Your Questions. Our Answers.

Chapter 13 Bankruptcy:

Do I have to go to Court regarding the bankruptcy filing?

Yes. You are required to attend your 341 Meeting of the Creditors after the filing of either a Chapter 7 or Chapter 13 bankruptcy petition. The proceeding generally occurs about 30 to 45 days after your bankruptcy petition is filed with the court. The meeting is presided over by your bankruptcy trustee. It is the trustee’s job to represent your creditors in the bankruptcy process and to help with the supervision and administration of your bankruptcy case. The bankruptcy trustee asks you a series of questions to make sure you are eligible for either the Chapter 7 or Chapter 13. No later than 45 days after the meeting of the creditors, the bankruptcy judge must hold a confirmation hearing to decide whether the proposed Chapter 13 bankruptcy plan is doable and meets the requirements for confirmation in the bankruptcy laws.

Can I get rid of my student loan debt in a bankruptcy?

You may only get rid of student loan debt in a Chapter 7 bankruptcy, if you can demonstrate an “undue hardship” to the bankrupty court.

Demonstrating undue hardship to the bankruptcy court, though not impossible, is very difficult to do.

Although you may not discharge debt in a Chapter 7 bankruptcty unless you can show “undue hardship”, you can consolidate the student loan debt with your other bills in a Chapter 13 bankruptcy reorganization plan, and stop all collection activities against you.

Can filing a Chapter 13 bankruptcy help me if I have past due car payments?

Yes. A Chapter 13 bankruptcy will allow for the past due payments and the entire balance on your car loan to be consolidated in the bankruptcy plan, which will allow you to pay it off in within the 3- to 5-year timeframe already discussed. The car finance company will no longer be able to repossess your car and you will no longer have to make a payment directly to the finance company. Only one payment is made, and that is to the Chapter 13 bankruptcy trustee appointed by the bankruptcy court to oversee your case.

Can filing a Chapter 13 bankruptcy stop a foreclosure and help me keep my house if I am behind on my mortgage payments?

Yes. A Chapter 13 bankruptcy plan helps a homeowner stop a foreclosure and allows for the past due mortgage amount to be included in the bankruptcy plan, to be paid over a 3- to 5-year timeframe. Keep in mind that you will have to demonstrate to the bankruptcy court through the submission of certain financial documents your ability to stay current on your mortgage payments while still being able to make the payments set forth in your Chapter 13 bankruptcy plan.

Can I keep any of my credit cards?

No. All creditors are treated equally. Consequently, you cannot pick and choose which creditors you want to list in your bankruptcy. You must list all of your creditors.

What is a Chapter 13 bankruptcy plan?

A Chapter 13 bankruptcy plan is an interest-free debt repayment plan through which you consolidate your debts, usually making a biweekly or monthly payment on your debt over a 3- to 5-year period. Debts that are often consolidated in a Chapter 13 bankruptcy include mortgage arrears and balances on car loans, student loans, credit card debts and other unsecured debts. All outstanding debt must be included in the Chapter 13 bankruptcy.

Who can file for a Chapter 13 bankruptcy?

The main eligibility requirement is that you have a steady source of monthly income and that you have enough money that at least a certain percentage can go towards paying your debts as set out in your Chapter 13 bankruptcy plan.

Chapter 7 Bankruptcy:

I was contacted by a creditor after I filed for bankruptcy, what should I do?

Get the name, address and telephone number of the person contacting you about the debt, as well as the name of the original creditor. Then give us a call and tell us the exact circumstances of the contact. You may have grounds for lawsuit that will cost you only the court filing fee and expenses. If we agree to take the case, we will not charge you attorney’s fees; we will seek to have our attorney’s fees paid by the debtor company.

Is there credit available to me after a Chapter 7 bankruptcy filing?

Depending on how good your credit was before filing bankruptcy, some credit may be less available to you and/or the terms of credit may be less favorable to you. However, many people find some types of credit are available to them immediately after receiving their bankruptcy discharge and they are eligible for competitive home and automobile loans in about 24 months. The important thing to keep in mind is to be financially responsible and pay any new debt in a timely manner. Also limit any post-bankruptcy discharge debt that you incur, because if you do get into financial difficulty again, you will not be able to file for bankruptcy unless it has been at least eight years since your last bankruptcy.

What happens if I get into financial trouble again and need to file for bankruptcy again?

If you meet the legal eligibility requirements, you can file once every eight years. Despite being eligible for filing for bankruptcy every eight years, it should be your intent and determination not to have file for bankruptcy again.

What are the negative results of a Chapter 7 bankruptcy?

The main disadvantage of a Chapter 7 bankruptcy is that a record of the bankruptcy filing stays on your credit report for 10 years.

Are there any positive results of a Chapter 7 bankruptcy?

Of course. One immediate result is that once the Chapter 7 bankruptcy is filed, none of your creditors listed in the bankruptcy can conduct any collection activities against you without filing certain documentation with the bankruptcy court and asking the bankruptcy judge for permission.

If your wages are being garnished, most wage garnishments are immediately stopped. However, certain obligations such as child support payments do not stop upon filing a Chapter 7 bankruptcy.

If you have lost either a home or a car to foreclosure or repossession, a Chapter 7 bankruptcy will generally eliminate the deficiency balance owed to your creditors after they have taken and resold your property for less than the amount you owed to them.

As soon as you file a Chapter 7 bankruptcy your creditors must immediately stop any sort of collection activity against you, including a foreclosure or repossession. It is important to remember, though, that the filing of the Chapter 7 bankruptcy only slows down a foreclosure or repossession; it does not eliminate the foreclosure or repossession.

If you owe IRS or state taxes, filing bankruptcy stops the IRS and state tax agencies from any form of collection activity during the Chapter 7 bankruptcy process. Depending on the circumstances, you may be able to also eliminate some of your tax debt.

Probably the most important benefit is that most credit card debt, medical bills, broken leases, certain deficiency judgments and other types of unsecured debt are eliminated in a Chapter 7 bankruptcy, and you get a financial fresh start. 

What happens if I want to file a Chapter 7 bankruptcy, and my household income amounts to more than my jurisdiction’s median income requirement, and I don’t pass the Means Test?

You need to consult an attorney about your other options. One option may be to file for a Chapter 13 bankruptcy. However, since there may be other options, you should consult with an attorney to discuss all of the potential ways to deal with the situation.

Why did Congress decide to come up with this “Means Test”?

The Means Test is based off your jurisdiction’s median income. If you and any other members of your household who have income make less a year than your jurisdiction’s median income for households of the same size, you will qualify to file a Chapter 7 bankruptcy.

How can I determine whether I qualify to file a Chapter 7 bankruptcy?

Since the bankruptcy law changed in 2005, the determination as to whether you qualify for a Chapter 7 bankruptcy is based on your income and household size, among other factors. Congress created what is referred to as the “Means Test” to help determine whether someone is eligible to file a Chapter 7 bankruptcy by entering the person’s income and household size, among other financial factors, into this Means Test formula.

Who can file a Chapter 7 bankruptcy?

Usually, those debtors with little or no income and with little or no assets of any significant value, or those debtors on fixed income such as social security or pension benefits can file a Chapter 7 bankruptcy, depending upon the amount of the fixed income.

Consumer Debt Issues:

I think a debt collector might have violated the law in regard to its debt collection practices. What can I do?

You might have the right to sue the debt collector under certain circumstances. If you win, the judge can require the debt collector to pay you for any damages you can prove you suffered because of the illegal collection actions. The judge can also require the debt collector to pay you up to $1,000.00 even if you can’t prove that you suffered actual damages. You can also be reimbursed for your attorney’s fees and court costs. This can occur in very fact-specific circumstances, so if you believe that you have a situation where a debt collector has acted illegally, contact Cathy Braxton for a free consultation.

I was sued. I ignored the lawsuit and a default judgment was entered against me. Can a debt collector garnish my bank account or my paycheck?

If a judgment is entered against you, the debt collector can get a garnishment order against you, directing a third party, like your bank, to turn over funds from your account to pay the debt.

Wage garnishment happens when your employer withholds part of paycheck to pay your debts. Your wages usually can be garnished only as a result of a court order. This is why it is so important to not to ignore a lawsuit summons.

What is a default judgment?

A default judgment is essentially a legal court ruling as to the amount that a person must pay the party bringing action against him or her. This legal court ruling is made without the consent of the person being sued, usually because he or she did not come to court in response to a court summons.

I think I might owe the debt I am being sued on, so should I just pay them the money or try to defend against the lawsuit?

It depends on the particular facts of your case. Keep in mind, though, that there are a lot of good reasons to at least consult with an attorney about defending against the lawsuit, and if it is a very old debt or a debt that you do not recognize, whether you should make any sort of payment arrangements at all. For example, the legal timeframe for the debt collector to collect on a debt may be up, and giving a payment, even a small payment, may start the timeframe again. Not defending the lawsuit and just ignoring it allows the debt collector to get an immediate default judgment, whereas defending the case puts it “at issue” and requires the debt collector to present evidence that shows he is legally entitled to be paid for this debt. Defending the case may also make it possible to negotiate a favorable settlement, whereas allowing a default judgment to be entered against you leaves you with very little negotiating power.

A debt collector is suing me, what should I do?

The most important things to do are (1) don’t panic; (2)  don’t beat yourself up, it happens more times than you think and (3) don’t ignore altogether or put off dealing with the lawsuit. Either respond to the lawsuit personally, or through an attorney, as soon as possible and definitely by the date stated in the court papers, so that you preserve all of your rights.

Can a debt collector contact anyone else about your debt?

If you are represented by an attorney, then the debt collector must contact the attorney rather than you. If you don’t have an attorney, a debt collector may contact other people, but only for very limited purposes. In other words, the debt collector can contact other people only to find out your address, your home telephone number and where you work. And debt collectors are usually prohibited from contacting third parties more than once.  Other than to get location information about you, a debt collector generally can’t discuss your debt with anyone except you, your spouse or your attorney without your express permission.

How can I stop a debt collector from contacting me?

If a collector contacts you about a debt and you don’t want the collector to contact you again, tell the collector – in writing – to stop contacting you. Here’s how to do that:

Make a copy of your letter. Send the original by certified mail, and pay for a “return receipt” so you will be able to document what the collector received. Keep in mind that sending this letter to a debt collector does not necessarily get rid of the debt (if it’s actually owed), but it should stop the contact from the debt collector. Once your letter is received, the debt collector may not contact you again, with two exceptions: a debt collector can contact you to tell you there will be no further contact or to let you know that the collector or the creditor intends to take a specific action, like filing a lawsuit.

What types of debts are covered under the FDCPA?

The FDCPA covers personal, family and household debts, including money you owe on a personal credit card account, an auto loan, a medical bill or to your mortgage company. The FDCPA would not cover a debt you incurred running a business.