I am looking into filing Chapter 13. We have about 60.000 plus in debt and a 5.000 title loan lien on our car and the title loan co. is requesting us to pay off the loan amount of 5.000. We have been paying for this loan for about almost three years now and our balance is still 5.000. Can we include this in the Chapter 13?

In a Chapter 13 payment plan, you can include the title loan.  This is typically very helpful because we can fix the interest rate and make sure everything is paid in full and taken care of by your discharge.  If you would like to set up a free consultation please give us a call and I will meet with you to look over the rest of your situation.

My taxes have been filed on time, but I have not been able to pay for about 3 years. What do I need to start the procedure?

Your first step would be to come in for a consultation.  If you owe taxes you can still file Chapter 7, but the tax debt may not be dischargeable.  You can give us a call to schedule your appointment or schedule one online for yourself. 

What will happen to our car that we owned, if we file for bankruptcy?

If you file for chapter 7 bankruptcy, a portion of the equity in the car is exempt, meaning the court will let you keep it as long as it is paid off.  Even if the car is not paid off, as long as you continue making payments and they are current, you will be able to keep the car.  If you file for chapter 13 bankruptcy, the same rules apply, and you may be given a reasonable payment plan you can afford to catch up on any late payments.

What is the 90 day rule, and what should I not do during the 3 months prior to filing bankruptcy?

If you plan to file bankruptcy, please be aware that you must NOT use your credit cards for at least 90 days before the date your petition is filed.  If you do, the Bankruptcy Trustee and the Court may look upon any charges made during that 90 days as an fraudulent and will likely not discharge (wipe out) those debts in your bankruptcy. There are some minor exceptions, however.  If you use a credit card for small "necessities of life" such as food, necessary clothing, gasoline, and similar items, and the amounts charged are relatively minor, it is unlikely that the court will require you to pay for such charges.  While there are no hard and fast rules, keep in mind that you would be wise to charge only those expenses which are absolutely necessary for your family's survival and, even then, keep the amounts as small as possible.

What is a Chapter 11 bankruptcy?

First, there are really two kinds of Chapter 11’s. There are the so called Chapter 13/11’s. This is the case that you would file a Chapter 13 Bankruptcy, but for the fact that your secured debt is too high, or your unsecured debt is too high. These cases while requiring more paperwork, and additional meetings, are less difficult than the typical Chapter 11 case.

If you have a small business that is looking to file Chapter 11 Bankruptcy, the process can be paperwork intensive, difficult, and disappointing. Often times small businesses file Chapter 11 based on debtor optimism. Bear in mind that for a Chapter 11 to go smoothly, the business must be making some money above and beyond expenses to pay back creditors, and some money to pay the officers, you, a salary going forward. After all, if the company is not paying you a salary, what is the purpose of continuing the Chapter 11 Bankruptcy.

Our best advice is to check your expectations at the door and to not let any attorney tell you the Chapter 11 process is easy. In a Chapter 11, the creditors wield more power than in a Chapter 13, or Chapter 7 Bankruptcy. In addition, retainers required to prosecute a Chapter 11 case are much greater than those required to prosecute a Chapter 7 or Chapter 13 case.

How quickly can my bankruptcy be filed?

People often call me at the last minute. Many times, I have met someone and then, that same day, prepared all of the legal papers needed to save their home from foreclosure, to stop a levy on their bank account, or to stop a creditor from taking their wages. However, it is always better to consult with me ahead of time. I can help you to be sure that you do not lose money and property that you otherwise could have kept.  I solve your problems by showing you how to fully use bankruptcy laws to your advantage.  

Who makes a good candidate to file bankruptcy?

How can you know if YOU should be considering bankruptcy? Thousands of people file bankruptcy each day because difficult circumstances prevent them from paying their bills. In 2005 nearly 2 million bankruptcies were filed nationwide. Job and medical problems are the most common reasons people cite for filing bankruptcy. A study by Harvard Law School showed that two out of three people in bankruptcy have lost their job and half have experienced a serious health problem. 

Contrary to public perception, the study said the average bankruptcy filer is well-educated, a homeowner and married. In fact, many successful people, including Walt Disney, Mark Twain, and Frank Lloyd Wright have used bankruptcy to forge a fresh start. During our first visit to discuss bankruptcy, we will assess your situation and weigh the different options available. If you can answer any of the questions below affirmatively, it would be useful for us to meet. 

Do you hate answering the telephone because you are avoiding multiple bill collectors? 

Are you falling further and further behind on your home mortgage, rent, credit card, or other payments? 

Have you had a disastrous event happen to you or your family, such as a serious medical illness or loss of job that will affect your ability to make payments on your outstanding debt? 

Does all of your paycheck go to cover your debt payments and leave little, if any, money left to buy groceries, medicine or clothing?

Do you have to rotate which bills get paid each month? 

Are you borrowing money to pay your bills? 

Are you using one credit card to pay another credit card? 

Do you regularly get red "pay now" notices - so often that you often disregard the non-urgent bills? 

Do you lie awake at night trying to figure out how you are going to make ends meet? 

Are your wages being garnished? House in foreclosure? Car repossessed?

Do debt repayment programs work as well as filing bankruptcy?

You may have heard of or already tried credit-counseling services in order to reduce your monthly payments. Unfortunately, credit counseling services do little to reduce your actual debt and may actually increase the length of time it takes to pay off that debt. Studies have estimated that only 4% of debt management plans survive the first year of what is typically a 3-5 year repayment program. If you are currently in a repayment program but do not feel it is helping your financial situation, explore the option of bankruptcy. 

Part of the problem with credit-counseling services is that they are primarily funded by credit card companies - their primary goal is to help the bank, not to help you. 

If you are in a credit-counseling program that is not fulfilling your needs, call our office or fill out the consultation form to set up an appointment.

If you need to learn more or think you might be a candidate for bankruptcy, it is essential to discuss your situation in further detail so you may explore ALL of your options.

What is Chapter 7 Bankruptcy?  Is it true that most people can still file a Chapter 7 bankruptcy, even after the laws changed?

I often get asked "I hear that you can't discharge credit cards anymore?" or "that it's harder to file bankruptcy?" 

The answer to the first question is, that it is not true, you can indeed discharge credit cards still. What the new law did was make it slightly harder to discharge recent charges that aren't for household expenses. In other words, if you charge over $500 in the 90 days preceding your filing bankruptcy, the credit card company can object to discharge and would most likely succeed. Otherwise, you are able to get a discharge from your credit cards with no major issues coming up in the bankruptcy.

Now the second question CAN be true depending on one's circumstances. One thing that is harder for debtors under the new law is that they MUST provide the trustee with the past 6 months of paystubs (or other proof of income) from all sources of income. Additionally they must provide tax returns (tax return transcripts are acceptable, and serve as better proof that the taxes were actually filed). The income information gets put into your means test, which determines what Chapter you may file (although if you can file a Chapter 7 there may be circumstances in which you choose to file a Chapter 13 instead).

Now the means test is the most difficult part about filing bankruptcy under the new law. But in reality, I find most people that want to file a chapter 7, still can. I find that most of my chapter 13 clients at this time are filing chapter 13, not because of their income, but because they risk losing their house, or because they don't qualify for a chapter 7 for other reasons (for example, filing bankruptcy in the last 8 years, or having too much equity to file a chapter 7 and still keep the property they own). If you make below the median income for your state and household size, you will qualify for a chapter 7. If you make above the median for your household size in your state, then your attorney must look at other factors in order to determine whether there would be a presumption of abuse if you were to file a chapter 7. These factors include, mandatory payroll deductions, secured debt payments (like mortgage and car), and other relevant expenses. Unfortunately, the means test is based on a mythical budget deemed reasonable based on IRS allowances. Your real budget could be in the red, but the Means test might still think you should be able to afford a chapter 13 plan. It can also be the other way around. The Means test might say that you should be in the red, but your real budget is so frugal that that isn't the case for you (you would still qualify for a chapter 7 in that situation though). 

Provided that after going through this analysis, you qualify to file a chapter 7 with no presumption of abuse, you will find that it really isn't much harder to file a bankruptcy. The only other thing that would require more effort from a debtor would be the fact the debtor needs to complete credit counseling prior to filing and a debtor education class after filing but before discharge in order to obtain a discharge. If those requirements are not met, you cannot get a bankruptcy discharge. For a list of providers for said classes in your state and district, go to the US Trustee's website at www.usdoj.gov/ust. There will be links to their approved lists from that site. 

Can my taxes be eliminated in bankruptcy?

There is a test that taxes need to pass in order to be discharged.  Typically they must be at least three years old, you must have filed them with the IRS at least two years prior to your bankruptcy, and the IRS cannot have assessed them within 240 days, and the taxes may not be an IRS lien.  IRS liens may sometimes be eliminated in Chapter 13.  IRS liens will not be eliminated through Chapter 7 filings.  

What is the "means test" that I keep reading about?

When the Bankruptcy laws changed in 2005 it made is so you must pass the means test in order to qualify for a Chapter 7 bankruptcy.  Your monthly income must be below the specified median for your state.  The Median applicable to you is determined by the number of people in your household.  Your completed means test will show if you qualify for a chapter 7 bankruptcy or if a chapter 13 bankruptcy repayment plan will be the applicable path through bankruptcy.  

What happens if I "redeem" property?

If you have an asset that is not exempt, you may pay the value of the property to the Trustee in order to keep it.  This is a way for the Trustee to use the money you pay to keep your asset, avoiding having to sale the asset at auction, and distribute the cash value among your creditors. 

What will happen to me if I neglect to list all of my assets on my bankruptcy petition?

Listing all of your assets in your bankruptcy petition is very important,.  Failure to do so could be considered fraud and you could risk being fined or going to jail.  When you sign your bankruptcy petition it is under penalty of perjury, so be sure you and your attorney is as thorough as possible when preparing your petition. 

What assets are usually not protected when I file bankruptcy?

If you qualify to use Alabama exemptions for your bankruptcy, you can use a $1,000 wildcard exemption for any unprotected assets.  Examples of unprotected assets are: cash, stocks that are not part of a qualified 401k or IRA account, money in bank accounts, boats or recreational vehicles, art, furs, jewelry, annuities, and cash value insurance policies.

What is Chapter 13 bankruptcy?

A Chapter 13 bankruptcy consists of payments made on a monthly basis to your bankruptcy trustee.  The period of time in a chapter 13 typically ranges from 36 to 60 months.  A Chapter 13 can be filed if you do not qualify for a chapter 7, need to pay IRS debt, or are trying to get caught up with secured payments, such as a home or vehicle.  

Can you explain how to file for bankruptcy?

In order to file for bankruptcy, credit counseling must be obtained and a petition filed (among other necessary paperwork depending on your specific situation).  Since the bankruptcy process can be quite complicated and each case is unique, it is best to seek out the advice of a qualified bankruptcy attorney in Alabama.  

How long does it take to stop a garnishment?

A wage garnishment will be stopped at the time that you file your actual bankruptcy petition.  We will send a letter to your employer letting them know that the garnishment needs to halt due to the filing of your bankruptcy case.  The constable is also notified.  The sooner you file the sooner you get to keep ALL of your hard-earned money!

I already filed chapter 7 bankruptcy, can I file again?

It depends on when you filed.  You may file for chapter 7 bankruptcy every eight years.  This time frame is measured from your last date of filing.  Therefore, if you filed on June 1, 2001, you will not be able to file again until June 2, 2009.

What is your "means test" in the bankruptcy?

Under the new Bankruptcy reform and consumer protection act of 2005, a means test must be passed in order to qualify for a chapter 7 bankruptcy.  The means test is comprised of your monthly income, which must be below the median income for the state.  Your income is determined by calculating the average of your income for the six months directly prior to filing bankruptcy.  This means that even if you are unemployed at the time of filing, if you had any work the six months prior to filing then your means test will reflect that amount.  It will not be zero.  
Your income will include regular income from all sources besides social security.  If your means test places you above the states median, then a chapter 13 repayment plan will be required.

What is the difference between filing a Chapter 7 vs Chapter 13 bankruptcy?

Chapter 7 bankruptcy is a total wipeout, or straight bankruptcy, where any dischargeable debt is taken off of your record.  Chapter thirteen requires you to make monthly payments to a trustee for a period of 3-5 years.  Each chapter 13 plan is unique since there are many reasons why a chapter 13 may need to be filed over a chapter 7.  There are certain debts which cannot be eliminated through a Chapter 7 Bankruptcy discharge, but may be included in a Chapter 13 Bankruptcy.  These include, but are not limited to, certain tax debts, HOA fees, back payments on secured debts, etc.  

*The following Q & A is for reference only.  It does not constitute legal advice.  Laws and circumstances change constantly, so some of this information may no longer be valid.  Please call us to schedule a free consultation and get the answers you need before filing bankruptcy.*


Have a Bankruptcy question not listed? Call Attorney Melissa Cain at 205-582-7007 now, or Email Her Here...

My husband has fallen out of debt management due to financial hardship on our family. He is being sued by a collection agency (summons/complaint) for a previous debt. It has been less than a year, but now the company is suing me for his debt that was incurred before we were married. The summons/complaint I received had a different name than that is legally mine. We still have outstanding debts. Would it be better to file for bankruptcy?

If you do decide to pursue bankruptcy it will stop the complaint that has been filed by the collection company.  It sounds like they were trying to come after you due to you living in a community property state.  Whether or not they can legally pursue you for debt accumulated prior to the marriage would be a case for civil court.  Bankruptcy court, however, could take care of the unsecured debts held by both of you.  If you would like to come in for a free consultation I may be able to better advise you on which chapter you would be filing, how long it would take, etc.  Feel free to call our office anytime!



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www.BhamBK.com 205-582-7007