A decision to file for Bankruptcy should be made only after determining that Bankruptcy is the best way to deal with your financial problems. Below are several Frequently Asked Questions that may help you in making your decision.
This website cannot explain every aspect of the Bankruptcy process and is meant to provide general information. You will probably have questions about your specific situation, so please feel free to contact our Washington Bankruptcy Attorneys for a personal consultation.What is Bankruptcy?
Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start and, in most cases, legally eliminate their "dischargeable" debts. The right to file for Bankruptcy is provided by the Federal law and all Bankruptcy cases are handled in Federal Court. Filing Bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.What can Bankruptcy do for me?
Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start.
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
- Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
- Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
- Restore or prevent termination of utility service.
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In Bankruptcy:
- you cannot eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time through the Chapter 13 Bankruptcy process and a Chapter 13 or Chapter 7 Bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the property unless you continue to pay the debt.
- you cannot discharge certain types of debts such as child support, alimony, student loans, Court restitution orders, criminal fines, and some taxes.
- you cannot protect cosigners on your debts in a Chapter 7 Bankruptcy. When a relative or friend has cosigned a loan, and you discharge the loan in Bankruptcy, the cosigner may still have to repay all or part of the loan.
- you cannot discharge debts that arise after Bankruptcy has been filed.
There are four types of Bankruptcy cases provided under the law: Chapter 7, Chapter 11, Chapter 12 and Chapter 13. Most people filing Bankruptcy will want to file under either Chapter 7 or Chapter 13. Either type of case may be filed individually or by a married couple filing jointly.Chapter 7 (Liquidation Bankruptcy)
In a Chapter 7 Bankruptcy you file a petition asking the Court to eliminate your dischargeable debts. The basic idea in a Chapter 7 Bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for "exempt" property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors. If you want to keep property like a home or car and are behind on your payments on a mortgage or car loan, a Chapter 7 case probably will not be the right choice for you. That is because Chapter 7 does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt if you do not make your payments. In this example a chapter 13 bankruptcy would probably be better and our experienced Washington Bankruptcy attorneys can determine this for you.Chapter 13 (Debt Adjustment)
In a Chapter 13 case you file a "plan" showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a Chapter 13 case is that it will allow you to keep valuable property, especially your home or car, if you can make the payments which Bankruptcy law requires to be made to your creditors. In most cases, chapter 13 bankruptcy payments will be at least as much as your regular monthly payment on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind. You should consider filing a Chapter 13 bankruptcy if you (1) own your home and are in danger of losing it because of money problems; (2) are behind on debt payments, but can catch up if given some time; (3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time. You will need to have enough income in Chapter 13 bankruptcy to pay for your necessities and to keep up with the payments required by the Bankruptcy Court as they come due.What does it cost to file for Bankruptcy?
The filing fee for a Chapter 7 Bankruptcy is $306 and the filing fee for a Chapter 13 Bankruptcy is $281, whether for one person or a married couple. The Court may allow you to pay this filing fee in installments if you cannot pay all at once. However $100 of this fee is due prior to filing your case.
The attorney's fees are in addition to the Court filing fees and depend on the specific case.
In addition, there are two required courses: the credit counseling course, which is done before the Bankruptcy case is filed, and the financial management course, which is done after the case is filed. These courses are taken from the comfort of your own home either online or over the phone. The first course takes about 1 – 1.5 hours and the second course takes 2 hours. The total cost for each of these courses is approximately $25.What property can I keep?
In a Chapter 7 case, you can keep all property which the law says is "exempt" from the claims of creditors. Generally, Washington law allows you to exempt some assets. Most people keep everything they own when they file chapter 7 or chapter 13 bankruptcy.
Also, in Bankruptcy, you have the right to receive certain benefits such as Social Security, unemployment compensation, veteran’s benefits, public assistance and pensions, regardless of the amount. The amounts of the exemptions are doubled when a married couple files together. In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
You also are allowed to exempt your equity in property. Your equity is the full value of the property minus the amount you owe on any mortgages or liens.
In a Chapter 13 case, you can keep all of your property if your plan meets the requirements of the Bankruptcy law. In most cases you will have to continue to pay creditors who hold mortgages or liens on your property as if you had not filed Bankruptcy.What will happen to my home and car if I file Bankruptcy?
In most cases you will not lose your home or car during your Bankruptcy case so long as your equity in the property does not exceed the exemption limit. Even if your property is not fully exempt, you will be able to keep (or redeem) it, if you pay its non-exempt value. However, some of your creditors may have a "security interest" in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as "collateral" for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the Bankruptcy case. There are several ways that you can keep collateral or mortgaged property after you file chapter 7 or chapter 13 Bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.Can I own anything after filing Bankruptcy?
Yes! Many people believe they cannot own anything for a period of time after filing for Chapter 7 or Chapter 13 Bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the Bankruptcy is filed. However, if you receive an inheritance or property settlement within 180 days after filing for chapter 7 Bankruptcy or while your chapter 13 bankruptcy is open, that money or property may have to be paid to your creditors if the property or money is not exempt.Will filing Bankruptcy wipe out all my debts?
Yes, with some exceptions. Bankruptcy will not normally wipe out: (1) money owed for child support or alimony, fines, and some taxes; (2) debts not listed in the Bankruptcy case unless the creditor knew of the Bankruptcy; (3) debts obtained by knowingly giving false information if the creditor reasonably relied on this information and files a complaint in the Bankruptcy case; (4) debts resulting from "willful and malicious" harm if the creditor files a complaint in the Bankruptcy case; and (5) student loans owed to a school or government body, unless the Court decides that payment would be an undue hardshipWill I have to go to Court?
In most Bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" to meet with the Bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your Bankruptcy forms and your financial situation.Will Bankruptcy affect my credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you have filed a Chapter 7 or Chapter 13 Bankruptcy can appear on your credit record for ten years. But since Bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.What else should I know?
Utility services —Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for Bankruptcy. However, the utility can require a deposit for future service and you have to pay bills which arise after Bankruptcy is filed.
Discrimination —An employer or government agency cannot discriminate against you because you have filed for Bankruptcy.
Driver’s license — If you lost your license solely because you couldn’t pay Court-ordered damages caused in an accident, Bankruptcy will allow you to get your license back.
Co-signers —If someone has co-signed a loan with you and you file for Bankruptcy, the co-signer may have to pay your debt.
Under the new Bankruptcy law, the process is difficult and you may lose property or other rights if you do not know the law. The bankruptcy attorneys at the Law Office of Jason S. Newcombe strongly recommend that you hire an experienced and qualified Bankruptcy attorney to represent you with all aspects of your case. If you are considering filing Bankruptcy, contact our experienced Washington bankruptcy attorneys to schedule an initial consultation.
If you have any questions, feel free to contact our Washington bankruptcy lawyers.