Answers from a Knowledgeable Houston Bankruptcy Lawyer
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Trueba is a trusted, skilled advocate for our clients. We strive to help
people alleviate their financial circumstances by providing effective
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is accessible, dedicated, and committed to helping you improve your financial health.
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What Is Chapter 7 Bankruptcy?
A common form of bankruptcy is Chapter 7 bankruptcy, sometimes referred
to as "straight bankruptcy" or "liquidation." It is
a process in which a consumer asks the bankruptcy court to wipe out (discharge)
the debts owed, essentially giving consumers a fresh start. However, certain
debts cannot be discharged. Chapter 7 is available to partnerships, married
couples, individuals, and corporations. Businesses cannot receive a discharge
under Chapter 7, while individual debtors typically receive their discharge
within 4-6 months of filing the case. Any wages earned after the case
is filed are the debtor's, beyond the reach of creditors who had existing
claims on the date of filing.
What Are the Most Common Reasons People File for Chapter 7?
People most commonly file for Chapter 7 due to unemployment, overextended
credit, disability, marital problems, large medical bills, or other large,
unexpected expenses. When they qualify under the means test, this is usually
the best option for them in bankruptcy.
What Is Chapter 13?
Individuals with regular income and secured and unsecured debt of certain
amounts are eligible for a repayment plan under Chapter 13. Under Chapter
13, the debtor is able to keep a majority of his or her property while
making consistent payments to the trustee over a period of 3-5 years.
While some debts must be fully repaid, others can be partially or completely
discharged. Depending on the type of debt, you may have to pay with interest,
at the beginning of your plan or at the end. The level of repayment depends
on the debtor's income and the composition of the debt. Some debts
can be discharged in Chapter 13 that cannot be discharged in Chapter 7.
Chapter 13 enables the prevention of repossessions and foreclosures, and
enables individuals to catch up with secured debts.
What Is a Chapter 13 Plan?
This is the agreement with the court stating what your obligations are
and how much you must pay each month. It is a several page document that
we prepare for you as part of the bankruptcy filing.
Must All Debts Be Paid in Full in Chapter 13?
No. Unsecured debts are usually paid only a percentage of what is owed.
Secured debts that are to be retained must be paid 100% of what is owed.
However, some secured debts are subject to certain exceptions under the
bankruptcy code where the Court will allow a lesser amount to be paid
than what is owed to the creditor to satisfy the debt. Typical secured
debts are your house and automobile.
Will My Spouse Need to File Bankruptcy with Me?
No. A married person may file as an individual, and the filing does not
necessarily adversely affect the credit of the other spouse. However,
there are often advantages to filing together with your spouse even though
Texas is a Community Property state. This is a legal and personal decision
you should make after full consultation with an experienced bankruptcy attorney.
Can My Employer Legally Fire Me for Filing?
No. This is illegal.
What Is a Secured Debt?
A secured debt is one where the creditor has a lien on the property you
purchased from them or some other property you own. This is a form of
collateral. The most common item used for security in a secured loan is
What Is an Unsecured Debt?
An unsecured debt is where the creditor only has your promise that the
loan will be repaid. It does not involve collateral. Some examples of
unsecured debts are credit cards, department store cards, medical, and
Should I File for Bankruptcy?
There are several bankruptcy options that might help improve your financial
well-being and give you a fresh start. A free consultation is offered
to determine the solution that is right for your unique financial situation.
How Will Filing Affect My Credit?
If you're already receiving phone calls or letters from collection
agencies, or if you have charge offs, payday loans, car repossessions,
or foreclosures on your credit-your credit history has already been affected.
A bankruptcy eliminated debt and clears the path for rebuilding with a
fresh start, and in many cases will actually improve your credit score
based on your debt to asset ratio.
Is Chapter 7 or Chapter 13 My Best Option?
Usually, Chapter 7 bankruptcy clears your debts within about 4 months,
but if you're delinquent on your car or house, or owe the IRS, Chapter
13 bankruptcy might be the best option for you. But, since everyone's
financial circumstances are different, we will meet with you at no charge
to review your situation and determine the best solution for you.
Why Should I File a Chapter 13 & Not Chapter 7 Bankruptcy?
- Because you wish to repay all or most of the debts and you have to income to do so.
- You have non-exempt property that you wish to keep that would be lost in
a Chapter 7.
- You are not eligible for a Chapter 7.
- You have debts that are dischargeable under a Chapter 13, but not under
a Chapter 7.
- You are behind on your home payments and need the court to force the bank
to accept payment on the arrearage.
Can Bankruptcy Filing Stop Foreclosure?
A bankruptcy can stop the foreclosure sale of a debtor's home due to
the imposition of the automatic stay, however, the debtor must take further
steps to address the basis for the foreclosure, or the creditor may proceed
with its state law remedies after seeking relief from the stay.
How Does the Automatic Stay Help in Bankruptcy?
A benefit of filing for bankruptcy relief is that it may, although sometimes
temporarily, stop a lawsuit. This is accomplished through what is called
the automatic stay.
How it works: Once a bankruptcy petition is filed, the bankruptcy clerk
mails notices to all the creditors listed. All creditors must cease contacting
you. Until the stay ends, they cannot call, send bills, threaten you,
file a lawsuit, or continue with an ongoing lawsuit.
Can I Keep My Tax Refunds?
Generally, yes. However, the refund will need to be exempted.
If I Am Surrendering My Home, How Long Can I Stay in It?
It depends on a number of things. We will need to review your situation
and will help you determine the date you'll need to vacate the home.
What Happens When the Case Is Filed?
The court immediately invokes an automatic stay when you file. The court
order prohibits creditors from calling, sending you letters, or contacting
you in any way. They cannot attempt to collect money from you by any means,.
What If I Have Been Sued & Have Judgments Against Me? Can I Still Discharge Debt?
Yes, you can still discharge the debt. The fact that you've been sued
or have a judgment doesn't stop the bankruptcy from discharging the debt.
Will Creditors Appear at My Meeting with the Trustee?
It's not likely. Creditors are allowed to appear to observe the testimony,
but interrogation is not allowed. The creditors meeting is not a trial
or a hearing, but simply a review and verification of the facts of your
How Much Will My Plan Payment Be?
In most cases, all extra income above your family's basic necessities
will be paid into the plan. Determining what your basic necessities are
is one area in which having a good attorney can benefit you.
If I Am Self-Employed, Can I File for Chapter 13 Bankruptcy?
Yes. Eligibility requirements are the same for the self-employed as everyone else.
Can I Add Creditors Where I Incurred New Debt During the Plan?
No. There are a couple of very narrow exceptions, but do not expect to
be able to do so.
Can I Keep My Vehicle?
Your vehicle is considered a necessity, so the court generally will allow
you to do so provided the vehicle payments are not beyond reasonable.
You do need to continue making payments on your vehicle. This is one of
the things we can discuss in your free consultation.
Can I Keep My Home?
Generally, yes, provided it is current in payments in a Chapter 7 bankruptcy
or any arrearages that exist on the date of filing the bankruptcy are
addressed in a Chapter 13 plan of reorganization that the bankruptcy court
determines is realistic and affordable for you.
What Is an Exemption? What Property Is Exempt?
Exempted property can't be taken by creditors or the trustee. An exemption
is the amount of value in a given item of property that the court determines
that a person filing bankruptcy is allowed to keep. Property which is
in excess of the allowable exemptions must be turned over to the trustee.
Can I Keep My 401k, Pension Plan, Profit Sharing Plan, etc.?
Usually, yes. "ERISA-qualified plans" are excluded. There is
no limit on the amount you have in these plans.
Will Someone Come to My Home & Take My Property or Look to See What I Own?
Not unless the court has reason to believe you have lied about the value
of your property.
Do I Have to Disclose All of My Assets?
Yes. All debts and assets must be disclosed by law and noted in your petition.
How Long After Filing Will Creditors Stop Calling?
After your bankruptcy petition is filed, the court mails a notice to all
your creditors. Typically it takes a couple of weeks for the contact to
stop. You can also get creditors to stop calling if you tell them you
have filed bankruptcy and provide them with your case number. If a creditor
continues attempting to collect from you once they've been informed
of your bankruptcy, they could be liable for court sanctions and attorney's fees.
Should I File On Debts Where I Am a Co-Signer?
Yes, you should file on those debts as well; doing so will have no effect
on the other parties. Also, if they default at some point in the future,
the creditor can't try to collect from you.
What if Someone Co-Signed on a Loan with Me?
If you file bankruptcy, the other party will then be stuck paying your debt.
Can I Discharge Student Loans?
There are two exceptions:
- The student loan may be discharged if it is neither "insured or guaranteed
by a governmental unit" nor "made under any program funded in
whole or in part by a governmental unit or nonprofit institution."
- The loan may be discharged if it imposes an undue hardship on the debtor
or the debtor's dependents. It is extremely difficult to prove that
a hardship case exists and it takes a special hearing to do so.
What Debts Are Not Affected by Bankruptcy?
Bankruptcy doesn't get rid of all debts. You are still responsible for:
- Child support
- Recent back taxes
- Student loans
- Recent large purchases
- Fines or penalties of government agencies
- Fraudulent debts
Liquidation: Does It Mean You Lose Everything?
When you file for bankruptcy relief under Chapter 7 (liquidation), the
bankruptcy trustee can take your non-exempt assets and sell them to pay
off your unsecured creditors. The ability under bankruptcy to exempt items
from liquidation and administration by the panel trustee essentially protects
you from the enforcement of judgments and creditors. This is the foundation
of bankruptcy law, premised on the understanding that people need certain
items in order to live and obtain a fresh start.
How Do I Surrender Items in Bankruptcy?
When you file for bankruptcy relief, you must evaluate all your secured
assets, if any, and determine which ones you can afford to keep. If you
must return assets, you must return them through a procedure called "surrender."
Secured assets are items that the seller can repossess from you if your
written agreement states the seller may take the items if you fall behind
on your payments.
Surrender can be voluntary. You can simply decide that you cannot afford
to keep the assets and return them. However, if you try to keep the assets
and the creditor or trustee determines that you cannot afford them, or
that they are merely luxury items, you may be forced to give them up to
your secured creditors. In general, it's not advisable to surrender
a secured asset before filing a bankruptcy case unless the value of the
asset is less than the amount of the seller's lien.
Can You Keep Assets?
The bankruptcy code permits you to keep secured assets through reaffirmation
of purchase agreements, or through redemption. If you are not in the financial
position to reaffirm or redeem an asset, you may have no other option
but to surrender the asset to the secured creditor.
How Can I Re-Establish My Credit Rating After Bankruptcy?
Re-establishing good credit is as simple as making consistent monthly payments.
A record of unpaid bills is worse than a record of a bankruptcy if good
payments are made afterwards. Additionally, since you can't file Chapter
7 bankruptcy again for a long time, creditors may work with you more willingly.
Although your bankruptcy will stay on your credit report for 10 years,
it will have less impact the farther in the past that it is. Notwithstanding,
many people benefit from filing in terms of their credit score given the
impact on their debt to income ratio.
After I File, Can I Obtain New Credit?
Yes. Some creditors may discard your application for credit due to your
bankruptcy; however, others will allow you credit because you have no
remaining debt and are able to pay a new loan. If court and trustee approval
is obtained and certain rules are followed, you can often secure credit
while in Chapter 13 bankruptcy.
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.
Do I Need an Attorney to File Bankruptcy?
Federal law does not require you to have an attorney. You are allowed to
file pro se, in other words, on your own without an attorney. However,
without the assistance of an attorney, it is extremely difficult to do
so successfully. Hiring a competent attorney is highly recommended.
We will meet with you at no cost to answer your questions and help you
determine the correct approach to solving your debt problems. For a free
consultation and evaluation of your situation,
call us today or fill out the contact form provided.
What Paper Work Should I Bring to the Consultation?
In order to prepare the consumer bankruptcy papers, the client must bring
these documents, among others:
- For each secured debt, such as a car loan or home mortgage:
- Copy of the latest statement showing the balance due on the debt
- Copy of proof of insurance coverage
- Income tax returns for the last two years, including W-2, 1099 and K-1
- A list of all creditors, including addresses, and the amounts and description
of each debt
- Copies of all pay stubs for the last 6 months showing the amount and frequency
of your income; if self-employed, copies of monthly profit-and-loss statements
for the past six months
Copies of any lawsuits or judgments, regardless of whether the client is
a plaintiff or