Frequently Asked Questions

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is repayment plan. Individuals or married couples with regular income can repay all or part of their debts. Chapter 13 is a good solution for debtors with significant equity in their secured assets such as their home or auto and want to keep those assets. A Chapter 13 repayment plan generally lasts 3 or 5 years.

Chapter 13 may be the only option for individuals or families whose yearly income is greater than their state average or they have a significant surplus of income after deducting all regular household expenses.

If you are behind on your mortgage, under a Chapter 13, you can a pay off your missed payments (arrears) through your repayment plan. Once the court approves your repayment plan, your lender cannot foreclose on your house for pre-bankruptcy mortgage arrears as long as you continue to pay them off through your plan.

Unsecured debts in Chapter 13 are paid anywhere from 0% to 100% of what is owed. The exact amount depends on the total value of nonexempt property, the amount of disposable income available each month to put toward those debts, and the length of the chapter 13 plan.

Can Filing For Bankruptcy Stop A Foreclosure Or Repossession?

Yes, Chapter 13 bankruptcy plans can arrange for car and mortgage payments in the reorganization, and the creditor is expected to accept these payments in lieu of foreclosure or repossession

Filing a Chapter 7 bankruptcy will not stop a foreclosure. It will merely temporally delay the foreclosure.

If you are facing a foreclosure, it is best to seek legal advice as soon as possible.

How Can I Re-Establish My Credit After Filing Bankruptcy?

While a bankruptcy is not something positive on your credit report, many times it actually improves our client's credit because all debt has been wiped clean and oftentimes creditors will consider you a lower risk after bankruptcy. A bankruptcy entry will appear on your credit report for 10 years following your bankruptcy discharge. This does not mean that you will not be able to get a credit card, buy a home, or car for 10 years. Creditors want you to borrow. Shortly after your bankruptcy is discharged, it is virtually certain that you will receive a credit card offers. Credit companies know that you no longer have the majority of your debt; your income is freed up, and you cannot declare bankruptcy (Chapter 7) again for six years.

Can just one spouse File Bankruptcy or Must Both File?

Either spouse can file on his or her own. It is not required that they both file. The Court will look at total household income for the purpose of the "means test".

What is the "Means Test?"

The means test is a 6 month look back on all sources of income for the household (even is only one spouse is filing bankruptcy).

The bankruptcy "means test" determines whether your income is low enough for you to file for Chapter 7 bankruptcy. It is a formula designed to keep high wage earners from filing for Chapter 7 bankruptcy.

I Am Current On All My Payments. I Have Never Been Late On A Payment. Can Bankruptcy Be Appropriate For Me?

Many clients are drowning in debt, but they think they are OK because they are able to make their minimum monthly payments. If you are living paycheck to paycheck, chapter 7 or chapter bankruptcy may be the best way to get a fresh start with your finances.

It feels wrong not to pay my debts.

Filing bankruptcy does not change your moral obligation to repay your debts, it only changes your creditors' abilities to use the legal process to force you to pay them. If you feel obligated to pay your debts, the law welcomes you to voluntarily pay your debts even after bankruptcy has forgiven them. And, if you pay a little bit towards a debt that has been legally forgiven in bankruptcy, that will not re-ignite the old debt, it remains extinguished. You are free to pay any of your old creditors, however much you want to pay and when you pay. For example, you may pay your dentist $10 one month and then skip three years before paying again.

MY SMALL BUSINESS HAS BEEN IMPACTED BY COVID-19. CAN BANKRUTPCY HELP SAVE MY BUSINESS?

There is good news for the struggling small business owner. Help is now available.

A recent addition to the United States Bankruptcy Code offers a new streamlined process for small business owners who need financial relief during trying times.

The Small Business Reorganization Act of 2019 ("SBRA" or the "Act"), became effective on Feb. 19, 2020. The SBRA created a Subchapter V to Chapter 11. The purpose of this his subchapter is to make small business bankruptcy proceedings less costly and easier to manage. It also contains provisions that can reduce a creditor's leverage in a small business case.

The new Small Business reorganization Act more easily allows business operations to continue and business owners to retain ownership of their businesses. You don't have to give up your dream!

What is a small business?

A "small business debtor" is a person or entity who: (1) is engaged in business or other commercial activities; and (2) owes no more than $2,725,625 as of April 1, 2019, in total claims, excluding obligations owed to insiders such as family members of the business owners. (In response to the coronavirus pandemic, the debt limit has been increased to $7,500,000 until March 26, 2021.

Call our office to Learn How the new Subchapter V Small Business Bankruptcy May Keep Your Business Open through These Difficult Times