People facing the decision of bankruptcy can often have many questions regarding their situation. To help those overwhelmed with debt and tired of being harassed by their creditors better understand their options, the Law Offices of R Mark Weaver is proud to offer this informative FAQ page. If you have further questions or if you would like to discuss your unique situation with a caring Texas bankruptcy attorney from our team, call our offices at your earliest convenience.
What is bankruptcy?
Bankruptcy is the legal process in which individuals or businesses file under the United States Code Title 11 to eliminate all or repay some of their debts. Most people choosing to file for bankruptcy will file under Chapter 7 or Chapter 13, also known as either liquidation or reorganization.
What is Chapter 7?
Chapter 7 bankruptcy is also known as liquidation bankruptcy, which uses the liquidation of nonexempt assets to repay creditors. By filing under Chapter 7, you are asking the federal bankruptcy court to eliminate all of your previous debt and bills. It will also stop harassing calls from collectors and credit agencies. After repaying the creditors through liquidation, you will be released from the balances of most types of remaining debts. Not everyone qualifies for Chapter 7 relief, however; before filing, you must first be able to pass the means test.
What is Chapter 13?
Filing for bankruptcy under Chapter 13, also known as a reorganization of debt involves repaying your creditors over a 3 to 5 month period through a single, more affordable monthly payment. You may file under this Chapter if you have sufficient income to pay your living expenses, but not enough to pay your debt. Chapter 13 will allow you to retain both your exempt and non-exempt property, which means you do not risk losing any assets by filing for this type of debt relief. Court appointed payment plans are often put into place to help the filer maintain a low payment for up to three years to help eliminate their debts. This type of bankruptcy does not eliminate debts and bills.
How often can I file for bankruptcy?
You will most likely not be granted a discharge in a Chapter 7 case if you have filed for a Chapter 7 bankruptcy in the past 8 years. Most people will not be able to receive a discharge of a Chapter 13 case if they have filed in the past 6 years. There may be a few exceptions to the rule, but it is best to contact an attorney to discuss your case.
Will I lose my property?
Whether or not you risk losing your property during bankruptcy depends upon the situation and the type Chapter you pursue. In Chapter 13, you will not lose any of your assets, as you repay your creditors through a court-approved 3 to 5 year repayment plant. If you choose Chapter 7 bankruptcy, you could lose certain nonexempt assets during the liquidation process, which uses the profits of liquidation to repay your debts. An experienced attorney can assess your situation to help you understand which of your assets could be put in risk through Chapter 7 bankruptcy.
How will this affect my credit?
Filing for bankruptcy can negatively impact your credit score for up to 10 years, however the effects will not be permanent and you can rebuild your credit in an number of ways. Approval of credit may be denied and borrowing from various lenders may not be possible. Although this may take a few years to sort out, sometimes as long as a decade, it will get better. Sometimes filing for bankruptcy has little effect on what your credit score already is due to lack of payments.
Generally speaking, a Chapter 7 bankruptcy can last for no more than 10 years on your score and a Chapter 13 can be reported for no more than 7 years. Some creditors will ask if you have filed in the past, without reference to a time period, but most creditors will want to know how long it has been since you last filed for bankruptcy.
Will filing stop creditors from calling?
Yes, because by law creditors are supposed to cease all collection actions as soon as the debtor seeks protection by filing for bankruptcy. By seeking counsel and filing for bankruptcy you will eliminate those harassing calls. If you hire an attorney, you can have the attorney contact the collections agencies or have certain calls forwarded to their office.
How do I begin filing for bankruptcy?
Filing for bankruptcy should be the last option available to you. You should first try to seek alternatives to filing. However, if there are no options, you should start by taking a means test. This test will help you determine if you are eligible for a Chapter 7 or Chapter 13 bankruptcy. Gather all necessary paperwork like mortgage information, credit card information and past tax filings. Speak with a lawyer regarding your options and start seeking answers to all your questions regarding your bankruptcy. Once you have retained a lawyer, you can start referring all creditors and collectors to your lawyer’s office. Each case is unique and contacting an attorney can help you start the process of filing for bankruptcy moving in the right direction.
How long will the case take?
Cases can vary depending upon the individual’s unique situation and the state in which they are filing. In general, most Chapter 7 bankruptcy cases resolve in about four to six months. The paperwork involved in the case prior to filing may take longer, and thus can draw out the entire bankruptcy process sometimes up to a year. For those who pursue freedom from debt through Chapter 13, the process will take between 3 and 5 years, based upon the terms of their court-approved repayment plan.