Bankruptcy Laws Protect Americans
How long does the bankruptcy process take?
The length of time depends on whether you are filing a Chapter 7 or Chapter 13 bankruptcy. If you are filing a Chapter 7 bankruptcy, the process takes on average 3 – 5 months from the date that your case is filed. If you are filing a Chapter 13 bankruptcy your case will remain open throughout the duration of your Court approved debt repayment plan, usually 3 or 5 years depending upon your circumstances.
What should I do if my creditors keep calling me?
Once you have signed our Fee Agreement you can begin referring all creditor calls to our office. You do not need to call each of your creditors. Instead, simply answer their calls and inform them that you “have retained a lawyer to file a bankruptcy” and further advise that “all future contact should be directed to his office.” Isn’t that easy? Should any of these creditors continue to call you, ask whoever is calling for their name and phone number (including their extension) and give this information to our office. We will handle it from there.
Once I sign up to file for bankruptcy, what else do I have to do?
Your eligibility for either Chapter 7 or Chapter 13 bankruptcy depends on several factors not limited to but including employment, household size, current income and income over the past six months, and types of income.
We do everything that we can to make this process as easy as possible for our clients. However, you will need to do the following:
Continue to make installment payments toward your attorney’s fees when due (if applicable). For those of you that have set up an installment payment plan to cover your attorney’s fees you will need to make your monthly installment payments in accordance with the terms of our payment plan. We require a monthly payment on your account, unless other arrangements are made. Payments can be made by cash, check, money order, or by debit card. Please contact our office for additional information.
Keep us updated as to your situation. If you move, change phone numbers, or if your situation changes in any way that impacts your case we need to know.
Respond to our calls and or messages. We will not contact you unless it is necessary. Please help us assist you by taking the time to respond to our phone calls and or messages. We have a busy law practice and we represent several clients at the same time. In many instances, we have deadlines to file responses and or to provide information/ documentation to third parties involved in your case, e.g., judges, trustees, creditor attorneys. A prompt response to our communications enables to effectively process your case. Please be respectful of our time and we promise to be respectful of yours. We are in this together but, remember, you are ultimately responsible for your case.
Complete the Pre-Bankruptcy Credit Counseling Course (Required under Federal Law). Prior to filing a bankruptcy petition you must complete a pre-filing credit counseling course. This course is available online or in person and usually takes about 60 minutes to complete. The purpose of the course is to ensure that you know about any other options that may exist as an alternative to bankruptcy. A certificate of completion of the credit counseling must be filed with the Court at the time the bankruptcy petition is filed. The cost of this counseling course typically ranges anywhere from $15 to $50 per household depending on the agency that you choose. A complete list of the approved agencies by state and judicial district can be found by clicking here.
NOTE: We recommend that our clients choose the course offered by DebtorCC. Their service is available in English and in Spanish by clicking here.
Provide us with updated documents and or information upon request. Once filed, your case will be assigned to a bankruptcy trustee. We will need to give the Trustee copies of several documents so that they can verify the accuracy of the information disclosed in your bankruptcy petition. In most cases, we will need at least the following:
– Copies of your two most recent Federal Income Tax Returns;
– Proof of Income. We will need to accurately calculate your average monthly income from all sources over the past 6 months. Thus, we will need copies of your pay stubs and or other proof of income depending on how you are paid. Also, in most cases, if you are married, we will need to include your spouse’s income whether he/she is filing with you or not, so we will need his/her pay stubs as well;
– Bank Statements. Copies of your most recent 60 days of bank statements for all accounts held in your name, whether individual or joint accounts
Attend your Meeting of the Creditors (341 Meeting). In most cases, you will need only make one appearance in your bankruptcy case. This is at the Meeting of Creditors, more commonly referred to as a “341 meeting” (named after the applicable Code section). The Meeting of Creditors is usually held 30-45 days from the date that your case was filed. Creditors very rarely come to these meetings. The meeting is conducted by the U.S. Trustee assigned to your case. The purpose of the meeting is to verify the accuracy of your Petition and to discuss any issues that exist with the filing. These meetings typically last about 5 – 10 minutes. However, you may need to wait for your case to be called. We recommend that you take the morning or afternoon off from work, as applicable.
Complete the Pre-Discharge Education Course (Required by Federal Law). Prior to obtaining a discharge in your case you will must complete a pre-discharge debtor education course. The purpose of this course is to provide you with the basic skills necessary to manage your personal finances, e.g., how to budget and manage your money after bankruptcy. These courses are also available online and the cost is usually $10 to $25 per household. Again, a complete list of the approved agencies complete list of the approved agencies by state and judicial district can be found by clicking here.
What is the “Meeting of Creditors?”
A Meeting of Creditors or “341 Meeting” as it is commonly called is an informal meeting often held at the office of the trustee assigned to your case. The Meeting of Creditors is a very important meeting and one that you will need to prepare for in advance. All of your creditors will be given notice of the meeting and allowed to attend the meeting. However, while your attendance is mandatory their attendance is not required. In fact, creditors rarely appear at these meetings. You have a duty to appear, testify under oath, and answer questions asked by your creditors. This meeting is presided over by the trustee assigned to the case. A Debtor’s failure to appear may result in dismissal of the case.
What do I need to bring to the meeting?
You must bring (1) your Driver’s license or State issued Identification Card, and (2) your Social Security Card or residency card.
What if something comes up and I cannot make it to my meeting of creditors?
Unfortunately, we have no control over the date and time of the meeting as it is scheduled by the Court. The Meeting is usually held 30 – 45 days from the date that your case is filed. We are usually given at least 2 – 3 weeks advance notice of the meeting date and we inform you of the date as soon as we are given the information. If there is an EMERGENCY and you cannot make the meeting it may be continued to a later date. However, this will likely impact your discharge date. If you fail to attend the meeting your case is subject to dismissal. If we are unable to reschedule the meeting in advance of the original date you may incur additional charges as described in our Fee Agreement. In any event, you should contact us as soon as you realize that you will not be able to attend the meeting.
What is a bankruptcy trustee?
A bankruptcy trustee is an official appointed by the United States Trustee, U.S. Department of Justice, who administers your bankruptcy estate (your assets and property rights as of the date that your case was filed).
A Chapter 7 trustee liquidates any non-exempt property and distributes it according to the scheme of priorities in the Code; the trustee also considers whether there are preferences or fraudulent transfers that can be recovered from which creditors can be paid. The trustee may bring a motion to dismiss the case as an abuse of the bankruptcy system or challenge your discharge if he or she finds evidence of fraud, perjury, or ineligibility.
A Chapter 13 trustee, amongst other things, reviews the debtor’s plan, and collects and distributes payments made by the Chapter 13 debtor.
What is a reaffirmation agreement?
: Some of your creditors may ask you to reaffirm a debt. Reaffirming really means that you are entering into a new contract. A reaffirmation agreement holds you legally responsible for the debt, even though your bankruptcy would have eliminated your personal liability for the debt. A reaffirmation agreement is something you should consider very seriously prior to signing. Remember, you filed bankruptcy to get relief from your debt! Not every reaffirmation agreement is in your best interest, instead these agreements really benefit your creditor. Below are some facts that may help you when deciding whether or not to reaffirm a debt.
What is a reaffirmation agreement? Reaffirmation agreements are prepared only by your creditor and never by the court or your attorney. It is a contract that your creditor drafts to protect its interest in your property. Once you sign a reaffirmation agreement, that debt cannot be discharged in your bankruptcy. This way the creditor is guaranteed payment or once again has the right to collect on the debt. If you sign the agreement, you would then resume a regular creditor-debtor relationship and resume making your payments.
What if I haven’t received any reaffirmation agreements? When you file a bankruptcy, the court notifies all your creditors within days. If your creditors have not faxed or mailed a reaffirmation agreement to your attorney prior to the discharge of your bankruptcy, they have no interest in reaffirming the debt. You cannot enter into a reaffirmation after your case has been discharged.
Are there hidden fees? Yes, the attorneys for your creditor can charge you a fee for preparation of the reaffirmation agreement and you are responsible for such fees. These fees cannot be discharged in your bankruptcy.
Should I reaffirm my second mortgage? We do not advise our clients to reaffirm their second mortgages. While doing so would be beneficial to your creditor, it will have absolutely no benefit for you. If you choose not to reaffirm any debts, or only reaffirm your first mortgage, you typically won’t owe anything in the event that you lose your home to foreclosure. If you sign the reaffirmation agreement on your second mortgage and your home is foreclosed, not only will you have lost your home, but you could be responsible for a large deficiency judgment.
What about over-financed vehicle loans? We also will not advise you to reaffirm a vehicle loan when you owe more to the finance company than the car is worth. The principle outlined above applies here as well. However, there are circumstances where a reaffirmation agreement on a vehicle can be beneficial to both parties:
You are completely 100% current on all of your car payments;
You can afford to pay the regular monthly car payments;
The vehicle has full insurance coverage;
The vehicle is worth more than you owe on it;
You plan to keep the vehicle for the foreseeable future.
If your car loan does not meet all of these conditions, you should be cautious when signing a reaffirmation agreement.
What if I forgot to include a creditor to my bankruptcy petition?
So long as your case is not closed and the time for filing claims has not expired, your petition may be amended to list additional creditors. If your case was closed without a distribution to creditors and the debt is not of the type that could be declared non-dischargeable, the debt is technically discharged even though it was not listed in your petition. In such cases, no further action should be required. In any event, contact our office as soon as you realize that the creditor was not listed.
What is a bankruptcy discharge (discharge order)?
The bankruptcy discharge is a court injunction prohibiting your creditors from taking action relating to debts that existed before your bankruptcy was filed. The discharge injunction replaces the automatic stay that goes into place when your bankruptcy case was filed. The discharge is the final step in most bankruptcy cases.
In a Chapter 7 bankruptcy, if everything goes as planned, you will receive an Order of Discharge signed by the Judge assigned to your case approximately 60 – 90 days from the date that your Meeting of Creditors was held. This order confirms that you no longer owe your creditors for “dischargeable” debts. If you have any “non-dischargeable” debts, most commonly student loans or IRS debt, you will need to contact the applicable creditor to make payment arrangements. In many cases, these creditors will offer you forbearance or temporary suspension of payments, while you get back on your feet financially.
What do I do after I recieve my bankruptcy discharge?
Relax and make the most of your new financial situation. Now that the stress caused by your creditors is gone you should focus on living on a balanced monthly budget, where your monthly expenses are less than your monthly income. If you need additional guidance on how to remain relatively debt free and financially stable there are a number of excellent sources on the internet and books available at local bookstores.
Each client’s bankruptcy case is as varied and unique as the circumstances leading up to them. The best way to determine your best path forward is to contact the bankruptcy attorneys of Allen Stewart, P.C. today.
In certain instances, you may want to pay a debt even though it can be discharged in your bankruptcy. Bankruptcy law does not prevent you from voluntarily paying a debt. When you voluntarily agree to pay a debt and it is secured by a lien, the creditor may want you to enter into a reaffirmation agreement to “reaffirm” your intention to pay the debt.
Q: How long do I have to make this decision?
A: A reaffirmation agreement must be signed and filed within 60 days of the date set for your first meeting of creditors, unless the deadline is extended by court order. In most instances, the signed reaffirmation agreement is filed by your creditor and the deadline will not be extended unless you or your creditor file a motion with the court.
Q: What is a reaffirmation agreement?
A: A written contract prepared by your creditor wherein you agree to be legally liable for a debt that would have otherwise been dischargeable in your bankruptcy case.
Q: What is a secured creditor?
A: A secured creditor is any creditor that has a secured debt, that is a debt backed by collateral, i.e., homes, vehicles, home furnishings or electronics if you used the money loaned to purchase such goods. A vehicle title loan or similar is also a secured debt. Secured debts are treated differently than other types of debts in your bankruptcy, i.e., credit cards, medical bills, and collection accounts. The collateral pledged secures your obligation to repay the debt.
Q: Do I have to sign it?
A: No, reaffirmation agreements are strictly voluntary. You are not required to reaffirm any of your debts. However, if your secured creditor proposes a reaffirmation agreement and you fail to sign and return it, in some instances, the creditor can exercise its rights to the collateral, i.e., repossession or foreclosure. A secured creditor has a legal right to the collateral if the original contract between you and such creditor had a provision that made your insolvency (filing bankruptcy) a default under the terms of the contract.
In other words, many secured contracts contain a provision wherein your bankruptcy is deemed a default, i.e., a breach of the contract similar to failing to make monthly installment payments.
Q: Should I sign it?
A: This is a personal decision that must be made by each debtor individually and it depends on your particular circumstances – this is not one size fits all. You should consider your options very carefully because once you reaffirm the debt you will be contractually obligated to repay it no matter what occurs during the term of the agreement. That is, if anything happens during the next 3-5 years and you cannot afford to make your monthly payment you can be sued for the debt. At a minimum, we suggest that you honestly answer the following questions:
- Do you really need it? Most individuals that file a Chapter 7 bankruptcy do so to get a “fresh start.” You should only reaffirm debts on things that are necessities – items that are a “need” and not a “want.” Reaffirming debts on items that you don’t really need may result in financial problems in the future, similar to those that caused you to file for bankruptcy in the first place.
- Can you really afford it? If you really need the item but can’t comfortably afford the monthly payment it’s still a mistake to enter into the reaffirmation agreement. Especially since you will be ineligible for another Chapter 7 filing to eliminate the reaffirmed debt for at least 8 years. Thus, if you sign the agreement and later default your creditor can take or foreclose on the collateral and may obtain a judgment against you personally.
- Did anyone co-sign for you? If yes, then you may wish to reaffirm the debt so that your co-obligor does not get stuck with it. If, however, you co-signed for a loan on behalf of another and you are not in possession of the collateral you should not reaffirm the debt under any circumstances. The secured creditor will likely let you co-obligor keep the property so long as he/she remains current on the monthly payments.
- What is the collateral – Real Property v. Personal Property? Where the creditor has a lien on your home or other real property the Bankruptcy Code does not require that you reaffirm the debt. In such case, so long as you remain current on your installment payments you can keep the property and the loan remains in place. We refer to this as a “ride through” because you are allowed to go through the bankruptcy process without reaffirming the debt and or otherwise impacting the loan. However, if the debt is secured by personal property, such as a car, furnishings, or appliances, and you want to keep such property then bankruptcy law technically requires you do reaffirm the debt, even if you have never missed a payment. We say “technically” because you cannot be forced to sign the agreement and the consequences for failing to sign it will ultimately depend on whether your creditor takes action as a result of your failure to enter into the agreement, i.e., your creditor will have a right to take the property but they might recover more of the money that they loaned you if they allow you to keep the property and you continue to make your monthly payments – this is a business decision for them.
Q: If I sign it will my credit score improve?
A: Possibly, but that will depend on whether or not you are able to consistently make you payments when due. Further, your credit score depends on a number of factors including, the amounts, age, and types of debt reported by the credit bureaus. There are other ways that you can improve your credit such as by paying your other bills on time, keeping your credit card balances to a minimum, and or reducing the total number of accounts held in your name.
Q: Why wouldn’t I sign the Reaffirmation Agreement?
A: Because there is no guarantee that you will be able to repay the entire debt. If anything happens during the next 3-5 years and you cannot afford to make your monthly payment you may still lose the collateral and be sued for the remaining balance on the loan. In many instances the reward of credit reporting will not outweigh the risk of being back on the hook for the debt.
Q: What do I do with the agreement once I have signed it?
A: If you have retained our office to negotiate the terms of your reaffirmation agreement you will return the signed agreement to our office for filing. If you have decided to sign the agreement without representation you will need to follow the instructions set forth in the cover letter provided by the creditor. Further, please note, the court may require that you attend a hearing to determine whether or not it is in your best interest to reaffirm the debt.
Q: Can a reaffirmation agreement be cancelled?
A: Yes, you can cancel a reaffirmation agreement but must do so by the later of: (1) the issuance of a discharge in the bankruptcy case; or (2) 60 days from the date the reaffirmation agreement is filed with the bankruptcy court.