Following are the questions that are most often asked of me by my clients. In addition to the discussion of the questions pertaining both to Chapter 7 and Chapter 13, which appear on this page, some questions link to the Chapter 7 and Chapter 13 pages.
How much does it cost to file? This, by far, is the most often asked question. This is understandable, because if someone is at the point of considering filing a bankruptcy petition, the cost of doing so is usually an important factor. Before getting into specifics on fees and costs, I will tell you that my fees are extremely competitive. If you “shop around”, you will find that my fees are in line with most attorneys who handle bankruptcy matters regularly. (You should retain only an attorney who practices bankruptcy law day in and day out). Court costs for a Chapter 7 are $306; for a Chapter 13 this amount is $281. This normally must be paid at the time of filing. Fees are in addition to the court costs. In a Chapter 7 case, these fees must be paid by the time of filing; in a Chapter 13, usually most of the fee is paid through the Chapter 13 plan. Although the complexity of the case determines the amount of the fee, in a typical Chapter 7 case you should expect to pay approximately $1,200 to $1,500 in fees. In a Chapter 13, the fee as prescribed by the court is $2,500, but usually only about $250-$500 is paid at the time of filing. Please see the Chapter 7 and Chapter 13 pages for more discussion on cost.
Do I Have To List All Debts? Yes, you do, even though you may not want to. Clients often tell me that for some reason they do not wish to list a creditor. Sometimes they indicate that they are current with their payments with a creditor, maybe a home mortgagee or a car lender, and do not wish to disturb their good relationship with the creditor. I have to advise them that the Bankruptcy Code requires that all debts be listed. This does not necessarily mean that the relationship with the creditor will be damaged. If the creditor has a security interest in some property, such as your home or vehicle, usually the creditor and debtor enter into a “reaffirmation agreement.” This is a special document which is also signed by your attorney and is filed with the court. The effect of the reaffirmation agreement is to again make the debtor legally responsible for the debt. The creditor usually is very happy to enter into this agreement. After all, the creditor would much rather have you pay the debt than to go to the expense and hassle of seizing and selling the collateral, usually at a loss. If the debt is an “unsecured” debt, meaning that there has been no property pledged to “secure” the debt, it almost always is not advisable to reaffirm the debt. The reason for this is that there is no benefit such as retention by the debtor of secured property to justify the reaffirmation of the debt. To reaffirm the debt, and consequently to be obligated to repay it, prevents a true "fresh start", which, after all, is the purpose of filing a Chapter 7 bankruptcy. Having said that, however, the Bankruptcy Code allows you to pay any debt on a voluntary basis, if you wish to do so. Whether this is advisable is questionable and is an issue to be discussed with your attorney.
Does my spouse have to file with me? No, there is no requirement that both spouses file, either under Chapter 7 or Chapter 13. In some situations, it might not be necessary. For example, in Louisiana, which is a community property state, a debt incurred during the existence of a marriage is presumed to be a community debt, and therefore owed by both spouses. (This presumption can be overcome if the debt was not incurred for the benefit of both spouses or the one who had not incurred the debt). Even if only one spouse files a bankruptcy petition, the bankruptcy discharge is effective as to the other spouse with regard to the community debts. Assuming that all debts are community in nature, one might then ask why it would ever be necessary for both spouses to file. Two reasons come to mind. First, the presumption that a debt is community is just that—only a presumption. It can possibly be overcome, and a creditor may attempt to do so. Second, creditors, especially those located out of the state of Louisiana, may be ignorant of this rule, and assume that the discharge does not cover the non-filing spouse, In either event, needless harassment or even litigation may ensue. Since one of the goals of filing bankruptcy is to obtain protection from creditors, it often is advisable for both spouses to file. If only one spouse has debt and it is clear that this debt is separate, not community (for example, if the debt was incurred prior to the marriage), then it is not necessary for both spouses to file.
Can I be fired or denied employment because of a bankruptcy? No, the Bankruptcy Code prohibits a private employer from discriminating against an employee or prospective employee solely because of a bankruptcy.
Can I be denied a student loan on account of bankruptcy? No. Again, the Bankruptcy Code strictly prohibits denial of a loan because your or someone with whom you have been associated has filed bankruptcy.
Can a utility (electrical, telephone, etc.) cut off or refuse service because of bankruptcy? No, however, the utility can require “adequate assurance” for service (usually a deposit.) Please note that this deposit must be paid within 20 days of filing.
Will a bankruptcy discharge get rid of a lien on my home? No. The discharge relieves you of the legal obligation of paying the debt underlying the lien. But, the lien generally survives. For example, if a creditor has obtained a judgment against you and has recorded the judgment, a judicial lien is created against your real estate. This lien will remain after the bankruptcy discharge. It may be possible to have this lien removed, but it is not automatically removed. You should discuss this with your attorney.
Will the trustee come to my house? No one will come to your home to examine your personal belongings, unless there is a suspicion that you have hidden assets or undervalued what you own. That is extremely rare and should not worry you at all. The trustee and the judge assume that you have truthfully scheduled your assets. In some cases, the trustee may have a real estate agent take a look at your house if there is uncertainty about its value. Similarly, you might be asked to have your car appraised. (This usually happens only if there is significant difference between the value listed in the “schedules” and the value in the “Blue Book” or other vehicle value guide. Actually, this is nothing to worry about. Anxiety about the bankruptcy process and the fear of exposure or humiliation is created in the mind of the debtor to a far greater degree than by the reality of the judicial process.
Will I have to give up all my property? No. The Bankruptcy Code provides that a debtor filing for bankruptcy can keep certain assets for a “fresh start” by exempting property from the estate. The vast majority of bankruptcy cases are “no asset” cases, meaning that there are no nonexempt assets which the trustee is going to administer in order to pay creditors. Of course, by the time you file your bankruptcy petition, you and your attorney will have thoroughly reviewed your situation in order to determine if there are any assets at risk.
Will bankruptcy stop wage garnishments? Yes. As soon as your case is filed, creditors must stop whatever collection efforts are underway, including garnishment. The only exception may be for ongoing child or family support ordered by a court. The discharge of a debt will forever eliminate a creditor's right to garnish your wages on account of that debt.
Can I keep my car? Yes, most probably. There are two questions which must be addressed.
- Will the trustee take the car? The first consideration is to determine whether the trustee will administer the vehicle (take it and sell it to pay creditors). If there is little or no equity in the car, after subtracting any car loan from the car’s present value, the bankruptcy trustee will not take the car. If there is equity in the car over and above the value of the exemptions available, a debtor can usually buy any unprotected equity from the Chapter 7 trustee, if necessary. Your vehicle is exempt up to $7,500 in equity value (the value remaining after subtracting the amount of any loan against it from the NADA retail value). Additionally, if the vehicle has been modified to accomodate a physically infirm person, then there is a $7,500 exemption available.
- Will the creditor take the car? If you still owe money on the car, you can choose to reaffirm the debt to the secured lender, keep the car, and continue paying under the existing terms; or you can buy the car from the secured creditor for its present value (redemption), usually in a single payment. Your creditor will be quite willing for you to reaffirm the debt. In a Chapter 7, the creditor usually requires you to be current with your payments at the time the reaffirmation agreement is signed. Of course, if you choose, you can surrender the car and be free of any obligation to pay for it.
Will I be allowed to file bankruptcy if my income is high? As discussed elsewhere in this site, in order to determine whether or not you are eligible to file under Chapter 7, a "means test" is utilized. If your income is above the state median level for a household size the same as yours in the parish in which you reside, analysis of your expenses is necessary. Some of these expenses are not your actual expenses, but rather are national and regional standards, and some are your actual expenses. If, after deduction of these expenses, your "disposable income" is less than a certain amount, then you are permitted to file a Chapter 7 without involving a presumption of abuse. If your income is over that amount, then you will be forced into a Chapter 13 proceeding.
Can I put my property in someone else's name before filing? Such transfers are not effective to put your assets beyond the reach of creditors and bankruptcy trustees. Worse, such action may lead to the denial of your discharge. A bankruptcy trustee can recover assets transferred within one year of the bankruptcy filing where the debtor did not get reasonably equivalent value for the asset, or where the transfer was made with intent to hinder creditors. This “look back” period may be even longer in some situations. If you have more assets than you can protect with the available exemptions, consider filing Chapter 13 where the debtor generally keeps all of his or her property and, in essence, “buys back” the non exempt value from the creditors through payments to the Chapter 13 trustee out of future income .
Can I get credit after bankruptcy? Most probably. Filing bankruptcy does not prevent you from getting new credit; an entire class of lenders targets the recently bankrupt as customers! Immediately after a bankruptcy filing, you can expect credit to be more difficult to get, more expensive, and limited in amount. Two years after a bankruptcy discharge, however, debtors are eligible for mortgage loans on terms just as good as those with the same financial characteristics who have not filed bankruptcy. That is, in getting a home loan, the size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past. There is no “right” to credit, and landlords and credit card companies are well within their rights to consider your financial history in their credit decision. However, debtors are protected from discrimination based solely on the fact that they have filed bankruptcy by provisions of the Bankruptcy Code. While the fact that you filed bankruptcy stays on your credit report for up to 10 years, it becomes less significant the further in the past the bankruptcy is. In fact, you may well be a better credit risk after bankruptcy than before.
What if I can't make the payments on my Chapter 13 plan? Chapter 13 plans are voluntary and you can dismiss them freely. Also, if you have a temporary interruption in income or an unexpected increase in your expenses, you can ask the court to modify your plan to reduce the payments, or to obtain a suspension of the payments for a couple of months. If you miss the payments and don't take action to modify your plan or to get a suspension, the court will dismiss your case. Even if this happens, however, you can refile, usually right away. (In some situations, you may have to wait 180 days before refiling).You also have the right to convert your Chapter 13 case to Chapter 7.
Does a previous bankruptcy prevent me from filing again? It depends on what chapter you want to file now, what chapter you filed before and whether you received a discharge in the earlier case You can only get a Chapter 7 discharge if a previous Chapter 7 case was filed more than 8 years ago. If you got a Chapter 13 discharge within 8 years, the Chapter 13 plan has to have met certain repayment requirements to permit a Chapter 7 case within 8 years. If your previous case was dismissed before discharge, this does not count in these considerations. You can file a Chapter 13 case after a Chapter 7 without any statutory time restrictions. The court, however, can question the debtor's good faith, a necessary element to confirm a Chapter 13 plan, if he or she has recently filed Chapter 7 and received a discharge. You can freely convert a pending case from one chapter to another. Generally, you can only convert a Chapter 7 to Chapter 13 before the discharge is entered.
Do I Need An Attorney At All? You may be tempted to attempt to prepare and file the bankruptcy documents yourself. After all, you can buy the forms and fill the blanks in yourself. That way, you avoid the attorney's fee (you still have to pay the court costs). Or, there are some “bankruptcy preparers” who charge a minimal fee to prepare and file the necessary paperwork to file a bankruptcy. While in some cases this may not be a major problem, it has been my personal experience that the risk is simply not worth it. Much of what goes into the bankruptcy petition, schedules and statements comes from insightful and probing questioning from a qualified bankruptcy attorney. Bankruptcy preparers are strictly prohibited from practicing law and, therefore, cannot give legal advice or even ask the necessary questions to make sure you are completing your paperwork fully and completely. Even if they were legally allowed to do so, they are not able to adequately assess the laws surrounding exemptions and to determine what your best options are. In preparing the documents yourself, with or without the assistance of a bankruptcy preparer, you may assume, for example, that there is no problem with not listing a particular asset or debt, or reaffirming a particular debt, only to find out months or even years later that you did not get rid of that debt, or that you may lose an asset, or any number of other problems. Perhaps most importantly, without an attorney, you will not have representation in court if the need should arise (and it often does when paralegals handle things). Further, if you list things incorrectly in your petition, schedules or statements, or omit necessary items, it is YOUR problem, not the paralegal's problem. You sign all your bankruptcy papers under penalty of perjury. Ultimately, the debtor may have to spend several thousand dollars to attempt to remedy a situation that could have been prevented, or at least planned for, at the beginning. Bankruptcy is a very important decision. It is basically the first step towards your entire financial future. The entire bankruptcy system is designed so that attorneys represent all parties involved. That is what we are trained to do. Do you want to trust this future to yourself or to a non-licensed nonprofessional? This is the time that you should do things correctly. Don't skimp and save at this point. Hire the most competent attorney that you can afford and take the first step towards your fresh start.
For a consultation with me, Click Here. Before you do so, however, please visit the page What Information Do I Need? If you can have the information discussed there available at the time of our consultation, I can better advise you.
SUITE 2608 
