Q:     How many times must I attend court during the course of my bankruptcy case?

A:     Generally, the average debtor will attend court once.   In both chapter 7 and chapter 13, you must attend your 341 meeting of creditors.  In certain circumstances, more than one hearing may be necessary.

A:     In chapter 7, your case will last approximately 3-4 months.   In chapter 13 you repay your debt over a 5 year plan.   

Q:    Must I list all of my creditors on my bankruptcy petition?

A:    Yes, every single creditor by law MUST be listed on the bankruptcy petition.

Q:    What paperwork must I get together in order for you to prepare my case?

A:   We require your most recent bill for every creditor, your last 2 years tax returns (2000,2001), your most recent pay stub and if you own real estate, your most recent property tax statement.

Q:   I don’t want to file on my house or car.   Will I lose them?

A:   I often hear clients say:   “I don’t want to file on my house or car. I don’t want to lose my house or car.” Relax.   You are not going to lose your house or car if you keep making your payments and stay “current” on your home or car loan.    You must list all debts, even the debt on your house and car.   You must live up to the agreement and stay current, and perform all obligations of the security agreement and mortgage, such as keeping the property insured and paying any taxes due.   You also may have to reaffirm the debt.   And, if you are delinquent on your home or car at the time of filing, then you may be required to file a Chapter 13 in order to “de-accelerate” or “cure” the debt and develop a plan to save your home or car.

Q:   I don’t want to pay for anything.   Will bankruptcy help?

A:   Secured debts such as a purchase money loan on furniture, appliances, an automobile or a home are treated much differently in bankruptcy than unsecured debts such as credit cards.   On most secured purchase money debts, you will have to keep making the payments if you wish to keep the collateral.   If you fall behind on the payments or if you do not make the payments after the filing of the bankruptcy, then the creditor may have a right to repossess the collateral.   Many people have a misconception that if you file bankruptcy then you may keep the collateral securing the loan without paying for the collateral.   This is simply an urban legend, or myth.   You may not file Chapter 7 bankruptcy and keep the collateral securing a loan without re-paying the loan.   You must either (1) keep the collateral and keep making the payments (2) surrender the collateral to the creditor or (3) redeem the collateral in one lump sum by paying the creditor the fair market value of the collateral.

Q:  How much does a bankruptcy cost and how do I pay for it?

A:   The Court charges a filing fee. Currently, the filing fee in San Angelo for a Chapter 7 is $200.00, but it has increased in recent years.  The filing fee in Chapter 13 is currently $185.00.   Ask your attorney how much the Court’s filing fees are, because they vary from district to district.   This is the court cost or court fees charged to file the case.   These costs are charged to you in addition to the lawyer’s fees for filing the case.

Attorney’s fees for bankruptcy have a wide range.   In a pro bono case such as where an attorney is donating his time, the services may be rendered without expectation of payment and the fee may be nothing.    Private attorneys who charge attorney's fees for services rendered perform most cases.   In the San Angelo area these fees range from $750 to $1,500.00 for a typical Chapter 7 consumer case.   The filing fees are usually extra.   Chapters 13 fees usually are $1,750.00, plus filing fees.   Most of the Chapter 13 fees are taken from your monthly repayment plan.  

Many attorneys offer payment plans.   Some attorneys, however, require that the client "up front" pay all the fees and court costs.   You are encouraged to discuss the fees with the attorney at the initial meeting so that you will have a clear understanding of your responsibility for the payment of the fees and court costs and to avoid any misunderstanding.  

Q:   What property do I get to keep?

A:   The bankruptcy laws are not designed to punish people by taking away all of their property.   Rather, the Bankruptcy laws are designed to give honest but unfortunate debtors a “fresh start”.   The reasonable and necessary things that people own, such as a home, an automobile, the typical household goods and furnishings in a normal home, clothing and many other personal items are exempt and will not be taken away.   Everyone needs housing, food, transportation and other normal necessities, and it is rare that a bankruptcy debtor loses any property.   However, not all property is exempt.   Some property is non-exempt.   If you own non-exempt property, then you could lose the non-exempt property if you file Chapter 7 Bankruptcy, though it is rare.   In Chapter 13, most debtors keep their non-exempt property, but your plan payments may be higher because of the non-exempt property.

Regardless of the kind of Bankruptcy that you file, you are required to claim certain exemptions on your property.   In most cases the laws of the State of Texas and the Bankruptcy Code determine what exemptions you may claim.   The Texas exemptions are called the “state” exemptions.   The federal exemptions, under the Bankruptcy Code are called the “federal” exemptions.   It depends upon which state you live in as to which exemptions you may elect.  

In Texas, you elect either the Texas exemptions or the federal exemptions.   You must elect one or the other, but not both.   The Texas exemptions are specifically stated in the Texas Property Code.   The federal exemptions are stated in the Bankruptcy Code.   You must elect either the federal or the Texas exemptions and in a joint case, one spouse cannot elect the Texas exemptions and one spouse cannot elect the federal exemptions.   You must elect either the Texas exemptions or the federal exemptions.

Q:   So what happens if my property is exempt?

A:   In general, if all of your property is exempt, then the bankruptcy court and trustee will declare your case to be a no-asset case and will close your case as a no asset case.   Thus, you will get to keep all of your exempt property.   In an asset case you will be required to turn over such nonexempt assets to the bankruptcy trustee for liquidation and sell to pay your creditors. 

A:     Some people want to pay their debts even if they file Chapter 7.   There is nothing wrong with wanting to pay your debts and if you file Chapter 7 you may voluntarily repay any debt at any time.   You may pick and choose which debts you wish to repay.   You may pay as much or as little on any debt that you wish.   By paying one debt, you do not revive the debt or make it a legally enforceable obligation against you simply because you may have paid on it.   More importantly, paying one debt does NOT revive the other debts!

Q:   I don’t want to list all my property.   I don’t want anyone to know that I own the property.

Q:   What if I can’t make my Chapter 13 plan payments?

A:     If you are unable to make the payments, then the trustee may request that your case be dismissed.   If you can not keep up with your payments, then you need to contact your attorney to review your options.   It may be possible for you to have your case converted to Chapter 7 or to have your case simply dismissed.   But keep in mind that if your case is dismissed, then you will still owe all of your creditors and you still risk repossession and foreclosure.

Q:   Will I be able to borrow money in the future?

Credit card and mortgage loan decisions are made on the basis of a credit score, yet consumers have no right to review their credit scores, and the Fair Credit Reporting Act does not require that credit bureaus to disclose a credit score with a consumer’s credit report.   The credit score carries heavy weight in nearly all mortgage loan decisions about whether a consumer will receive the loan and at what rate of interest.   The current law is that the creditors are not required to disclose the credit score with the credit report.   However, the Fair Credit Reporting Act does require a creditor to disclose a credit report if that credit report contains information upon which the creditor based their decision to deny credit.

Q:   Someone owes me money and now I have received a notice that they have filed for         bankruptcy.  I've heard that you cannot get anything out of bankruptcy.  Is there anything I can do?

A:   The worst thing that you can do is to do nothing.  If you fail to file a Proof of Claim, then you will receive nothing even if your claim is valid.  Also, even if you do file a Proof of Claim, but fail to follow bankruptcy rules and procedures, then you may get nothing.  All creditors are usually listed.  As a creditor, you should receive a Notice of Commencement of Case that will advise you as to when, where and how to file a Proof of Claim.  If you heard the debtor went bankrupt but have not received a notice, then contact the debtor, the debtor's attorney or other creditors to get the notice. 

Do not delay in filing a Proof of Claim.  File immediately and attach copies of all supporting documents to the Proof of Claim, i.e. security agreements, etc.  Follow proper court procedures exactly.  Send a copy to the Trustee and to the Debtor's Attorney and ask that you be placed on the mailing list.  Then just be patient.  In an asset case, it sometimes take months, even years, for a distribution.  As always, it's best to have a professional help you file a Proof of Claim, so as not to make errors which may ultimately be very costly to you.

Q:   I loaned money to my relatives/child/friend/significant other.  We didn't really discuss       repayment terms and now they will not repay me, and are ignoring me.  Is an oral debt legally enforceable?

A:   Shakespeare had the right kind of wisdom when he said, "Neither a borrower nor a lender be...".  Oral debts are enforceable in some situations, but the problem will be a matter of proof.  How are you going to prove that the borrower received the money?

Always get a loan in writing.  Never loan cash.  On the check write "LOAN" in the bottom left corner.  Better yet, get a note and be sure to specify the correct amount, terms of repayment, interest rate (HINT: Do NOT charge excessive interest -- this is usury, and you will be very sorry) and the maturity date.  Your best option would be to speak to your attorney and ask them for help.

Q:   I'm running out of space and want to clean out my filing cabinet.  How long should I keep my   checks, receipts, bank statements, and tax records?

A:   The IRS can ask you to document income tax deductions up to three (3) years after the April 15 deadline, up to six (6) years if you accidentally fail to report 25% or more income, and indefinitely if there is fraud involved.  It's better to have the records and be able to document later, than to not have the records when you really need them.  Many tax practitioners are of the opinion that you should permanently keep tax returns, bank statements, canceled checks and other supporting documents indefinitely.

Q:   Will filing for bankruptcy effect my ability to obtain further credit and loans?

A:    Bankruptcy, regardless of 7 or 13, will harm your credit.  The fact that you have filed a bankruptcy in a chapter 7 may be reported on your credit history for up to 10 years.  The fact that you have filed a chapter 13 bankruptcy may be reported on your credit history for up to seven (7), and sometimes even as much as ten (10) years.

It is very difficult, and sometimes impossible, to obtain credit while you are in bankruptcy.  While it may be possible though quite difficult to obtain credit while you are in a chapter 13 bankruptcy, the trustee and the bankruptcy judge generally disfavor incurring any additional debt while you are in chapter 13 bankruptcy.  After all, credit is what got you into bankruptcy in the first place, and the court is very concerned about incurring any additional credit debt while you are in bankruptcy.

You may also face other problematic factors, such as having to pay higher interest rates, and creditors may require more down payment prior to financing your purchase.  In addition, you may even be denied credit because you have filed bankruptcy.

Q:   People often have a misconception about bankruptcy and their credit report.  I often hear clients ask, "Will this be taken off of my credit report when my case is discharged?"

A:   It is often believed that if you file a chapter 7 bankruptcy, that you will have a "clean" credit report after the bankruptcy process.  This is far from the truth.  Your credit report will still reflect very negative matters such as delinquent payments, slow payments, all charge-off accounts, closed accounts, and even balances still owed on the account.  Many times the information reported on your credit report is inaccurate or misleading.  You have certain rights under the Fair Credit Reporting Act to have accurate information in your credit report, but please understand that the bankruptcy process does not "fix" your credit report.  To the contrary, the bankruptcy process will harm your credit report.  Moreover, your bankruptcy attorney is not being employed for the purpose of providing you with a clean credit report.  At best, your bankruptcy attorney will only obtain a discharge of your debts so that you are not legally obligated to pay your dischargeable debts.  The attorney is NOT responsible for the information that appears in your credit report, nor is he or she being employed for the purpose of "fixing" your credit report.

Q: Will I be fired for filing?

A:  The Bankruptcy Code contains an anti-discrimination provision that provides that you may not be terminated from your job for the sole reason of filing a bankruptcy.However, certain jobs are highly sensitive with respect to security matters.  For example, in the military, certain jobs require a "security clearance" that requires the employee to show financial stability.  There are many other areas of employment that require a showing of financial stability, as well.  Bankruptcy could have a negative effect with respect to those jobs, making it more difficult to obtain those jobs if you do indeed file bankruptcy.

Q: What changes are in store for Bankruptcy? 

A: The 106th session of the U.S. Congress has considered many possible changes to the federal Bankruptcy Code (11 U.S.C. 101).  It is anticipated that these changes will greatly alter your ability to file for bankruptcy relief. Congress is likely to impose a "test" based upon your net disposable income to determine whether you can file for Chapter 7 relief.  The amount and calculation of these tests will probably be based upon objective standards established by the Internal Revenue Service.  It is likely that exceptions will be allowed only in extraordinary circumstances, but the legislation is likely to contain "safe harbors" for low income persons.  Other provisions are friendly to consumer debtors, but most are not.  It is important to note, however, that at the time of this publication, these alleged "reforms" had not been enacted into law, but it is likely that they will be soon.