Frequently Asked Questions
Q: Why do I need a bankruptcy lawyer?
A: Due to the complexities of bankruptcy law, rigid deadlines and potentially aggressive creditors, a licensed bankruptcy lawyer is highly recommended. Mistakes in the bankruptcy process can delay the final outcome of the case and may leave some debts still due and owing even after the bankruptcy is approved. If mistakes are serious enough, the bankruptcy court may dismiss the case altogether.
Q: Will I be able to keep my property when I file for bankruptcy protection?
A: This is a great question for local bankruptcy attorneys to answer. In general terms, certain property clearly may be exempt (which you may be able to keep) or nonexempt (which you may have to give up to pay off creditors). The analysis depends on state law and on the way courts have interpreted those laws. What seems like a simple analysis can be confusing or full of grey areas. Licensed lawyers are taught how to analyze these situations and find ways to protect you to the full extent allowed by law.
Q: What are the differences between Chapter 7, 11 and 13 bankruptcy?
A: Bankruptcy can either be a “fresh start” or it can be a reorganization. “Fresh start” bankruptcy is often used when debts far exceed the assets and income. Chapter 7 is the “fresh start” chapter of the bankruptcy chapter. While it may be a relief to get out from under a heavy debt load, certain assets and property may have to be sold for the benefit of the creditors. Reorganization, on the other hand, does not discharge all debts, but allows for a repayment plan over time, often at steep discounts. Reorganizations are only allowed where there is sufficient and regular income to support a repayment plan. Businesses often use Chapter 11 to reorganize and save their business, while qualifying individuals often use Chapter 13. Selecting the right bankruptcy chapter can be a complicated analysis. Consulting with a licensed bankruptcy attorney is highly recommended.
Q: What is debt settlement?
A: Debt settlement is an alternative to bankruptcy. If your creditors are willing to work with you by lowering principal amounts, monthly payments, interest rates or other concessions, you may not have to file for bankruptcy protection. Debt settlement can be a complicated process, since it often requires the cooperation and agreement of all creditors. If even one creditor is unwilling to make concessions, debt settlement may not be a good solution. Having a licensed bankruptcy attorney working on a debt settlement agreement for you is a good way to help creditors understand the seriousness of your situation. While there may be some useful debt settlement companies, be aware that there are a lot of scams!
Q: What is an “automatic stay”?
A: When a bankruptcy case is filed, an automatic stay is put in place which requires creditors to stop collection activities. The automatic stay applies to phone calls, collection letters, foreclosure proceedings, repossessions, wage garnishments and more. While the automatic stay can give you immediate relief from harassing creditors, the automatic stay can be removed for certain creditors. Make sure you talk to a local licensed bankruptcy attorney to understand how the automatic stay can give you immediate relief.