Questions to Ask Your Lawyer About Bankruptcy

Considering Filing for Bankruptcy? Here Are the Questions to Ask Your Bankruptcy Lawyer

You’ve been working hard to get your financial life back in order, but still can’t see any light at the end of the tunnel. You’re thinking maybe it’s time to consider filing for bankruptcy, but you are uncertain what that means, now and in the future. Here are the key questions to ask a bankruptcy attorney.

  • What are your qualifications? Before you hire a bankruptcy lawyer, find out how much experience they have, what types of bankruptcy proceedings they have handled and how well they have worked with others.
  • What are my options in bankruptcy? There are different approaches to bankruptcy. Chapter 7 allows you to permanently discharge most debts. In a Chapter 13 proceeding you have to make monthly payments to a Chapter 13 trustee who will distribute that money to your creditors over a three to five year period. A Chapter 13 bankruptcy case can also be used to catch up on missed mortgage payments, stop a foreclosure, or get back a car that has been recently repossessed.
  • Do I qualify for Chapter 7 protection? Under the 2005 revisions to the bankruptcy laws, to qualify for Chapter 7, you must demonstrate to the bankruptcy court that you lack the means to pay off your debts over a three-to-five year period. Your attorney should be able to walk you through the means test, provided you supply accurate financial information. Most people who are considering filing a Chapter 7 bankruptcy are eligible for Chapter 7.
  • If I file Chapter 7, can I keep any assets? The federal bankruptcy laws allow certain exemptions when you file for protection under Chapter 7. Each state has its own set of exemptions. You can choose one or the other. As a practical matter, nearly 98% of all people who file a Chapter 7 bankruptcy are able to keep everything that they own, including their houses and their cars.
  • What debts can I discharge? Most debts can be discharged in bankruptcy. However, not all debts may be discharged in a Chapter 7; certain tax obligations, child support arrearages and student loans are typically not dischargeable.
  • What information do I need to provide? You will be required to make an accurate and complete disclosure of your assets and liabilities as well as your monthly income and expenses. Your lawyer can work with you to collect all the documents necessary for a bankruptcy filing.
  • What is the cost? The cost for filing a bankruptcy case varies based on the complexity of the case. Between court costs and attorney’s fees, a standard Chapter 7 case can cost between $1,500 and $2,000. This amount is usually only equal to a small fraction of the debt owed.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Deciding Between a Chapter 7 and a Chapter 13 Bankruptcy Filing

If you’ve concluded that the best (or only) way out of your current financial predicament is to seek protection in bankruptcy, your next step is to determine which direction you want to go. You’ve heard references to “Chapter 7” and “Chapter 13,” but you may not know what these terms mean and what the basic differences between them are.

What Happens to Your Debt?

In both a Chapter 7 and a Chapter 13 you will receive a discharge of your debts. The primary difference is what source creditors can look to for possible repayment.

In a Chapter 7, creditors can only be paid from your current assets – they do not have a right to be paid from your future income. However, in Chapter 7 the person filing for Chapter 7 protection can protect (“exempt” in bankruptcy lingo) their assets up to certain limits. In New Jersey and Pennsylvania these limits are generous and as a result, most people who file a Chapter 7 keep all of their assets, discharge their debts, and do not have to make payments to their creditors. A Chapter 7 discharge of debt typically takes place 100 to 120 days after the Chapter 7 case is filed.

In a Chapter 13, creditors are typically repaid only from the future income of the person who files (i.e. monthly payments). The money paid each month is paid to the Chapter 13 trustee and not to each individual creditor. A Chapter 13 case can last between 36 and 60 months.

There are two primary types of Chapter 13 cases, as determined by what the goal of the Chapter 13 case is. The first type of Chapter 13 case is a “cure and reinstate” plan, where the person filing for bankruptcy has fallen behind on mortgage payments, car payments, or IRS tax payments and needs to impose a repayment plan on their creditors. In these types of plans, the person filing for Chapter 13 makes a monthly payment to a Chapter 13 Trustee who channels this money to the appropriate creditor. Some of the money paid will also go to their other creditors such as credit card and medical creditors. At the end of the Chapter 13 case (which can be as short as 36 months or as long as 60 months), the unpaid amounts on remaining debts will be wiped out.

The second type of Chapter 13 case is a case where the person looking to file for bankruptcy is ineligible to file a Chapter 7 case. Roughly speaking, this is because they “make too much money” to wipe out their debts without at least paying a portion of those debts back to their creditors. In these cases the person filing for bankruptcy must pay their monthly disposable income to their creditors for 60 months. At the end of the Chapter 13 case the unpaid balances are discharged. Even in this kind of case creditors are only paid a fraction of what they are owed.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Why Is Bankruptcy Called Chapter 13?

Why Is It Called a Chapter 13?

So you are facing a mountain of debt, but have some income. Your attorney or a friend has recommended that you seek protection under “Chapter 13.” But what does that mean? Why is it called a Chapter 13 bankruptcy, and what does that look like? This form of bankruptcy is called Chapter 13 because it is provided for in Chapter 13 of Title 11 of the United States Code. (When Congress passes a law it become part of the United States Code. Title 11 of the United States Code provides for the country’s bankruptcy laws and is known as the Bankruptcy Code)

Chapter 13 bankruptcy is often called a “reorganization bankruptcy”, but that term is often misleading. It is more appropriate to call Chapter 13 a “partial repayment bankruptcy”. In a Chapter 13 bankruptcy your attorneys work with you to craft a Chapter 13 bankruptcy plan where you will make monthly payments to a Chapter 13 trustee. These payments will be payments that you can afford each month. The Chapter 13 trustee will distribute these payments according to your Chapter 13 plan. Your unsecured creditors will typically receive only a portion of what they are owed. At the end of 3 to 5 years the unpaid balances will be wiped out.

When you file for protection under Chapter 13, as with other forms of bankruptcy, you are immediately subject to the protections established under the automatic stay. The automatic stay prohibits your creditors from calling, writing, pursuing legal action or making any other effort to collect your debts, other than through the bankruptcy proceedings. So the calls and letters must stop, and any legal proceedings that are already underway must be suspended.

Contact John Hargrave and Associates

We have provided comprehensive bankruptcy counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Most Common Misperceptions about a Bankruptcy Filing

We live in the information age, but we also live in the disinformation age. Anyone can go on the Internet and start rumors about just about anything. Bankruptcy is no exception. Many false beliefs have become common misunderstandings. Here are some of the most prevalent myths about your ability to file for bankruptcy and the potential consequences:

  • The 2005 revisions to the bankruptcy laws essentially did away with personal bankruptcy filings—Not true! Under the 2005 changes you must now submit to a “means test” to qualify for protection under Chapter 7. The bankruptcy court will look at your income and expenses to determine whether you have the ability to pay something to your creditors creditors over a three-to-five year period. If the means test says you must file a Chapter 13, your personal bankruptcy option will be limited to Chapter 11 or Chapter 13 reorganization.
  • You can’t file for bankruptcy until you have exhausted all savings and other funds, including retirement assets—Not true! You don’t have to lose everything before you can qualify for protection under the bankruptcy laws. You may be limited to Chapter 13 reorganization, but simply filing will put the automatic stay in place, so that your creditors can no longer call, write or take legal action against you.
  • You will never be able to purchase anything on credit again—Not true! Though you will be limited in what is available for a period of time, the simple act of filing for bankruptcy can be a step in the direction of rebuilding your credit. Potential creditors and lenders are more interested in what you do after your bankruptcy filing. If you establish good habits and pay your bills on time, your credit scores will improve. Under the right circumstances, you may be eligible for a car loan or a mortgage within 24 months.
  • Your employer will find out and fire you—Not true! Discrimination in employment based solely on the fact that you filed for bankruptcy protection is not permitted by bankruptcy law.
  • If you file for bankruptcy, you will lose all your property—Not true! Under state and federal bankruptcy laws, you have the right to claim a certain amount of real and personal property as exempt from sale in a bankruptcy proceeding.

Contact John Hargrave & Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Stop Garnishment and Levies by Filing for Bankruptcy Protection

When your debts become unmanageable, you face the risk that creditors will take legal action against you, garnishing your wages or levying on your bank account. If you are already subject to a garnishment or you fear that a creditor may seek to attach your bank account, you can stop this action and protect your interests through a bankruptcy filing. Whether you file for protection under Chapter 7 or Chapter 13, an automatic stay immediately goes into effect when you file, preventing creditors from calling, writing or taking legal action against you.

The automatic stay will be in effect throughout the bankruptcy process. In a Chapter 7 proceeding, your debts will be permanently discharged, and your creditor will have no further right to seek recovery from you, once the bankruptcy is final. In a Chapter 13 reorganization, your creditor may not contact you or take any legal action against you (outside of the bankruptcy proceeding) during the term of your repayment plan (typically three to five years). At the end of your Chapter 13 reorganization your debts will be permanently discharged.

Ending Wage Garnishment with a Bankruptcy Filing

Before a creditor can file a request to garnish some of your wages, the creditor must file a lawsuit against you and get a judgment. Before the lawsuit can proceed, you must receive notice that you have been named as a defendant in a lawsuit. If you do not respond to the lawsuit, the creditor can obtain a default judgment. Even if a creditor files for garnishment of your wages, your employer typically cannot withhold more than 10 percent of your paycheck (there are exceptions, though, for child support and tax arrearages). The automatic stay in a bankruptcy stops wage garnishments.

Stopping a Bank Levy

When a creditor attempts to levy a bank account, they obtain a court order directing your bank to freeze some or all of the assets in your bank account. The automatic stay in bankruptcy prohibits your creditor from taking this legal action against you.

Contact John Hargrave & Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Should You File a Joint Bankruptcy Petition if You Are Married?

Under the bankruptcy law, if you are married, you can choose to file a joint bankruptcy petition, or you can file individually. Before you file, you need to take a careful look at your situation and what you want to accomplish, so that you take the measures that are in your best interests. Here are the key questions to ask:

How much property do you own jointly and how much do you own separately?

  • In a joint bankruptcy filing, all of your assets are subject to the bankruptcy proceeding. If you want to keep assets in a Chapter 7 filing, you will need to look at the exemptions that are available and determine if you have enough to cover the property you want to keep. If you or your spouse individually own a significant amount of non-exempt property, Bankruptcy may only be a good solution for one of you.

What debts are you trying to discharge?

  • When you file a joint bankruptcy petition, you can rid yourself of all dischargeable debts either of you owe, or that you owe jointly. If you have little or no joint debt, and you or your spouse has significant individual debt, an individual filing will probably be to your benefit.

What is your individual credit rating?

  • A joint bankruptcy will affect both of your credit scores, but an individual bankruptcy filing will only reflect on the credit rating of the person filing the petition. If you have strong credit and the debts are primarily those of your spouse, you may be best served by having your spouse file independently.

It is important to understand that, even if you file independent of your spouse, you must report your spouse’s income if you share the same household. The court will use this information when determining whether you qualify to permanently discharge debt under Chapter 7 or Chapter 13.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Understanding the Different Bankruptcy Filings

Whether you face personal financial challenges or your business has fallen upon difficult times, there are options available to you under the federal bankruptcy laws. This blog post provides an overview of the most common types of bankruptcy filings.

Chapter 7 Liquidation Proceedings

The protections afforded by Chapter 7 are available to individuals or businesses. In a Chapter 7 petition, you are allowed to permanently discharge most types of debts. In a Chapter 7 bankruptcy you are allowed to “exempt”, or protect your assets up to a certain dollar amount. In more than 95% of all bankruptcy cases, the person who files for bankruptcy keeps everything they own. In a Chapter 7 certain debts, such as child support arrearages, student loans (except under very limited circumstances) and some tax obligations cannot be wiped out. Each state has its own state based exemptions, and some states allow their residents to use the federal property exemptions. You may choose the state or the federal exemption, but not both. Once your Chapter 7 bankruptcy if finalized, you are permanently freed from any obligation to repay any debts discharged.

In 2005 Congress added a “means test” to the bankruptcy code. The means test determines if an individual or couple makes “too much money” to file a Chapter 7 and instead must file a Chapter 13 to repay their creditors a portion of what is owed. For the vast majority of people looking to file bankruptcy, the means test has no impact on their ability to file Chapter 7. It is simply false to say that you “can’t file a Chapter 7” or that is it “much harder to file a Chapter 7”.

Chapter 13 Reorganization

In a Chapter 13 filing, you pay what you can afford to pay on a monthly basis. Your creditors will receive a percentage of what they are owed, and at the end of your three to five year plan, the balance of what is owed is wiped out.. As with a Chapter 7 petition, you are immediately protected by the automatic stay, which prohibits your creditors from calling, writing or taking legal action against you to recover a debt.. As long as you honor the terms of the reorganization plan, your creditors may not make any other attempts to collect any debts you owe.

Chapter 11 Business Reorganization

A Chapter 11 bankruptcy filing allows a business to obtain the protection of the automatic stay, and to negotiate new payment arrangements with creditors, in a fashion similar to the Chapter 13 petition for individuals. Chapter 13 has debt limits and if an individual owes more money than what is allowed, they will be required to file a Chapter 11 case in order to reorganize.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Can You Prevent the Loss of Your Home or Car by Filing for Bankruptcy Protection?

If you have fallen behind on your mortgage or car payments because of the loss of your job, medical expenses, a divorce, or for any other reason, you may live in daily fear that you will lose your home or your vehicle. You may have considered filing for bankruptcy, but heard conflicting stories about whether or not you can protect real property or a car through a bankruptcy petition. Here’s what you need to know.

The Automatic Stay Provided by the Bankruptcy Laws

When you file for bankruptcy, an automatic stay immediately goes into effect, suspending all legal action related to any debt that is part of the bankruptcy. This means that your creditors cannot call or write you in an effort to collect on a debt. It also means that they cannot initiate or continue any legal action (outside of the bankruptcy proceeding) and that all legal efforts to collect from you, or to foreclose on or repossess your property must immediately stop. In order to take advantage of the automatic stay, however, you must file for bankruptcy protection before the foreclosure sale, or before your vehicle has been repossessed. It may be possible, with respect to a car, to get the vehicle back if you file for bankruptcy after it has been repossessed, but before it has been sold at an auction.

Discharge vs. Reorganization of Your Debts

Some creditors, such as credit card creditors and medical creditors, are unsecured creditors. This means that there is no specific piece of property that their debts are attached to. On the other hand, some creditors are secured creditors. The most common secured creditors are automobile lenders, who hold a lien on the car, and mortgage companies, who hold a mortgage on a home. Both Chapter 7 and Chapter 13 bankruptcy let you discharge most of your debts. However, if you want to keep the property which is subject to a secured creditor’s lien or mortgage, you need to keep paying that secured creditor.

A Chapter 13 bankruptcy provides a unique opportunity to have your unsecured debts discharged and to restructure your secured debts. While it is typically not feasible to change the terms of mortgage loans in a Chapter 13 bankruptcy without the cooperation of the lender, it is often times possible to change the terms of car loans. For example, in a Chapter 13 bankruptcy many individuals are able to reduce the total amount they need to pay to their auto lender by lowering the effective principal balance owed and interest rate to be paid to the auto lender. In addition, these payments can be stretched out over 5 years, so if you have a car payment that is too high, but only two years left on payments, then you can lower your monthly payment so that it is instead paid out over 5 years.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).

Housing Recovery on the Way? If you are in debt and own a home, consider a bankruptcy to set yourself up for success

This morning the Associated Press reported two things which indicate that the housing market is strengthening.

First, foreclosure repossessions fell in February 2013 to the lowest level since September 2007. This decline is accompanied by increasing house prices and state programs to help people save their homes. The number of completed foreclosures for February 2013 was 45,038, which is 11% less than January 2013 and a whopping 29% down from February 2012. In addition, 25% fewer foreclosures were started in February 2013 than in February 2012. Second, home mortgage interest rates have ticked up for the first time in a long while, with the average 30 year rate for the US increasing from 3.52% to 3.63%.

Taken together, these two things indicate that the housing market is heading for a rebound. A rebounding housing market means that home values could increase rapidly.

If you own a home and the mortgages exceed the value of your home, then filing a bankruptcy will typically allow you to shed your unsecured debts while keeping your home. In other words, if there is no equity in the home, it will not be sold in a bankruptcy proceeding. However, if you own a home with a lot of equity, it could be sold by a Trustee in a Chapter 7 bankruptcy or you would be required to pay extra money in a Chapter 13 bankruptcy to ‘buy back’ that equity from creditors. Rising home prices mean that many people who currently have no equity and lots of debts might find themselves in a position where they suddenly have equity, which makes it more difficult to shed your debts in a bankruptcy filing.

If you own a home with little or no equity, now may be the perfect time to file a bankruptcy. A properly timed bankruptcy will allow you to wipe out your debts so that you can enjoy and take advantage of the rising values for your home.