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Do I need an attorney to file for bankruptcy?

The Bankruptcy Law significantly changed in 2005, making it more difficult to file for bankruptcy protection. Although you are not legally required to have an attorney file for bankruptcy, consulting with an experienced Bankruptcy Attorney will help you fully understand your options and avoid potential pitfalls. For example, failure to obtain Credit Counseling before filing or not providing certain documents to the Court and the Trustee timely will cause your case to be dismissed. Other problems that could result include losing your home or other property you are trying to protect, that you otherwise may have been able to protect had you sought out legal advice. There are a number of Bankruptcy Preparer Services that advertise that they can prepare and file your petition for you, however, they are prohibited from giving legal advice and they cannot represent you when a problem develops. There are a number of pro bono services that may be able to assist you if you qualify for free legal services.

What Are the Positive Benefits of Bankruptcy?

While bankruptcy carries a nasty cultural stigma with it, it may be a very positive choice for a number of indebted individuals to help them lighten their financial burden. Here is a list of the possible benefits that bankruptcy can bring:

1. Allows for the "discharge" of most, if not all of your debts. This means that you are no longer legally obligated to pay the debts.

2. Prevents property from being repossessed, or it may require creditors to return property that was repossessed.

3. Stops the collection process. This means that creditors must stop attempting to collect on the debts.

4. Prevents you from having your utilities cut off, or if they are cut off, requires the utility company to restore service.

5. Stops/Prevents wage garnishment.

6. Halts the Foreclosure Process and gives you time to catch up on payments. This means you will not necessarily lose your house or mobile home.

7. Gives you the opportunity to dispute false claims from creditors who may be trying to collect more than what it owed to them.

While bankruptcy will allow for the discharge of a number of debts, others remain non-dischargeable according to federal regulation. Non-dischargeable debts include family support, student loans, certain types of taxes, and criminal fines. Liens, mortgages, and other secured debts will also survive bankruptcy procedures seeing as how they are secured by either some sort of collateral or by the federal government.

Additionally, it is important to remember that Chapter 7 Bankruptcy does not relieve a co-signer from any responsibility that he or she might have. The creditor has the right to enforce the co-signer's obligation. Chapter 13, on the other hand, will protect a co-signer as long as the debtor complies with his or her bankruptcy plan.

What are the different types of bankruptcy?

Paying for debts regardless of their nature is a mandatory obligation of every individual, as well as partnerships in business. In some cases, it might really be impossible or unreasonable to expect the borrower to be able to pay off under his present miserable condition.

Understandably, the government made provisions on different Bankruptcy Proceedings that a person or a group can acquire to protect himself from his creditors. This way, lawsuits that creditor are bound to file against the borrower would be avoided. He will also have a chance to protect his properties of retain possession of his assets.

However, it is important to remember that declaring bankruptcy will not prohibit criminal prosecution or cancel tax obligations. Also, a person may not use bankruptcy as a reason to excuse himself of his financial obligations for his children or alimony.

Let’s see some basic points about each kind of bankruptcy that are available to the public.

Chapter 7. Among the 5 types of bankruptcies, this one is the most uncomplicated. An individual, a married couple or business partners can apply for this proceeding. Before filing for an application, the individual or the group will be interviewed by a representative from a Credit Counseling Agency. He will be required to make an appearance on court. It usually takes about three and a half months before the proceedings are done. Afterwards the individual will be declared free from past unsecured debts. He will then be assigned a trustee who will be in charge of identifying which of his assets will be exempted from bankruptcy. The rest of his assets will then be sold and distributed among his creditors.

Chapter 9. This type of bankruptcy proceeding particularly deals with municipalities. Under thebankruptcy code, a municipality could be a political subdivision or a public agency. Since it involves a larger group, this type is a lot more complex than the other bankruptcies.

Chapter 11. This type of Bankruptcy Proceeding generally applies for business corporations. There wouldn’t be any designated trustee for a corporation; instead the corporation itself will come up with its own reformation plans. This may include actions to try to recover the productivity of the business, debt consolidation, and repayment strategies such as selling some assets, merging, and other possible options to generate some funds.

Chapter 12. This type of bankruptcy is exclusively for family farmers and fishermen. In this case, he will not lose any of his assets but will be required to pay of his debts out of his future earnings.

Chapter 13. Similar with chapter 12, here an individual is allowed to retain his property and pay off his credits out of his future salary. He may allot at least 10% or more out of his income to make up for his debts. Provisions could be made on his behalf to give some assistance with his payment plans

Will my creditors stop harassing me?

Many people who file for bankruptcy feel like that they have no more rights or protection from the law. In fact this is not so at all. Filing for bankruptcy is done under a set of rules and regulations and does afford some protection to debtors.

One of the foremost benefits of filing for bankruptcy is that creditors can no longer harass you. Once you file for bankruptcy your lawyer will call the collection agencies and this will result in cessation of all telephone calls and bills indicating lawsuits against you. There is something known as automatic stay which is a part of bankruptcy filing. This injunction is issued automatically upon filing of a bankruptcy case and forbids collection agencies to harass the debtor, or gain access to the debtors property or assets belonging to the estate. This automatic stay is intended to safeguard the debtors property and to give the individual a brief break from litigation. When Chapter 13 is filed, the stay also protects the debtor from other consumer debts.

Both state and federal laws shelter consumers from unfair debt collection practices.

Debt collectors are only allowed to call you at reasonable times that means between 8.00 am to about 8 pm.

You may also get debt collection letters in the mail. As a consumer, your financial dealings are strictly not to be disclosed and private. No collection agency is allowed to correspond with use of open postcards because this eliminates any privacy, as anyone may read the message. Moreover, a letter can only contain reasonable language without the use of any abusive words or threats.

You definitely have the right to stop a collection agency from contacting you once you have filed for bankruptcy. Do to this write to them and say you refuse to pay the money or notify them in writing that you want to stop all further communication with them. If this does not help, send them the name of your lawyer and this will immediately cease any further harassment.
As a consumer you should also be aware that there are federal and state laws in place to prevent collecting agencies from making threats, using obscene language, publishing anything negative about you or making harassing phone calls.

If you deem that a collection agency has desecrated your rights, get in touch with the Federal Trade Commission or seek an attorney who is knowledgeable about consumer rights. When you seek bankruptcy counseling, you will be advised of all your rights.

Will I lose my home in a bankruptcy?

Whether or not you will lose your home in a bankruptcy depends on the type of bankruptcy you file. In most cases, you will choose whether or not you wish to keep your home. If your home is about to be foreclosed, a bankruptcy can stop the foreclosure and you will not lose your home. You must, however, file chapter 13 in order to keep your home.

You can file an emergency Chapter 13 case on the night before your home is set to be sold in foreclosure and you will not lose your home. You will be able to complete the chapter 13 case and you will be allowed to work out an arrangement with your mortgage company. The filing of a chapter 13 case stops a foreclosure on a home.

Once the case is filed with the court, you will have to work out an arrangement with your mortgage company. Your bankruptcy attorney will handle this for you. The amount that is delinquent on your home will be put in your bankruptcy and that portion of the payment will be paid by the bankruptcy trustee.

You will still owe for your current and future mortgage payments. In some cases, you may be given one to six months in which no payment is due in order to recover from financial hardship. In this case, that amount is also included in the bankruptcy. You must request this and the attorney must file a motion with the court.

The mortgage company will cooperate with a Bankruptcy Attorney and will normally do whatever they can to keep your home from being foreclosed. The mortgage company will likely lose more money if the home is foreclosed than they will in the bankruptcy. The mortgage payments that are being made the mortgage company by you once your bankruptcy is in effect must be made in a timely manner. They payments must also be for the full amount owed each month. Otherwise, you may be in breach of contract and they mortgage company can petition the court to have a relief of stay, meaning they will then try to collect on the past due payments and force you back into foreclosure.

Simply stated, bankruptcy can save your home. However, once you are in bankruptcy, you must make timely payments to avoid future problems with the mortgage company. You are only given one chance by most mortgage companies to Resolve a foreclosure.

If I File Bankruptcy Do I Need To Go To Court?

Everyone who files bankruptcy must go to court. It is mandatory that each person filing bankruptcy appear before the Judge on their court date. It is mainly a formality but there are times when your case could be dismissed if everything is not in order. Your Bankruptcy Attorney will appear in court with you.

If you are filing Chapter 7, you will have a meeting of creditors in which any of your creditors may appear in court. If you fail to appear in court, your case will be dismissed. If everything is order and all of the required paperwork has been submitted to the court prior to your court date, you will likely be in court only one time. Your case will be conditionally approved and you will later receive a discharge of debts by the court.

In a Chapter 13 bankruptcy, the case becomes more difficult. It is possible that you will have to appear in court more than once. Again, this depends on whether or not all of the required paperwork has been submitted to the court. It also depends on if any of your creditors have made an appeal to the court.

On the day of court, your attorney will conduct business prior to you being called to the stand. If there are any missing documents or if there are outstanding issues with your case, your attorney will attempt to resolve those issues prior to you being called to speak to the Judge.

Once you are called to approach the Judge, you will be sworn in. You will be asked a series of questions, including if all of your creditors were contacted and informed that you are filing bankruptcy. If your attorney has handled your case properly, this will have been done by them. This is where you may run into a problem if you attempt to file bankruptcy without the help of an attorney.

Bankruptcy court isnt as intimidating as it sounds. It is a federal building and you will be required to go through security. You should dress appropriately for court. Be prepared to wait. You may be called within the first hour of being in court but this is unlikely. However, it isnt a stressful event and should be viewed mainly as a formality. Speak with your attorney if you have concerns about court.

Can student loans be part of my bankruptcy?

In most cases, student loans cannot be forgiven by a bankruptcy. Almost all student loans are federal debts. The only way to have a federal student loan forgiven is if you are permanently disabled. Otherwise, the loan must be repaid.

In almost all cases, you have to fill out the FAFSA or Free Application for Federal Student Aid. A federal student loan cannot be included in a chapter 7 or a chapter 13 bankruptcy. If you are making payments toward your federal student loans and you are filing chapter 13 bankruptcy, the amount that you are repaying is taken into consideration in figuring your payment that you will make to the trustee.

If you are permanently disabled and getting Social Security Disability, you can ask the lender for the paperwork to complete to have your student loans forgiven. This means, because you are disabled, you do not have to repay your loans. The paperwork must be completed and approved by the lender.

It is often the case that your student loans can be placed in deferment so that you do not have to make your payments while you are having financial difficulty. You can also request forbearance due to financial hardship. Ask your lender which you may qualify for. If you are eligible for a forbearance or deferment, the lender can send you the paperwork to sign.

Your Bankruptcy Attorney should be informed that you have student loans, despite not being able to include them in the bankruptcy. They are a part of your financial situation and your attorney may need to report them during the bankruptcy process. The court does look at your entire financial scenario when they are approving your case.

If you are filing for a chapter 13 bankruptcy, you will be repaying part of your debt to the trustee of the court. The amount that you pay monthly is determined by your income, your secured debts and your financial obligations. If you have a delinquent student loan, you will need to work out payment arrangements with the lender before your bankruptcy is filed so that you can report the payments to your attorney. Otherwise, you may end up paying a higher amount than if it were calculated at the time that your trustee payment is determined.

What Will Happen to My Home and Car If I File Bankruptcy?

In most cases you will not lose your home or car during your Bankruptcy Case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. However, some of your creditors may have a ‘‘security interest’’ in your home, automobile, or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

In a chapter 13 case, you may be able to keep certain secured property by paying the creditor the value of the property rather than the full amount owed on the debt. Or you can use chapter 13 to catch up on back payments and get current on the loan.
There are also several ways that you can keep collateral or mortgaged property after you file a Chapter 7 Bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth.

In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.

Do I Still Owe Secured Debts (Mortgages, Car Loans) After Bankruptcy?

Yes and No. The term ‘‘secured debt’’ applies when you give the lender a mortgage, deed of trust, or lien on property as collateral for a loan. The most common types of secured debts are home mortgages and car loans. The treatment of secured debts after bankruptcy can be confusing. Bankruptcy cancels your personal legal obligation to pay a debt, even a secured debt. This means the secured creditor can’t sue you after a bankruptcy to collect the money you owe. But, and this is a big ‘‘but,’’ the creditor can still take back their collateral if you don’t pay the debt. For example, if you are behind on a car loan or home mortgage, the creditor can ask the bankruptcy court for permission to repossess your car or foreclose on your home. Or the creditor can just wait until your bankruptcy is over and then do so. Although a secured creditor can’t sue you if you don’t pay, that creditor can usually take back the collateral. For this reason, if you want to keep property that is collateral for a secured debt, you will need to catch up on the payments and continue to make them during and after bankruptcy, keep any required insurance, and you may have to reaffirm the loan.

Can personal taxes be part of my bankruptcy?

If you owe personal taxes, you need to report all years owed to your bankruptcy attorney at the time you file your case. You may be able to include part of the tax debt in your bankruptcy. This is determined by the type of bankruptcy that you qualify for, the amount of taxes owed and other factors. It is important to bring any documentation pertaining to tax debts with you to your attorney at the time that you file your case.

In a Chapter 13 Bankruptcy, the taxes will be calculated in the trustee payment. You will pay on your bankruptcy for the time specified by the court. This is normally five years. At the end of the bankruptcy, you will no longer owe on the debt. Therefore, if you have taxes owed for several years and you file bankruptcy, you will no longer owe the taxes once your case is discharged.

In some cases, you may be able to have your tax debt reduced. You would need to talk with a tax consultant in order to do this. Check first with your Bankruptcy Attorney to find out what you will need to do. Your attorney may tell you who to contact at the local tax office.

There are different rules governing the issue of tax debt relief in different states. You may owe for taxes for your state or to the Internal Revenue Service. If you have received a letter from either your state revenue department or the IRS, take that with you to your attorney. Your attorney should explain the process to you and advise you as to what you must do to have the debt taken care of.

In most all cases, there is a way to either include a portion of the tax in the bankruptcy or have a portion of the debt forgiven. Do try to work this out prior to your bankruptcy court date. This is often a difficult process that involves several people. Paperwork has to be filed and documentation must be completed to resolve the debt. Give yourself time to complete each process. It will be well worth the time involved to resolve the debt