FAQ Bankruptcy Law:
• Will I have to give up all my assets?
Chapter 7 bankruptcy is a liquidation proceeding. Liquidation is a process in which the debtor turns over all non-exempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors.
That’s the bad news. The good news is, for most people, as a practical matter, you may be able to retain many or even all of your assets through the exemption process.
In Virginia, bankruptcy exemptions are governed by the Virginia Code, not federal law (this varies from state to state).
There are ways to protect your assets legally and maximize your trip through the bankruptcy process. This is one area where a lawyer can definitely help. If it turns out that bankruptcy isn’t in your best interest, better not to even file.
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com
• Do I have to list all my debts?
Yes, you do have to list all your debts on your bankruptcy petition.
However, you don’t have to send notice to all your creditors, for example, a friend or relative who loaned you money whom you want to repay, or your landlord.
Also, even though you list a debt in a bankruptcy proceeding, that doesn’t mean that you’re prohibited from paying this debt, even if it’s discharged.
You always have the right to repay debts if you want to do that, once the bankruptcy proceeding is completed. But if you pay too much to one creditor before or during the bankruptcy proceeding, this may be treated as a preference, which can be voided by the trustee to be fair to the other creditors.
If you want to keep paying certain debts, you should reaffirm the debt in the bankruptcy proceeding. There is a special form just for this.
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com
• Will I lose my house even if I’m current?
This depends on how much equity you have in the house, and how much debt you have, both mortgage debt and other debt.
Most homeowners in Northern Virginia have a lot of equity, and so file Chapter 13 (or Chapter 11, if their debts are mostly business debts). In those cases, they typically keep the house by keeping the mortgage payments current, and make smaller payments to the unsecured creditors.
If you only have a few thousand dollars in equity, you can probably file Chapter 7.
If you are in one of the in-between situations, some people are able to work out a deal with the Chapter 7 trustee to refinance their mortgage and take out equity to pay off the creditors. If you do this, you must use the money as agreed, or you’ve probably committed bankruptcy fraud.
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com
• Will the trustee come to my house?
Probably not. Trustees are busy lawyers who generally have their desks piled high with a lot of paperwork to go through.
This doesn’t mean that they have to take your word about your assets, liabilities, and financial situation. Under the new laws, you must provide them with your latest tax return, pay stubs for the 60 days before the filing, and any other document they require in order to determine the validity of your petition.
The new law also has provisions for audits to be performed by persons employed by the Office of the Trustee. Although I have never heard of an auditor coming to your house, I see no reason why they can’t.
It’s not any harder for honest people to file for bankruptcy under the new laws, but the laws does make life much harder for dishonest people.
• Does my spouse have to file bankruptcy with me?
No, especially if you are separated with separate residences, and no joint debts.
If you are living together in the same household, then your spouse’s income is included in your household income, which may mean that you are not eligible for bankruptcy if your joint income is too high.
Also, if you have joint debts, your spouse will not be discharged unless he or she files a joint petition with you.
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com
• Will bankruptcy stop wage garnishments?
Yes, as long as the debt is dischargeable, and as long as this is the first filing, filing for bankruptcy gives you an “automatic stay” of all proceedings to collect a debt.
However, if the debt is a support obligation to your children, or spouse (or former spouse) then it is not dischargeable and filing for bankruptcy will not stop wage garnishments for domestic support.
Also, if you screw up the first filing, and the case is dismissed, you will have to file motions with the court in order to get an automatic stay beyond 30 days after filing.
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com
• Are there debts that I cannot discharge?
Absolutely.
You cannot discharge secured debts, such as mortgages and car payments (there’s some loopholes here that a lawyer can explain).
You cannot discharge domestic obligations, such as child support payments and spousal support payments, and similar obligations to your family.
You cannot discharge debts incurred as the result of criminal activity or fraud.
You cannot discharge most taxes.
You cannot discharge most student loans, most of the time.
These are all general statements, which are generally true, although there may be loopholes that a lawyer may be able to help you find.
• Is the IRS affected by my bankruptcy filing?
Yes and no.
If the debt owed to the IRS is non-dischargeable, then filing for bankruptcy will stop collection proceedings, but the debt will still have to be paid.
It is possible (rare, but possible) that the debt owed to the IRS is dischargeable, for example, if the statute of limitations for collection has run and the IRS did not file an effective tax lien.
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com
• Can I keep my car?
If you owe more on the car than the car is worth, which is the usual state of affairs when buying a car with a car payment, then the loan is what is called “upside down,” that is to say, there is no equity in the car.
In that case, the trustee can’t take it because it really “belongs” to the finance company. If you make your payments and reaffirm the debt, you can keep the car.
If you own the car free and clear, then you may be able to use your Virginia exemptions in order to keep the car, depending on the fair market value.
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com
• Will I be allowed to file bankruptcy?
Contrary to popular belief, yes, you can still file for bankruptcy under the new laws.
The first step is calculating your income, pro-rated over the last six months. If your income is below a certain level, then you should have no problems based on income.
If your income is higher than that level, then the question gets more complicated, as you have to calculate your expenses over that same time period. However, the statutes are a lot more generous towards the debtor than most people realize, far more generous than they were before the new laws.
Most lawyers representing consumer debtors agree that the new laws don’t make it harder to qualify for bankruptcy, they just generate more paperwork (a lot more paperwork!)
You are not required to have a lawyer and can represent yourself. It is your decision whether to hire an attorney. However, you may be at a disadvantage without legal representation.
For more information, call me, 703-273-6764, or email me, uptonlaw@gmail.com |
