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Answers to Popular Bankruptcy Questions

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Over many years of practicing bankruptcy law, we have found that certain questions consistently reoccur.  If you are considering filing for bankruptcy, the below questions have likely crossed your mind.  

Please remember that this is broad information that may or may not apply to your unique situation. It’s critical to discuss your specific circumstances with an attorney who has the knowledge, expertise, and experience to assess your financial situation.

Below you will find the answers to frequently asked bankruptcy questions.  These answers can help you decide whether to proceed with the bankruptcy procedure or look into alternative debt-relief options.

How does bankruptcy work?

The two most common kinds of consumer bankruptcies are Chapter 7 and Chapter 13. 

Chapter 7 bankruptcy dismisses almost all types of debts, such as credit card debt, medical bills, and loans.  In the unlikely event that a debtor has non-exempt property (vacation homes, boats, excessive jewelry), the bankruptcy trustee may sell those assets and use the profits to pay your creditors.  Qualification for Chapter 7 is largely based on income, and there is no required payment to creditors.

A Chapter 13 bankruptcy contemplates that you pay some or all of your debts via a repayment plan. Debtors can use Chapter 13 to reorganize their debts while also making up on past taxes, unpaid mortgage arrearages, auto loans, and child support payments.

What Happens if I Declare Bankruptcy?

Most, if not all of your debts, will be discharged.  This means that declaring bankruptcy will relieve you of your legal responsibility to pay on the majority of your debts. It also has the ability to:

  • Stop your home or mobile home from going into foreclosure and offer you a chance to make up for missing payments. 
  • Save a car or other property from being repossessed (or sometimes force the creditor to return property even after it has been repossessed) 
  • Stop garnishment, debt collection letters, and other creditor measures to collect a debt
  • Stop a lawsuit from proceeding
  • Reinstate or avoid utility service termination.

Will I Lose My House?

A homestead exemption preserves a certain amount of equity in your primary house in most states. In Texas, the homestead exemption is unlimited in most circumstances.  It is extremely rare for anyone to lose their home due to filing bankruptcy.  If you are in danger of losing your home to foreclosure, a Chapter 13 bankruptcy will help you save the home and make up for any missing mortgage payments.

If you have a mortgage on your house, the mortgage does not disappear when a person declares bankruptcy. You must continue to pay the mortgage, like normal, to keep the home. 

Will I Lose My Car?

The answer is contingent on the automobile’s worth and whether you have a car loan. Texas allows debtors to exempt automobiles, which means a debtor can keep their car in almost all circumstances. The trustee won’t be allowed to confiscate your automobile if it is the main car you use.

If you want to keep your automobile, you must continue to make your monthly payments. Regardless of your bankruptcy discharge, if you default on your auto loan, your lender has the right to repossess the vehicle.

How Long Is It Going to Take? 

In most cases, a Chapter 7 bankruptcy will take three to four months to complete. A Chapter 13 bankruptcy typically takes three to five years, but can end sooner in some cases.

Why Do I Need a Lawyer?

Filing for bankruptcy is a legal and financial choice that can have long term implications if done incorrectly. It is critical for the debtor to fully comprehend all the rights associated with filing for bankruptcy. All paperwork must be correctly presented, and all requested actions must be followed. If you don’t complete the required tasks, your case may be dismissed without a discharge.

If I’m Unemployed, Can I Still File for Bankruptcy?

There is no requirement that you be employed to file a bankruptcy. 

If you file a Chapter 13 repayment plan case, your ability to make monthly payments is critical. During Chapter 13, the court wants to know that you can afford a repayment plan to pay back at least a percentage of your creditors, and being jobless may be an issue that prevents your case from being accepted.

The absence of income is a common reason for filing a Chapter 7 bankruptcy.  Discharging debt accrued due to lack of income can be very beneficial for many debtors.  If you do not have a significant source of income, you will almost always qualify for a Chapter 7 bankruptcy. 

Can a Bankruptcy Stop a Foreclosure?

The automatic stay will stop a foreclosure as long as the bankruptcy case is filed before the foreclosure is completed. 

How Much Will I Pay an Attorney?

As with any legal arrangement or contract with a lawyer, you’ll want to know exactly how the attorney will charge you for their services. Your total out-of-pocket costs are determined by the Chapter of bankruptcy you are filing, and the complexity of your case.

If you file a Chapter 13 bankruptcy, Acker Warren P.C. only requires a down payment cover court filing fees and the costs subject to the complexity of the case.  Complexity of the case is at attorney’s discretion based on years of experience handling various types of cases.

In Chapter 7, you’ll usually pay the total legal fee upfront before the case is filed, including court costs and other expenses. You will have to pay a court filing fee of $338.00 in addition to your attorney’s fees. The bankruptcy legislation also requires you to attend two credit counseling sessions, each costing about $50.00. Many lawyers spend approximately $50.00 for a complete credit report from a provider.

Do you have any more bankruptcy questions that need answers? Don’t hesitate to get in contact with Acker Warren, P.C., to learn more about bankruptcy. 

 

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