FAQs
Bankruptcy
FREQUENTLY ASKED QUESTIONS BY PEOPLE CONSIDERING BANKRUPTCY
NOTE - WE ARE A DEBT RELIEF AGENCY - WE HELP PEOPLE FILE BANKRUPTCY CASES
PERSONS ASSISTED SHOULD READ IMPORTANT DISCLOSURE FORMS
Q: What is a Chapter 7 bankruptcy case?
A: Chapter 7 lets you get rid all of your debt. A trustee will be appointed to see if any of your assets should be sold. But, most chapter 7 debtors can use exemptions to keep their property. In addition, assets which are subject to liens, like your house or car, in many cases, won’t be sold by a bankruptcy trustee. So, if you reaffirm these debts, you stand a good chance to be able to keep these assets. Not every debtor is eligible for relief under chapter 7. If you make less than the national median income, either personally or taking into account your entire family income, or if your "current monthly disposable income" is such that you cannot afford to pay prescribed minimum amounts to your creditors over a 5 year period, then you can file a chapter 7 case.
Q: What is a Chapter 13 bankruptcy case?
A: If you need to catch up on payments for a house or car, you need chapter 13. If you have substantial equity in a house or other assets to protect, you also need chapter 13. Even if you don't have assets to protect in a chapter 13 case, you still may have to make payments under a chapter 13 plan for five years. If you make more than the national median income and, after taking into account strictly prescribed allowed expenses, you have enough disposable income to pay at least $10,000 or even $6,000 or less if that would pay 25% of your unsecured debt, you must file a chapter 13 case. If you try to file a chapter 7 case when you have the means to satisfy a chapter 13 case, your case will be presumed "abusive" and is subject to dismissal. Dismissal of your case has serious consequences if you want to file again.
Q: Why should I consider filing a chapter 13 to pay a portion of my bills instead of a chapter 7 to eliminate all my bills?
A: People consider filing a chapter 13 for several reasons:
- They filed for chapter 7 bankruptcy within the past 8 years and can’t file another chapter 7 case
- They have equity in a house or car which they would like to protect
- They are behind in their payment on a house or car and can’t afford to lose them through foreclosure or repossession
- They have debts which can’t be discharged in chapter 7 but which can be discharged in Chapter 13
Most importantly people must file a chapter 13 case if their case would be presumed abusive under the "means test". While the court has the authority under special circumstances to allow a chapter 7 case to proceed for persons who otherwise would have to file a chapter 13 case, this is the exception and not the rule. Click here for more information about the “means test"
Q: I don't think I will have enough money to even pay some of my bills in the future, now what?
A: In that case, you may be a candidate for Chapter 7. Under this type of bankruptcy case, sometimes called "straight bankruptcy", most, if not all, of your debts can be discharged. You must not have been discharged in a chapter 7 case within the past 8 years or under a chapter 13 case within the past 4 years. You must meet the eligibility requirements under the "means test"- Click here for the means test
Q: Will my creditors keep bothering me?
A: Once you hire Lakelaw as your attorneys, your creditors no longer can contact you. We will determine whether you have a potential claim under the Fair Debt Collection Practices Act if your creditors have been particularly aggressive or hostile towards you.
Q: Will this affect my husband or wife?
A: A married couple may file a joint case but if you file a case on your own, your spouse’s credit is not involved. If you own property jointly with your spouse, please let us know because there are special rules which pertain to you and they vary from case to case. In Wisconsin, because of community property rules, a chapter 7 bankruptcy case might be beneficial to your spouse even if he or she does not file with you.
Q: Is this a public record?
A: Bankruptcy records are public and available on the web. Some newspapers may choose to publish a notice of your case, but this is not typical. Most people will be unaware that you filed. Your credit report will show your bankruptcy for as long as 10 years. However, your credit will improve constantly during these 10 years if you start to pay your bills regularly after bankruptcy.
Q: Can I get credit again?
A: Actually, you will be surprised how quickly you can get credit again. Some credit card companies will solicit you to keep your credit card and reaffirm your debt with them. This may or may not be a good idea for you. We will advise you about your particular case.
Q: Will my employer know?
A: Usually not. And your employer can’t discriminate against you because you filed a bankruptcy case. It’s the law!
Q: Will I lose my house or car?
A: Not necessarily. In many cases, you can reaffirm your debts and keep your house or car. You also will be able to keep your qualified retirement accounts in almost every case.
Q: Where can I get help?
A: We have an extensive network of resources to which we refer our clients. We want you to succeed in your life so that your bankruptcy truly is a "fresh start".
Q: I hear that this new bankruptcy law is very complex.
A: The new law is, indeed, very complex. You will need to obtain many records before we can help you file your case. You will also need to obtain a special "briefing" before you file your case and special "financial education" before you obtain your discharge. The law has been changed to discourage you from filing your bankruptcy case. We can help you navigate through the maze that Congress has created so that you can get the fresh start you need and deserve.
Q: Could you explain the “means test”?
A: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created a means (income) test, which will be applied to Chapter 7 bankruptcy petitions, filed on or after October 17, 2005 if the debtor is an individual with primarily consumer debts. The test will determine if the debtor is eligible for Chapter 7 or must file under Chapter 13 for relief. Here's how the test works:
1. Your current monthly income (CMI) equals the average monthly gross income that you (in a joint filing, you and your spouse) received from all sources. This includes any amounts paid by any other entity on a regular basis for the household expenses of you, your spouse (in joint filings), and/or your dependents, over a six-month period immediately preceding the bankruptcy filing. Social Security benefits and payments to victims of war crimes, crimes against humanity, and terrorism may be excluded.
2. As published by the U. S. Bureau of Statistics, adjusted for family size.
3. Generally, allowable expenses include living expenses, determined under:
the IRS National Standards for Allowable Living Expenses, based on family size and gross monthly income--an additional 5 percent of the National Standards food and clothing categories is allowed if you can demonstrate that this additional amount is reasonable and necessary.
The IRS Local Standards Housing and Utilities Allowable Living Expenses for your state and county--you may be granted an additional expense allowance for actual home energy expenses if you can document the expenses and demonstrate that they are reasonable and necessary.
The IRS Allowable Living Expenses for Transportation for your area
The actual amounts of other necessary expenses, including:
Charitable contributions not to exceed 15 percent of your gross income
Child care
Care for elderly, invalid, or handicapped members of your immediate family who cannot pay for these expenses themselves
Elementary or secondary school expenses for each dependent child under 18 years old, to a maximum of $1,500 per child per year
Health insurance, disability insurance, and health savings account expenses
Federal, state, and local tax payments, including FICA and Medicare Secured debt payments (e.g., home mortgage, car payment)
Administrative expenses if you're eligible to file Chapter 13
Reasonably necessary expenses to keep you and your dependents safe from family violence
THIS IS COMPLICATED. BRING YOUR DATA TO US AND WE'LL HELP YOU DO THE MATH!
More information about bankruptcy....
Remember, there is no substitute for qualified legal advice. Our website is designed to give you general information. Each case and each person is different. So don't take legal action based on what you read here or on any web page.
