Bankruptcy - Frequently Asked Questions
At Andress | Inzina, we represent people with serious debt problems. We provide answers that can relieve the pressure you are under. Here are a few of the questions we often receive from people when they first come to see us. The answers are generalized information and are not to be considered legal advice. To learn how bankruptcy might help in your situation, contact us online or call one of our office locations.
What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
There are many differences between Chapter 7 and Chapter 13. A Chapter 7 is a liquidation of assets, whereas a Chapter 13 is a reorganization of debt. In Chapter 7, there is no payment plan, whereas, in Chapter 13, you are in a three- to a five-year payment plan.
Chapter 7 cases last approximately three months, and Chapter 13 cases usually last the full five years if they are successful. All fees and costs in a Chapter 7 are due before filing, but in a Chapter 13, you only pay a portion of your fees up front. You do not need an income to file Chapter 7, but an income is required to proceed in a Chapter 13.
As you can see, the differences are numerous. In most cases, it is clear which chapter will best suit your needs. This is something that we can discuss in detail at your initial consultation.
Do I Qualify for Chapter 7 Relief?
The answer depends on what is known as the “means test.” To qualify, your income over the past 6 months must fall below the median income in Louisiana. When you meet with us, we will discuss the means test to make sure you choose the correct form of bankruptcy.
Will Bankruptcy Erase All My Debt?
Bankruptcy is a powerful tool. It has the power to help people get back on their feet after suffering financial hardship. That said, there are debts that bankruptcy does not have the power to erase. The discharge of debts at the end of Chapter 7 will not affect the following:
Debts you did not disclose in your bankruptcy filing
Most student loans
Some local, state and federal taxes (typically the most recent bills)
Child support and alimony payments
Debts for luxury goods or services incurred in the 90 days prior to filing for bankruptcy
Miscellaneous fees, fines and penalties
You should discuss your concerns about any of these debts with your attorney before filing for bankruptcy.
What Will Filing Bankruptcy Do to My Credit?
Odds are that if you are seriously considering filing for bankruptcy protection, then your credit report is probably not looking good. Lawsuits, judgments, late payments, collection accounts and charge-offs reflect negatively on your credit. A bankruptcy is just another credit event that appears on your report. Bankruptcy does not destroy your credit score forever.
Will I Be Able to Get Credit Again?
In a word, yes. Many of my clients have received financing for homes and cars within a couple of years after filing bankruptcy. There used to be a stigma attached to filing bankruptcy, but that is a thing of the past. With so many people and businesses filing for bankruptcy, we can't imagine that banks and lending institutions go more than a few days without seeing a bankruptcy on the credit report of a potential borrower.
Will I Lose My House or My Car?
The Bankruptcy Code is designed to provide you with a fresh start. Your home and car are vital components to that fresh start and to reestablishing yourself as a productive member of the economy.
One of the main reasons to hire an attorney to navigate you through the bankruptcy process is to avoid the loss of assets. Each case is different; in most cases, it is possible to keep your house, car, home furnishings and appliances through the appropriate use of exemptions, as well as with careful bankruptcy planning and strategy. If any of these items is encumbered by a loan, it is also vital that the payments are made—either directly or through a Chapter 13 plan—and that you maintain insurance on the property.
How Much Does Bankruptcy Cost?
The down payment on Chapter 13 cases starts at $650.00, depending on case complexity. Chapter 7 fees are due before filing and depend upon the type of case.
What Happens After I File a Chapter 7 Bankruptcy?
After filing your Chapter 7 bankruptcy case, you will be required to attend a creditor’s meeting. This meeting will occur roughly a month after filing. Prior to this meeting, you will receive a notice from the court and a letter from Andress | Inzina notifying you of the court date and time. You will also receive a letter from your trustee, asking you to turn over certain documentation.
You must comply with the requests of your trustee. Attendance at your creditor’s meeting is mandatory, and you must bring your original driver’s license and Social Security card. We will be there with you. The trustee will swear you in, turn on his or her tape recorder and ask you a series of specific questions that you must answer truthfully, under oath. The meeting usually lasts about five to 10 minutes, and after the meeting is concluded, you are free to leave.
You will be scheduled to receive your discharge approximately 60 days after the creditor’s meeting. Between the meeting and your discharge date, you must complete your financial management course and sign any reaffirmation agreements. If your case is an asset case, you will also receive additional correspondence from the trustee. If you have an asset case, you will need to coordinate with our office and the trustee to retain your assets and pay the balance due.
Once you receive your discharge, your case is usually closed, unless the trustee is administering assets. The administration of assets usually does not delay the discharge of your debts.
What Is a Reaffirmation Agreement?
A reaffirmation agreement is an agreement between you and one of your secured creditors that is signed by both parties and filed with the court for the judge’s approval. Under the terms of the reaffirmation agreement, the creditor is agreeing to allow you to keep the collateral, such as a car or a house, as long as you make the payments and keep the property insured.
Signing a reaffirmation agreement excludes that debt from discharge. It is a way to keep property that would otherwise be sold to pay off your debts.
What Happens After I File a Chapter 13 Bankruptcy?
After filing your Chapter 13 bankruptcy, you will be required to attend a creditor’s meeting. This meeting will occur roughly a month after the case is filed. Prior to this meeting, you will receive a notice from the court and a letter from Andress | Inzina notifying you of the court date and time.
Attendance at your creditor’s meeting is mandatory, and you must bring your original driver’s license and Social Security card. We will be there with you. The trustee will swear you in, turn on his or her tape recorder and ask you a series of specific questions that you must answer truthfully, under oath. The meeting usually lasts about five to 10 minutes, and after the meeting concludes, you are free to leave.
Plan payments to the Chapter 13 trustee are due 30 days after the case is filed and direct payments to secured creditors are due on the next due date after the case is filed. Failure to make these payments could result in the dismissal of your case or the lifting of the automatic stay that protects your property.
After the creditor’s meeting, the trustee will usually want some additional documentation. If so, you will need to provide that information to us, so we can turn it over to the trustee. Also, you must turn over all check stubs and all proof of mortgage payments to our office until your case is confirmed. Failure to do so could harm your case.
There is a second hearing in Chapter 13 cases called a confirmation hearing. This is the hearing where the judge reviews your proposed payment plan for approval or confirmation. Once your plan is confirmed, you just need to make sure that you make all your payments, on time and in full, to successfully complete your case.
Between the confirmation hearing and your discharge date, you must complete your financial management course. Failure to complete your financial management course will prevent you from receiving your discharge.
Will I Lose My Tax Refund?
Your tax refund is property of your bankruptcy estate and should be turned over to your trustee immediately upon receipt. In a Chapter 7 case, you will usually have to give up your tax refund for only one year. In Chapter 13 cases, your tax refund will go to the trustee during the entirety of your case (three to five years). The trustees use the tax refund money to distribute to creditors.
Discuss Your Situation in a Free Initial Consultation
If you are tired of worrying about debt and want to take control of your financial life, we can help. At Andress | Inzina, we have extensive bankruptcy experience in South Louisiana. We can answer your questions and put your mind at ease, knowing that you are on the path back to financial health.
To schedule a free consultation with one of our South Louisiana bankruptcy lawyers, contact us online or call one of our convenient office locations.