1) Should I file Bankruptcy? A person should file a bankruptcy if, and only if, he or she can’t pay bills as they come due or is about to lose property or have property attached by the Court. Very few people lose any property when they file bankruptcy. In Pennsylvania, you are allowed to keep $3,225 equity in a car, $10,775 in personal household goods, $20,200 in a home, and at least $1,000 in any property that you choose in a general exemption plus ½ of the unused portion of the home exemption. For married couples, filing jointly, these exemptions are doubled. In a Chapter 13, the property that can be kept is just about unlimited as the plan pays at least what a Chapter 7 would pay. Filing a bankruptcy is generally better than having a foreclosure on your credit record. A person will often be able to rebuild credit and buy a house within 2 years after a bankruptcy. A repossession can do more damage to your credit and it may take much longer to recover. Government regulations may forever keep you from financing a home with the VA or FHA if you have a repossession for a home, but allows financing 2 years after bankruptcy. Only 7 magical items may not be bankrupted: Child Support and Alimony; taxes less than 3 years old; federally guaranteed student loans; debts due to fraud; debts due to drunk driving; debts due to intentional injuries; and criminal restitution.
2) What does it cost to file bankruptcy? Court costs are about $299 for a Chapter 7 and $274 for a Chapter 13. Chapter 7 attorney fees at our office will run about $1,500 plus any expenses and Chapter 13 attorney fees will run about $3,000 plus any filing fees.
3) What happens when I file? When you file a bankruptcy, a Court order goes into effect immediately stopping all collection activity. This includes stopping foreclosures, attachments, garnishments, and Creditors calling you. The sooner you come in to the law office, the sooner you can get relief—and the more you can save from Creditors. You will have a 341 hearing within about 4 to 6 weeks after the bankruptcy is filed. When the bankruptcy is finally over, a discharge is issued. This is a final and permanent order to stop all collection activity and declaring the debts to be non collectable. Bankruptcy does not normally get rid of a security interest that you gave to a Creditor such as a mortgage or a standard car lien, but it does make you not liable for the debt.
4) Which bankruptcy is right for me: Chapter 13 or Chapter 7? A Chapter 13 is like a bill consolidation loan, and you normally file it to keep property and stop foreclosures. A Chapter 7 is used to completely wipe out unsecured debts and to get rid of secured debts for property you don’t want to keep. Both will stop garnishments and Creditor harassment. If you earn more than the average wage for your state and size of family you will normally be required to file a Chapter 13. Usually, the only times you will want to file a Chapter 13 are 1) when you have already filed a Chapter 7 and can’t file another one or 2) if you have so much property and equity that a Chapter 13 is necessary to keep that property. You may have to file a Chapter 13 if you have so much income (after you pay your normal monthly living expenses) that you can repay something to your debts. A Chapter 13 can repay child support, repay student loans, or protect a co-signer. The fortunate thing about virtually all Chapter 7 cases is that the Debtor’s assets are normally exempt, so there are rarely any assets to liquidate. Married couples with valuable assets, such as over $40,000 in equity for a home or over $7000 equity in cars (these amounts are for Pennsylvania), may want to choose Chapter 13.
5) Why file a Chapter 7? If you have substantial unsecured debts you may want to file a Chapter 7. You may also want to file a Chapter 7 if you want to surrender property and not owe for it. You can usually keep all your property in a Chapter 7, because you won’t have enough equity in any property to exceed the exemptions allowed.
6) Why file a Chapter 13? You may want to file a Chapter 13 if you have secured debts and are threatened with foreclosure or repossession, if you filed a Chapter 7 less than 6 years ago, if you wish to protect your cosigner, or if you have debts that are not dischargeable in a Chapter 7 but are payable in a Chapter 13. Child support can be paid first in a Chapter 13 before secured creditors giving you the advantage of not losing a car or property but having all of your payments go to child support at the start of the case.
7) Can I convert from a Chapter 13 to a 7 or from a 7 to a 13? Yes they can be converted. Few people convert from a 7 to a 13. However if you earn over $60-$70,000 you have a strong chance that the US attorney’s office will file a 707 b motion that may force you into a 13. If you file a Chapter 13 you have a good chance that you will have to convert from a 13 to a 7. Over 3-5 years, you are very likely to miss payments and have the Chapter 13 dismissed (or have to re-file). Some Chapter 13 cases are never finished and are converted into Chapter 7 cases. If you are close to completing the plan, you may be granted a hardship discharge. Plans can also be later modified if incomes change.
8) How long will bankruptcy take? It will take about 3 to 4 months for a Chapter 7 to be final. (You will get a letter within 10 days of filing, telling you the time and date of the 341 hearing. This hearing will be held about 4 to 6 weeks after you file.) A Chapter 13 will take as long as the repayment plan takes, usually from 36 to 60 months.
9) What are the most common mistakes I can make when filing? Not showing up for your hearing and not listing all of your debts. Fail to show up at the hearing, and your case is dismissed. Fail to list a debt, and you continue to owe it. Also people often have too much in a checking account when they file or a tax refund coming. The best policy is to list all your debts and assets. Always list every debt, even if you think it is non-dischargeable, it may be discharged anyway. Even include last month’s utilities.
10) How do I qualify for bankruptcy? Can I not be approved? You qualify for bankruptcy if either your outgo exceeds your income or your liabilities exceed your assets. If you don’t qualify, we will tell you when we type up the bankruptcy. You basically have to be a US citizen, reside in the state you file in, and not have filed within certain time periods (you can’t file two Chapter 7s within 8 years of each other).
11) What if the Court does not approve my Chapter 13 or Chapter 7? If there is anything wrong with your Chapter 13 or Chapter 7 bankruptcy it will usually be changed and amended. Of course, it is less costly and time-consuming to do it right the first time. If you earn so much money that you can afford a Chapter 13, you will be forced to change it from a Chapter 7 to a Chapter 13. Repayment plans often are amended.
12) How often can I file? You can file a Chapter 7 8 years after you filed your last Chapter 7 the time used to be 6 before 10-2005. The time is measured from the time of filing your first case to the time of filing of your second case. You can file Chapter 13s 2 years after a Chapter 13 discharge. You can file a Chapter 7 4 years after a Chapter 13. You can only have one bankruptcy going on at a time.
13) If I file does it mean my old bad debts are erased from my credit report? NO! What is reported is that you had a debt and that a bankruptcy was filed. Bankruptcy does not give you a good credit record or “repair” your credit record automatically. You repair your credit by paying your debts on time after the bankruptcy.
14) Can I file without an Attorney? Yes. You can file a bankruptcy yourself, and this is called “filing pro se”. You can also do dentistry on yourself, but we wouldn’t recommend it.. Considering the time and risk involved, we recommend you use an Attorney. You may lose far more in Court than what the Attorney would have cost—plus there is the extra time and effort on your part doing the work.
15) What about a Bankruptcy Mill? Filing a bankruptcy through a Bankruptcy Mill or paralegal may be even worse than doing it yourself and they often charge as much as the attorney. Many people have lost thousands of dollars with these businesses—through intentional scams or just plain bad work. Non-Attorney bankruptcy petition preparers are barred by law from providing you with any legal advice. In enacting legislation governing bankruptcy petition preparers, Congress stated: “These preparers lack the necessary legal training and ethics regulation to provide [legal advice and legal services] in an adequate and appropriate manner. These services may take unfair advantage of persons who are ignorant of their rights both inside and outside the bankruptcy system.” The bankruptcy petition preparer’s role is limited by law solely to typing. Unlike an Attorney, a bankruptcy petition preparer cannot help you understand the law, advise you how to answer questions, assist you in planning, or be in Court. Federal law requires that bankruptcy petition preparers sign any documents they prepare; print on the document their name, address, and social security number; and furnish you with a copy of the document. A bankruptcy petition preparer may not sign any document on your behalf, may not use the word “legal” or any similar term in any advertisement, and may not receive any payment from you for Court fees. The bankruptcy petition preparer is also required to disclose to the Court the amount of any fee you pay. Beware of any bankruptcy petition preparer who does not comply with these requirements.
16) How much do you charge? We charge a flat fee of about $1,000 for doing a personal uncontested Chapter 7 bankruptcy. Court costs are $300. Your total cost is $1400 including credit counseling. Chapter 13 Court costs are $275. We charge a flat fee of about $2,000 for doing a Chapter 13 bankruptcy.
17) Can I pay you in payments?. For a Chapter 7, our filing fee must be paid before we file the petition. For a Chapter 13, you only need to pay the filing fee before we file the petition—sometimes, in an emergency, even the filing fee can be paid in payments to the Court. Our attorney fee is often paid by post dated checks or installments.
18) What paperwork do I need to bring to my Attorney? Bring the names, amounts, account numbers and proper addresses of all of your Creditors. You may estimate the amounts. Credit bureau reports normally don’t have the addresses on them.
19) How can I get a copy of my credit report? You can get a free credit report if you have been denied credit, are unemployed, are a victim of fraud, or are on welfare.
To get one free (if you qualify) or for a small fee (if you don’t) without going through a “middle man” just contact any of the 3 major reporting services below. They will charge you between $3.00 and $8.50 depending on your state of residence.
1. Experian (TRW) at 1 888 EXPERIAN (1 888 397 3742) allows you to charge your credit report to your Visa or MasterCard over the phone.
2. Trans Union at 1-800-888-4213 or write to: Trans Union Corporation Consumer Disclosure Center, P.O. Box 390, Springfield, PA 19064-0390
3. Equifax at 1-800-685-1111 or write to: Equifax Information Service Center P.O. Box 740241 Atlanta, GA 30374-0241. For $8, you can get an immediate report online from Equifax at: http://equifax.com/resources/fcra_info_rights.html
If you decide to write to any of these services, be sure to include your: name, address, phone number, previous addresses for the past two years, social security number, birth date, employer, signature—and be sure to include your payment. (You’ll have to call to get the payment amount.) Proof of identity such as a photo copy of your driver’s license will also be required. Normally you are better off if you just pay for the report.
20) Can I file jointly with my spouse? Does my spouse have to file or sign if I want to file individually? Yes, you can file jointly. No, your spouse doesn’t have to file but, if most of your debts are joint debts, he or she may want to. There is no need for a spouse to file if the debts are not in his or her name. If you are filing a Chapter 7, and the bills are also in your spouse’s name, he or she generally should file to be protected. (Co-signers are protected in a 13 with 100% plans, but are not in a Chapter 7.) There should be no additional charge for a spouse filing, but some firms charge extra. The only extra work to do in a joint filing is adding an additional name and social security number to the petition.
Dunne Law Offices, P.C.
1500 JFK Blvd, Two Penn Center, Suite 200
Philadelphia, PA 19102