|
The answers to
the most commonly asked questions
1. What exactly is “Straight Bankruptcy”?
2.
Who can file bankruptcy?
3. How much does it cost to file bankruptcy?
4. How often can I file bankruptcy?
5. Where is my bankruptcy filed?
6: Can both Husband and Wife file a joint
bankruptcy petition?
7: Under what condition should both husband
and wife file bankruptcy?
8: When should I file bankruptcy?
9: How does filing bankruptcy affect
lawsuits and attachments that have already
been filed against me?
10: When will I go to court and what do I do
there?
11: What is a “Trustee in Bankruptcy”?
12: What are my responsibilities to the
trustee in bankruptcy?
13: What is a First Meeting of Creditors?
14: What happens after the First Meeting of
Creditors?
15: What should I do when I receive an order
from the bankruptcy court?
16: What happens to the property that I turn
over to the trustee?
17: What will happen if there is no money or
property to turn over to the trustee in
bankruptcy in my case?
18: What happens if my case contains
non-exempt assets?
19:
What are exempt assets?
20: How will the court contact me about
orders that I am to follow?
21: What should I do if I move or change my
address?
22: How does filing bankruptcy affect my
credit rating?
23: Do I lose any of my rights, such as the
right to vote, by filing bankruptcy?
24: Will news of my bankruptcy be published?
25: Are my out-of-state debts discharged in
bankruptcy?
26: Will I lose all of my property if I file
bankruptcy?
27: Is there a way that I can minimize the
amount of non-exempt assets that I will have
to turn over to the trustee in bankruptcy?
28: What is a discharge in bankruptcy?
29: How will I receive my discharge in
bankruptcy?
30: What debts are not discharged in
bankruptcy?
31: Can I continue to pay some of my debts
after I file Bankruptcy?
32: What should I do if I am sued after
Bankruptcy on a debt that was discharged?
33: What is the role of an attorney in a
consumer Bankruptcy?
1: What exactly
is “Straight Bankruptcy”?
Straight,
ordinary bankruptcy is a proceeding under
the federal laws (Chapter 7 of the
Bankruptcy Code) where a person is released
from paying his or her debts by declaring
himself bankrupt and turning all of his
non-exempt assets over to the trustee in
bankruptcy. Some types of debts, however,
are not affected by bankruptcy. These debts
are described in question 30.
2: Who can file
bankruptcy?
Any person who
resides in, does business in, or has
property in this country can file straight
bankruptcy. It is not legally necessary that
your debts be greater than your assets in
order to file bankruptcy, although as a
practical matter it is seldom wise to do so
unless your debts are greater than your
assets. Some experts say that your
dischargeable debts should exceed you
non-exempt assets by at least one thousand
($1000) dollars before it is wise to file
straight bankruptcy.
3: How much
does it cost to file bankruptcy?
Court costs are
$209.00 regardless of whether you are filing
bankruptcy individually or jointly with your
spouse. The attorney’s fees vary with regard
to the tile complexity of the case; however,
a minimum retainer fee will be quoted to you
after your initial conference.
4: How often
can I file bankruptcy?
Discharge in
bankruptcy cannot be granted if you have
been granted a discharge in a Chapter 7
bankruptcy case filed in the last six years.
5: Where is my
bankruptcy filed?
In the office of the
Clerk of the United States District Court in
the district where you live or where you
maintain your principal place of business.
If you have lived in or maintained your
principal place of business in your present
district for the last 180 days, then your
case must be filed in that district. If not,
then your case must be filed in the United
States District Court in the district where
you have resided or maintained your
principal place of business for the greatest
portion of the last 180 days. The bankruptcy
court is associated with the United States
District Court.
6: Can both
Husband and Wife file a joint bankruptcy
petition?
Yes, under the
bankruptcy laws a husband and wife may file
a joint bankruptcy petition, using the same
set of forms. Only one filing fee is charged
for joint petition, so it costs no more to
file a joint petition than to file a single
petition.
7: Under what
condition should both husband and wife file
bankruptcy?
Both Husband
and wife should file when some of the debts
are owned jointly by both husband and wife.
If both husband and wife owe debts and only
the husband files bankruptcy, the creditors
may try to force or harass the wife into
paying the debts even if she is unemployed.
8: When should
I file bankruptcy?
The answer
depends on the status of your dischargeable
debts and the nature of your non-exempt
assets. It is not wise to file bankruptcy if
you are likely to incur sizable new debts in
the near future. For example, if you or a
member of your family are in bad health and
have run up huge medical bills, it will be
wiser to wait until the illness or injury is
cured, or until you have obtained adequate
insurance coverage, before filing
bankruptcy. It will be at least six years
before you can file bankruptcy again and it
will do you little good to discharge, say,
$10,000 in medical bills by filing now, and
then another $10,000 worth in the next few
months. It would be better to wait a few
months and discharge them all.
Under
the bankruptcy law, all non-exempt property
that becomes yours by inheritance, life
insurance, or divorce within six months
after the date that you file bankruptcy must
be turned over to the trustee in
bankruptcy. Therefore, if you anticipate
acquiring any property or money during the
next six months by inheritance, through
divorce, as the beneficiary of a life
insurance policy, or death benefit plan, you
should not file now.
9: How does
filing bankruptcy affect lawsuits and
attachments that have already been filed
against me?
The filing of a
petition in bankruptcy will automatically
stop most lawsuits and attachments against
you. A few days after your bankruptcy papers
are filed, the court will mail a notice to
all of your creditors, ordering them to stop
all actions against you. If you cannot wait
this long it is permissible for you or your
attorney to notify the creditor. If this is
done, the creditor should be given the
bankruptcy number assigned to your case and
advised, in writing, of the day and hour
that your case was filed. About the only
cases not affected by filing bankruptcy are
criminal cases and those for collections of
debts for alimony, maintenance, or support
from property that is not a part of your
bankruptcy estate (i.e., exempt property or
property acquired after the date of filing),
certain taxes, and certain educational
loans.
10: When will I
go to court and what do I do there?
You will have
to appear in court twice. The first time
will be about a month after your case has
been filed for what is called “The First
Meeting of Creditors.” There you will be put
under oath and questioned about your
bankruptcy papers and your assets but the
trustee in bankruptcy. In all probability
few, if any, or your creditors will appear.
The second court appearance will be for your
discharge hearing, where the court will
either grant or deny your discharge in
bankruptcy and handle matters relating to
the reaffirmation of any debts that you
might wish to pay off.
11: What is a
“Trustee in Bankruptcy”?
The trustee in
bankruptcy in an officer of the court,
usually a practicing attorney, who is
appointed by the bankruptcy court to gather
your nonexempt property, turn it into cash,
and pay this money out to the proper
creditors. The law gives the trustee in
bankruptcy the power and the means to
perform his duties, the principal one of
which is to collect, on behalf of your
creditors, all of your non-exempt property.
12: What are
my responsibilities to the trustee in
bankruptcy?
The law
requires that the debtor cooperate with the
trustee in bankruptcy in the execution of
his duties. If you refuse to cooperate with
the trustee, your discharge in bankruptcy
may be denied.
13: What is a
First Meeting of Creditors?
The First
Meeting of Creditors is a hearing held by
the trustee in the bankruptcy court to start
the administration of your case. During the
hearing you will be called upon to testify
under oath and will be asked questions about
your assets, your debts, and any other
matters that may affect the settlement and
administration of your bankruptcy estate.
The trustee will probably want to examine
your cancelled checks and bank statements
for the past year and your income tax
returns for the past three years.
14: What
happens after the First Meeting of
Creditors?
After the First
Meeting of Creditors, the court may issue
orders to you. These orders will be sent
through the mail and may require that you
provide certain information to the trustee
in bankruptcy.
15: What should
I do when I receive an order from the
bankruptcy court?
You should
contact the trustee in bankruptcy. He will
make arrangements with you as to how and
when you should do the things required by
the court order.
16: What
happens to the property that I turn over to
the trustee?
It is converted
into cash, which is then distributed to
those of your creditors who file claims
against your bankruptcy estate. The expenses
of administering your estate will also be
paid from these funds.
17: What will
happen if there is no money or property to
turn over to the trustee in bankruptcy in my
case?
If you have no
money or property of value over the
exemption allowed by law, your case will be
considered a “Non-asset” case. If your case
is a non-asset case, your discharge hearing
will be held a short time later, unless a
creditor files as objection to your
discharge unless you need more time in which
to reaffirm debts. Your case will probably
be closed shortly after the discharge
hearing.
18: What
happens if my case contains non-exempt
assets?
If your case is
one involving assets, the trustee in
bankruptcy will immediately begin to collect
all of your property to which he is entitled
by law. Your creditors may file claims any
time within ninety days after the First
Meeting of Creditors. The trustee will
examine these claims and object to those
that he deems to be improper. All claims not
objected to by the trustee, you, or a
creditor will be approved by the court.
19: What are
exempt assets?
Both the
Federal Government and the State of Texas
have passed laws defining what assets are
exempt. After determining your situation, an
election will be made as to which exemption
statute will provide the most benefit to
you. Generally the statuses are as follows:
THE STATE OF
TEXAS
-
Homestead,
subject to purchase money or
improvements liens thereon, consisting
of a lot or lots not exceeding one acre
is located in a town. No limit as to
value
-
Personal
property having a value of, not excess
of 15,000.00 for a single person or
$30,000.00 for a family comprising of
the following items:
(a)
Household furnishings
(b)
Tools of your trade
(c)
Clothing
(d)
Two firearms and sporting
equipment
(e)
Two passenger cars or light trucks
(f)
Cash Surrender value of Life
Insurance policies which have been in force
more than two years.
(g)
Current wages
(h)
Household pets and certain
livestock.
FEDERAL
·
$17,450 in value in real or
personal property as a residence
·
Up to $2,775.00 in any one motor
vehicle (Per person)
·
Up to $450.00 in value in any
particular item of household furnishing, or
wearing apparel, up to a total of 9,300.00
per person.
·
Up to $1,100.00 in jewelry held
for personal use
·
Up to $1,750.00 in tools of trade
·
Any unmatured
life insurance contract on the debtor
·
The right to receive certain
support and disability payments.
·
Any property selected by Debtor in
an amount not exceeding $925.00 plus any
unused amount of the $17,425.00 listed
above, up to $87,250.00. This can include
income tax refunds.
Generally,
the election of the
Texas exemption statutes are more
advantageous if you have substantial equity
in your home. However, in certain cases the
Federal statutes are more beneficial. You
can not use both exemptions statutes, one
must be elected.
20: How will
the court contact me about orders that I am
to follow?
The orders will
be mailed to you. It is very important,
therefore, that you always make sure that
the court has your correct address. It is
your responsibility to see to it that the
court always has your correct address.
21: What should
I do if I move or change my address?
You must notify
the court and your attorney in writing of
any change in your address..
22: How does
filing bankruptcy affect my credit rating?
Depending on
your previous credit rating, it will usually
worsen it and the fact that you have filed
bankruptcy will probably remain in your
credit file for at least ten years.
23: Do I lose
any of my rights, such as the right to vote,
by filing bankruptcy?
No. Bankruptcy
is a CIVIL, not criminal proceeding, and you
do not forfeit any of your civil or
constitutional rights by filing. Also,
neither a utility nor a governmental unit
may discriminate against you because you
file bankruptcy.
24: Will news
of my bankruptcy be published?
When your
bankruptcy papers are filed, they become
public records and the fact that you have
filed may be published by some
credit-reporting agencies. However,
newspapers do not usually report or publish
consumer (non-business) bankruptcies unless
it is of a public or well-known person like
a movie star.
25: Are my
out-of-state debts discharged in bankruptcy?
Yes. Bankruptcy
is a federal proceeding and the bankruptcy
court has the jurisdiction and power to
discharge debts contracted anywhere in the
country, whether in or out of your state.
26: Will I lose
all of my property if I file bankruptcy?
You will only
have to turn in your non-exempt assets over
to a trustee in bankruptcy. Under the laws
of the state where you live, and under the
federal laws, certain properties are
declared to be exempt, and out of the reach
of your general creditors. It is these
exempt properties that you will get to keep
after your bankruptcy. (See paragraph 19)
27: Is there a
way that I can minimize the amount of
non-exempt assets that I will have to turn
over to the trustee in bankruptcy?
You will only
be required to turn over to the trustee in
bankruptcy the nonexempt assets that you
possess on the day and hour that you file
your petition for bankruptcy. Most of your
non-exempt assets will be liquid in nature
and tend to vary from day-to-day. It will
pay you, therefore, to engage in some
negative estate planning to minimize the
value of your assets on the day and hour
that you file bankruptcy. The non-exempt
liquid assets that the trustee in bankruptcy
usually looks for are the following which
are in excess of the allowable exemptions:
·
Cash
·
Bank Deposits
·
Landlord and utility deposits
·
Collections (Coin, stamp, etc.)
You should plan
so that the value of these assets is as low
as possible on the day and hour that you
file bankruptcy. By doing this you will not
be cheating or violating any laws. You will
simply be using the law to your advantage,
much the same as the rich investor who sells
some stock at a loss near the end of the
year so as to take advantage of the income
tax laws.
·
Cash: If possible, you should have
no cash whatsoever to either report or turn
over to the trustee. During the last few
days before you file bankruptcy, you should
use your extra cash to buy groceries and
other exempt household supplies, but enough
to last you until your first payday, because
you won’t have any cash until then.
·
Bank deposits: If you are electing
state exemption, be sure that the balance is
Zero and that all of the checks that you
have written have cleared the bank. If, for
example, you have written a check to someone
for fifty dollars and it has not cleared the
bank by the time you file bankruptcy, the
fifty dollars that is in the bank to cover
that check will be deemed an asset of your
bankruptcy estate, even if the check later
clears the bank and is paid, and you will
later have to turn that fifty dollars over
to the trustee in bankruptcy.
·
Tax refunds: If it is early in the
year and you are expecting an income tax
refund in excess of the exemption, you
should wait and file bankruptcy after you
receive the refund. Otherwise, it will go to
the trustee in bankruptcy. If you file
bankruptcy late in the year, you will owe
the trustee a good portion of any refund
that you later receive for that year. If you
and your spouse file a joint income tax
return and only you file bankruptcy, the
trustee will still probably get all of the
refund, especially if most of the taxes came
from your wages or salary.
·
Collections: If you own
collectibles that are not exempt and that
are of any value, you may have to turn them
over to the trustee. You might want to sell
them before filing and use the cash for
food, utility bills, and necessities of
life; but not to purchase exempt properties,
as this has been held to be fraud, which is
a serious offense.
28: What is a
discharge in bankruptcy?
It is a court
order stating that you do not have to pay
your dischargeable debts. A debt that is
discharged in bankruptcy is one that you do
not have to pay.
29: How will I
receive my discharge in bankruptcy?
At a special
court hearing, which you probably will not
have to attend, where the bankruptcy judge
will tell you whether your discharge will be
granted, and if not, any reason for not
granting it.
30: What debts
are not discharged in bankruptcy?
If your
discharge in bankruptcy is granted, all of
your debts will be discharged except for the
following:
-
Taxes (some
taxes may be dischargeable – please
consult your attorney)
-
If the
bankruptcy court so rules, debts for
obtaining money, property, services, or
an extension, renewal, or refinancing of
credit by means of false pretenses,
fraud, or a false financial statement
used with intent to deceive.
-
Debts not
listed on your bankruptcy papers, unless
the creditor had actual knowledge of the
case in time to file a claim
-
If the
court so rules, debts for fraud,
embezzlement or larceny.
-
Debts for
alimony, maintenance, or support.
-
If the
court so rules, debts for intentional
injury.
-
Debts for
certain fines and penalties payable to
governmental units.
-
Debts for
student loans, unless not discharging
the debt.
31: Can I
continue to pay some of my debts after I
file Bankruptcy?
Yes, you may
repay any debt you like after bankruptcy. By
paying one creditor, you will not be
obligated to repay another creditor.
Further, even if you make a payment of a
discharged debt, you will still not be
legally obligated to repay the debt. The
only discharged debts that a debtor is
legally obligated to repay are debts for
which the debtor and creditor have entered a
Reaffirmation Agreement, which must meet
certain requirements of the bankruptcy laws.
Among other things, the reaffirmation
Agreement must be made prior to the date the
discharge is granted and must contain the
statement that it may be rescinded at any
time prior to the discharge or within sixty
(60) days after it is filed with the court.
The agreement must be filed with the court
and then the Bankruptcy Judge will advise
you of the results of the Reaffirmation
Agreement.
Often fully
secured creditors with mortgages on real
estate or automobiles or other personal
property will demand an enforceable
agreement in order to refrain from
repossessing or foreclosing on the property
after your bankruptcy is discharged..
32: What should
I do if I am sued after Bankruptcy on a debt
that was discharged?
The important
thing is that you MUST do something; for if
you ignore the lawsuit and do nothing, a
default judgment will be entered against you
and your discharge in bankruptcy may have
been waived or lost as against that debt. If
you are sued after bankruptcy on discharged
debt, you must first of all respond to the
suit papers and file an answer in the court
where you have been sued, stating that the
debt has been discharged in bankruptcy. In
most instances, the case will be dismissed
when the judge learns that the debt has been
discharged. If the case is not dismissed,
you can apply to the bankruptcy court for an
injunction ordering the creditor to
discontinue the suit against you. In
summary, a discharge in bankruptcy is a
valid, legal defense against any debt that
has been properly discharged, but it is a
defense that you must raise.
33: What is the
role of an attorney in a consumer
Bankruptcy?
The Debtors
attorney will normally perform the following
functions in a consumer bankruptcy case:
-
Analyze the
amount and character of the debts owed
by the debtor to determine whether
bankruptcy is the best remedy for the
debtor’s financial problems.
-
Assemble
the information and data necessary to
prepare the bankruptcy schedules and
statements for filing.
-
Prepare the
proper petitions, schedules, and
statements for filing with the
bankruptcy court.
-
Assist the
debtor in preparing his estate for
bankruptcy so that a minimum amount of
property will later have to be turned
over to the trustee in bankruptcy.
-
Prepare the
bankruptcy petitions, schedules, and
restraining orders.
-
Attend the
first meeting of creditors with the
client.
-
Assist
debtor in overcoming obstacles barring
his discharge in bankruptcy.
The fees paid
to the attorney are required to be
disclosed, and must be approved by the
bankruptcy court, which will allow the
attorney to charge only a reasonable fee for
representing the debtor. The fee quoted as a
minimum retainer includes only the routine
services required in routine bankruptcies.
If additional work is required, additional
attorney’s fees will be charged
|
