Kinkade & Associates, P.C., A Debt Relief Law Firm
Updated September, 2023
Q: Do I need a lawyer to file bankruptcy?
A: The short answer is “No,” but . . .
Explanation: It may be tempting to save the expense of hiring an attorney to prepare your bankruptcy and represent through the bankruptcy process. But, should you file bankruptcy without an attorney? For reasons explained below the answer is a very big “NO!”
Without question, and without exception, considering bankruptcy is a serious undertaking. The decision to file bankruptcy, and if so, the decision regarding the type of bankruptcy that will meet your needs and circumstances, can have serious long-term effects on your financial future. Bankruptcy is a complicated area of law. The average person, regardless of their experience and education cannot possibly know enough about bankruptcy law to make decisions about their best options in bankruptcy and thereafter properly and correctly prepare the paperwork the bankruptcy court requires. The average person cannot know what is necessary to protect their assets and their financial future. The bankruptcy code, essentially the law governing filing bankruptcy, is over a thousand pages. Certainly not every page applies to every person but how will you know which applies to you? How will you know what steps you must take or how the paperwork must be prepared to protect your assets? How will you know what you must do after you file bankruptcy to eliminate or manage your debt while retaining and protecting your home, your car and/or your personal possessions? Filing for bankruptcy and the outcome of doing so is simply to important to your financial future to undertake it without an attorney.
Q: What is a bankruptcy discharge?
A: A bankruptcy discharge is the end result of a properly prepared, properly filed and properly completed bankruptcy filing. A bankruptcy discharge eliminates the legal obligation to repay most debt. (Detailed explanation below):
At the end of a Chapter 7 or Chapter 13 case you are relieved of the personal responsibility and liability for eligible debt by virtue of the “discharge. Not all debts are eligible for discharge. Among these are child support or alimony, government backed student loans, most tax debt and court fines like speeding tickets. Secured lenders who hold debt on home mortgages and car liens will likely retain their lien on the property (more below in next question). This means, despite the discharge, the lender may seize or foreclose on the property if payments are not made, even though the personal liability for the loan may have been discharged. Unsecured creditors (those without collateral tied to the loan) whose debt is dischargeable and are who were listed in a bankruptcy are sent notice of the discharge and that the debt owed has been discharged and that they should not attempt to collect on a discharged debt. If an unsecured creditor whose debt was discharged attempts to collect on a debt after discharge that creditor could face serious sanctions. If a creditor contacts a person after discharge they should contact their bankruptcy attorney before giving out any information or paying on that debt. Most attempts to collect a discharged debt, even years later, are either scams or at the least certainly a violation of the law.
Q: Will Bankruptcy Clear Mortgage Debt?
A: The short answer is “Yes” as to personal liability for a mortgage loan but the mortgage company or bank debt remains a lien on the real estate.
Explanation: A typical loan for the purchase or refinancing of real estate has two components; a promissory note signed by the borrower(s) and a mortgage, which essentially is a consensual pledge of the real estate as collateral for the loan which places a lien on the real estate in favor of the mortgage lender. Filing bankruptcy, either Chapter 7 or Chapter 13, can provide for a discharge of the personal liability component. This may permit a person or couple who files a bankruptcy to surrender the home to the lender and eliminate personal liability for the debt. A bankruptcy filing does not require a person or couple to surrender real estate. In most cases an option exists to keep the home and continue to pay the mortgage payments. This may require the execution of a reaffirmation agreement with the mortgage lender. A reaffirmation agreement executed during a pending bankruptcy, once filed with the bankruptcy court, will preserve and maintain personal liability. If real estate is surrendered to a lender as part of a bankruptcy filing the lender is free to proceed in foreclosure once a bankruptcy is concluded, or prior thereto with the permission of the bankruptcy court. Once a bankruptcy discharge is entered the foreclosure is against the real estate only, known as “In-Rem” foreclosure, as the discharge in bankruptcy has eliminated personal liability for the debt and prevents the mortgage lender from collecting debt from you.
Q: Will filing bankruptcy stop foreclosure on my home?
A: Yes.
Explanation: When a bankruptcy is filed, either chapter 7 or chapter 13, an automatic “stay” is placed on creditor collection activities. This means that once a bankruptcy is filed creditor collections efforts and tactics, including foreclosure (and wage garnishment, court hearings, lawsuits, phone calls, letters and other forms of creditor harassment) must stop. There are significant differences in how long this protection can last in Chapter 7 versus Chapter 13.
Q: Does Bankruptcy Erase All Debt?
A: The short answer is that Bankruptcy eliminates most, but not all debt.
Explanation: There are some types of debt that cannot be discharged in bankruptcy including most student loans, most tax debt, alimony, child support, debts arising out of a divorce, court fines such as speeding tickets, debts that were a result of auto accidents involving intoxication, debts that are a result of criminal activity and debts incurred through fraud. Secured debt, such as debt that is tied to a car, home, furniture, appliances or other collateral must be paid if you want to keep the property that is tied to the debt.
Q: Can I discharge student loan debt in bankruptcy
A: For most people, if remains difficult to discharge student loan debt in bankruptcy.
Explanation: The current legal standard for possible discharge of student loan debt in bankruptcy remains legally difficult. A separate action within the bankruptcy (known as an “adversary complaint”) must be filed and prosecuted. Although the current administration has taken steps that may streamline the process within the adversary action, the legal standard has not changed. If you have questions, you should consult with an experienced bankruptcy attorney.
Q: How much do you have to be in debt to file Chapter 7?
A: There is no minimum amount of debt required to file Chapter 7 bankruptcy.
Explanation: Although there is no minimum amount required whether or not bankruptcy is an option for you depends on all of your facts and circumstances. An experienced Kinkade & Associates debt relief attorney will give you information about your options for debt relief after meeting with you for a no-charge strategy session, including potential options for debt relief through bankruptcy.
Q: Can I file bankruptcy and keep my home and car and other property I own?
A: The short answer is that a significant amount of equity in personal property can be protected in Chapter 7 bankruptcy.
Explanation: This is one of the most frequently expressed concerns expressed by individuals or married couples considering Chapter 7 bankruptcy. The facts are that most individuals or married couples who are eligible for Chapter 7 bankruptcy can keep their home, their vehicles, their furniture, their retirement accounts and their other possessions. Every person or married couple who files Chapter 7 bankruptcy is entitled to keep property worth up to a certain amount that is set by law. The vast majority of individuals and married couples who file Chapter 7 bankruptcy keep everything they own. It is very important to keep in mind that there are limits to the value of property you can keep in a Chapter 7 bankruptcy and not all types of personal property and other assets are protected in a Chapter 7 bankruptcy. You must consult a knowledgeable bankruptcy attorney to learn the details of what types of assets can be protected and the limits of that protection. If you have property that you cannot protect in Chapter 7 then in that case you may be eligible to consider a Chapter 13 bankruptcy.
Q: What are the different types of Bankruptcy?
A: The short answer is that there are two types of bankruptcy, Chapter 7 and Chapter 13.
Explanation: There are important differences between Chapter 7 and Chapter13 bankruptcy. A person or family’s unique situation will often determine whether Chapter 7 or Chapter 13 is best. One size does not fit all!
CHAPTER 7 BANKRUPTCY: Chapter 7 bankruptcy is filed primarily by individuals, married couples (who meet qualification criteria) or small businesses (who cease business) to eliminate debt and achieve a “fresh start.” When a Chapter 7 bankruptcy is filed you are granted an automatic “stay” on creditor collection. This means that once a Chapter 7 bankruptcy is filed creditor collections efforts and tactics, including wage garnishment, court hearings, lawsuits, phone calls, letters and other forms of creditor harassment must stop. If a creditor fails to stop collection efforts after being notified of the filing of a Chapter 7 bankruptcy that creditor may be subject to punishment. Once the bankruptcy process is concluded most debts are “discharged,” which means eliminated. Individuals or married couples or receive a discharge in Chapter 7 bankruptcy are no longer legally liable for discharged debts. Creditors whose debts are discharged cannot legally collect on those debts and in fact may not make any effort to collect on a discharged debt. A Chapter 7 bankruptcy discharge erects a barrier to any further collection efforts. As stated above, there are some types of debt that cannot be discharged in bankruptcy including most student loans, most tax debt, alimony, child support, debts arising out of a divorce, court fines such as speeding tickets, debts that were a result of auto accidents involving intoxication, debts that are a result of criminal activity and debts incurred through fraud. Secured debt, such as debt that is tied to a car, home, furniture, appliances or other collateral must be paid if you want to keep the property that is tied to the debt.
CHAPTER 13 BANKRUPTCY: Chapter 13 bankruptcy is a court supervised
reorganization and repayment plan that permits individuals and married couples who have a steady and reliable source of income to propose a Plan to their creditors to repay some or all of their debt over time, usually a three-to-five-year period. A Chapter 13 bankruptcy requires a monthly payment. The amount of the monthly payment depends upon the household income and expenses as well as the type and amount of debt that needs to be paid through the repayment plan. Chapter 13 may permit you to propose a plan to cure defaults on car loans, home mortgages, student loans and child support. Filing a Chapter 13 bankruptcy can stop a Sheriff’s sale of real estate, rescue a home from foreclosure and permit repayment of the missed mortgage payments over time. You may be able to eliminate second mortgages and combine payments on cars and other secured debt into one affordable monthly payment. Depending on a person or married couples’s circumstances it is possible that some debt (unsecured debt) can be eliminated without a substantial amount of that debt being repaid. Like a Chapter 7 bankruptcy, filing a Chapter 13 bankruptcy stops wage garnishments as well as other collection activities. In the end, for most Chapter 13 bankruptcy candidates, a discharge eliminates unsecured debts not paid during the term of the Chapter 13 bankruptcy.
Q: Are there alternatives to filing bankruptcy?
A: The short answer is, there may be, depending on your circumstances. For instance, debt settlement may be an alternative to bankruptcy depending on a number of factors. Debt Settlement is discussed in more detail below.
DEBT SETTLEMENT – A POTENTIAL ALTERNATIVE TO BANKRUPTCY : At Kinkade & Associates we are frequently asked by clients if there are any alternatives to filing bankruptcy. Under the right circumstances settling debt may be an option. Debt Settlement is a fairly straight forward concept. Your creditors would like you to pay your debts in full. However, if you can’t pay your debts in full your creditors would generally prefer to have some money rather than nothing. When possible, we talk with your creditors on your behalf and attempt to negotiate a settlement with them. Since we are bankruptcy attorneys, creditors recognize that the vast majority of the people we represent do in fact file bankruptcy. Under the right circumstances we may be able to talk with your creditors about settling your debt. If the negotiation is successful your creditor will agree to accept the negotiated lump sum, a sum that is less than the full amount of the debt you owe. Generally, our average settlement is between 45 – 60% of the debt owed. However, please keep in mind however that this is only an average and actual results vary from person to person and creditors depending on the circumstances. At times a higher percentage is required, especially if a lawsuit has been filed. Debt settlement is not right for everyone. There can be challenges in raising the money to offer lump sums to your creditors. There is important additional information that you need to know regarding the potential option of debt settlement, including potential income tax implications and possible tax liability for forgiven debt. If you have any questions, please refer to our web site information page or schedule a no-charge strategy session with an experienced Kinkade & Associates attorney.
Q: If I file Chapter 7 bankruptcy, will I ever be able to have credit again, buy a car on credit or qualify for a mortgage? How does filing bankruptcy affect my credit?
A: You will be able to rebuild your credit after bankruptcy.
Explanation: The fact is that most individuals and married couples who receive a Chapter 7 bankruptcy discharge are able to re-establish their credit worthiness in a relatively short period of time. Each individual or married couples’ situation is unique. Often, what folks do after a bankruptcy is more important than the fact that a bankruptcy was filed. In other words, there is hope.
Q: How long does filing bankruptcy stay on my credit report?
A: Ten years from discharge. However, for most who file for bankruptcy the impact lessens with respect to re-establishing credit and rebuilding credit for a much more limited period, generally two to four years.
Q: How long after a file bankruptcy can I possibly buy a house?
A: There are of course many factors’ lenders consider when evaluating someone or a couple for a mortgage loan. However, generally, if someone who files bankruptcy follows a few simple steps, and all other factors permit them to qualify, the period of time a bankruptcy impacts eligibility for a mortgage is 2 to 3 years.
Q: If I work and have income, can I file a Chapter 7 bankruptcy?
A: Yes
Explanation: The fact is that most individuals or married couples who qualify for and then file Chapter 7 bankruptcy do have income from working. Although there are limits to the amount of household income an individual or married couple can earn and still qualify for Chapter 7 bankruptcy, statistically most candidates for bankruptcy do qualify for Chapter 7 bankruptcy. Each person’s situation is different, and the income test used to determine who may qualify for Chapter 7 bankruptcy should be performed by a qualified and experienced bankruptcy attorney.
[For other frequently asked questions and answers please click this link for our frequently asked questions page.
The decision to take control of your debt and how to best eliminate and/or manage that debt is one of the most important decisions you can make. Experienced, compassionate, knowledgeable and professional guidance is crucial to your decision being the correct decision for you and your family. If you have questions about whether Chapter 7 or Chapter 13 bankruptcy is the best option for you, the experienced bankruptcy attorneys at Kinkade & Associates would be pleased to meet with you, discuss your situation and work with you to develop the most effective and best debt relief strategy for you and your family.
It is not unusual to seek basic information in an effort to determine whether or not bankruptcy may help you and your family eliminate or manage debt and rebuild your financial life. Ultimately, your decision on debt relief may be one of the most important financial decisions you will ever make. It is important that you not only you get the information you need to make that decision, but that you develop the right debt relief strategy for you and your family.
This is the very reason that Kinkade & Associates offers a no-charge strategy session. At Kinkade & Associates debt relief is all we do. Our approach to providing debt relief for our clients is decidedly different from other attorneys who file bankruptcy cases. We do more than discuss your potential options in bankruptcy. During your no-charge strategy session a Kinkade & Associates attorney will talk with you about your financial circumstances and your need for debt relief. After sitting down with you and discussing your circumstances we are able to work with you in order to develop the appropriate individualized strategy for you to gain relief from your debt. We do not offer a “one-size-fits-all” approach that treats you like just another number. Instead, our experience, focus, unique approach and dedication to you place us in a position to offer you and your family a unique opportunity. An opportunity to discuss and develop a personalized strategy for dealing with your debt which may include, but is not necessarily limited to, potential options in bankruptcy.
If bankruptcy is right for you, we thoroughly discuss your bankruptcy options with you. Bankruptcy is a legal process available to most individuals and married couples that permits a person or married couple to either eliminate most types of consumer debt (Chapter 7) or propose a repayment plan under bankruptcy court supervision (Chapter 13). Most, but not all, individuals or married couples are eligible for either Chapter 7 or Chapter 13. Sometimes an individual or married couple have a choice about which type of bankruptcy they can file. Making the right choice can potentially be one of the most important decisions you will make. Your individual facts and circumstances will determine whether Chapter 7 or Chapter 13 is right for you. The type of debt you have will be one of the important factors in determining which type of bankruptcy will be most beneficial.