Today, you are probably wondering what bankruptcy can do for you, how bankruptcy works, and how can you pay for it. You may be nervous or unsure about filing for bankruptcy, but what you need to know first is that bankruptcy is a tool that is used to help people.
This paper will answer those questions, plus provide some basic facts about bankruptcy which the federal government wants you to know before you file. In my practice, I have filed thousands of bankruptcies for good people who need financial help for all kinds of reasons. Often, clients have suffered financial setbacks due to divorce, illness, job loss, or simply been trapped in the cycle of high interest rates of credit cards or IRS tax bills. Many highly respected and famous people have had to file bankruptcy, such as Abraham Lincoln, Ulysses Grant, Walt Disney, an many other good Americans. In fact, more than 1 million Americans file bankruptcy each year, and it is a constitutional right to file bankruptcy if you qualify.
Be assured, if we accept your case, and file bankruptcy for you, your creditors and debt collectors of all kinds, even IRS, will be stopped cold in their tracks. It is very unusual that I cannot help a client wipe out his unwanted debts, or restructure his debts into lower payments, with the proper choice of bankruptcy. Usually you may keep your cars, trucks, and home with the relief provided by bankruptcy, even if you are far behind on these debts, and are about to suffer repossession or foreclosure.
No longer will creditors be allowed to harass you, call you at home or work, repossess a vehicle, foreclose on a house, seize your bank accounts, or garnish your wages. If you are already being sued, a powerful federal law called the “Bankruptcy Stay” immediately stops the court case.
After filing bankruptcy, this law makes any collection attempt a serious offense punishable by the court with heavy fines and contempt of court.
Because every client is different, your needs must be evaluated by me, an experienced bankruptcy attorney, so that the right kind of bankruptcy can be filed and tailored to meet your needs.
My staff is trained to assist me in gathering the information necessary to prepare your case for filing and provide you general guidelines about bankruptcy. However, your legal questions need to be directed to and answered by me. I take personal and professional interest in you and want to answer your questions and concerns.
There are certain bankruptcy laws that apply to almost every client. This paper will explain some of those laws, tell you what can be done for most clients, and about the four different kinds of bankruptcy.
There is no charge for this information and first visit to my law firm. After you read the paper, you will provide some basic information to my staff. This will help us decide if you qualify for bankruptcy, and if so, which of the four basic kinds of bankruptcy would be best to help you.
A fee will then be set for you based on the amount of debt you have, the kind of debt you have, the kind of bankruptcy you need, and bankruptcy problems that appear based on the paperwork you fill out for me. Fees for Chapter 7 typically range from $1,300 to $2,000 (unless you are a business owner), plus court fees and credit reports. Fees for Chapter 13 are set by the bankruptcy court, and typically require a minimum retainer before filing. If you are one of the rare cases (such as where a fraudulent statement has been made in writing to obtain a loan) that require litigation (trial) in bankruptcy court, additional fees will be required of you.
My staff will explain payment options to you, and if you and I agree to file a bankruptcy, you will have to sign a contract and provide a deposit. You will be given a very important information packet to fill out and bring to your next appointment. This “bring back packet” includes a list of documents you will need to bring to your next appointment, such as 6 months of bank statements, and 6 months of pay stubs or a computer printout of detailed pay information from your employer.
We will also provide you with information for a court required “credit counseling” course that must be taken prior to filing your bankruptcy. This course normally takes about an hour on the internet or over the phone and must be presented before we can actually file your case.
After you complete the homework and your “bring back” appointment, we use the “bring back packet” and proof of your income to prepare 17 different schedules for your case. You will then have an appointment to meet with me to discuss our plans for your case, file your case with the court, and get your appointment to meet me at the courthouse about 4 to 6 weeks after filing your bankruptcy case.
CHAPTER 7 BANKRUPTCY
The law requires that I discuss the four different kinds of bankruptcy with you, and it is helpful to know generally how those work. Chapter 7 bankruptcy is known as a “liquidation” bankruptcy, because all eligible debts are wiped out, and any unprotected or “non-exempt” property under state and deferral law may be sold by the United States Trustee (a kind of a referee in bankruptcy court). There is no need to fear any loss of your important property or possessions in most cases, because the Texas and federal protections of bankruptcy are so strong and wide ranging. Indeed, it is rare that a client has to surrender any property in bankruptcy, and if you are one of those rare situations, you will be advised of your options prior to filing any bankruptcy.
In a chapter 7 case, you may keep your homestead and one car for each licensed driver driving in your home, if you are current (or can quickly become current) on any debt tied to your home or your car on the date you file bankruptcy. If you have debt on your home, your car, or any other personal property which you purchased by financing, you may reaffirm the debt, which means you will keep the item, and continue paying the debt on time, during the bankruptcy and thereafter.
The court will only require that you sign a contract with the bank or finance company called a “Reaffirmation Agreement” and show that you can afford the payments. Once that agreement is signed, you may change your mind and/or void the reaffirmation agreement in writing within 60 days of signing the contract, or before your bankruptcy case is discharged, whichever is later.
Almost all our clients officially “reaffirm” some secured debts on property they own. In my many years of bankruptcy work, no client has ever been refused the right to reaffirm a debt on his home, so long as he/she is current on the debt at the time the bank presents the new contract. So, you should not be concerned if this is the kind of debt you want to reaffirm, and you are current on the debt and can afford to keep making the payments.
A chapter 7 bankruptcy does not , in most cases, wipe out IRS debt that is less than 3 years old, nor does it wipe out student loans, child support, alimony, sales tax if you had a business, or large sums of money borrowed in the 90 days before you filed bankruptcy. If you have borrowed large sums (more than $1000) in the 90 days before you file a case, I will need to counsel you on your options, and possible ways to wipe out such a debt. Most people who have this kind of problem are “business” or “self-employed” filers, and I have successfully steered many such cases through bankruptcy and successfully discharged recent debts.
There is one other rare kind of debt which cannot be discharged in bankruptcy. All of our clients, but especially self-employed or business clients, are asked to consider whether they have provided any written false financial statement in order to obtain a loan or credit. We are not talking about a “mistake” in the paperwork you gave the bank, but an intentional written misrepresentation in order to get a loan or finance a purchase. These kinds of false statements, if in writing, can result in an objection being filed in the court, asking that a particular debt not be wiped out. In such event, additional attorney fees will be required before and after your bankruptcy is filed. I have handled many such cases over the past 25 years, usually for business owners, and those debts are normally, but not always, substantially reduced, or even discharged entirely.
I want to assure you that, for most of our clients, chapter 7 bankruptcy is a relatively fast and simple means of starting a new financial future. Under current law, a chapter 7 bankruptcy can only be filed every 8 years. (Caution: be sure and tell me and the staff if you have filed a bankruptcy before. We can then search online and determine the date of your prior case, and what kind of case you filed. If you are ineligible for chapter 7, you may be eligible for another kind of bankruptcy which I will discuss with you).
WHAT HAPPENS AFTER BANKRUPTCY
In addition to wiping out all eligible debt, you are beginning to build your credit and a new financial future right after you file bankruptcy. Many of our clients want to know how they will get credit in the future after filing a bankruptcy. I can tell you from personal experience that hundreds of our clients have qualified to purchase a home in about 2 years after filing Chapter 7 bankruptcy, if they follow our simple credit rebuilding program.
When you seek to obtain credit after bankruptcy, creditors know that you are a relatively low risk and more qualified for a loan since you have wiped out almost all your debt, and you cannot file another chapter 7 case for 8 years. If you file a chapter 7, your filing will remain on your credit record with the credit bureaus for 10 years. However, most all of our clients experience a rapid improvement in their credit scores after filing bankruptcy (if they are wiping out substantial credit card debt and medical bills), and the client pays all of his reported debts on time in the 2 years following bankruptcy. I will discuss more of the proven “credit rebuilding” plan when I meet with you later.
Many of our clients want to know if they will lose any possessions after bankruptcy in chapter 7. Very liberal and strong Texas and federal laws protect almost all your property in bankruptcy. For example, under Texas protection in bankruptcy, our married clients may keep up to $100,000 of personal possessions in furniture, clothes, and the like. Also, they may keep any of the equity, if any, they have in their cars or trucks. The exempt limit is $30,000 for a single person. All the equity in your homestead is protected under Texas law in bankruptcy even if it involved millions of dollars.
If you do not have more than $40,000 in equity in your home, you may also protect a large portion of cash when you file a bankruptcy. Be assured that any earning or income that you generate from labor or services after you file a chapter 7 bankruptcy are completely free from the claims of your creditors or the U.S. Bankruptcy Trustee. If you hire this firm, we will go over all your property with you, and show you how your possessions are protected in bankruptcy, or if not, show you what course to take for maximum protection.
CHAPTER 13 BANKRUPTCY
There is another kind of bankruptcy for clients that do not qualify for chapter 7, or they are behind on their house payments, car payments, child support, or tax obligations. The chapter 13 bankruptcy will help most clients in such cases, which is sometimes referred to as a “reorganization bankruptcy”. This kind of case is only for individuals, i.e. it is not available for corporations or partnerships.
The chapter 13 case involves setting a budget under government guidelines, so that you can propose a written “payback plan” in order to stop any foreclosures or repossessions. Chapter 13 bankruptcy also helps to catch up on your past due mortgage payments through a 3 to 5 year payment plan, based on your needs and qualifications. In chapter 13, you will begin making monthly payments to the government 30 days after you file bankruptcy by sending a payment to the U.S. Trustee. The amount of the payment is based on your budget and your ability to pay under the federal guidelines, Chapter 13 is purely voluntary, meaning you may stop or dismiss a chapter 13 at any time, or even switch to a different kind of bankruptcy if you can no longer make the payments, or simply wish to wipe out debt on a home or car that you can no longer afford.
The chapter 13 bankruptcy has much more paperwork requirements for the client and the attorney, and therefore the fees are substantially more than a chapter 7. However, the government allows some of the attorney fees to be paid out of the monthly payment you make to the government.
After your first payment, the law requires your future payments to the U.S. Trustee to be payroll deducted. Again, chapter 13 is a voluntary program, which you may stop at any time.
A chapter 13 stays on your credit record for 7 years, whether you finish your repayment plan or dismiss your case. You may rebuild your credit through making payments on time to the Trustee. Plus, the 2 years following completion of your case, our credit rebuilding program should allow a major improvement to your credit. Many of our clients are able to refinance their homes at fixed interest rates after they successfully completed one to two years of their chapter 13 case.
One interesting aspect of a chapter 13 is to “cram down” car or truck payments or other secured payments if you have been in a loan for over 2.5 years. In a cram down, you pay only the market value of your car or truck on the date you filed bankruptcy, at the federal prime interest rate plus 2% over the life of your plan. For clients whose car or truck is worth substantially less than the full balance owed, a cram down provides tremendous reduction in the balance due, and the amount of each monthly payment is also reduced, sometimes as much as by half.
As in chapter 7 bankruptcy, some clients simply cannot afford to keep their home, or their vehicle, even with a reorganized plan. They feel that their whole financial picture would be much improved if they could surrender the item and wipe out the debt. This is only possible through a chapter 7 or chapter 13 bankruptcy. If you surrender collateral to a bank, the creditor will sell the item at auction, apply the proceeds to your debt, and then sue you for the balance. In bankruptcy, you surrender the item and the debt is gone.
CHAPTER 11 BANKRUPTCY
I am pleased to report to you that I am one of the few bankruptcy attorneys in Amarillo qualified by the bankruptcy court to serve as a chapter 11 attorney for the debtor. This kind of case is for corporations or wealthy individuals who wish to present a plan for repayment to all of their creditors for a vote, and if 2/3 of the creditors vote “yes’ (as determined by the amount of each creditor’s debt) the U.S. bankruptcy judge can approve a repayment plan, and the payments will begin 9 month after the case is filed. This kind of bankruptcy is very expensive and is used in rare circumstances in Amarillo.
CHAPTER 12 BANKRUPTCY
This kind of case is for debtors who earn a living as farmers, ranchers, or commercial fishermen in which to reorganize their debt in a fashion somewhat similar to chapter 13.
BANKRUPTCY OVERVIEW AND FINAL COMMENTS:
What Happens Now?
STEP 1- Sign a contract and make a deposit. You will then be given a “bring back” packet to take home, then fill out completely. Also, you will be given a “bring back” appointment and a “signing” appointment the same day.
STEP 2- Take your pre-bankruptcy credit counseling course
STEP 3- Come back for your “bring back” appointment. During this appointment, you will return the “bring back” packet and all the required documents listed on the front of the packet.
STEP 4- Come back for your “signing” appointment. During this appointment, you will meet with Van to go over and sign the 17 bankruptcy schedules, based on the information you provided in the “bring back” packet. Your case will be filed this day as well.
STEP 5- Meet Van about 4 to 6 weeks after Step 4 to attend court for about 30 minutes. Be sure and take your second course (financial management course) after Step 3, which allows you to wipeout your debts.
Van or Natalie will attend all other hearings, provide information to the court and the Trustee, and provide all other paperwork, unless you are notified by this office.
Of course, there are many questions and issues that are not addressed here or are not fully explained to your satisfaction. My staff and I look forward to serving you and answering all your questions. At this time, please sign the form provided to you that states you have read this paper and have read the government required disclosure.
Thank you for your kind attention.