Bankruptcy FAQ’s

Parker Lawyers is a federally designated debt relief agency pursuant to Title 11 of the US Code. This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the information of a lawyer/client relationship. OUR FIRM PROVIDES LEGAL ASSISTANCE AND HELP PEOPLE FILE FOR BANKRUPTCY RELIEF UNDER THE BANKRUPTCY CODE.

WHAT IS CHAPTER 7 BANKRUPTCY?

Chapter 7 bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose. In other words in most cases the debtor does not have property that can be lost to the trustee since the property is protected by the State & Feral exemption laws.  The idea is that a Chapter 7 will give that person a relatively quick “fresh start”.

One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by eliminating many of the debts.

WHAT IS CHAPTER 13 BANKRUPTCY?

Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter 13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.

WHAT WAS THE NEW LAW ABOUT?

New Bankruptcy Law took effect on October 17, 2005: The major intent of the bankruptcy reform act was to require people, who can afford to make some payments towards their debt, to make those payments, while still affording them the right to have the rest of their debt reduced by causing an increase in Chapter 13 repayment filings.

IS A CHAPTER 7 FILING STILL AVAILABLE?

There has been much doom and gloom written about the new laws and how much more difficult will be to be to file Chapter 7. It’s true that there are more hoops to jump through under the new laws and it’s true that some people are going to have to file chapter 13 instead of Chapter 7. However, for the vast majority of filers Chapter 7 is still available.

WHAT ABOUT THE CLASSES THAT NEED TO BE TAKEN?

A person filing Chapter 7 bankruptcy will have to take an approved Credit Counseling Course before he or she files. Your bankruptcy lawyer can set this up for you. In some cases the course can be taken over the Internet.

An approved Financial Management Course will have to be completed before you can have your debts discharged. Your bankruptcy lawyer can set this up for you.

WHAT DOES THE NEW LAW DO ABOUT DIVORCE OBLIGATIONS?

For cases filed after October 17, 2005, debts owing under a dissolution decree are now non-dischargeable. The types of debts that are now automatically non-dischargeable in bankruptcy are more inclusive and include more than just support debts. Debts that are now non-dischargeable include such debts that are ordered to be paid by the debtor for the benefit of the non-filing spouse. This can include such debts such as car payments, credit card bills and medical bills as long as they were ordered paid by the debtor for the benefit of the non-filing spouse.

WILL I PASS THE FIRST STAGE OF THE MEANS TEST AND BE ALLOWED TO FILE CHAPTER 7?

You can check to see if your gross income is below the median income for your state. If it is you can file Chapter 7: The State of Colorado’s median income is a follows as of February 24, 2015.

1 Member Household – $50,242.00
2 Member Household – $65,701.00
3 Member Household – $71,138.00
4 Member Household – $83,330.00
5 Member Household – $91,430.00
6 Member Household – $99,530.00
7 Member Household – $107,630.00
8 Member Household – $115,730.00
9 Member Household – $123,830.00
10 Member Household – $131,930.00

WHAT IF I AM OVER THE MEDIAN INCOME LEVELS? WILL I BE ALLOWED TO FILE CHAPTER 7?

Remember, if your income is slightly over the state’s median income you may still be able to file Chapter 7. Your bankruptcy lawyer will be able to make this calculation and also advise on allowable expenses you can use in the calculation.

WHAT IS MEANS TESTING?

Means Testing is a method of determining a person’s eligibility to maintain a chapter 7 case. Under this method a person whose annualized current monthly gross income from all sources exceeds the median income, as reported by the U.S. Census Bureau, for the state of Colorado and family size, must show that he or she is not able to pay a minimum of $100.00 per month for 60 months to his or her unsecured creditors from his or her disposable monthly income in order to be eligible to maintain a chapter 7 case. Disposable income is a person’s current monthly income from all sources less the permitted current monthly expenses. The chapter 7 case of a person whose disposable monthly income is such that he or she is deemed to be able to pay $100 per month or more to unsecured creditors for 60 months will be dismissed or converted to chapter 13 unless special circumstances exist.

What happens after I file my bankruptcy case? When you file your petition, the “automatic stay” takes effect and prohibits creditors from taking collection action against you or your property. The Bankruptcy court issues a notice to all creditors advising them of the filing, the case number, the automatic stay, and the name of the trustee assigned to the case. The notice also tells creditors the date of the meeting of creditors (the “341 meeting”) the deadline for filing objections to the debtor’s discharge or to the discharge ability of certain debts, and whether and where to file claims. The information in the notice varies with the Chapter of the case. All debtors must appear at the meeting of creditors or the case may be dismissed.

In an individual’s Chapter 7 case, creditors generally have 60 days from the first date set for the meeting of creditors to object to the debtor’s discharge or to discharge ability of certain debts. If the deadline passes without any objections to the debtor’s discharge being filed, the Court will normally issue the discharge order. If any objections to the discharge ability of debts are filed, they will be heard by the Court, but will not stop the entry of the discharge as to other debts. Only an individual debtor receives a discharge. Corporations and partnerships do not receive discharges. If there are no non- exempt assets with equity above the liens against the assets from which creditors can be paid, the Chapter 7 trustee will prepare a report of no distribution, and the case will be closed. If non-exempt assets exist, the Court will set claims deadlines and notify all creditors to file their claims. The Chapter 7 trustee will collect the assets, liquidate (sell) them, and distribute the proceeds to creditors. When the assets have been completely administered, the trustee files a final distribution report and the Court will close the case.

In a Chapter 13 case, a plan is filed, and creditors are given the opportunity to object to the plan. If no objection is filed by the creditors or the Chapter 13 trustee, the Court may confirm the plan. The debtor(s) then make payments to the Chapter 13 trustee under the plan. The Chapter 13 trustee will distribute the proceeds of the plan payments to creditors until the debtor completes the plan or the Court dismisses or converts the case to another Chapter. Upon completion of the Chapter 13 plan, the court issues a discharge order, the Chapter 13 trustee will prepare a final report, and the case will be closed.

What is a Reaffirmation Agreement? A reaffirmation agreement is an agreement with a creditor by which a debtor becomes legally obligated to pay all or a portion of an otherwise dischargeable debt. Such an agreement must be filed within 60 days after the first date set for the meeting of creditors. A debtor who signs a reaffirmation agreement has 60 days after the agreement is filed, or until his discharge date, whichever occurs later, to change his mind. Debtors entering into a reaffirmation agreement without counsel representing them will need to attend a hearing before a judge to determine if the agreement will be valid.

What is a Motion for Relief From Stay? Under certain circumstances, a creditor or a party seeking to continue an action outside of the bankruptcy will file a motion for relief from stay. This motion is filed with the bankruptcy court requesting authorization from the court that the creditor be allowed to take some action. Typically, the creditor is seeking to foreclose on property, sell it and apply the proceeds to the debt in cases where there is no value in the property for the bankruptcy trustee to administer in excess of valid liens and claims of exemption. These typical cases are where the auto lender is wishing to take the car since the debtor is behind in the monthly payments and the same situation often applies to home lenders as well seeking to start a foreclosure due to non-payment of the mortgage loan. If a motion for relief from stay is filed in your case, you should contact a bankruptcy attorney. If you want to object to a motion for relief from stay, you must do so in writing by filing your objection with the Court on or before the objection date listed in the notice sent to you and appearing at the preliminary hearing scheduled in that notice. Do not simply appear on the hearing date to state your objection, because relief will be granted and the hearing will not be held unless a written objection has been filed within the time frame noted in the notice.

How many years will a bankruptcy show on my credit report?

Under the Fair Credit Reporting Act, 15 U.S.C. §1681, a bankruptcy can remain on a credit report for ten years. If you have additional questions, contact a bankruptcy attorney or visit the website of the Federal Trade Commission, at http://www.ftc.gov/bcp/conline/edcams/credit/index.html.

WHAT IS A DISCHARGE?
A discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay debts that are discharged. Not all debts are discharged and you should contact an attorney to discuss in detail the types of debts than can be discharged.

The discharge serves as a permanent order directed to the creditors of the debtor that they are prohibited from taking any form of collection action on discharged debts, including collections actions of communications with the debtor, such as telephone calls, letters, personal contacts as well as legal action in the form of filing suit.

Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., such as a mortgage or auto lien that is a charge upon specific property to secure payment of a debt) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

What types of debts are not dischargeable in a chapter 7 case?

The following is a list of the most common types of debts that are not dischargeable in a chapter 7 case.

Most tax debts and debts that were incurred to pay non dischargeable federal tax debts.

Debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement, if the creditor files a complaint objecting to the discharge by the deadline set.

Debts not listed on the chapter 7 forms, unless the creditor knew of the bankruptcy case in time to file a claim.

Debts for fraud, embezzlement, or larceny, if the creditor files a complaint objecting to the discharge by the deadline set.

Debts for domestic support obligations, which include debts for alimony, maintenance, or support, and certain other divorce –related debts, including settlement debts.

Debts for intentional or malicious injury to the person or property of another, if the creditor files a complaint to the discharge by the deadline set.

Debts for certain fines or penalties

Debts for most educational benefits and student loans, unless a court finds that not discharging the debt would impose an undue hardship on the debtor and his or her dependents

Debts for personal injury or death caused by the debtor’s operation of a motor vehicle, vessel or aircraft while intoxicated.

Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge.

IS THERE ANY WAY TO OBTAIN A FREE CREDIT REPORT?

FREE SITE (available once every 12 months), Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281; web site: www.annualcreditreport.com , but there is probably a small reporting charge/hidden fee as I recall.

TRACKING DOWN YOUR CREDITORS AND WHAT ABOUT OBTAINING COPIES OF MY CREDIT REPORTS?

For about Ten Dollars you can obtain credit reports concerning your credit as follows:

Trans Union, P.O. Box 1000, Chester, PA 19022; Phone             800-851-2674      ; web site: www.transunion.com

Equifax, P.O. Box 740241, Atlanta, GA 30374; phone,             800-685-1111      ; web site: www.equifax.com

Experian: P.O. Box 2002, Allen, TX 75013; phone,            800-682-7654      ; web site: www.experian.com

FREE SITE (available once every 12 months), Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281; web site: www.annualcreditreport.com

FOR ABOUT $35.00 you can obtain a merged report of all three, by contacting www.fullcreditreports.com or try www.truecredit.com

WHAT ABOUT DEBT COLLECTORS? WHAT CAN I DO?

Remember that creditors with real leverage don’t waste time on calls, collection letters and memo of collections. Creditors with real leverage act on their rights and do it. Mortgage companies foreclose, lenders on cars will repossess. Those creditors and collection agencies are used for unsecured creditors and their agents will do a lot of huffing and puffing to collect. If you are represented by an attorney and you tell the creditor that you are they are precluded from contacting you. They often are precluded from contacting you at inconvenient times as well as precluded from contacting you at work if you tell them it is inconvenient or if it is embarrassing.

WHAT ELSE CAN I DO ABOUT DEBT COLLECTORS?

Send them a cease-and desist letter. A simple letter that indicates something like this should help, Dear________, Pursuant to the Fair Debt Collections Practice Act, 15 USC 1692, I am requesting and informing you as required by law that you immediately stop communicating with me about my account with_____, account __________. I will take care of this obligation when I am better able to do so. (sign the letter and keep a copy)

The letter should stop the calls, but of course they could then file suit. It might be a good idea to send a copy of this cease-and desist letter by certified mail to the collection agency and the original creditor. Keep a copy of it for your file. Keep track of any further contacts and memo your file as to when they do and let them know that you are keeping track of their post notice calls.

WILL MY SPOUSE BE AFFECTED?

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt.  There are a few exceptions to that rule, such as the Family Purpose Doctrine .

WHO WILL KNOW THAT I FILED?
Bankruptcy filings are public records. However, under normal circumstances, no one will know you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years.

WHAT ARE THE MOST COMMON REASONS FOR A CHAPTER 7 BANKRUPTCY?
The most common reasons for filing bankruptcy are:

1. Unemployment
2. Large medical expenses
3. Seriously overextended credit
4. Marital problems
5. Other large unexpected expenses.

CAN I KEEP ANY CREDIT CARDS?

Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card they will cancel the card unless you reaffirm the debt. Even if you have a zero balance the credit card company might cancel the card.

WILL I EVER GET CREDIT AGAIN?

Yes! A number of banks now offer “secured” credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt. Usually after a few years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who has not filed bankruptcy. The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past. Also if you have stayed out of debt this factor will be important in having a good debt to income ratio.
The fact you filed bankruptcy stays on your credit report for 10 years. It becomes less significant the further in the past the bankruptcy is. The truth is, that you are probably a better credit risk after bankruptcy than before.

CAN MY BOSS FIRE ME FOR FILING BANKRUPTCY?

No. U.S.C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.

HOW MUCH AM I ALLOWED TO KEEP?

You are allowed to keep certain assets and Colorado has many exemptions (laws that indicate how much you can keep). The biggest exemption in Colorado is the one that sets the sum of $60,000.00 of equity is protected by Colorado’s homestead law. That amount increases to $90,000.00 if you are elderly. Exemptions or Assets that can be kept in a Bankruptcy $60,000 in equity in your home or sale proceeds if sold within the year prior to bankruptcy; $25,000 – Farm machinery, tools, livestock; $3,000 – Household goods; $2,000 – jewelry and watches; $25,000 – Cash surrender value of an insurance policy; $5,000 in equity in motor vehicle or a bicycle.  The auto exemption increases to $10,000.00 if you are over the age of 60 or disabled; $1,500 – Personal books, family pictures; $3,000 – Professional library; $600 – Provisions and fuel; $20,000 in things you need for your job (tools, books, etc.); $1,500 – Wearing apparel; any amount in an IRA, 401(k), or pension plan; your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistant, and pensions ­ regardless of the amount. There are other exemptions as well.