Frequently Asked Questions About Bankruptcy

It takes about four months from the time your Chapter 7 case is filed to get a discharge. In order to file your case, you must get all of your paperwork, and fees to your attorney and take the credit counseling class. Your attorney will then schedule a petition signing appointment. The bankruptcy court uses an electronic filing system so your case can be filed as soon as the petition is signed.As soon as your case is filed, you fall under the protection of the Bankruptcy Code. This means that creditors must stop taking actions to collect from you. When you are under bankruptcy protection, creditors cannot call you, lawsuits are put on hold, and garnishments are released. Before you can get a discharge, you must take a second financial management class. I recommend my clients take this class before their meeting of creditors.About six weeks after your case is filed, you must attend a meeting of creditors with a bankruptcy trustee.

Sixty days after your meeting of creditors is held and concluded, you will get your discharge. So, depending on when your meeting is scheduled, you will get your discharge about three and a half to four months after your case is filed as long as you attend the meeting and do your second class.

If the bankruptcy trustee is not making a claim on any of your assets (most cases) your case will be closed by the court shortly after you get your discharge. In some cases, the trustee is going to make a claim on an asset and pay creditors. For example, you may have to pay a portion of your tax refund for the current tax year. If this happens, you will still get your discharge on time, but your case will remain open until the asset is administered.

If you have questions about the bankruptcy process, please call me!

The short answer is, make an appointment and find out! People have lots of different things going on in their lives and complicated debt problems that make it hard to give a one size fits all answer.Below is a little bit longer answer to give you an overview of each type of consumer (for people) bankruptcy:Chapter 7: This bankruptcy allows you to discharge, or get rid of most of your debts. Debts from credit cards, medical bills, foreclosures and vehicle repossessions can be wiped out. A few of the things that can’t be eliminated include child support, spousal support, student loans and most taxes.

In order to qualify for a Chapter 7 you must be below the median income for your household size or pass the “Means Test” (more about that later). For example, in Ohio the median income for a household of 1 is $44,849, for two people it is $55, 771 and for 3 is $64, 241. Also, you can only file a Chapter 7 if you haven’t filed and gotten a discharge in the last 8 years.

The way a Chapter 7 works is that you get to discharge eligible debts and in exchange, the bankruptcy trustee can take your unprotected assets. Don’t panic! For every type of asset, there is a protection and most people who file a Chapter 7 bankruptcy keep all of their property.

Chapter 13: A Chapter 13 is for people who make too much money to file a Chapter 7, have gotten a Chapter 7 discharge too recently or have some other reason, like wanting to protect an asset that makes a Chapter 7 a bad idea for them.

A Chapter 13 is a repayment plan for a period of three to five years, depending on your situation. You file a debt repayment plan with the court and make monthly payments in accordance with that plan. If you can’t afford to pay back 100 percent of your debt during the bankruptcy, they court may approve a plan for less and allow you to discharge the remaining debt after completing your plan.

If you would like more information about which bankruptcy would be best for you, please give me a call!

No! If you want more information about filing for bankruptcy, just call and make an appointment. All you need to bring to the appointment is yourself. At the appointment, we will talk about what is making you consider bankruptcy, your income and your life. Then, I will explain the bankruptcy process and we will analyze whether a Chapter 7 or Chapter 13 bankruptcy would be beneficial to you. If you decide that you want to move forward with a bankruptcy, then I will give you a checklist of documents that you will need to file.

You are correct, in order to get under the protections of the bankruptcy code and receive a discharge you must take two classes.Most people do theses classes on the internet with a company authorized to do bankruptcy classes and the cost ranges between $10 to $25. You can also do the class over the phone, which may cost a bit more. If you think you need extra assistance taking the class, I can help you with that also. At our first meeting, I will give you a list of approved class providers you can use.You must take the first class before you file bankruptcy. The class provider will ask you to have a list of your debts and to have some idea of your income and expenses. This class helps you make a budget and identify financial changes you could make to help you avoid bankruptcy or to make a plan going forward. After you complete the online portion, you will have to call the provider and chat for a few minutes and they will give you some recommendations. These recommendations are for your personal knowledge only. The information you give in the class does not go to the court and the class provider does not have anything to say about whether or not you can file your case.

You must take a second class after you file and have your case number. The second class is more informational. You will have to read a series of articles meant to educate you on budgeting, fixed and variable expenses and determining your monthly income. At the end of the class, you will have to take a quiz on the things you have learned. Don’t worry, the quiz is EASY! After you successfully complete each class and pay your fee, the company will issue you a certificate. You need to get that certificate to your attorney and your attorney will file it with the court. Usually, there is a space for you to enter your attorney’s email address on the class form so that the certificate can get sent right to me.

No, most Chapter 7 debtors do not need to attend court. You will need to go to a meeting with the bankruptcy trustee assigned to your case. This meeting is held in an office building, not court. Your attorney will be there with you and the meeting usually only takes about 10 minutes.

No, you should definitely consult with an attorney before taking money out of an IRA or 401k to pay debts. Only very rarely would this be the best course of action for you. If you file bankruptcy, you can keep all of your 401k! If you take money out, you are spending money that would be protected under the bankruptcy code and paying taxes and penalties on it. Taking money out of a 401k is a very expensive way to take care of your debts.

No! You need to consult an attorney if you are planning on filing bankruptcy and want to transfer property. First, you need an attorney to make sure you don’t accidently commit fraud. Second, an attorney can help maximize your protections under the bankruptcy code.You have a $3,675.00 protection for equity in a motor vehicle you own on the date of a bankruptcy filing.

Let’s think about these scenarios:

1. You own a truck worth 10k and you owe 8k on it and you file bankruptcy. This means you have 2k in equity in the truck which is under the protected amount. You can keep your truck!
2. You transfer the same truck to your brother one month before filing bankruptcy. The bankruptcy trustee can undo the transfer because it was too close to the filing date. You cannot protect the 2k in equity because you didn’t own it on the date of filing. You either lose the truck or have to pay the trustee 2k.

Always consult an attorney before taking action!

Yes! A married person can file bankruptcy without a spouse. The bankruptcy code requires that household income, which includes a spouse’s income, be listed on the petition, but you can file on your own. If you have debt problems and qualify for a bankruptcy, you can get relief under the bankruptcy code without impacting your spouse’s credit or assets.

No! In fact, the vast majority of people who file bankruptcy keep all of their property!People worry that if they file bankruptcy they will have to give the Trustee their house, car, first born, ect. It is true that in exchange for a bankruptcy discharge, a Chapter 7 trustee can get a debtor’s unprotected assets. The good news is that there are protections available for assets that cover everything that most of my clients own. For example, under Ohio law you can have up to $132,000 in equity and still keep your home ($264,00 for joint debtors) .The most common asset a Trustee may have a claim on is a tax refund for the tax year in which you file. However, losing your tax refund can often be avoided by picking the right time to file. I can help you with this!

When people talk about “being under bankruptcy protection,” they are referring to the automatic stay mandated by 11 U.S.C. 36. As soon as you file bankruptcy, the automatic stay goes into effect. This is an injunction that automatically stops lawsuits, foreclosures, garnishments and all collection activities against a debt, including PHONE CALLS! The automatic stay in a Chapter 13 case even protects co-debtors who are liable with the debtor on consumer debts.

The Law Office of Andrea Henning will give immediate notice to creditors who have an active lawsuit against creditors. The court will mail notice to ALL creditors.

What is not covered by the automatic stay?

• Actions to establish or modify a child support order
• Criminal proceedings
• Tax Audit- The IRS can make a demand for tax returns or assess taxes but cannot make efforts to collect the tax

In a Chapter 7 bankruptcy, the automatic stay will be in effect until you get your discharge or the creditor gets permission from the court to proceed with collection.In a Chapter 13 bankruptcy, the automatic stay will be in effect for the life of the plan unless the creditor gets permission from the court to proceed with collection.A creditor could apply for relief from the automatic stay if they have a security interest in your property and you are not making the payments. For example, if you are not making your car payment, the creditor can ask the court permission to repossess it. The creditor cannot take any action without court permission.

Once you get your discharge on eligible debts, creditors cannot take action to collect on those debts.

If a creditor continues to take collection against you after you have filed bankruptcy, the creditor will be liable for your actual damages and sometimes punitive damages. If the court finds a creditor has violated the stay, the creditor will be ordered to pay your attorney fees to pursue the claim for the violation.

There are some debts that are not dischargeable in bankruptcy. This means you will continue to owe these debts after the bankruptcy is over.

Nondischargeable debts include:

• Most taxes
• Credit incurred because of fraud
• Consumer debts owed to a single creditor over $500.00 for luxury goods or services and incurred within 90 days of filing bankruptcy
• Cash advances over $75.00 incurred within 70 days of filing bankruptcy
• Child and spousal support
• Debt owed for injury you caused that was “willfully or maliciously done”
• Debts owed because of drug or alcohol related auto accident
• Student loans
• Non dischargeable debts from prior bankruptcy