a similarly-situated household, then you have at least 5 years to complete your repayment plan. If you earn less income than the median monthly income for a household under similar circumstances, you may get a 3-year plan. You may reduce the length of your plan if you can demonstrate that it will pay all unsecured debt in less time.
You are eligible for Chapter 13 bankruptcy relief if you regularly and reliably receive income from almost any source, including from retirement benefits. This also means that the opposite is true. A debtor cannot file a Chapter 13 plan for a household without any income because there is no way to make regularly scheduled plan payments.
If you have more questions about bankruptcy, Throop Law can help. Our Richmond bankruptcy attorneys can provide top-tier advice regarding your available legal options. Moreover, our firm is sensitive to your hardships and will handle your case with the highest regard and discretion.
Contact us online, or call (804) 464-3989 to speak with one of our Richmond lawyers about bankruptcy today.