General Bankruptcy Questions

What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

A Chapter 7 Bankruptcy is what people usually think of when they hear the word bankruptcy. It is the most common type and it will help you eliminate your unsecured debt, such as credit cards, medical bills, collection accounts etc. It ultimately is the fastest and cheapest way to eliminate your debt.

A Chapter 13 Bankruptcy is essentially a debt consolidation through the government. Your debt will be consolidated and you will make monthly payments to pay down your debt. Your case will last anywhere between 3 to 5 years.

If I file for bankruptcy, will I have to give up assets like my house or car?

One of the most common misconceptions about bankruptcy is that individuals who file will have to give up all of their things. This is simply not true. Although chapter 7 is called a “liquidation” in most cases (approximately 98% of the cases we file) there is no liquidation and our clients get to keep everything they own. At Moran Law we pride ourselves on helping clients protect their assets while getting rid of debt and if we think that you own an asset that may be unprotected, we work with you to determine the best course of action.

Start to finish, how long does the bankruptcy process take?

Chapter 7 Bankruptcy takes approximately 3-4 months. The first step is the initial consultation where we meet with you for about an hour to discuss your situation. Unless there is a specific cause for delay, we will try to get you into your filing/signing appointment within 1 week. Once a case is filed you will have a hearing about 30 days later and be eligible for a discharge 60 days after that.

Chapter 13 cases run a bit longer: typically 3-5 years. After your first hearing, there will be a second hearing, called a Confirmation hearing about 30-45 days later. Assuming your case is confirmed at the second hearing, your Plan will run 3-5 years from there.

What should I expect at my initial consultation?

The initial consultation is our chance to diagnose your financial situation and advise you on how to proceed. Assuming we decide a bankruptcy is in your best interest, we will discuss fees and provide you with a list of documents that we will want you to bring to your signing/filing appointment. You should expect an experienced friendly face that is eager to help you get back on track and a cold or hot beverage based on your preference. You should not expect to be pressured into signing a retainer agreement or making a down payment. The appointment usually lasts 1 hour.

What should I expect at my signing/filing appointment?

At the signing appointment you will provide us with the documents that were requested at the initial consultation as well as the agreed upon down payment to get your case filed. We will scan your documents into your electronic file while preparing and reviewing your bankruptcy petition with you. Once the petition is complete, we will print it out and have you sign it and in most cases the petition is filed that day or within 1 week. This appointment typically takes about 2 hours.

What types of documents will I have to provide?

In almost every case, we need your last two years of taxes (if required to file), proof of income, bank statements and vehicle titles. If you own real estate we may need your Recorded Deed, Recorded Mortgage, Mortgage Statement and Property Tax Bill. We also need you to provide us with any bills that are available to you along with lawsuit paperwork. Having said that, we will pull your credit and many of the documents we need can be obtained online.

Do I have to go to court?

Yes, everyone who files for bankruptcy must attend at least 1 hearing which is called the 341 Meeting of Creditors. This gives your bankruptcy trustee as well as your creditors a chance to ask you question about your financial affairs. We attend that hearing with you and guide you in assuring the hearing runs smoothly.

Do I have to file my taxes?

Unless you were unemployed during the required tax years, you will need to have the last 2 years of taxes filed for a chapter 7 case and 4 years for a chapter 13 case.

Do I have to list all of my creditors?

Yes, however different creditors can be treated different ways. For example, if you are financing a vehicle, you must list the finance company but you can continue to pay them after the bankruptcy and keep your car as long as you continue to make the payments. The same is true for a mortgage.

Can I get rid of unemployment overpayment in my bankruptcy?

Yes, however it is possible that the Unemployment Insurance Agency (UIA) may file a Complaint to have the debt deemed non-dischargeable due to fraud. Even if that happens, you can almost always settle the debt with the UIA for much less than what you owe.

If I am being sued by an insurance company because my car was not insured and I was in an accident, can that debt be included in a bankruptcy?

Absolutely! As long as you were not intoxicated when the accident took place, that debt will be wiped out.

Can I eliminate tax debt in bankruptcy?

Tax Debt can be eliminated so long as it is more than 3 years old, has been assessed for at least 2 years and the taxes we filed on time. Tax debt incurred within 3 years can be paid off over 5 years in Chapter 13.

Can I eliminate traffic tickets and/or Driver Responsibility Fees in bankruptcy?

Traffic tickets cannot be eliminated in Chapter 7, however they can be eliminated in Chapter 13. Driver Responsibility Fees can be eliminated in both Chapter 7 and Chapter 13.

Can I get rid of domestic support obligations such as Child Support and Alimony in bankruptcy?

Domestic Support Obligations cannot be eliminated in either Chapter 7 or Chapter 13; however arrears on a Domestic Support Obligation can be spread out over 5 years in Chapter 13.

If I am married, does my spouse have to file with me?

Your spouse does not have to file with you, but unless you are living in separate households, you will have to include his/her income and expenses.

Why does my spouse’s income have to be included?

The federal bankruptcy code requires that we include all household income in your schedules.

I am interested in filing with Moran Law, but your offices are too far away from me. Can we file my bankruptcy over the phone?

Absolutely. We are always willing to accommodate our clients in any way we can.

Is it difficult to file for bankruptcy?

Many people fear the thought of bankruptcy because they think it is a difficult and overwhelming process. However, an experienced bankruptcy attorney can make the process as seamless and comfortable as possible. They can explain what will happen, what you can expect and how they can help you and your family achieve financial freedom. Of course some cases are more complicated than others, but at Moran Law, we strive to have every case run as smoothly and seamlessly as possible.

How will bankruptcy affect my job?

It is illegal for an employer to fire or discriminate against an employee because the employee filed for bankruptcy. An employee cannot be demoted, receive a reduced salary or be removed from responsibilities as a result of filing for bankruptcy. If a person is discriminated against or fired because the employee chose to file for bankruptcy, the employer may suffer consequences of such actions. For some government employees, security clearances may be affected because of your bankruptcy.

Should I join a credit union after bankruptcy?

You may want to consider using a credit union instead of a traditional corporate bank. Credit unions can help rebuild credit after bankruptcy and can provide an alternative method for storing funds.

Many people are unfamiliar with how credit unions work or what benefits they might be able to offer. Simply put, credit unions are financial cooperative organizations that are controlled and owned by their members.

When can I buy a house/car after bankruptcy?

The most common types of bankruptcy are Chapter 7 and Chapter 13. The chapter you file under will play a role in how soon you can be eligible to purchase a home.

The type of loan will also play a role in determining when you’re eligible to purchase a home. Different mortgage programs can have different “seasoning periods” following a bankruptcy or foreclosure. Lenders may have their own in-house requirements on top of that.

With Chapter 7 bankruptcy, the seasoning clock begins when the action is discharged, not when your case is filed. From the point of discharge, there is typically a four-year wait for conventional loans and a two-year wait for either FHA or VA financing. (The FHA’s short-term “Back to Work” program offers qualified borrowers the possibility of even faster movement after both bankruptcy and foreclosure.)

Chapter 13 bankruptcies can be a little different. You may be able to obtain a new loan to purchase a home or refinance your home while in your Chapter 13 bankruptcy (but you’ll need Court permission and this process may take several months). You might be able to land a conventional loan two years after a Chapter 13 discharge. FHA and VA loans are even more lenient. Borrowers can be eligible for these government-backed loans just a year removed from filing a Chapter 13 bankruptcy. They’ll typically need to show at least 12 consecutive months of on-time payments and permission from the court to take on new debt.

Will Bankruptcy really harm my credit score for 10 years?

No. This is another common misconception. In most cases, bankruptcy is reported on your credit report for 10 years. However, because something is reported on your credit report does not mean it will have a negative effect on your standing. In fact, most people who file for bankruptcy see an increase in their credit score as their debt to income ratio will improve drastically over a very short period of time.

Will everyone know I filed for bankruptcy?

No. While bankruptcy is public record, someone would have to know where to look to find this record. Bankruptcy allows you to get rid of certain debts without ever having to pay for them. This means only creditors and people you tell will ever know you filed for bankruptcy. Keep in mind that a creditor can be someone who you do not owe past debt to (i.e., you are current on your obligation, such as child support or rent). An ongoing, but current, obligation to pay someone makes them a creditor and all creditors must be notified of your bankruptcy filing.

Will filing bankruptcy hurt my credit score?

Not necessarily. In fact, in most cases filing for bankruptcy will actually improve your credit as your debt to income ratio will improve almost immediately.

Keep in mind that how your credit will be affected will depend on a number of factors, such as where your credit level is at today and which type of bankruptcy you file. There are also a number of things you can do to improve your credit once you’ve filed for bankruptcy, and those things along with the bankruptcy filing will allow your credit score to improve, even during the period in which the bankruptcy still reflects on your credit report.

Will filing bankruptcy remove the debt on my credit report for good or will the debt show up on my credit report again?

After you have completed your bankruptcy, it takes up to 6 months before your credit report starts reflecting the discharged debt. The account itself will remain, but the status line will read “discharged in bankruptcy” and the balance will be reported as “$0.00.”

Can I file a Chapter 7 to eliminate Student Loan debt?

Student loan debt is presumed non-dischargeable. However in limited and extreme circumstances such as permanent disability, we can petition the Court to have the debt deemed dischargeable.

Can a Chapter 7 or 13 get me caught up on my vehicle?

Chapter 13 is an effective tool for catching up and even lowering your auto loan payment. In Chapter 7, you may be able to redeem your vehicle which allows you to pay the value of the vehicle rather than what you owe.

Can I add a bill after I file?

You can add a debt after you filed your case but we will have to amend your bankruptcy petition before we do that. The court requires a $100 amendment fee that will need to be paid before we can amend the petition.

Chapter 7 Bankruptcy Questions

What is Form 403b? And what is the Financial Management Course?

This is a letter the court will send you to remind you to complete your second credit counseling course. The Court sends this letter whether or not you’ve already completed the course. There are many websites you can use to complete this course online but the website we suggest is debtorcc.org

What do I have to do to get my case filed?

After your free consultation with our office, we will give you a list of required documents of all the items we need to get your case filed. Please schedule your next appointment with our office so we can scan in the required documents and get your case filed.

How long is the process?

A Chapter 7 bankruptcy typically takes 3-4 months to complete.

Where can I take the 2nd credit counseling course?

The course is online. You can take it on any computer, tablet or smartphone. If you do not have online access, you can always schedule a time with our office to complete the course.

What are the fees and how do they work?

At Moran Law we never want price to be the reason you don’t choose us. We offer competitive prices and are one of the only firms in the State that offers payment plans that run past Discharge. Your payment plan to our office will include the Court fee unless a waiver of the court fee is appropriate. In most cases, we require a $400.00 down payment to get your case filed. The monthly payment and length of the payment plan will vary based on the complexity of your case.

If you have been garnished and the funds that have been taken exceed $600.00 within 90 days, we charge only $100.00 to file your case as we are able to recover the garnished funds and apply them towards your attorney fees.

When does my payment plan to pay my attorney fees start?

Your payment plan will start the month after your case is filed. For example, if you filed in June, your payment plan will start in July.

Why does my court letter say I have a $335 filing fee due the day of my hearing?

This is just the standard letter the court will send to you. Your court filing fee is included in your payment plan with our office and we will pay the fee so long as you are current with your payment plan to our office.

When is my second credit counseling course due?

You must complete the second credit counseling course within 45 days of your court hearing.

Why are my checks still being garnished after I filed?

The average garnishment release (the paperwork that will be sent to your payroll to stop the garnishment) is filed about 10-15 business days after your case has been filed. It is up to the creditor’s attorney to send the release over to the court for it to be finalized and sent over to your payroll department. Some payroll departments will accept the Notice of Filing which is generated immediately upon filing.

What happens if my paycheck is garnished after filing?

If your check has been garnished after you have filed, do not worry. It is a typical practice for payrolls to continue taking the garnishment out until they receive your garnishment release from the court. In the event your check is garnished, the creditor will either send your check back to your payroll or our office. If it is returned to our office, we will apply it to your balance with our office.

After my case is filed, how long do I have until my court hearing?

The Meeting of Creditor will almost always be held 30 to 45 days after your case is filed.

If a creditor continues to contact me after I filed, what should I do?

Let the creditor know that you filed a bankruptcy with our office and give them your case number. If they continue to call you after that, contact our office. Be sure to keep a record of all correspondences in case we need to sue them for damages.

What is the best way to contact my attorney/paralegal?

The best way to communicate with your attorney/paralegal is through email. Our staff is constantly on the phone, in court or in appointments helping people eliminate their debt, and sometimes it is tough to communicate via phone. If you send an email, we will almost always respond by the end of the next business day.

When will I receive my Discharge?

Chapter 7 Clients become eligible for a Discharge 60 days after their first 341 Meeting of Creditors.

What is the best way to build up my credit after completing my bankruptcy?

There are many ways to improve your credit after bankruptcy and as one of our new services we offer advice on those techniques. Contact Brad Harbison at bharbison@moranlaw.com to discuss our most popular packages for credit repair.

I need to send documents to my debt relief expert, what is the best way of doing that?

The easiest way to send your expert documents is via email. It might be more convenient to take a picture of the documents on your phone and then directly emailing it to your expert. It saves a lot of time for you and makes it easier for us to review and send the document where it needs to go.

Chapter 13 Bankruptcy Questions

What are the benefits of a Chapter 13 verses a Chapter 7?

Chapter 13 Bankruptcy allows you to treat certain creditors in ways that you cannot otherwise treat them in Chapter 7. For example, it allows you to spread out mortgage arrears, auto loans, tax debt and domestic support arrears over 5 years. For some secured debts you can decrease the interest rate or even decrease the principal balance of the loan. Chapter 13 is also an effective tool for protecting assets that would have otherwise been sold in Chapter 7. Finally, Chapter 13 allows you to combine all of your creditors so they can be paid in a more organized fashion. All the while, your creditors are prohibited from contacting you in an attempt to collect the debt.

How is my Plan Payment determined?

Various factors including your total debt, the value of your assets and your income after deducting necessary expenses are considered when determining your Plan Payment. At Moran Law we strive to propose the most efficient and cost friendly Plan Payments for our Clients.

When is my first Chapter 13 Plan Payment due?

Your first payment is due 30 days after your case is filed.

How do I make my Plan Payments?

You will likely have to mail the first payment to the Trustee until the payments start coming directly out of your paycheck or bank account.

If you are employed and your income is sufficient to support your Plan Payment than it will come directly out of your paycheck through a Wage Order.

If you are not employed, your Plan Payment will either be withdrawn from your bank account through an ACH or for two of the three Trustee’s you can set up an account through tfsbillpay.com which allows you to make your Plan Payments online.

In Chapter 13, can I keep my tax refunds, profit sharing and bonuses?

You can keep your tax refunds, profit sharing and bonuses if you are repaying all of your debt or if you can show a specific unexpected need for the funds. Some examples include unexpected home repair, auto repair, medical expenses, etc.

If I get a raise at work, will my Plan Payment increase?

Although the Chapter 13 Trustee does reserve the right to propose a Plan Modification if your income increases, it is extremely rare and typically only happens if there is a drastic increase in income.

How long will my Chapter 13 case take?

Almost all Chapter 13 Cases run 3 to 5 years. The only way a Plan can run for a shorter period is if all of your debt is paid off.

I could not make my Chapter 13 plan payment this month, what happens now?

Once your Chapter 13 Case is confirmed, one missed payment is typically not a death sentence for your case. However, if you miss a Plan Payment or expect to miss a Payment, you should contact us so we can establish a strategy for keeping your case on track.

Can I monitor my own Chapter 13 Case?

Yes, through two websites: 13Network.com or NDC.org. These websites are helpful tools, but should be read in conjunction with your attorney’s advice.

Can I pay off my Chapter 13 early?

Yes. If you are able to pay off all of your debt, you will receive a Discharge regardless of whether your plan has run 3 or 5 years.

Can I obtain new credit in a Chapter 13? If so, how do I do that?

Yes, it is quite common for Clients to obtain new credit while they are in Chapter 13. The most common form of new debt obtained inside of Chapter 13 is an auto loan. In order to do so, you will need to provide us with the new financing terms so we can petition to Court for approval to do so.

Does Chapter 13 stop Student Loan garnishments?

Yes. If you cannot afford to pay back your student loans and the lender is garnishing your wages, Chapter 13 is an effective tool for stopping the garnishment and allowing you to make payments that you can afford. Just remember that in most cases, once the Chapter 13 bankruptcy is over, the student loan debt will not be discharged.

I received a Motion for Relief from Stay. What is this and what should I do?

When you file for Bankruptcy something goes into effect called the Automatic Stay. The Stay protects you from your Creditors attempts to collect their debt. A Motion for Relief from Stay is almost always filed by a Creditor who holds a security interest in one of your assets like your house or car. If you intend to surrender the asset, you can disregard the Motion. If you would like to keep the asset, we will need to respond to the Motion within 14 days, explaining why the Stay should not be removed.