BIGGEST FINANCIAL MISTAKE:

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Biggest mistakes clients make before filing bankruptcy?

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People are afraid of bankruptcy.  Therefore, they do whatever is possible in order to avoid filing bankruptcy.  One of the biggest mistakes I see is when someone takes their hard-earned retirement out and pays off unsecured creditors.  This endangers their future retirement to make sure a big credit card company or hospital has been paid.  Most retirement accounts are exempt assets in a bankruptcy.  Before you take out your retirement please make an appointment for a free consultation so we can sit down and discuss your options.

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What is Bankruptcy?

 

Bankruptcy is a proceeding under Federal Law which allows individuals and businesses to get rid of certain debt and start over.  Bankruptcy is not something to fear but is rather a way to resolve financial problems while regaining control over your finances. 

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Who is a Debtor?

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A debtor is the person or business who files for Bankruptcy.

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Who is a Creditor?

 

A creditor is a company or person who is owed money. Example: Credit Card companies, pay day loan companies, banks, hospitals, etc.   

 

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What is collateral?

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When you give or pledge an item, title, or possession and you receive a money (loan) in return.  The item pledged or given is considered the collateral for the loan.  The most common collateral is your house, car, or household goods.   

 

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What is an exemption?

 

When you file bankruptcy, you have to list everything thing you own and everything you owe.  Certain things that you own are exempt from a Trustee considering the value of the property in a Chapter 13 or exempt from the Trustee liquidating the property in a Chapter 7 bankruptcy.  Most common examples of exemptions in bankruptcy: Most retirement accounts, one car up with up to $7,500 worth of equity, a house with up to $35,000 worth of equity, and most household goods.  This means you get to keep the exempt property and the value of the item does not have to be considered for liquidation. 

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What is a Chapter 7 Bankruptcy?

 

Chapter 7 Bankruptcy is most commonly referred to as the liquidation bankruptcy or straight bankruptcy.  Chapter 7 is for individuals who are current on payments (i.e. house or car payments)  for the collateral that they would like to keep and keep paying OR are willing to surrender the collateral and walk away from the debt.  Chapter 7 normally last 4 to 6 months from date of filing to discharge.  This means you will only be in the bankruptcy case for 4 to 6 months.  Additionally, you can start rebuilding your credit when you receive your discharge.

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What is Chapter 13 Bankruptcy?

 

Chapter 13 is most commonly referred to as the consolidation bankruptcy.  Chapter 13 Bankruptcy allows a person to repay all or a portion of his or her debts under the supervision and protection of the Bankruptcy Court.

 

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What is a Chapter 13 Bankruptcy plan?

 

In a Chapter 13 bankruptcy case, the debtor must submit to the court a plan for the repayment of all or a portion of his or her debts.  The first payment is due 30 days from the date the bankruptcy case is filed.  The plan will have to be approved by the Bankruptcy Court at a confirmation hearing.  Most of the time, the debtor is not needed at the confirmation hearing.  Only on rare occasions is the debtor required to attend the confirmation hearing.  The debtor must make regular monthly payments to a Chapter 13 Trustee.  The Chapter 13 Trustee collects the money paid by the debtor and disburses it to the creditors in accordance with the confirmed plan.  Typically, a Chapter 13 plan lasts three to five years.  Once all the payments are made per the plan, the debtor is released from liability for the remainder of his or her dischargeable debts.  This means you can start rebuilding your credit after you receive your discharge. 

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What is the different between Chapter 7 and Chapter 13 Bankruptcy?

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In a Chapter 7 Bankruptcy, the debtor’s nonexempt property (if any exist) is liquidated to pay as much as possible of the debtor’s debts.  You do not have worry about losing any property, because if that is a possibility, it should be addressed by your attorney before you file a Chapter 7 Bankruptcy.  In a Chapter 7 Bankruptcy, the debtor only has to pay the regular monthly payment for the secured debts which he or she would like to keep (normally a car or house).   There is no monthly payment or plan in a Chapter 7 Bankruptcy. 

 

In Chapter 13 Bankruptcy, the debtor’s future income is used to pay as much of the debtor’s debts as is feasible under the circumstances.  Debtor must make a payment each month for three to five years per the confirmed plan. 

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How does a Chapter 13 Bankruptcy differ from a private debt consolidation service?

 

In a Chapter 13 Bankruptcy, you are protected from your creditors by the automatic stay.  This means your creditors cannot collect, foreclose on your house, repossess your vehicle, or garnish your paycheck without the Bankruptcy Court permission.  If you do decide to use a private debt consolidation service, make sure the service you use starts paying your creditors when you start paying the service.  If not, you are not paying your creditors and your creditors can start collection activities (i.e. sue you for the debt owed, foreclose on your property, repossess your vehicle, or garnish your paycheck) because you are not paying the creditor and you are not protected by the Bankruptcy Court.

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Am I eligible to file a Chapter 7 or Chapter 13 Bankruptcy?

 

There are a lot of factors to consider when determining if an individual or business is eligible for a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.  Therefore, you need to speak to an experienced Bankruptcy attorney.  We offer free consultations in person, over the phone, or over Zoom.     

 

 

How long does the process take to file bankruptcy? 

 

The process to file bankruptcy depends on the individuals need and time needed to complete the documents required to file bankruptcy.  If someone has a sheriff sale, garnishment, or repossession pending, then the process to file a bankruptcy case can take 24 to 48 hours. You will be required to complete paperwork and provide information to file a bankruptcy.  The longer it takes for you to complete the paperwork, then the longer it takes for a bankruptcy case to be filed.

 

 

What information do I need to file bankruptcy?

 

In our office, we will walk you through the process of filing bankruptcy.  At the initial consultation we will go over everything you will need to provide in order to file a bankruptcy case.  You will be required to complete a questionnaire and read and acknowledge all the rights and duties for the bankruptcy.  In addition, you will need to provide proof of income for the last six months, tax returns for the last two years, vehicle registration, proof of insurance on vehicles, driver’s license, social security card, any lawsuits or collection notices that you have received, and if you are filing a Chapter 7 we will need bank statements for the last three (3) months.

 

 

Do I need to contact my creditors to let them know I filed bankruptcy?

 

No.  Once you file bankruptcy, your creditors will receive notice of the bankruptcy filing.  However, after we file your case if your creditors continue to call, please let our office know so we can contact the creditor on your behalf.

 

 

What if I need a loan while I am in bankruptcy?

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This happens more than you think.  Cars break down, someone gets sick, house needs to be repaired, etc.  During the Chapter 13 Bankruptcy plan, you have to go through the court to get approval to incur debt and/or the Chapter 13 Trustee.  During a Chapter 7 Bankruptcy, you would have to go through the court and the Chapter 7 Trustee.  However, the Chapter 7 Bankruptcy only last a few months and motions to incur debt are rarely needed. 

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How much time will I have to take off work to file bankruptcy? 

 

Due to modern technology, this depends on you and what you prefer.  We will try to work with you in order to do everything in a manner which you feel comfortable and safe.  You will have to attend an initial consultation, this can be done in person, by telephone, or over Zoom.  You will have to sign all the final paperwork. This can be done in person or over Zoom with an attorney or paralegal to make sure that you understand what you are signing.  Due to the COVID-19 Emergency, the meeting of the creditors is being held over the phone.  We are unsure how long this will continue but it does cut down on the time required for debtors to take off work to attend the meeting of the creditors.

 

 

How will bankruptcy affect my credit?

 

The bankruptcy will stay on your credit for 7 to 10 years depending on the credit reporting agency.  Most people are afraid they will not be able to purchase anything after they receive a discharge in a bankruptcy.  This is not true.  You can even purchase a car or house on credit while you are in bankruptcy.  After you receive a discharge, you will be able to incur debt but you may have a higher down payment or a higher interest rate than others. 

 

 

When will my creditors stop calling?

 

When you hire us to be your attorneys, you will refer all creditors to contact our office.  

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What debts can I not get rid of in a bankruptcy? 

 

In bankruptcy, the debts that you cannot get rid of are referred to as non-dischargeable. Typically, you cannot discharge the following debts:

• Most tax debts if not fully paid in a Chapter 13 Bankruptcy;

• Debts for fraud, embezzlement, or larceny;

• Debts paid outside of the plan and not covered in the plan;

• Debts for domestic support obligations i.e. child support and alimony;

• Debts for death or personal injury caused by debtor’s operation of a motor vehicle, vessel, or aircraft while intoxicated;

• Debts for restitution or criminal fines included in a sentence imposed on the debtor for conviction of a crime;

• Debts for certain student loans or educational obligations; and

• Debts for damages caused by willful or malicious conduct of the debtor.

Fines for lapses in vehicle insurance are non-dischargeable in a Chapter 7 bankruptcy only.  If you have any questions about whether a debt is dischargeable, please make an appointment with our bankruptcy attorney to discuss. 

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I have DMV fines for lapses in my vehicle insurance.   Can I get my driver’s license renewed?

 

If you owe the Louisiana Department of Motor Vehicles or the Louisiana Department of Debt Recovery, you will need to list the debt in your bankruptcy.  However, you can only discharge this debt in a Chapter 13 Bankruptcy.  After you file a Chapter 13 bankruptcy, we will contact the DMV to release your driver’s license.  This process takes time. 

 

 

Can I file bankruptcy without my spouse? 

 

Yes, you can file bankruptcy with or without your spouse.  This is a decision that we recommend you make with your spouse, or not, depending on your situation.  I usually recommend that if you are co-signers on the same debt and you are together, then file together because you only have to pay one filing fee.

 

 

What is better a Chapter 7 or Chapter 13 Bankruptcy?

 

This depends on your situation.  Most attorneys like for you to file a Chapter 13 because the attorney gets paid more money for a Chapter 13 bankruptcy.  My preference is a Chapter 7 because you are only in the case for 4 to 6 months.  But depending on your situation, you may not be eligible to file a Chapter 7 Bankruptcy.  Please contact our office today for a free initial consultation.