It’s a myth that people who file bankruptcy lose all or even most of their property. People who file bankruptcy generally never lose property, even in a Chapter 7 bankruptcy, because the property is either exempt or because they pay the trustee for any nonexempt value.
Anyone can file bankruptcy, regardless of income. The question isn’t whether you can file bankruptcy but what type of bankruptcy you can file. If you make less than the median income for your household you should be eligible for a Chapter 7. But even making more than median income doesn’t mean you won’t qualify for a Chapter 7. It only means you have to pass a “means test” that considers how much income is available after expenses. The sample means tests you can find on the Internet often don’t provide accurate answers so don’t be discouraged if you “fail” one of them. It’s also possible to “pass” the means test and still not qualify for a Chapter 7 because of other issues like current income and expenses. That’s why it’s better to just commit to filing bankruptcy and let us advise you on what type best fits your situation. Even filing Chapter 13 bankruptcy is usually better than the alternative of not filing at all.
From the time of filing to the receipt of a discharge in Chapter 7 or confirmation of a Chapter 13 Plan takes about five months. Most of that time nothing is happening except waiting for required time to pass. Most debtors are finished having to do anything within two months of filing. How long it takes to get a bankruptcy filed depends mostly on how quickly you get all the information to us and the fee paid.
It depends on how long ago you filed and what type of bankruptcy you filed. You can file Chapter 7 if you filed an earlier Chapter 7 more than eight years ago. You can receive a discharge in Chapter 13 bankruptcy if you received a Chapter 7 discharge more than four years ago or a Chapter 13 discharge more than two years ago. You can also file Chapter 13 sooner than four years after Chapter 7 if you’re not seeking to discharge debts. For example, sometimes it’s best to file Chapter 7 to discharge what debt you can and then file a Chapter 13 soon after to deal with nondischargeable taxes or a mortgage arrearage. This so-called Chapter 20 allows you to use both types of bankruptcy to deal with debts.
It might if you don’t have much debt, but for most people a Chapter 13 bankruptcy provides more benefit than using a debt settlement program. With a Chapter 13 bankruptcy you can’t be sued by your creditors while you’re making payments and the debt is frozen at the time you file. No interest or late fees can be added to the debt. In addition, unless you’re able to settle with ALL of your creditors, you will have wasted the money you spent on the few who do settle while still having to file bankruptcy. Filing Chapter 13 bankruptcy also provides other advantages over debt settlement like:
- avoiding the tax consequences of debt forgiveness
- possibly “cramming down” loan values and interest rates on secured loans,
- possibly stripping off second mortgages and
- paying tax debts, mortgage defaults and student loans that no debt settlement program can resolve.
In a Chapter 13 bankruptcy, unsecured creditors who fail to file a proof of claim also have their debts discharged without any payment, unless the debt itself is not dischargeable.
No, absolutely not. The relationship between bankruptcy and religion is important because faith in God is a key part of my life and that of my staff. Obviously, people should repay their debts if they can, but it’s clear from the Bible that filing bankruptcy is an acceptable way to deal with burdensome financial problems. In Deuteronomy 15:1-2 God instructed creditors to release from debt anyone who had borrowed money. It didn’t matter whether the lender was legitimately owed the money or whether the borrower had made mistakes. The debt was to be forgiven. Period.
Mandatory debt forgiveness had a two-fold purpose in biblical times. It showed compassion and mercy to the poor, which is required to honor God, and it led to more economic stability for families and the community. Being weighed down by debt isn’t a productive way for any family to live and it prevents people from doing the Lord’s work. Filing bankruptcy to relieve yourself of debt is neither sinful nor against God’s will. This is especially true when the cause of bankruptcy is almost always something beyond your control, like medical problems or loss of a job. In short, bankruptcy is a form of grace and people of faith should embrace bankruptcy as a way of extending grace to people who need it, just as God demanded that grace be shown to debtors throughout scripture.
In general, student loans, alimony and child support, recent tax obligations, criminal restitution and debts arising from a death or personal injury caused by operating a vehicle while intoxicated can’t be discharged. There are exceptions though so if you have these debts we can talk about your options before filing.
For an uncontested personal Chapter 7 bankruptcy we charge a flat fee of $1300. This includes the filing fee. It doesn’t include the required credit counseling courses but those only cost about $30. Bankruptcies involving businesses, farms or very large numbers of creditors may require a larger fee.
While disputes in bankruptcy are rare, if any disputes do occur with a creditor or trustee, we will charge an hourly rate for time spent dealing with the dispute. There may also be additional costs for filing amendments to the bankruptcy, filing for redemption on a vehicle or seeking reimbursement of garnished wages.
For a Chapter 13 bankruptcy we charge an hourly rate. A payment of $1300 is still needed before filing and any additional costs are paid through the Chapter 13 plan.
I’m happy to take payments but all fees must be paid in full before the bankruptcy can be filed. If you need a Chapter 11 or 12 bankruptcy, please call me to discuss the necessary fee.
It’s impossible to say for sure. A bankruptcy can remain on credit reports for ten years (but generally come off sooner in a Chapter 13 bankruptcy). Every creditor has its own policy about loaning to someone with a previous bankruptcy. Your future ability to get credit will depend on the amount of your income, whether you’ve had late payments or other credit problems since the bankruptcy was discharged, and how long it’s been since the bankruptcy was filed.
We ask clients to complete a questionnaire that collects information about property, expenses and creditors. We also ask for paystubs or other income statements, tax returns, credit reports and other information.
Debtors can “exempt” or keep certain property in bankruptcy. In Iowa, each debtor can exempt the property listed below. This isn’t a complete list so other property may be exempt also and you may be able to keep other property by paying its value to the trustee. In most cases debtors lose no property when they file bankruptcy.
- A homestead
- One vehicle with equity of $7000
- Household goods and clothing valued at $7000
- Most pension and retirement plans
- Jewelry valued at $2000
- Public assistance benefits like Social Security, the Earned Income Tax Credit and unemployment benefits
- Farm equipment or tools of the trade valued at $10,000
- Whole life insurance cash value of $10,000
- Any other property valued at up to $1,000
Filing bankruptcy will stop foreclosure proceedings. When you file bankruptcy an “automatic stay” immediately stops debt collection, including foreclosure. You may need to file Chapter 13 bankruptcy to cure a mortgage default and start making mortgage payments again. If you’re facing foreclosure, DON’T WAIT to contact our office.
Debtors in bankruptcy aren’t usually required to appear in court. Debtors are only required to attend a “meeting of creditors,” where the trustee asks questions related to your case, especially about any property owned. It’s very rare for creditors to even show up for this meeting. Hearings before a judge generally only occur when there are disputes with creditors or the trustee and even then debtors are rarely required to attend. Only the debtor’s attorney needs to attend. If you’re required to be at a hearing we’ll be sure to let you know in advance.
It might. Filing bankruptcy is a matter of public record. Some newspapers publish the names of people filing bankruptcy but it’s not something we control. You won’t be alone though and you should remember that getting out of debt is more important than people knowing you took advantage of the opportunity to file bankruptcy.