Will creditors stop calling if I file bankruptcy?

Yes. One of the major benefits of filing for bankruptcy is that your creditors must immediately STOP ALL collection action the moment your bankruptcy is filed. This means all
foreclosures, repossessions, wage garnishments, tax levies, lawsuits, letters, telephone calls, etc., are immediately stopped. 


People who file Chapter 13 cases do so precisely because it immediately stops foreclosures and repossessions and allows them to save their homes and vehicles.


How do I get started?

 The first thing you will need is to undergo consumer credit counseling from an approved credit counseling agency. This is required before you can file bankruptcy. The credit counseling usually takes about an hour, can be done by telephone or over the Internet, and costs about $50. The counseling agency will review your budget and advise you of the possible options available to you in solving your debt problem.

    

Before contacting a credit counseling agency, I encourage you to call me for a free consultation so together we  can determine whether you qualify for a Chapter 13, how a Chapter 13 would affect you specifically, or whether Chapter 7 or something else would be a better option to solve your debt problem.


If you decide that filing Chapter 7 or Chapter 13 is in your best interest, then you can contact a credit counseling agency and make an appointment for the counseling session. I can provide you with a list of approved credit counseling agencies to contact or you can obtain a list from the website of the United States Trustee at www.usdoj.gov/ust. 


How long does the process take?

 A Chapter 7 case normally takes about three (3) months from the date you file your case to when you will receive an official order from the Bankruptcy Court discharging you of the debts you listed in your bankruptcy schedules and officially closing your case.


A Chapter 13 repayment plan can be as long as five years (60 months). 


What types of debts cannot be discharged?

Debts that are not dischargeable in bankruptcy include taxes, alimony and child support. In a Chapter 13 bankruptcy you can pay these debts as part of your plan to get them out of your life. While you are doing this, Chapter 13 will stop the creditors on your most debts from taking any collection action against you and it will also stop interest from accruing on these debts as long as you pay these debts in full through your Chapter 13 plan.


Thus, Chapter 13 is very effective for paying tax debts and is frequently a better payment plan than what the IRS offers. 


How will filing bankruptcy affect my credit?

 A bankruptcy will appear on your credit history for 10 years. It is very difficult to say how it will affect your future credit because your credit depends on many factors including your future income and the specific creditor to whom you apply for credit. If you are having serious debt problems now, your credit score may already be so low that you cannot obtain credit anyway.


In some circumstances, filing bankruptcy may actually improve your credit rating because the creditors to whom you apply for credit in the future will see that you filed a Chapter 7, that you discharged your previous debts, that if they extend credit to you they are not standing behind a lot of creditors who you already owe, and that you cannot discharge your debts in another Chapter 7 within eight (8) years from the date you filed your previous Chapter 7. Obviously, however, you should make sure you never become overextended in credit in the future so you will never have to file another bankruptcy. 


Will I have to shut down my small business?

 Whether you will have to close your business if you file Chapter 7 bankruptcy will depend on many factors pertaining to the nature of your business and the types of assets you own as part of your business. Therefore, the only way to get an answer to this question is to talk to a bankruptcy lawyer.


Suffice it to say that depending on the circumstances, it may be possible for you to file bankruptcy and continue operating your business. You can file Chapter 13 and continue to operate your businessHowever, your Chapter 13 case will be more complicated because, among other things, you will have to file monthly reports concerning your business and you may need special provisions in your Chapter 13 plan pertaining to your business creditors to accommodate the particular needs of your business. 


How would Chapter 13 affect my general unsecured creditors such as my credit
cards, medical bills, etc.?

There are two advantages of Chapter 13 regarding general unsecured debts such as credit cards, medical bills, department store bills, etc. The first advantage is that depending on your income, living expenses, and assets, the Bankruptcy Court may confirm a Chapter 13 plan that pays general unsecured creditors far less than the full amount of the debts. There are cases in which the Chapter 13 plans that pay nothing to general unsecured creditors have been approved. It depends on your individual financial circumstances. The second advantage is that Chapter 13 freezes all interest on general unsecured debts allowing you to just pay off the balance of the debt as of the date you filed your Chapter 13 with no further interest accruing. 


If I file Chapter 13, how much will my monthly payment be?

 ​Unfortunately, while this is a crucial question, it is impossible to give you a specific answer. The amount of your Chapter 13 monthly payments and the number of months you would have to make those payments depends on (a) your monthly income, (b) your monthly living expenses, and (c) the nature and amount of your debts. The answer is different for each person. However, as part of my free consultation with you, either over the phone or in person, I can calculate the approximate amount of your Chapter 13 payments and how many months you would have to make those payments and provide you with this information. ​


Can I strip the second and third mortgages from my home?

If the present value of your home is equal to or less than the balance you owe on your first mortgage, Chapter 13 will allow you to strip the second and third mortgages off your home and leave you with only your first mortgage. This will make your home much more affordable because it will eliminate your second or third mortgage payments. 


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Am I eligible to file bankruptcy?     

Generally, there may be two reasons why you might not be eligible to file a Chapter 7:

  • Your income might be too high; or
  • If you previously filed a bankruptcy, not enough time has passed to allow you to file another bankruptcy.  

If your average monthly income for the last six months, including your spouse’s income, is above the median family income for Ohio, then you may or may not be eligible to file a Chapter 7 depending on whether you pass a financial test known as “the means test.”


This test involves a complex calculation using several factors including, but not limited to, the amount of you and your spouse’s average income for the last six (6) months, the number of people in your household, and the types and amounts of your debts.  


During our consultation I can do the necessary calculations to determine whether you will pass the means test. If you pass, you are eligible to file a Chapter 7.

If you do not pass, you are not eligible to file a Chapter 7 unless you have extraordinary circumstances that would persuade the Bankruptcy Court to allow you to file a Chapter 7 anyway.  


If you are not eligible to file a Chapter 7, you should consider whether a Chapter 13 bankruptcy will solve your debt problem.


Whenever I meet with someone concerning a debt problem, I always discuss both Chapter 7 and Chapter 13 bankruptcy options with them.  


You are not eligible to file a Chapter 7 case if you received a discharge of your debts in a Chapter 7 bankruptcy case that you filed within the last 8 years, or you received a discharge in a previous Chapter 13 case that you filed within the last 6 years and you paid less than 70% of the allowed unsecured debts in your Chapter 13 case.  


If you believe a prior Chapter 7 or Chapter 13 disqualifies you from filing a Chapter 7 at this time, I strongly encourage you to consult with me before reaching a final conclusion on this question because the question is not as simple as it seems and there may be ways to deal with the problem.  


If the above rules prevent you from filing a Chapter 7, you should still consider filing a Chapter 13 bankruptcy to solve your debt problem.


Generally, to be eligible to file a Chapter 13, you must have regular income (which can include Social Security, pensions, child support, etc.), and your secured debts (such as your mortgage loans, vehicle loans, etc.) must not exceed $1,081,400, and (c) your unsecured debts (i.e., credit cards, medical bills, etc.) must not exceed $360,475 (note that these eligibility requirements are more complicated than they may appear.


Even if you think you do not meet these eligibility requirements, I strongly advise you to consult with us before reaching a final conclusion because with the application of certain exceptions you may indeed be eligible to file a Chapter 13).


Will I lose my house? My car? Other property?

 ​The short answer is that the vast majority of people who file Chapter 7 do not lose any property. There are two reasons for this.


First, the property exemption laws that apply in bankruptcy that allow people to retain their property are sufficiently broad to allow most people to keep all their property in a Chapter 7. Second, before filing a Chapter 7 most people meet with bankruptcy lawyers to find out whether they would lose any property in a Chapter 7 and, if so, they often decide not to file. Frequently, they file a Chapter 13 instead or find other solutions to their debt problem.

   

In the case of creditors who have a mortgage on your home or a lien on your vehicle, a Chapter 7 will erase those debts but it will not erase the creditor’s security interest on your home or vehicle. However, if you are current in your monthly payments on your mortgage on your home and/or your vehicle loan or lease payments when you file your Chapter 7, you can continue making the monthly payments on your home or vehicle until the debt is paid in full and thereby keep your property. 


Chapter 13 does not require anyone to give up any property no matter how valuable it is. This is why people who have extraordinarily valuable property, which they would lose if they filed a Chapter 7, file Chapter 13 instead to solve their debt problem. A Chapter 13 will immediately stop a foreclosure on your home and allow you to make up your missed payments through a Chapter 13 payment plan. But you must file your Chapter 13 before the foreclosure sale actually occurs. 


Chapter 13 would require you to make two payments each month. First, you would be required to make all your normal payments to secured creditors such as your mortgage provider as they fall due after you file Chapter 13 so that your mortgage delinquency does not increase while you are in Chapter 13. In addition you will have to make a payment each month directly to the Chapter 13 trustee to make up the mortgage payments you missed before you filed Chapter 13 and to pay your other debts.


The amount of your monthly payments to the Chapter 13 trustee and the number of months you would have to make those payments will depend on many factors including:

  • your income
  • your living expenses, and
  • the amount of your mortgage delinquency and other debts.


I can calculate the approximate amount and provide you with this information during our consultation together.

 Can I change my mind after I file?

 That depends on if you file a Chapter 7 or 13 case. You cannot voluntarily dismiss a Chapter 7 case. However, a Chapter 13 case is a strictly voluntary procedure on your part. You can terminate it whenever you wish with no questions asked.


However, if you terminate your Chapter 13 before you complete it, then generally speaking you will not receive a discharge of your dischargeable debts, you will immediately lose the protection of the Bankruptcy Court, and your creditors can immediately resume taking collection action against you including foreclosure, repossession, etc. Thus, if you decide to terminate your Chapter 13 case before you complete it, you should have some plan for how to deal with your creditors. 

 

Do I have to go to court?

 Normally, you will have to go to Court just once. This will be for what is called a “meeting of creditors.” The label is misleading because usually no creditors attend the meeting. Instead, the meeting is conducted by a bankruptcy trustee who will ask you questions concerning your bankruptcy forms and your general financial situation.


The meeting typically takes about ten (10) minutes and is low-key. No Judge is present. I would attend the meeting with you and represent you. The meeting of creditors is usually scheduled about four to five weeks after your bankruptcy case is filed with the Court.    

 

What will happen to co-signors of debts I owe?

 If you file bankruptcy you will erase your debt, but the co-signer will still owe the debt and the creditor may go after them for payment of the debt.  


If your spouse is a co-signer, this may be a reason for your spouse to join you in filing bankruptcy so that their debts as well as yours are erased.


Chapter 13 will prohibit a creditor from enforcing the cosigned debt against your cosigner if:

  • the debt was incurred for a consumer purpose
  • you received the benefit of the debt (i.e., you received the car, you received the loan money, etc.), and (c) you pay 100% of the debt through your Chapter 13 plan.