What Is Bankruptcy & Why Does It Have A Negative View?
Bankruptcy is a legal process that takes place in federal bankruptcy court, it’s nestled underneath federal district courts and its court system.
It’s intended to provide people and businesses relief from debt, so you shouldn’t have to live with all that debt.
It can either restructure it in some cases, it can completely erase it and people have a negative image of it for lots of different reasons, it’s seen by some as some kind of moral failing and that the people who file bankruptcy are bad people for accumulating debt, or bad people for not being able to pay the debt.
Fun fact, in the 70s and early 80s creditors like banks and their lobbyists, has worked very hard to frame bankruptcy as a moral failing so there’s this reputation out there that it’s an easy out for people who just overspend and that has not been my experience at all of the people who file bankruptcy.
How is it that bankruptcy is a financial relief tool rather than something bad that we should avoid at all costs?
Lots of different people use bankruptcy corporations, we always hear about corporations who have filed bankruptcy but they stay alive, and even cities filed bankruptcy, Detroit filed bankruptcy a while back.
Bankruptcy as soon as you file it starts something called The Automatic Stay, it’s not something you have to ask for, it happens automatically and it stops all collection activity.
If you are being hounded by your creditors, they’re calling you, they’re emailing you the minute you file bankruptcy, they’re supposed to stop making those phone calls, sending you bills, garnishing your paycheck, suing your back pay, all of that stops the minute you file bankruptcy and then once that happens you get a little bit of a breather and then there’s a process where you work on how does each debt get treated in a bankruptcy.
Debts are all treated very differently depending on the kind of bankruptcy and the kind of debt it is.
How Do I Know That It’s Time To File For Bankruptcy?
Is a matter of when it becomes on the eve of disaster, don’t wait until you are going to be evicted tomorrow contact us a month before that, don’t wait until your bank account is about to be levied or you’re out of money because your bank account got levied.
Make sure you find bankruptcy advice at the moment you should start thinking about it, if you see the writing on the wall you’re not able to make ends meet because all of your money is going to your credit cards.
If you can’t meet your financial goals it might be time for a fresh start, so when those things are starting to crunch where you’re feeling, then that’s a good time to start thinking about bankruptcy.
Is There An Age Limit To File For Bankruptcy?
There’s no age limit, absolutely not, you can be 100 years old and file bankruptcy.
How Can Bankruptcy Help With Different Types Of Debt
Sometimes bankruptcy will help with most types of debt, how it helps is going to depend on what kind of debt it is.
Medical debt is usually completely dischargeable, we’ve seen it where it’s not dischargeable so that can be completely erased whereas what’s a good example is child support.
If you’re behind on child support, you can’t erase that child support, but you can use bankruptcy to catch up on your child support if you’ve fallen behind some debts you just can’t get out of no matter what.
Debts that come out of fraud debts, that come out of a criminal conviction, or driving under the influence, those are not dischargeable and they can’t be helped with bankruptcy, but just about every other kind of debt if it’s not fully dischargeable at least there’s a bankruptcy strategy that can ease the relief if you’ve fallen behind on your taxes, if you owe the IRS, then even if it’s not dischargeable you might be able to use bankruptcy to catch up on the IRS debt without accruing more interest in penalties.
Does Bankruptcy Help With Evictions?
It does help with evictions; different bank kinds of bankruptcies 7s and 13s are the ones that I usually deal with. They do different things for an eviction.
The first question for a client-facing eviction is: What is your goal? Do you want to stay in this rental? or Are you looking to just leave and find someplace new so bankruptcy can buy you time to find a new place to live?
We talked about the automatic stay when you file the bankruptcy, stops collection activity including an eviction, that’s a type of collection activity.
If you file, the eviction has to stop so your landlord can ask the court to lift the stay if they want to go ahead and evict you, but even then that won’t happen for a little while before it is granted, if they don’t ask to lift the stay then you have a significant period of time to be able to find a new place, get your affairs in order.
You can also ask for a Texas rent relief to step in and help you with that back rent payment.
The other thing if you want to stay in that rental, is it can not only give you time to work out a solution, but you can use your plan, your bankruptcy restructuring plan to catch up on rent that way too, so yes stops the eviction from happening.
It stops it when it is in its tracks and then either it will resume at a later time, so you’ve bought yourself some time or it allows you to restructure that back rent so that you can stay in your rental as long as you need to.
Different Types Of Bankruptcy
There are all kinds of different bankruptcy chapters that you can file under, there are chapter nines for cities, municipalities, there is chapter 12 for family farmers and fishers.
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We work with chapters 7 and 13, and that’s for most individuals or small businesses, it is the best option to talk with an experienced bankruptcy attorney who can help guide you on which chapter of bankruptcy would work best for you.
Sometimes it’s cut and dry if you want to file a chapter 7 bankruptcy, which is kind of the quick and dirty three-month discharge where you can leave everything else very straightforward.
Bankruptcy is sometimes called a fresh start but you have to qualify for a chapter 7 in bankruptcy.
You have to be under a certain income limit, so if you are over that income limit, let’s say you’re a single person and you make 150K a year, you could still qualify for bankruptcy in general, but you wouldn’t qualify for a chapter 7 in bankruptcy so if it’s that cut and dry, it’s a very easy calculation, chapter 7 is not available, let’s look at chapter 13 possibly, but there are other circumstances where even if you qualify from your income for a chapter 7, a chapter 13 might be better for you.
In some cases, even chapter 11 might be better for you.
Chapter 11 is very complicated, so we try to avoid those if possible and send them to some other firms, but a chapter 13 even if you qualify for a chapter 7 might be a good idea.
We had used the example earlier of having tax debt, if you have some tax debt that’s not dischargeable and some of it is, but if you have tax debt that’s not dischargeable chapter 13 is a great plan where you take 3 years to catch up on that debt, but you’re not accruing more interest and penalties.
Another example is if you own your home, but you’ve fallen behind on mortgage payments you can’t do a modification of your mortgage, or you don’t want to.
Chapter 13 is a wonderful strategy to use where you make your ongoing mortgage payments, but you also have 3 to 5 years to catch up on your mortgage payments without interest or late fees, so that’s another example where it might be a better idea to be in a 13 even if you qualify for a chapter 7.
We encourage people to talk with an experienced bankruptcy attorney because the calculation of which chapter you file has to do with how much debt you have, what kind of debt you have, what is your family size, how much money do you make, and ultimately what are your goals, what is it that you want out of a bankruptcy and then, how can we help you meet those goals.
What Can I Do To Start A Bankruptcy Case?
To kick off bankruptcy the only thing you need is a list of your creditors and their addresses, how much you owe them, etc.
You have to complete an online class and our office will help you with that, it takes about an hour to do that class, and you file a bankruptcy petition by law, that’s the minimum that you need.
We try to get everything put in at once, we don’t want to do just the minimum, there’s more that you have to disclose so we would ask that people start gathering things like all of your pay stubs going back 7 or 8 months.
Bank statements last 2 years of tax returns, you’ll need to have filed all of your tax returns that you’re required to file a car registration information about who you owe, we pull a credit report to help guide us to who are all your creditors, but you also not every company reports to credit reporting agencies, medical debt usually doesn’t report to credit reporting agencies until it goes into collections.
If you’re passed on your utilities that won’t be on your credit report until it goes into collections or it gets shut off, so make sure you have some kind of idea of who you owe, how much you owe them, etc, you’ll also need their addresses.
There’s a lot of information that goes into it that we pull from different sources to be able to create a bankruptcy petition that then gets filed with the court
How Long Does A Bankruptcy Case Last
It depends, a chapter 7 in bankruptcy from filing date to discharge it’s usually about 90 days, sometimes a little bit over 90 days.
Chapter 13 can last somewhere between 3 and 5 years, that’s what’s typical, but there are exceptions to all of these, but 3 to 5 years for a chapter 13 because you’re in a monthly restructuring plan, that one lasts a little longer.
What Happens After A Bankruptcy Case Is Finished
Once the case is closed and you’re not in bankruptcy anymore, you usually get what’s called a discharge, that’s the official court order that says: You no longer have to pay these debts, so your financial obligation on these debts are completely gone and your case is closed, your bankruptcy will stay on your credit for about 10 years, but that doesn’t mean that it’s a financial death sentence, it’s not the death penalty.
When you file bankruptcy it just means that it’s there like lots of other things.
There you can build credit and buy a house and you know all that stuff after you file the bankruptcy.
Can You File For Bankruptcy Many Times?
There are some limitations, however, you are not permitted to file a chapter 7 more than once every 8 years, so from the time you filed your first bankruptcy chapter 7 you have to wait 8 years to file your next chapter 7.
If you go from chapter 7 and let’s say it’s not 8 years yet and you need some kind of bankruptcy relief, you can file a chapter 13.
We’ve had clients who just finished their chapter 7 and they turned around and filed a chapter 13.
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There are some good legal reasons to do that, but you don’t have to wait that being said if you got a discharge in your first bankruptcy and you want to discharge in your second bankruptcy if it’s a 13 you have to wait 4 years before you get that done.
This is again why you want to talk to an experienced bankruptcy attorney, not somebody who dabbles in it and there are strategies around if you need to file more often than once every 8 years.
How Should I Feel About Starting A Bankruptcy Case?
How you should feel is up to you, I’m not in the business of telling people how they should feel but there’s a lot of reason to not feel terrible about it, nobody wants to come to see me, nobody wants to talk to me, but everybody makes mistakes, most people 68 of bankruptcies in the United States are filed because of medical debt, and that’s not something that anybody brings on themselves.
For example, a person got cancer and got laid off from their job and couldn’t pay or didn’t have their insurance anymore.
There are just all kinds of scenarios that come up, a lot of people are just one visit away from filing bankruptcy not being able to pay their bills.
The other thing is that bankruptcy is in the Constitution, it’s an article one of the Constitution.
If you’re a person of faith then you know that it’s there, it’s in the bible or if you’re not a person of faith at least you know that bankruptcy is very old.
Bankruptcy it’s been going on for thousands of years and it’s just a financial tool, it is just a strategy like any other financial strategy, so I never want my clients to feel bad for where they are, they should be proud of themselves for doing the hard thing for doing the steps that it takes to clean things up and be able to move on and provide for their families or meet their financial goals.
In case you have additional questions about bankruptcy, your debts, or about your specific case, you can contact us at (855) 502-0555. After a short 10 minute evaluation of your case over the phone we will let you know what options you have. You can also follow us on our social networks so as not to miss our weekly transmissions via Facebook, YouTube & Twitch.
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