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Answers to Popular Bankruptcy Questions
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.
Prevent or Avoid Repossession
One of the most common concerns among bankruptcy filers is the potential of losing their property after filing the case. Our clients obviously rely on their vehicles to go to and from work and home. Some people file bankruptcy with their vehicle loans already in default. When it comes to preventing repossession during bankruptcy, what is the best advice?
Our goal is to inform our clients about all aspects of bankruptcy. Having the correct information helps individuals to make educated decisions while avoiding potentially harmful information. There are a lot of misunderstandings about Texas repossession law. Any property encumbered by loans, like automobiles, furniture, and appliances, may be subject to repossession by a creditor if you default on your payments. If you are late or otherwise default on your loan contract, repossession may occur without warning.
If you fall behind on payments on your car or other collateral, the first step is to contact your creditor. The creditor is not required to cooperate with you, even if it’s only a temporary problem. If they do, be careful to have any arrangement in writing, as creditors may still seize your property after accepting partial payment.
Bankruptcy and Student Loans: What You Need to Know
You may have heard that student loans are not dischargeable in bankruptcy. However, this is a construed and oversimplified statement. Under certain circumstances, you can get your student loans discharged, but the threshold is higher, and the process is more complicated than it is for other forms of debt.
To do so, you must demonstrate that paying the debt will cause you and your dependents undue hardship. Courts use different criteria to determine whether a borrower has shown undue hardship. Our District, the 5th Circuit uses the Brunner Test.
The student loan will get canceled if you can successfully prove undue hardship. Declaring bankruptcy also shields you from collection actions on your debts.
Consult with a bankruptcy lawyer to understand how bankruptcy and student loans interact.
Facts about Bankruptcy and Taxes
There is a life after bankruptcy, and it includes taxes. Since bankruptcy and tax laws are both complex, it is critical to know how filing for bankruptcy may impact previous tax debt as well as future commitments to the IRS before you file.
The Bankruptcy Code requires a debtor to file an individual tax return or request an extension, per the IRS Publication 908 Bankruptcy Tax Guide and this return MUST be provided to your case Trustee. The bankruptcy case may convert or dismiss if this does not occur.
Bankruptcy and taxes can make anyone feel uncomfortable, especially during hard times. In this article, Acker Warren P.C. will share some facts about bankruptcy and taxes so you can prepare for what to expect and hopefully reduce some stress.
Arlington Based Firm Acker Warren P.C., Selected to Texas Rising Stars List 2021
The research team at Super Lawyers selects no more than 2.5 percent of the lawyers in the state to obtain this honor every year. The Texas Rising Stars list for 2021 included Arlington Based Law Firm Acker Warren P.C.
Super Lawyers is a Thomson Reuters business that recognizes distinguished lawyers from more than 70 fields of practice that have attained a high rate of peer recognition and professional success. The picks for the Rising Stars list are made by a patented multistage process that includes a statewide lawyer survey, an unbiased polling assessment of candidates, and peer reviews by practice field. As a result, a trustworthy, extensive, and varied list of outstanding attorneys develops.
About 2.5 percent of lawyers in each state are named to the Rising Stars list. To be considered for Rising Stars, an applicant must be under 40 years old and have practiced for a decade or less. Licensed and practicing attorneys are eligible to be nominated by their peers.
I Have Been Sued By a Debt Collector. Now What?
Getting sued by a debt collector can be overwhelming. Financial hardship takes a toll on our minds and can affect our mental health. However, it is essential to know that you’re not alone and have options if you’re facing debt-related problems. To understand what to do when you have been served, you’ll need to learn more about what happens to unpaid debts and how these lawsuits typically proceed.
What Happens When You Don’t Pay Your Debt
When you miss a monthly payment on a loan for the first time, the creditor will most likely contact you or send you a letter via email or postal mail to recover the overdue amount. After several months of missed payments, the initial creditor is likely to cut losses and sell the loan to a collection agency. The debt collector who bought your debt will then start collecting from you. If all collection efforts fail and you proceed to fall behind on your payments, creditors can file a lawsuit against you.
What is an Emergency Bankruptcy Filing?
On some occasions, debtors must act quickly to stop a creditor’s collection action such as garnishment, foreclosure, or repossession. In that case, quickly declaring bankruptcy may be beneficial. When a Debtor files a case, the court issues an automatic stay, which prevents most creditors from pursuing recovery efforts against you. However, completing all the bankruptcy forms takes time. If time is of the essence, you can file an emergency bankruptcy to obtain an automatic stay and file the remaining documents afterward.
An emergency bankruptcy filing is filed without any of the requisite paperwork to avoid a collection proceeding that is about to happen, such as a foreclosure, repossession, or wage garnishment. With an emergency bankruptcy filing, the automated stay is activated, halting all collection actions. The filer gets some time to complete the remainder of their bankruptcy forms. If the filer does not meet the deadline, the bankruptcy is dismissed, lifting the automatic stay.
What Does Life After Bankruptcy Look Like?
Some people find themselves in a situation where they are unable to repay all their accumulated debts. Whether it is due to medical emergencies or a job loss, these dire situations put some people in a position where they have no choice but to max their cards and deplete their savings. Unfortunately, making the minimum monthly payments on credit cards and loans remains challenging even with unemployment checks or a temporary job.
Filing for bankruptcy can be a viable approach if you have financial issues. All collection actions are halted, including phone calls, wage garnishments, and certain lawsuits. It also eliminates various debts, such as credit card accounts, medical bills, and personal loans. However, it does not eliminate all responsibilities. For example, you still need to pay your student loans (most filers will NOT qualify for student loan discharge) as well as arrearages for child support, alimony, and most tax debts.
Life after bankruptcy means a new beginning. Your credit score will likely improve immediately upon discharge of your case. This is due to a large portion of one’s credit score stemming from the Debt-to-Income Ratio. The bankruptcy filing will stay on your credit report for ten years. However, it will only affect you for about two years. Most filers find that they can purchase a vehicle the instant a case is discharged. Additionally, debtors can expect a reasonable interest rate on a vehicle approximately a year after discharge. Most filers find that they are able to receive a credit card as soon as the Bankruptcy has been discharged. The reason for the rapid recovery of one’s credit is because you are viewed as a lower risk post discharge. You have legally written off at least some of your previous debts thus lowering your debt-to-income ratio. The largest affect stemming from a bankruptcy filing is a filers ability to qualify for a mortgage. Most filers find that they can qualify for a mortgage 2 years after a Chapter 7 discharge.
Filing for Divorce and Bankruptcy
Financial struggles are a common source of marital difficulties that lead to divorce. Going through a tough divorce during the COVID-19 pandemic is difficult enough. Still, the struggles will be exacerbated if you lose your job or have to pay for extensive medical attention. Even if you don’t get sick or lose your job, divorce hurts most peoples’ finances and is the leading cause of bankruptcy in the United States.
Divorce and bankruptcy are two of the most stressful and mentally draining experiences a person can go through. Nonetheless, planning ahead will make both your bankruptcy and divorce less complicated and less expensive. The amount of property and debt you have, as well as the form of bankruptcy you intend to claim, determine if you can file for bankruptcy before or after a divorce.
In addition, applying for divorce and bankruptcy at the same time is not a smart option. Filing for bankruptcy when divorcing will confuse property separation, make each spouse’s living arrangement less predictable, and cause both the bankruptcy and the divorce to be prolonged.
Coronavirus and Bankruptcy
Bankruptcies track the financial climate as companies and consumers pursue relief from macro-economic disruptions. During the COVID-19 crisis, though, this relationship has flipped around. Despite media reports and many experts’ expectations on how the coronavirus and bankruptcy would interact, consumer and small business filing have sharply declined since mid-March 2020.
Despite accounting for a limited proportion of all bankruptcies, the number of Chapter 11 filings by major companies has risen since 2019. Consumers, small companies, and multinational firms have had different financial experiences during the COVID-19 crisis. Large companies have pursued and obtained bankruptcy protection as they would in a typical recession. Comparatively, affluent households have benefited on average from the fiscal stimulus and housing moratoria mandated by the CARES Act and other initiatives. Non-homeowners and small companies, on the other hand, may face financial, physical, and technical obstacles to filing for bankruptcy, especially in areas where unemployment is high.
From our office in Arlington, we serve clients throughout Tarrant County, Dallas County, Parker County, Denton County, Wise County, Dallas, Fort Worth, Irving, Grand Prairie, Bedford, Keller, Euless, Richland Hills, North Richland Hills, Mansfield, Coppell, Kennedale, Las Colinas, Burleson, Azle, Saginaw, Haltom City, Watauga, Southlake, Benbrook, Colleyville, Grapevine, Crowley, Aledo, Roanoke, Trophy Club, Carrollton, Farmers Branch, Richardson, and Hurst, as well as other communities across North Texas.
Results listed are not a guarantee or indication of future case results.
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