6 Myths of Bankruptcy
May 19, 2010
Filing bankruptcy ruins your credit … you’ll never be able to get a credit card or loan again … and your possessions will all be taken.
Or: your debts will all fly away, your home will be safe no matter how far behind on payments you are, and your credit will improve.
With some creativity, you likely could come up with your own common “myths” of bankruptcy. But there is nothing wrong with mistaking the benefits and negatives of filing bankruptcy. These are all common online.
This posts shows you 6 myths you no longer need to believe. Some you may know, but read on, because some may surprise you.
1-You’ll Lose Everything
In most Chapter 7 bankruptcy cases, actually over 90 percent, you lose absolutely no assets. And the point of Chapter 13 bankruptcy is that you pay over an extended period so you lose nothing. The myth is that you 1) will lose your home and car and 2) you won’t be able to get them back. In fact, if you work with a trustee in the rare case you might lose something, you can negotiate to keep items such as your car. With Chapter 13, you can put an automatic stay on your home and stop any foreclosure proceedings if you are not too far behind.
2-You’ll Eliminate All Debt
Taxes, alimony, and child support cannot be eliminated. And with Chapter 13 bankruptcy, you are paying back everything, just typically over an extended period of time. Chapter 7 bankruptcy can eliminate credit, medical, and mortgage debt.
3-You won’t have to pay on your house
You still have to stay current on your home in order for the bankruptcy to work out. For instance, if you file Chapter 7, you can eliminate that debt, but you’ll lose the house. With Chapter 13, you must stay current on the mortgage or you’ll lose it.
4-Credit cards will no longer be an option
Let’s get back to the positives. Bankruptcy will stay on your credit report for, in most cases, 10 years. However, you will still get many offers for credit cards and you will have the opportunity to rebuild your credit. The interest rates on the credit cards may be high, but if you stay up on them it can be beneficial in rebuilding your credit.
5-Filing Bankruptcy Will Improve Credit Scores
Just because you eliminate debts with bankruptcy does not mean you get a clean slate. As noted above, a bankruptcy will show up on your credit report for 10 years. It’s not going to ruin you, but it certainly won’t improve your credit.
6-You won’t be able to make large purchases
You can still make purchases. Just because you file bankruptcy does not mean all options are off the table. You can still get credit cards, loans, and buy properties. You may have to work on rebuilding your credit, but if everyone who filed bankruptcy could never make a large purchase again there would be far less car and home owners.
Common Questions on Chapter 7 Bankruptcy in Texas
May 12, 2010
There are are many important questions when it comes to filing personal bankruptcy, so here on Higgins and Associates Texas law blog, we’ll be answering common questions.
For this post, let’s focus on Chapter 7 bankruptcy. What it is; how much it costs with lawyer fees; what you need to do to file; if you’re eligible, and more.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most common form of bankruptcy for filers who want to eliminate debt. You will file with the courts, usually and preferably with the help of a lawyer, and a trustee will be appointed. A “trustee” is someone who handles the liquidation of any nonexempt assets. Your car or some other asset may be worth more.
Do you always lose assets with Chapter 7 bankruptcy?
One of the disadvantages of Chapter 7 is that you may lose some assets. In bankruptcy, the less you have the less you lose. If you are jobless, rent an apartment, and have few assets, in most cases you lose nothing. There are many other ways where you lose nothing, even if you have a job, home and assets. In fact, most bankruptcy filers, of all situations and various income levels, typically lose nothing by filing. If your assets are valued too high, you might file under Chapter 13.
What is the difference with Chapter 13?
Chapter 13 is a debt repayment plan; you don’t discharge debts, you pay them back over time. Chapter 7 means you discharge (eliminate) many forms of debt. So you pay with Chapter 13, and not with Chapter 7. However, if you make a lot of money and/or have many assets, Chapter 13 lets you keep them.
What are the advantages?
We kind of pointed out how Chapter 7 can discharge debts, but what debts? You can discharge mortgage, credit card, and medical bills. You can’t discharge taxes, alimony, and child support. If you have thousands in credit card debt, Chapter 7 is a very good option. It should be noted, you can eliminate mortgage debt, but you will lose your home in this case unless you can pay it.
Are you eligible for Texas Chapter 7 bankruptcy?
In order to file Chapter 7 bankruptcy, you must be eligible. In order to be eligible, you need to be below the median income for households in Texas.
Texas Median Income
1 Person Family – Annual Income $38,801
2 Person Family – Annual Income 55,660
3 Person Family – Annual Income $59,011
4 Person Family – Annual Income $66,145
And it goes up if you have larger families than this. If you make too much, under new Bankruptcy Code you can still file Chapter 13. Chapter 13 has definite advantages that an experience Texas bankruptcy attorney can help you with.
How much does it cost?
Chapter 7 bankruptcy costs $299 and Chapter 13 $274, in any state including Texas. Lawyer fees can range in variety, but typically are from $1,000-$2,000. Higher price does not always mean they’re an expert. Be thorough in reviewing bankruptcy lawyers.
Who should you hire?
You have all the answers you need but one: who should you hire? A Texas bankruptcy lawyer helps you fill out documentation, claim exemptions, stop creditor harassment, and gives you a fresh start financially. Hire a lawyer who cares about his or her clients, who has the time to handle your case, specializes in personal bankruptcy, and has a fair price.
Dallas Bankruptcy Process — What to Expect at Your Bankruptcy Consultation
June 2, 2009
What should you expect when you come to Higgins and Associates for your Bankruptcy Consultation? This short video explains the bankruptcy process for people filing bankruptcy in Dallas Fort Worth.
What is the role of the filed attorney in a chapter 13 case?
March 28, 2008
The filed attorney performs the following functions in a typical chapter 13 case:
- Examining the filed financial situation and determining whether chapter 13 is a feasible alternative for the debtor, and if so, whether a single or a joint case should be filed.
- Assisting the debtor in the preparation of a budget
- Examining the liens or security interests of secured creditors to ascertain their validity or avoidability, and taking the legal steps necessary to protect the filed interest in such matters.
- Devising and implementing methods of dealing with secured creditors.
- Assisting the debtor in devising a chapter 13 plan that meets the needs of the debtor and is acceptable to the court.
- Preparing the necessary pleadings and chapter 13 forms.
- Filing the chapter 13 forms and pleadings with the court and paying, or providing for the payment of, the filing fee.
- Attending the meeting of creditors, the confirmation hearing, and any other court hearings required in the case.
- Assisting the debtor in obtaining court approval of a chapter 13 plan.
- Checking the claims filed in the case, filing objections to improper claims, and attending court hearings thereon.
- Assisting the debtor in overcoming any legal obstacles that may arise during the course of the case.
- Assisting the debtor in obtaining a discharge upon the completion or termination of the plan.
The fee charged by an attorney for representing a debtor in a chapter 13 case must be reviewed and approved by the bankruptcy court. This rule is followed whether the fee is paid to the attorney prior to or after the filing of the case, and whether it is paid to the attorney directly by the debtor or by the chapter 13 trustee. The court will approve only a fee that it finds to be reasonable.
May a self-employed person file under chapter 13?
March 28, 2008
Yes. A self-employed person meeting the eligibility requirements listed in the answer to Question 18 above may file under chapter 13. A debtor engaged in business may continue to operate the business during the chapter 13 case.
What happens if a debtor is unable to complete the chapter 13 payments?
March 28, 2008
A debtor who is unable to complete the chapter 13 payments has three options:
- dismiss the chapter 13 case,
- convert the chapter 13 case to chapter 7, or
- if the debtor is unable to complete the payments due to circumstances for which he or she should not be held accountable, close the case and obtain a partial chapter 13 discharge as described in the answer to Question 6 above.
When should a husband and wife file jointly under chapter 13?
March 28, 2008
If both spouses are liable for any significant debts, they should file jointly under chapter 13, even if only one of them has income. Also, if both of them have regular income, they should file jointly.
What if the debtor later decides to discontinue the chapter 13 case?
March 28, 2008
The debtor has the right to either dismiss a chapter 13 case or convert it to chapter 7 at any time for any reason. However, if the debtor simply stops making the required chapter 13 payments, the court may compel the debtor or the filed employer to make the payments and to comply with the orders of the court. Therefore, the debtor who wishes to discontinue a chapter 13 case should do so through his or her attorney.
May a husband and wife file jointly under chapter 13?
March 28, 2008
A husband and wife may file jointly under chapter 13 if each of them meets the requirements listed in the answer to Question 18 above, except that only one of them need have regular income and their combined debts must meet the debt limitations described in the answer to Question 18 above
What should the debtor do if he or she moves while the case is pending?
March 28, 2008
The debtor should immediately notify the bankruptcy court and the chapter 13 trustee in writing of the new address. Most communications in a chapter 13 case are by mail, and if the debtor fails to receive an order of the court or a notice from the chapter 13 trustee because of an incorrect address, the case may be dismissed. Many courts have change-of-address forms that may be used if the debtor moves.