- How do I know if bankruptcy is the right solution?
If you have explored all possible alternatives and none of the alternatives, such as a debt management plan or renegotiation with your creditors, are the right solution, then bankruptcy may be your only solution.
- What is a Debt Management Plan?
A debt management plan works by combining multiple creditor payments into a single monthly payment. It reduces the length of time it takes to repay credit card debt while lowering the total amount of interest paid. It also eliminates collection calls and stops late fees and over-limit fees. Debt management plans are managed by nonprofit credit counseling agencies.
- Is Take Charge America® approved by the United States Trustee Program to provide the required pre-filing credit counseling and post-filing debtor education courses?
Yes. Take Charge America® is approved by the United States Trustee Program (USTP) to provide the required courses and issue certificates. The USTP does not endorse or recommend any particular credit counseling agency or debtor education provider, or guarantee the quality of its counseling or instructional services.
- Is bankruptcy counseling a requirement when filing for bankruptcy?
Yes. The federal government requires you to obtain a Pre-Filing Bankruptcy Credit Counseling certificate from an approved credit counseling agency, like Take Charge America, before you file for bankruptcy.
The federal government also requires you to complete a course in financial management prior to discharging any debts. You must obtain a Post-Filing Bankruptcy Debtor Education certificate from an approved credit counseling agency, like Take Charge America, after you file for bankruptcy.
- How long will the Pre-Filing Bankruptcy Credit Counseling course take to complete?
Under the bankruptcy law, The Executive Office for United States Trustees requires that you participate in a counseling session that may take up to 90 minutes or longer. Sessions could be longer or shorter, depending on your particular circumstance, the number of questions you have, the amount of information to collect, etc.
- How long will the Post-Filing Bankruptcy Debtor Education course take to complete?
Under the bankruptcy law, The Executive Office for United States Trustees requires that you participate in a 2-hour debtor education course.
- How long are the certificates good for?
The Pre-Filing Bankruptcy Credit Counseling certificate is valid for 180 days. The Post-Filing Bankruptcy Debtor Education certificate is valid until your court-ordered completion date for discharge.
- Should I use an attorney to help me file bankruptcy?
For Chapter 7, it depends on your familiarity with reading forms, your understanding of the U.S. Bankruptcy Code, and your ability to speak under pressure. For most people, we recommend using an attorney. Attorneys will attend the § 341 (a) Meeting of the Creditors, negotiate with your creditors, advise their clients about offers to accept or refuse, and give general legal advice. While a paralegal can fill out the forms, they cannot represent the debtor or give legal advice as to how the law applies to your specific situation.
- Is it necessary to meet with an attorney before I complete the bankruptcy counseling courses?
No. You can complete the bankruptcy counseling courses before or after you meet with an attorney.
- When I file bankruptcy, do I have to go to court?
Yes. Whether you file a chapter 7 or 13 bankruptcy petition, you need to attend a § 341(a) Meeting of the Creditors in either chapter. These usually last less than one hour, but can last all day in a Chapter 13.
- What happens when I go to court?
In the § 341(a) Meeting of the Creditors, some creditors such as Sears or Best Buy may show up and ask about the property you bought from them. There is a trustee who reviews your bankruptcy petition and determines if you have any assets to give the unsecured creditors in Chapter 7′s. In most instances, your attorney may help you on your behalf with those creditors at these meetings.
- What is a Reaffirmation Agreement?
Even if a debt can be discharged, you may have a particular reason why you want to promise to pay it. For example, you may want to negotiate a plan with the bank to keep your vehicle. To promise to pay that debt, you must sign and file a reaffirmation agreement with the court. Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law. Reaffirmation agreements:
- Must be voluntary
- Must not place too heavy a burden on you or your family
- Must be in your best interest and can be canceled at any time before the court issues your discharge or within 60 days after the agreement is filed with the court, whichever gives you the most time
If you are an individual and you are not represented by an attorney, the court must hold a hearing to decide whether to approve the reaffirmation agreement. The agreement will not be legally binding until approved by the court. If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.
- Can I keep a credit card out of my bankruptcy?
In most cases, you must include all of your credit cards. There are some instances where you can keep a credit card, but you will need to discuss each situation with your attorney.
- If I’m married, do we have to file together?
No. Sometimes only one spouse files, but that is an exception. You may be able to file without your spouse if you have been married a short time or if all the debt is in your name alone. Your spouse will always be involved in a Chapter 13 whether or not their name is on the petition.
- How long does bankruptcy take?
In a Chapter 7, you attend the § 341(a) Meeting of the Creditors about one month after you file your bankruptcy petition. You then receive the discharge about two months after that.
- A creditor is threatening to take my wages. Can they do that?
Yes. The creditor can take up to 25 percent of your take-home pay. Filing bankruptcy can stop the wage assessment and most likely eliminate the creditor’s claims completely.
- How does bankruptcy affect my credit?
Bankruptcy does hurt your credit, but if you are considering bankruptcy, chances are your credit may already be affected. Once your bankruptcy is over, you will be able to tell people that your credit was bad, but you’ve been working to rebuild it since the bankruptcy. Just try not to fall behind on anything going forward.
It is challenging for most people to obtain credit within one year of the bankruptcy. You can buy a car at a high interest rate with a considerable amount down. After one year, things will begin to get easier. After four years, many mortgage lenders will grant you a loan at their lowest interest rates. Bankruptcy will remain on your credit reports 7 to 10 years.
- Can a bankruptcy stop creditors from calling me?
Yes. No creditor is permitted to contact you in any way after you file your bankruptcy petition. In most instances, before filing the bankruptcy petition, your attorney will notify your creditors to stop contacting you.
- What is a bankruptcy discharge and how does it work?
One reason a person chooses to file bankruptcy is to be able to start fresh. A discharge is a court order which states that you do not have to pay most of your debts. However, certain debts cannot be discharged. For example, the following debts cannot be discharged:
- Child support
- Most taxes
- Most student loans
- Court fines and criminal restitution
- Personal injury caused by driving under the influence of drugs or alcohol.
The discharge pertains only to debts that arose before the date you filed. Also, if the judge discovers you obtained money or property as a result of fraud, that debt may not be discharged. It is essential to list all debts and properties in your bankruptcy schedules. If you do not list a debt, it is possible the debt will not be discharged. Your discharge may also be denied if you do something deceitful in relation with your bankruptcy case, such as lie, falsify records, destroy or conceal property, or if you disobey a court order. You can only receive a Chapter 7 discharge once every eight years. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not need to sign a reaffirmation agreement or any other kind of document in order to do this. Some creditors hold a secured claim (for example, the bank that keeps the mortgage on your house or the lender that holds a lien on your car). You do not have to pay a secured claim if the debt is discharged, however the creditor can still take the property.
- Will bankruptcy help me save my home?
If you are at risk for home foreclosure and are unable to obtain a loan workout plan, bankruptcy may stall or avoid foreclosure with an automatic stay. The stay postpones the sale of a home while bankruptcy is pending. However, a lender may be able to obtain a motion to lift the stay from the bankruptcy court. If your foreclosure notice was issued before you were in bankruptcy, the automatic stay will not stop the clock.
The Chapter 7 bankruptcy effect on your mortgage is dependent on several factors, including the amount of equity you have in the home and how much your state’s laws allow you to keep. Contact an attorney in your state to clearly understand your specific circumstances. Once the Chapter 7 bankruptcy is discharged, the lender is still able to foreclose on your home if you do not make your payments and keep them current.
Chapter 13 bankruptcy enables you to pay off late and unpaid mortgage payments during the repayment plan. You will need to continue to make your mortgage payments. If you make all the payments up to the end of the repayment plan, you can avoid foreclosure and keep your home. This may or may not include second mortgages or home equity loans, depending on your individual situation. Consult with an attorney about your specific circumstances.
- Can the bankruptcy court take all of my property?
In a Chapter 7 bankruptcy, certain types of property are exempt from being liquidated in most states. This usually includes, motor vehicles, necessary clothing, necessary household furnishings and goods (a second large HDTV may have to go), household appliances, jewelry up to a certain value, personal effects, life insurance up to a certain value, pensions, part of the equity in your home, tools of your trade or profession up to a certain value, and public benefits (welfare, Social Security, unemployment compensation) accumulated in a bank account.
Items that are nonexempt (property that may be liquidated) include: a second or vacation home, a second car or truck, expensive musical instruments (unless you’re a professional musician), stamp, coin, and other collections, family heirlooms, high-valued jewelry, cash, bank accounts, stocks, bonds and other investments.
- Are there ways to eliminate tax debts by filing for bankruptcy?
Generally, most tax debts cannot be wiped out in bankruptcy. In Chapter 13 you are able to include your tax debt in the repayment plan. If the following conditions exist, the taxes may be discharged:
- Taxes are for federal and state income tax
- Tax return was due at least three years prior to the bankruptcy filing
- Tax assessment took place at least eight months before the bankruptcy filing
- Tax return was not fraudulent and there was no attempt to evade the tax
- If I have questions in the future, can I call Take Charge America for help?
Yes. Our counselors are always glad to help you with any future questions you may have in regard to financial education and budgeting, etc.
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