What is a Chapter 13 bankruptcy?
- In a Chapter 13 a person has to pay all of their disposible income to the Chapter 13 Trustee. Disposable income is the money left over after day to day living expenses, such as house payment, utilities, food, etc are paid.
- Instead of using their disposible income to pay for their debts (car payment, etc) the client would pay the money to the Chapter 13 Trustee. The Chapter 13 Trustee would then pay their debts for them.
- The Trustee pays the secured creditors first. Secured creditors are the ones who have collateral, such as a car. The secured creditors must be paid 100% of the value of their collateral.
- The unsecured creditors are ones who do not have collateral, such as credit cards, or medical bills. Unsecured creditors can be paid any amount between 100% and 1% of their debt.
What is a Chapter 7 bankruptcy?
- In a Chapter 7 a person agrees to keep paying the debts which he wants to keep; the other debts get wiped out, for the most part.
- If a debt has any collateral a person MUST agree to keep paying the debt or must give the collateral back.
- If a person gives back some collateral the debt for the collateral will be wiped out.
- There are some debts which can not be wiped out, in most instances. These include taxes which are less than 3 years old, back alimony and child support, crimnal fines and restitution, student loans and debts which occured because of fraud.
- Any debt not listed in one of the catagories mentioned above can be completely wiped out.
- In order to determine whether a caller’s particular debt can be wiped out they must make an appointment to talk to one of our lawyers.
What does it cost?
There are three different costs: the filing fee, attorney fees, and miscellaneous fees
- The filing fee for Chapter 7 is $335.00, for Chapter 13 $310.00. Not all of the fee has to be paid at once. The attorney may be able to set up an installment payment.
- The Attorney fee varies from case to case depending on how complicated the case is. IT DOES NOT COST ANYTHING TO MAKE AN APPOINTMENT AND TALK TO ONE OF OUR ATTORNEYS.
- In addition to the filing fee, everyone must take a “Credit Briefing” prior to filing any bankruptcy case. The cost for this service is $50.00. We can arrange for you to take this briefing with a Counseling Service which has been approved by the Office of the United States Trustee to offer this service. We must provide the Chapter 13 Trustee copies of your last filed tax returns. If you do not have a copy there will be a $20 fee to obtain a copy from the IRS. Additionally, there is a $20.00 processing fee.
How will it affect my credit?
- A Chapter 7 stays on a person’s credit record for 10 years. This does not mean that a person cannot get credit. It means that if the creditor gets a credit report the report will show that a Chapter 7 has been filed. After 10 years the Chapter 7 comes off of the credit report.
- A Chapter 13 in which a person pays back all creditors 100% may not be reported on a person’s credit report for 7 years from the date of filing. If all creditors are not paid back 100%, the Chapter 13 stays on the credit record for 10 years.
Will I lose any of my possessions?
- Most people in a bankruptcy case do not lose any property that they do not want to lose. This includes their house and their car.
- To determine if you would lose any property, make an appointment to come in and discuss your situation with one of our attorneys.
How will it affect my co-signer?
- In a Chapter 13 a co-signer is protected if you pay the co-signed debt 100%. If you do not pay the co-signed debt 100%, then the court will give the creditor permission to collect from your co-signer.
- In a Chapter 7 the creditor will usually not try to collect from your co-signer if you agree to keep paying the debt.
- To determine if your co-signer would be affected, make an appointment to come in and discuss your situation with one of our attorneys.
Do both of us have to file?
- Not necessarily. If only one or two debts are in both parties name, it may be possible for only one to file.
- If one of the couple does not have any debt, that person will not have to file.
- To see for sure whether both will have to file, make an appointment to talk with one of our lawyers.
How much will my payments be?
- If you file a Chapter 7, you will continue to make your regular payments to the creditors you are going to keep.
- If you file a Chapter 13, your payments will depend on how much you owe, how much secured debt you have, how much unsecured debt you have and how much you make.
- To determine your payment in a Chapter 13 case make an appointment to come in and discuss your individual situation with one of our attorneys.
Do I have to owe a certain amount?
- No. There is no particular amount of debt which a person must have to be eligible to file for bankruptcy protection.
- No matter how much or how little debt you have, if you cannot afford to make your monthly payments then you may benefit from filng a bankruptcy case.
What about my house payment?
- In either Chapter 13 or Chapter 7 most people continue to pay their house payment themselves.
- If you are behind on your house payments, the amount that you are behind can be caught up in a Chapter 13 plan, while you continue to make all of the payments which come due after the date of filing.
What about child support?
- You must continue making regular child support payments as they come due after you file your case.
- If you are behind on your child support you can catch it up through a Chapter 13 case.
- You cannot wipe out past due child support payments in any kind of bankruptcy case.
What about criminal fines or restitution?
- Most of the time you will continue making your monthly payment on your criminal fine yourself.
- If you are on probation, you will have to continue making your monthly probation maintenance fee yourself.
- If you owe restitution you may be able to pay it back through a Chapter 13 plan.
- You cannot wipe out a criminal fine or restitution in any kind of bankruptcy case.
What about returned checks?
- Not all returned checks are bad checks which can lead to criminal prosecution.
- If the check is a “bad check” you can pay it through a Chapter 13 case. You cannot wipe it out in any kind of bankruptcy case.
- If the check is simply an insufficient funds check, you can wipe it out in either a Chapter 13 or Chapter 7 case.
- To determine whether you would be able to wipe out a returned check, you must make an appointment to come in and discuss your situation with one of our attorneys.
- I cannot answer the question as to whether a check is a bad check or not because that it is legal question and I am not a lawyer.
What about insurance?
- You must maintain insurance on any house or car which is being paid for in your Chapter 13 case.
- In a Chapter 13 case, the creditor who has a lien on your car may require you to have full coverage insurance, if your car is operational.
- In a Chapter 7 case you will need insurance only if you are going to keep the car or house.
- If you cancel the insurance on a car you must not drive the car. It is illegal in Georgia to drive a car without any insurance.
What about past due taxes?
- All taxes can be paid through a Chapter 13 case.
- Some taxes that are over three years old can be wiped out in either a Chapter 13 or Chapter 7 case.
- Taxes that are less than 3 years old cannot be wiped out in any bankruptcy case.
- To determine if taxes which you owe can be wiped out or must be paid you must make an appointment to come in and talk with one of our attorneys.
- If you have not filed tax returns for the past four years and were required to do so it is important to do so as soon as possible. Your bankruptcy case can be dismissed for failure to timely file your tax returns.
- Paying back taxes through a Chapter 13 plan stops all penalties and some kinds of interest.
- Surrendering property and discharging debts does not create a taxable event, so you will not have to pay taxes on the value of the debt which you discharge.
What about tax refunds?
- The taxing authorities cannot withhold your future tax refund and apply it to tax debt which you have listed in a Chapter 13 case. However, you may have to pay your future refunds into your case, depending on the basis for the refund.
- If a tax debt is wiped out in a bankruptcy case, the taxing authorities cannot collect it in any form in the future.
Can I get credit in the future?
- A person in a Chapter 13 may not get more credit or make more debts without getting permission from the Court first. The Court wants people to take care of the debt they already have before getting more debt.
- A person in a Chapter 7 case can apply for credit any time after the case is filed. Whether they will be granted credit will depend upon each individaul creditor.
Can I stop creditors from calling me?
- When you file any sort of Bankruptcy case, the law requires your creditors to sop trying to collect on the debts you owe. The creditor may not repossess or foreclose on any of your property. The creditor may not call you on the telephone or send you bills. The creditor may not garnish your wages or seize your checking account or other property. The creditor must work with you through the Bankruptcy Court.
- If the creditor is already garnishing your pay or attempting to repossess your car or foreclose on your house they must stop, immediately.
- Any attempt to collect on a debt after your case is filed may result in the creditor being held in contempt of court.
What are the median income and means tests?
- In order to prevent the misuse of the bankruptcy system, Congress has established two laws to determine if the filng of a bankruptcy case is an abuse of the Bankruptcy Law.
- The first of these tests, the “median income test”, compares your gross income from almost all sources to the income of every other family in Georgia which has the same number of people as is in your household. If your household income is beneath the median (middle) of that group, then it is presumed that your filing any sort of bankruptcy case is not an abuse of the Bankruptcy Law. If your income is above the median income for this group, then the presumption of abuse arises and you must complete the “Means Test.”
- In calculating the means test, we deduct from your gross income all of your regular monthly expenses…housing, utilities, food, etc. Some of these deductions are based on national standards, some are based on the county in which you live, and some are your actual expenses. After all of these various expenses are deducted we are left with a figure called your “Current Monthly Income” (CMI). If your CMI is $0.00 or is a negative figure then, again, the presumption is that it is not an abuse of the bankruptcy system for you to file any sort of bankruptcy case and you would be allowed to file either Chapter 7 or Chapter 13. If your CMI is above a certain level (currently $125.00) then there is a presumption of abuse, so you would probably not be allowed to file a Chapter 7 case, but can file a Chapter 13 case. If your CMI is between $0.00 and $125.00 there is no presumption either way so the kind of case you could file would depend on other factors.
- This is a very basic explanation of the Median and Means Tests which is not intended to be comprehensive. In order to determine how these tests actually apply to you, we would need to make you an appointment to discuss the matter with one of our attorneys.
What if I just moved to Georgia or Tennessee?
- You must file where you have lived the greater part of the last 6 months.
- If you have lived in Georgia or Tennessee for at least 3 months and 1 day you can file there.
Do I have to include my home?
- If you file a bankruptcy case, you have to list everything that you own and everybody you owe, so yes, you would have to list you house on your case. That does not mean that you would lose your house, however.
- If you want to keep the house you would just keep paying for it, it most cases.
What if my spouse isn't on all my credit cards?
- The answer to this question depends on a couple of things. The first question is whether your wife is a co-signer on the card or just an authorized user. If your wife is a co-signer, that is, she signed the application with you, then both of you are probably liable for the debt. If you file and she doesn’t, then the credit card company can try to collect from her. (By the way, it doesn’t matter who signed first and who signed second.
- Co-signer means that each is equally responsible for paying the debt.) But, if your wife is an authorized user, then she is not liable for the debt.An authorized user is a person to whom you directed the credit card company to send a card on your account, but who did not sign the credit card application.
- Secondly, if you wife is a co-signer, how much is the debt? If it is not a large amount and she can work out a reasonable payment with the credit card company, then it may be a good idea for you to file by yourself.
- Many times the creditor will work out a payment arrangement with a co-signer, which may include reducing the total amount owed, in order to get paid something on the debt.
What if my ex-spouse moves out of state?
- Unfortunately, yes they can. You can divorce your spouse but you can’t divorce your creditor. The Order in your divorce is only between you and your ex, you remain liable for the debts even if he was ordered to pay them.
- You can take him back to the Court that granted the divorce for contempt of court, if you can find him, but you will still need to take care of the debt yourself, in the meantime.