Bankruptcy FAQ’s

FAQs - What exactly is bankruptcy? Will it wipe out all my debts?

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What exactly is bankruptcy? Will it wipe out all my debts?

Bankruptcy is a legal route by which indebted individuals or businesses (debtors) who are unable to repay this debt may arrange a long-term payment plan or a discharge (elimination) of this debt. Most, but not all debt can be wiped out through bankruptcy.

Debt You Can Erase Debt You Can’t Erase
  • Credit Card Debt
  • Medical Bills
  • Broken Leases
  • Utility Bills
  • Repossessions
  • Payday Loans
  • Unsecured Failed Business Debts
  • Criminal Debts
  • Some Tax Debts
  • Student Loans
  • Back Alimony
  • Child Support Payments
  • Debts Obtained Through Fraud
  • Can I keep my house?
    It is possible depending on your individual situation.

    If you are current on your payments and there is not a lot of equity in your home, you may be able to file for Chapter 7 bankruptcy relief and keep your home.

    If you are behind on your mortgage payments, you may need to consider filing for Chapter 13 bankruptcy relief. However, an important consideration will be determining whether keeping your home makes financial sense and whether making these payments is possible.

    Can I keep my vehicles?
    In most cases you will be able to keep your car.

    If you are current on your payments, you may be able to file a Chapter 7 bankruptcy and file a request called a reaffirmation agreement with the court to continue being able to make payments. The reaffirmation agreement binds you to making the payments on the vehicle and allows you to keep your car if you are current.

    What is a Reaffirmation Agreement?
    A reaffirmation agreement in bankruptcy is a new contract signed between you and a lender that reaffirms your debt and personal liability for the obligation. Such an agreement is usually executed for secure property such as an automobile. Before signing an agreement of this type, our office will discuss with you whether such an agreement makes financial sense in your individual situation. We will also give you an overview regarding your other options. The reaffirmation agreement must also be approved by the court. However, if you obtain approval for a reaffirmation agreement from the court, please be aware that you have the right to revoke it within 60 days after execution of such an agreement.

    What is a Redemption Agreement?
    A redemption agreement allows you to redeem property by paying its replacement value—not the amount owed on the debt generally within 30 days of the 1st creditors meeting-341 Meeting of Creditors.

    It may be also possible to pay in installments, if the creditor agrees, especially if you are willing to pay a higher price than the replacement value. However, you can only redeem property if:

    1. The debt is a consumer debt, meaning it was incurred primarily for personal, family, or household use;
    2. The property is personal tangible property, which is property that can be touched, such as furniture, appliances, and cars;
    3. The property is claimed as exempt or the trustee has abandoned it.

    If you and your creditor cannot agree on the replacement value, then you can ask the court for a valuation hearing to determine the replacement value. Once the replacement value is determined, then you and your creditor must sign a redemption agreement. If you agree to pay in installments, then this should also be in the redemption agreement.

    Please be aware that the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 has added an exception to redeeming motor vehicles. If the vehicle was purchased within 910 days of your filing date, then you can only redeem it by paying the full amount of the debt, not just the replacement value.

    Does filing a bankruptcy get me out of debt permanently?
    For most debts yes. You will never have to pay back discharged debts unless you want to.

    Can I include my student loan?
    No. Student loans are not dischargible except under a very strict disability exception. Most people do not qualify..

    Can I keep things out of my bankruptcy like a car loan or a zero balance credit card?
    Usually Yes, but it is subject to what the lender decides to do. Most car lenders will gladly allow you to keep your car as long as the payments are kept current. Zero balance credit cards are sometimes left open and sometimes closed by the lender. No guarantees.

    I’ve heard it is difficult to qualify for bankruptcy under the new laws. Is it a problem?
    Not usually. I would estimate that 90% of our clients under the old rules would have also qualified under the new ones. The bankruptcy act of 2005 was nothing more than an attempt by credit card corporations to scare you away from bankruptcy protection. Handling the additional complexity is our job.

    Can I keep all my belongings and cash?
    Yes, within reason. If you’re considering bankruptcy, it’s safe to assume you don’t have a lot of assets. There are limits, so be sure to talk with a bankruptcy attorney about what those limits are.

    REAL ESTATE FAQ’s

    My foreclosure is TOMORROW! Is it too late to stop it by filing a bankruptcy?
    It might not be too late.

    I’m behind on my mortgage but I have a good job. Can I stop the foreclosure and get some breathing room to catch up?
    Yes. You can consolidate your mortgage and other debts into a Chapter 13 and catch up in 3 to 5 years.

    Can I get rid of my second mortgage, but still keep the house?
    Yes. As long as your home is valued at less than your first mortgage, we can usually eliminate the second mortgage in a Chapter 13. This is called a lien strip. It can be complicated, but we do lots of them successfully.

    If I file bankruptcy, will I ever be able to buy a house again?
    Of course you will. For the average person, credit “jail” will last from 2 to 4 years. Most people qualify for a normal mortgage after that time.

    Can a bankruptcy be used to modify the terms of my existing mortgage?
    The answer is no, however at this time we need to qualify it with a definite maybe. Lenders are beginning to offer loan modifications to debtors in bankruptcy. In many instances, a client in bankruptcy has received an offer modifying the interest rate, the principle balance, or both. There are no guarantees.


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