Frequently Asked Questions
What types of bankruptcy are there?
The bankruptcy laws are divided into chapters ... like the chapters of a book. Some of the chapters relate to all bankruptcies filed, and some of them relate only to specific types of bankruptcies. Our office is concerned primarily with personal or consumer bankruptcies. These are covered by Chapter 7 (straight bankruptcy) or Chapter 13 (debt payment plan). To determine which chapter you qualify for, we must consider your income and living expenses, property you own, and the amount and type of your debts.
What is Chapter 7?
Chapter 7 is also called straight bankruptcy, and is available to those persons who cannot reasonably make Chapter 13 plan payments. If you file a Chapter 7, essentially all of your unsecured debts are eliminated (the exceptions are said to be "non-dischargeable" and are described below). If you have secured debts, then you could either keep paying the creditor on time, sometimes work out an easier payment plan, or give up the collateral. In some cases, the lien can be voided or canceled, and you keep the collateral without paying the loan. A good example of this are the small loans many people get that are secured by everyday household items. You are allowed to keep certain rights you have in a home, cars, household and personal goods, jewelry, and many other items up to a point. These are called exemptions and will be explained to you as needed by our office personnel. Persons filing Chapter 7 usually do not lose anything they own. A Chapter 7 is generally concluded within 6 months after it is filed.
What is Chapter 13?
The main feature of Chapter 13 is a payment plan whereby you make a single payment each month to a person called a "trustee", who then will pay some or all of your creditors for you. Your payments to the trustee would be substantially less than the total of payments you are presently making to your creditors. If you desire, your payments can be made by an automatic deduction from your paycheck. In most Chapter 13 cases, you are allowed to keep possession of everything you own. We will help you draft the proposed payment plan within the limitations of the law and subject to the approval of the trustee and the bankruptcy court. Through such a plan, you can stretch out short-term debts up to 60 months, eliminate interest on unsecured debts and some secured debt, reduce interest rates on many other debts, substantially reduce some debts if necessary because of your budget limitations, and catch up arrearages or delinquencies on homes, mobile homes, cars, and other debts. Sometimes, in chapter 13 plans, the unsecured creditors only get about 1% of of what you owe them through the payment plan and the other 99% is eliminated. The Chapter 13 plan represents your best good-faith effort to pay your creditors. Typically, a Chapter 13 plan lasts from 36 up to 60 months.
What is the automatic stay?
If it is your first time to file bankruptcy, at the moment the case is filed, you are automatically protected from your creditors. They are no longer supposed to talk or write to you about your debts, they cannot file suit against you, all lawsuits including foreclosures against you are stopped, and they cannot repossess anything from you without permission from the bankruptcy judge, among other things.
What about my home?
If you are behind in your home payments, then it may be permissible to file a Chapter 13, which would allow you to catch up your payments over an extended period of time. This is true even if the creditors have started foreclosure proceedings, since the bankruptcy automatic stay stops foreclosures. It is a common practice to file Chapter 13 bankruptcies so that people with financial difficulties will have another chance to keep their homes. If you are current on your home payments, then you may simply keep making them on time, and bankruptcy generally will not interfere with your home loan. However, whether you are behind or current, if your home is worth a lot more than what you owe, that makes a difference in which type of bankruptcy you file and how you protect or keep possession of your home. We will need to discuss this situation with you and explain your choices.
What about my car?
Before you file bankruptcy, if you are behind in your car payments, then there are circumstances whereby it would be permissible for the creditor to repossess your car without getting a court order first. After you file bankruptcy though, you are under the court's protection and a creditor may not take your car without permission from the bankruptcy judge. In Chapter 13 cases, car payments are usually reduced to make it easier to pay for the car. In Chapter 7 cases, you can still keep your car only if you are current and you keep your payments current, or you work something out with your creditor. Of course, in either case, you have the choice of giving your car back to the creditor to get out from under the car payments altogether. If you don't owe anything on your car, or if it is worth a lot more than what you owe, that makes a difference in which type of bankruptcy you file and how you protect and keep possession of your car. We will need to discuss this situation with you and explain your choices.
What about my furniture?
Usually, people that file bankruptcy do not lose any of their household furniture or similar personal items. The laws are very good about letting you keep furniture and personal belongings that have already been purchased and paid for at one time or another. However, if you are presently buying some furniture or other personal items of any significance, then you may be required to continue paying in order to keep them. But such purchase debts are frequently paid out through a Chapter 13 at much lower payments. In a Chapter 7, purchase debts are handled by keeping the payments current, working out new payments with the creditor, or giving up the collateral.
Do I have to go to court?
There is one court hearing that you will have to attend which usually lasts about 5-10 minutes. However, at the present time, you attend that hearing simply by a phone conference call, and you can do this in the comfort of your own home. I will be on the phone as well. The trustee and your creditors have a right at that hearing to ask some basic questions about your income and what you own. However, most creditors do not call in to attend the "hearing", and the few questions asked are very simple ones. For that reason, our office will handle bankruptcy matters for people from surrounding counties in the upstate.
What about my credit rating?
Generally a person's credit is already bad by the time they are thinking about filing bankruptcy, and you should certainly expect it to be worse if you do file. However, the mere filing of bankruptcy does not stop you from getting credit in the future; rather, that is a decision to be made by each creditor. Some creditors rely heavily upon your credit report to decide whether to give you credit. Chapter 7 can show up on your credit report for 10 years from the date you file bankruptcy, and a Chapter 13 can be on your credit report for 7 years. By comparison, however, a judgment against you may be reported for 10 years, and a charged-off debt or repossession may be reported for seven years. So many people are filing bankruptcy nowadays, a growing number of creditors are carefully looking at the circumstances in order to grant credit to people who have filed. For example, if you have a good income, and no longer have any debts because of the bankruptcy, some creditors would consider extending credit to you. We hope, though, that in the future you will be able to avoid the use of all forms of credit.
What about attorney's fees?
Unfortunately, we must charge for our services. The fees, vary from year to year, and depend upon the type of bankruptcy and other related services which are needed. Our fees are competitive here in the Upstate and we give discounts for clients with low income, fixed income only, elderly widows, and others. However, we can't quote a final fee until after you complete our worksheets and, in some cases, after the first interview, which takes about 1 hour. Limited fee payment plans are available in almost all cases.
I would imagine that attorney's fees can be high. Can't I just fill out the bankruptcy forms myself?
Filing bankruptcy on your own can be a disastrous move. You may unknowingly submit incomplete information, you may miss a deadline, you may not claim all property as exempt to which you are entitled, or you may attempt to file under the wrong chapter. As a result of not completely adhering to or understanding the law and procedures, your case could be dismissed without debts being discharged. Mr. Bailey will guide you through the process to make it as easy as possible for you, and help you to achieve the desired goal of getting back on your feet again while protecting your property, wherever possible. The present law is very complex. There is so much information for you and your attorney to discuss and disclose in court documents, many deadlines to keep track of, and new provisions regarding eligibility for bankruptcy. Mr. Bailey will need to obtain a credit report for you that is specialized for bankruptcy only and it will connect your case with the bankruptcy departments for most major creditors. Because of the complexity and work required, the fee you pay to Mr. Bailey is money well spent. After all, most creditors will have attorneys representing them who know the system and the rules. So. you will also want an experienced attorney on your side to protect your rights, and you will be pleased with the result.