Bankruptcy FAQ

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At Rahaim & Saints, our attorneys work to support people who are facing bankruptcy. Over the years, we've noticed some bankruptcy frequently asked questions come up more often than others. Individuals like you may have some of those same concerns. That's why we've compiled these bankruptcy law FAQs to help you in your own process. If you have a question you don't see answered here or if you're considering filing bankruptcy, please contact our law firm for a consultation.

We've compiled the following bankruptcy law FAQs to help address some of the questions you may have. If you don't see your question answered here, or you need more support, contact Rahaim & Saints at any time for a consultation.

How do I know when I should file bankruptcy?

Generally, people file for bankruptcy when they face considerable debt, especially consumer debt, and have no means of paying it. If you are struggling with debt, you may be able to:

  • Consolidate it
  • Work out a payment arrangement
  • Take on a second job to pay down what you owe

However, if your debt is so overwhelming and you're getting collection calls, suffering wage garnishment, or struggling to pay the bills and your assets are in danger, filing for bankruptcy can give you a fresh start and protect some of your most important assets.

Should I file for Chapter 7 or Chapter 13 bankruptcy? What's the difference between these two?

Chapter 7 completely eliminates certain kinds of debt mainly unsecured debt such as, credit cards, medical bills, personal loans, past due utility bills and repossessions. After the bankruptcy procedure is completed, the court grants the debtor a discharge of these debts. The debtor has no obligation to pay these debts and the creditors can no longer collect. With regard to secured debt, a debtor may surrender the property, or keep the secured property and continue to pay the secured debt in monthly installments.

Debtors who want to keep unexempt property or have some disposable income must file a Chapter 13 and repay some of their debt over a period of three to five years. In addition, Debtors who file a Chapter 13 do so to repay nondischargable debt, avoid foreclosure, and/or avoid repossession.

Not everyone qualifies for Chapter 7 Bankruptcy, which completely eliminates qualifying debts. First, if your mortgage is in default, those past due loan payments cannot be discharged in a Chapter 7 if you want to retain your house. Only filing Chapter 13 bankruptcy provides foreclosure protection.

In 2005, Congress instituted a bankruptcy means test. If you earn more than the Delaware median income, you may be required to file for Chapter 13. Although you must make payments, most Chapter 13 repayment plans settle your debts for a fraction of the total you owe.

If you're considering filing for bankruptcy and are confused about whether you qualify for a Chapter 7 or Chapter 13, you should contact a bankruptcy attorney to review your situation and get personalized advice.

How do I file for bankruptcy? What is the bankruptcy process?

The bankruptcy process largely involves paperwork and attending a creditors' meeting at the bankruptcy court. Before you start the filing process, you'll want to take a look at all of your earnings, debts and assets, since you'll be asked about these things when preparing the petition. An attorney can assist you in the preparing and the filing of the petition and ensuring you don't have to file a second time. In addition, the attorney will be with you at the required court hearings and ensure that you do not have to come back to the hearings a second time.

What can I expect once I file for bankruptcy?

Once the bankruptcy petition is filed with the court, all collection processes, foreclosures and repossessions must come to a complete stop. If they do not, contact your attorney, since companies are not allowed to harass you over unpaid debts.

How can bankruptcy help me?

If you currently have excessive debt, bankruptcy can reduce the amount of debt you owe or even eliminate it entirely, giving you a financial fresh start. If your debts aren't all discharged, the amount you need to pay per month may be much smaller and more affordable for you than what you currently pay.

Most importantly, bankruptcy can protect your most important assets, such as your retirement fund, your house and other vital assets, which means you don't necessarily have to start over entirely after your bankruptcy. Used correctly and with a commitment to financial responsibility, bankruptcy can help you get out from the burden of overwhelming debt and allow you to make better financial decisions in the future.

What should I do before and after bankruptcy to get the most out of my filing?

Before your bankruptcy, you will want to do a few things, including:

  • Evaluate your finances. Consider what circumstances led to your current situation and examine your debts, earnings and other details of your finances.
  • Gather all your financial documents. Not having a crucial piece of financial information can mean your application is incomplete, which may cause delay or may cause you to have to file a second time.
  • Determine what you need to do to make better choices in the future. Do you need debt counseling? Do you need to make changes in your career to afford the lifestyle you want? Do you need help with budgeting or spending decisions? Get the support you need before the bankruptcy so you are prepared to make better decisions afterward.
  • Be realistic about what bankruptcy can do for you. Bankruptcy may be able to get you out of burdensome debt now, but not all debts can be discharged. Tax debts, alimony and other payments are still things you mayl need to pay. Have a plan for dealing with these obligations.
  • Get legal support. Talking to an attorney and getting help with the bankruptcy process can ensure your paperwork is filled out completely and ensure you get the support you need every step of the way.

After the bankruptcy, there are many things you can do to capitalize on your fresh start:

  • Be judicious with a debt. Avoid getting into debt again, and if you do need financing, make sure you can afford it.
  • Work on building up your credit rating again. Bankruptcy will affect your credit, but there are several things you can do to improve your FICO score. For example, make all your bill payments on time, work on paying down your debts, and, as soon as you are eligible, apply for a credit card or small debt you repay on time. Showing financial responsibility can improve your credit rating over time.
  • Work on financial literacy. Use budgets, financial management tools and financial advice to make smart financial decisions to protect your future.

Will bankruptcy ruin my credit?

Your credit rating is already low if you have high debt, late or missed payments, or judgments filed against you. You may initially have trouble getting credit or be charged higher rates. However, within a year or two, you should qualify again for loans and credit cards at market or near-market rates. Bankruptcy is an opportunity to repair bad credit.

Contact Tiffany Poole at Rahaim & Saints today for a free consultation.

Do I need to file bankruptcy to save my home?

In most cases, personal bankruptcy is the best way to avoid foreclosure. In some situations; however, an experienced lawyer can negotiate with banks or lenders to reduce your monthly mortgage payments so that you do not have to file for bankruptcy.

Will I lose anything in a Chapter 13 bankruptcy?

Absolutely not. Any foreclosure proceedings, repossessions, or collection actions are immediately halted when you file. Creditors cannot call your home or threaten lawsuits. You will not forfeit any assets or possessions should you chose to retain the asset and pay the secured loan.

What happens after I file a Chapter 7?

As soon as the petition is filed with the Court, they enter an "automatic stay" that prevents creditors from further collections. Simply, the creditors can no longer call the debtor and any pending lawsuits must stop. The court will then send the debtor and creditors a notice scheduling the creditors' meeting (341 meeting) that debtor has to attend. The meeting is conducted by a bankruptcy trustee (not a judge). Generally, creditors rarely attend this meeting. Once the debtor's name is called, the meeting lasts no more than five minutes. The court will send a Notice of Discharge about two months after the Meeting of Creditors.

What is a Chapter 13?

Debtors who want to keep unexempt property or have some disposable income must file a Chapter 13 and repay some of their debt over a period of three to five years. In addition, Debtors who file a Chapter 13 do so to repay nondischargable debt, avoid foreclosure, and/or avoid repossession.

How often can I file bankruptcy?

If Debtor has received a Chapter 7 discharge, Debtor must wait eight years to file another Chapter 7 and 4 years to receive a Chapter 13 discharge. Debtors may; however, file a Chapter 13 anytime after a Chapter 7 should the need to stop a foreclosure but will not receive a Chapter 13 discharge. . If debtor has completed a Chapter 13 plan and received discharge, Debtor must wait two years before filing another Chapter 13.

What does it cost to file a bankruptcy?

Total cost depends upon the Chapter filed and the complexity of the case. The Court charges a filing fee of $335 for a Chapter 7 and $310 for a Chapter 13.

What property can I keep?

In Delaware, you are allowed to exempt up to $25,000 in personal property, $125,000 of equity in the house in which the debtor resides, and $15,000 for a vehicle. Simply, you can keep your clothing, furniture, house and car and still file for bankruptcy.

What debt is generally nondischargable?

Most student loans, most taxes, back payments on child support and alimony, court fines and restitutions are generally nondischargable.

Can I get a credit card after filing bankruptcy?

Yes. Some banks issue credit cards as soon as the day after debtor files for bankruptcy because they know that debtors will not be able to receive a new discharge in the near future. However, banks that mail these credit cards after filing often charge very high interest rates for the first year after the petition is filed with the court.

Can I be discriminated against for filing bankruptcy?

You cannot be fired, demoted or given a reduction in pay for filing bankruptcy whether you work for the government or a private employer.

Can a married debtor file without the other spouse?

Yes. If you have other questions or are ready to get started with your bankruptcy filing, contact Rahaim & Saints for a consultation.