FAQ - Bankruptcy
Q. What fees are involved in filing a bankruptcy?
A. Fees for filing a bankruptcy are in three categories: attorney’s fees, court fees, case costs. The attorney’s fees vary from case to case depending on the complexity of the case and the services the client wishes to have the attorney perform. Court costs are currently at $335 for a Chapter 7 and $310 for Chapter 13. Costs related to any bankruptcy are for the credit report for all debtors, the pre-filing credit counseling course and the post-filing debtor education course.
Q. How long does it take to complete my case?
A. Cases vary widely as to when they are completed based on the complexity and the completion of all requirements by the debtor. The soonest a chapter 7 can be completed is approximately 4 months but generally is longer. There are many steps that have to be completed by the debtor, debtor counsel, the case trustee and the clerk of the court. Chapter 13 ranges from 36 months to 5 years depending on the income of the debtor(s).
Q. Do I need an attorney?
A. In my experience of over 400 cases there is never a time when an attorney is not a necessary part of bankruptcy. Bankruptcy law is based in an expansive code with stringent rules and requirements and cases are often dismissed for failure to comply with the rules. Nothing slows a case down more than case dismissal for failure to follow all relevant rules for deadlines, formatting of filings, accuracy of filings and demands by the trustee, creditors and the court. I have seen even the most sophisticated of individuals at a loss as to how to proceed and how to complete a case timely and efficiently.
Q. How soon can I file my case?
A. A timeline for filing depends on the needs of the client and individual circumstances and can be done as soon as next day. The one main limitation on filing times is the pre-filing credit counseling course. This course is required by statute and must be completed within six months of filing the case and at least the day prior to filing. For example: if a debtor comes into the office on a Monday and decides to file to prevent a wage garnishment, the soonest we can file that case would be the next day, i.e. Tuesday, after successful completion of the required class.
Q. When do I have to pay the fees related to my case?
A. The fees required to be collected prior to filing are the attorney’s fees, the credit report inquiry and the pre-filing credit counseling course. When necessary the court filing fees can be paid after the case has been filed in installment plan payments to the court during the processing of the case. Both bankruptcy and ethical rules govern fees paid to an attorney after filing that creates potentially unethical situations and rule violations which necessitates collection of all fees before your case is filed when filing a chapter 7.
Q. What documents are needed to file my case?
A. The necessary documents vary based on the case but as a general rule you should have ready six months of pay stubs if employed, business income for the past six months if you own a business, tax returns for the last 2 years and any documents regarding debts that will not show up on a credit report such as a doctor’s bill.
Q. Will a bankruptcy stop a wage garnishment or foreclosure?
A. The short answer is yes it will stop a wage garnishment and a creditor’s ability to continue collecting money from a debtor. The automatic stay is put in place the minute a case is filed which prohibits any creditor from collecting, attempting to collect or even contacting a debtor regarding a debt owed. Every type of creditor is subject to this prohibition against collection efforts even the IRS with one exception; family support obligations such as child support. There are times when an employer does not understand the rules or fails to process the termination of the garnishment and money is taken after filing but that money must be returned and the employer can potentially be sanctioned by the court for failure to comply with the automatic stay.
Q. Can I keep my car during and after bankruptcy?
A. Simply put, yes. The automatic stay also applies to creditors who have property that secures your debts to them such as a car or house. If you are behind on your car payment the creditor may be threatening to repossess the car. If this is the case a bankruptcy can stop the creditor from repossessing and can result in sanctions against that creditor if they repossess after being notified of the bankruptcy. The key to understanding your rights related to secured debts in a bankruptcy is that the debt is discharged but the creditor continues to have a lien on the car or house. This means that you will need to come current with your payments by the end of the bankruptcy or work out a repayment plan for the payments you are behind on and in most cases you will be able to keep your car. You can potentially reaffirm your secured debt and save money and ensure you get to keep your car.
Q. Will I have to go to court?
A. As a general rule debtors never have to attend any court hearings or appear before a judge. However, all debtors are required to attend a 341 meeting of creditors where they will be examined by the case trustee. This is a hearing that is under oath and requires proof of identity where the case trustee will ask several generic questions to ensure that the debtor has been truthful and honest with the contents of their bankruptcy petition. Representation at this meeting is part of our services so your attorney will be present and can assist in the completion of this meeting.
Q. How long does the bankruptcy stay on my credit?
A. Chapter 7 stays on your credit for 10 years. Chapter 13 is reported for 7 years. This may seem concerning or something that would cause you to not want to file but it shouldn’t. There are many reason to file and reasons to not file and rest assured that credit should be one of your last concerns. Debt settlement is a viable option and we offer services to fit needs on a case by case basis but there is a misconception that bankruptcy is financial suicide and debt settlement is more positive on a credit report. It is more complicated than that and each person is different. A consultation will answer this question and help you make a decision as to whether you are better off filing for bankruptcy or trying to work out settlements with your creditors.
Q. How much money can I make and still file Chapter 7?
A. Unfortunately there is not a simple answer to this as it depends on several factors such as household size, single debtors versus married debtors, the county in which you reside, the types of debts you have and your monthly expenses. The fact that the income calculation is not as simple as “how much can I make” often benefits my clients so do not be concerned with this question. What is important is for your attorney to understand your goals, what your financial situation is and how to find a way for your goals and life circumstances to meet in the middle. The most simplistic table for Maricopa County is as follows: single individual: $43,749; household size of 2: $54,236; household size of 3: $57,927; household size of 4: $67,800. Remember that calculating income qualification for bankruptcy is far more complicated than this for most cases.
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