A Fresh New Start
Discover How Bankruptcy Can Be The Key to Regaining Control of Your Life...
Filing for bankruptcy protection provides consumers with the ability to start over. Many see bankruptcy as an admission of failure or as a punishment for people who can't pay their bills. These people just don't understand what bankruptcy is all about.
Bankruptcy is not a punishment. It's not an admission of failure. It's just a way to say, "I need to start over..."
If you feel that things have gotten out of hand or that you don't have control over your financial life, come talk to us. We will look at your situation together and ensure that you understand all of your legal options. You need an experienced legal team in this regard and we are here to help.
The initial Bankruptcy consultation is always free. There are no further obligations unless we decide together that we can help you.
What is Bankruptcy?
Bankruptcy is a legal process wherein individuals and businesses are given the opportunity to start over if they have become overwhelmed by debt. The bankruptcy laws allow you to discharge your debts or reorganize your debts, depending on whether you have assets that need to be administered by a third-party trustee. The trustee ensures that you are not "abusing" the bankruptcy process by attempting to hide assets or by trying to escape debts that you could actually pay. In many cases, however, persons filing for bankruptcy just simply have fallen on hard times due to circumstances out of their control, like a long-term illness, a slumping housing market or lay-offs.
Are there different kinds bankruptcy?
Yes. There are four main types of bankruptcy proceedings:
- Chapter 7 bankruptcy is a form of bankruptcy in which a debtor liquidates assets, with creditors collecting the funds from the sale of the assets. In order to qualify to file under this Chapter, a debtor must not have enough disposable monthly income after deductions for necessary expenses available to make some minimal monthly payments to creditors under a repayment plan or make a yearly salary which falls below that individual's state median income. At the end of this process, the majority of the debtor's debts are discharged, allowing him or her a fresh start. In addition to being used by individuals, chapter 7 bankruptcy can also be utilized by businesses. It is the most common form of bankruptcy in the United States.
- A Chapter 13 bankruptcy is also known as a "wage earner's" plan. An individual is eligible for Chapter 13 relief as long as the their unsecured debts are less than $360,475 and secured debts are less than $1,081,400. Chapter 13 enables individuals with regular income to develop a plan to repay all or part of their debts. Under this Chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period. If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. Chapter 13 is generally preferable over Chapter 7 in the following six instances: (1) You are behind on your house and car notes and need time to catch up; (2) You have the desire and income to pay your debts, but need extra time or the court's protection; (3) You have certain debts that might not be dischargeable in Chapter 7; (4) You own valuable non-exempt assets, which may be seized by the Chapter 7 bankruptcy trustee; (5) You owe certain tax debts; or (6) You have filed a Chapter 7 bankruptcy in the last eight years.
- Under Chapter 11, an individual or business entity is given the opportunity for reorganization. This type of bankrupcty filing is most common among business entities that wish to keep business operations alive while paying creditors over time. Individuals that file under this Chapter usually do not qualify under the Chapter 7 "means test" or "median income" test and have too much debt for Chapter 13 relief. The debtor usually remains in possession of its assets, and operates the business under the supervision of the court and for the benefit of creditors. The debtor is a fiduciary for the creditors. If the debtor's management is ineffective or less than honest, a trustee may be appointed. A Creditors Committee is usually appointed by the U.S.Trustee from among the 20 largest, unsecured creditors who are not insiders. The committee represents all of the creditors in providing oversight for the debtor's operations and a body with whom the debtor can negotiate an acceptable plan of reorganization. A Chapter 11 plan is confirmed only upon the affirmative votes of the creditors, who are divided by the plan into classes based on the characteristics of their claims, and whose votes are a function of the amount of their claim against the debtor. If the debtor can't get the votes to confirm a plan, the debtor can attempt to "cram down" a plan on creditors and get the plan confirmed despite creditor opposition, by meeting certain statutory tests. Chapter 11 is probably the most flexible of all the chapters, and as such, it is the hardest to generalize about. When having to choose between Chapters 11 and 13, Individuals typically reorganize under Chapter 13, which offers a streamlined plan at modest cost that allows the individual to keep possession of his assets, catch up on secured debt and discharge unsecured debt at the end of the plan.
- Chapter 12 is designed for family farmers or family fishermen with regular annual income. It enables these types of individuals to propose and carry out a plan to repay all or part of their debts. Generally, the payment plan must provide for payments over three years unless the court approves a longer period "for cause." In no case may a plan provide for payments over a period longer than five years. The debtor's annual income must be sufficiently stable to permit them to make regular payments under the plan, however, an exception exists in situations in an individual has income that is seasonal in nature. In tailoring bankruptcy law to meet the economic realities of family farming and the family fisherman, Chapter 12 eliminates many of the barriers such debtors would face if seeking to reorganize under either Chapter 11 or 13. For example, Chapter 12 is more streamlined, less complicated and less expensive than chapter 11, which is better suited to large corporate reorganizations. In addition, few family farmers or fishermen find Chapter 13 to be advantageous because it is designed for wage earners who have smaller debts than those facing family farmers.
Will all my debts be discharged?
Maybe. If all you have are credit card debts and other unsecured debts, then you may be able to discharge all of your debts. If, however, you owe secured creditors or have other types of non-dischargeable debts, then you may not be able to discharge all of your debts. The following are non-dischargeable in both Chapter 7 and Chapter 13 and you will need to continue to pay these debts.
- Most Taxes (with certain exceptions applicable to taxes over three years old)
- Child Support and Alimony
- Student Loans
- Fines and Penalties imposed for violating the law, such as traffic tickets, criminal restitution
- Debts for personal injury or death caused by your intoxicated driving
In addition, the following debts may be declared non-dischargeable by a bankruptcy judge in Chapter 7 if the creditor challenges your request to discharge them. These debts are dischargeable in Chapter 13. You can include them in your plan, and at the end of your case, the balance will be eliminated:
- Debts you incurred on the basis of fraud, such as lying on a credit application
- Debts from willful or malicious injury to another person or another person's property
- Debts from embezzlement, larceny or breach of trust
- Debts you owe under a divorce decree or settlement unless after bankruptcy you would still not be able to afford to pay them or the benefit you'd receive by the discharge outweighs any detriment to your ex-spouse
How long does the process take?
In the vast majority of cases, individuals that file for relief under Chapter 7 are discharged within 4 to 6 months. The discharge date of Chapter 13 filers varies because each payment plan is prepared based on specific personal information such as the debtors amount of debt and income. All of these factors are taken into consideration to prepare a plan that is manageable payment wise. Five years is the maximum time allowed to schedule repayments, so depending on the amount of debt, it could be the full five years or less. In Chapter 11 cases involving business or individuals with a more complex financial situation, the discharge date greatly varies, ranging from months to years. This is because of the flexibility and intricities of the Chapter. Generally, repayment plans are confirmed through the court using a three-step process. First, debtors are required to develop a repayment plan. Secondly, creditors must accept the plan. Third, the plan is presented to a judge during a confirmation hearing. The judge reviews the repayment proposal to ensure debtors possess the financial means to follow through on their plan. Upon confirmation of the repayment plan, debts are discharged with the exception of non-dischargeable debts.
Will I have to go to court?
Regardless of whether you file for Chapter 7, 11 or 13 relief, you will be required to go to the office of the U.S Trustee, not a courthouse, at least once for what is known as a Section 341 meeting for creditors. In Puerto Rico and Virginia, these offices are located close to the Bankruptcy Courthouses. Usually, no creditors show up and the only persons in attendance will be you, your attorney and the appointed bankruptcy trustee. The typical meeting in a Chapter 7 or 13 case will last only a few minutes, during which time any creditors in attendance and the trustee will have opportunities to ask you questions about the information included in your bankrupcty Petition and your financial situation. In more complex Chapter 11 litigation, these meetings may be adjourned and take several sessions to complete.
Free Bankruptcy Consultations
A Legal Team That Cares About The Communities We Serve...
We are a friendly, casual law firm and welcome the opportunity to earn your trust. Our main goal is to aliviate the pressures that have complicated your life. During the initial consultation, which may be in English or Spanish according to your preference, we explain the different Chapters of bankruptcy, make a determination of which Chapter would most benefit you, discuss our fees and discounts, which are very competitive within the Washington, D.C., and Northern Virginia markets, and educate you on your legal and financial options. Further, we discuss the new requirement for credit counseling and debtor education and provide you with a guideline to proceed with bankruptcy. Even if we agree that bankruptcy is not ideal for you at that specific point in time, we discuss other services we provide which can benefit you such as debt negotiations with with your creditors.
Come see us with your questions. Contact us today to set up an appointment.
Should Any Documents Be Brought To The Initial Consultation?
You do not have to bring anything to our office during the initial consultation. However, prudence suggests that if you are concerned about certain documents, you should bring those documents to our office to discuss. It is also important to let us know if you have already been sued or are facing other legal proceedings so that we may advise you accordingly. A consultation is not a substantive review of legal documents and free legal advice, but rather an opportunity for you to obtain information with respect to your specific case and how you might proceed with the bankruptcy process.
For those that are adament that they are ready to begin the bankruptcy process, whether Chapter 7, 11 or 13, we will need to see your last two years of tax returns, six months of paystubs, six months of bank statements or other financial accounts you may have, including 401k, IRA and investment accounts. Please note that prior to filing for bankruptcy, you are required to take an hour and a half long credit counseling course which can be completed online. We provide the option of taking the course online at the computers in our offices.
Should I Review Anything Before Coming in For My Initial Consult?
The bankruptcy process is not complex. In fact, we make the process easy and our ultimate goal is to work with you to ensure that every step goes as smoothly and quickly as possible. The key to an easy process is organization. As long as you take the time at the beginning to locate and organize your supporting documentation, you will find that the rest of the process takes care of itself. The sooner we have all necessary documents, the sooner you can relax and let us do all the work.
Click below to print and review our "Getting Organized" documents:
Actions You Should Avoid Before We File Your Bankruptcy Petition
The bankruptcy trustee and Bankruptcy Court can scrutinize your actions prior to bankruptcy, especially with regard to transactions during the 90 days prior to filing. Even if you’ve been well-intentioned, such moves can be considered fraud and lead to dismissal of your case and/or unfair preference being given to certain creditors contrary to the best interests of your estate. Below are a few of the common mistakes:
- It is important not to buy what you have no intention of paying for (in other words, it's important that you do not incur further debt) in anticipation of filing for bankruptcy.
- You should not show favoritism by paying one creditor to the detriment of other creditors before filing for bankruptcy.
- You should not unload property or transfer it for nominal consideration so as to diminish your assets prior to filing for bankruptcy.
- You should not take out cash advances over $825 within 70 days of filing for bankruptcy.
- You should not incur over $550 in debt to a single creditor for luxury purchases within 90 days of filing for bankruptcy.
- You should not make a lump sum payment of money/property worth more than $600 to a single creditor within 90 days of filing for bankruptcy, or within one year of filing for bankruptcy if the recipient was family, a friend, your corporation or a business partner. If the transaction is done in the ordinary course of business, it will be considered favoritism if for over $5,475.
We also recommend that the following be avoided:
- Getting a Home Equity Loan To Pay Bills – Many people put off the inevitable by getting a home equity loan to pay off credit cards, then they end up losing their home when they cannot afford the home equity loan payments. If you don’t pay your credit cards, the creditors harass you. On the other hand, if you don’t pay your home equity loan, you lose your house.
- Getting A Retirement Loan or Cashing In An IRA – Many people put off the inevitable by borrowing from a 401(k) or cashing out their IRA in order to pay credit cards. You are not required to do that. It is better to address the underlying problem and save your retirement, because Social Security may not be around when you need it. If it is around, you certainly will not receive enough to live on comfortably.
- Reaffirming Burdensome Debt – You should not reaffirm debts that are unreasonable such as new vehicles with high monthly notes. Doing so will make it difficult or impossible for you to recover financially.
If any of the above scenarios apply to you, please contact us so that we may advise you accordingly.
Myths About Bankruptcy
The following are common societal myths that surround the process of bankruptcy. Read on and rest assured that you are not alone if you have believed in any of the following. We are pleasured to inform you that we have guided countless individuals through the bankruptcy process and our experience has shown that almost every single one of those individuals has gone on to continue living a productive life and have regained the financial freedom and security which we all strive for and deserve.
If you have any lingering questions after reading the below, contact us so that we can explain everything and clear up your doubts.
Myth #1. Everyone will know I have filed for bankruptcy:
Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors and the people who you tell personally. While it’s true that your bankruptcy is a matter of public record, the number of filings is so massive, that unless someone is specifically trying to track down information on you, there is almost no likelihood that anyone will even know you filed.
Myth #2. You will lose everything you have:
Nothing could be further from the truth. Most people who file bankruptcy don’t lose anything. Every State and Puerto Rico has exemptions that protect certain kinds of property. If you want to keep a car, truck, home or business equipment that serves as collateral for a loan, you need to keep paying on the debt. You will be able to keep these items if you make these payments and have exemptions to cover any value above what is owed.
Myth #3. You will never be able to own anything again:
This is completely false. You will be able to buy, own and possess whatever you can afford. In fact, we find that the vast majority of our client’s are back to having good credit within 2 to 3 after the bankruptcy. How you handle your credit repair after bankruptcy will ultimately be up to you. You will have the new start you needed and living responsibly will be vital. If you are responsible with your spending, chances are you will have good credit much sooner rather than later.
Myth #4. You will never get credit again:
Quite the contrary. Filing bankruptcy gets rid of debt, and getting rid of debt puts you in a position to handle more credit which in turn makes you very attractive to would-be lenders. You can expect credit card offers again within months after the bankruptcy. At first, the would-be lenders will want more money down and will want to charge you higher interest rates. However, over time, if you are careful, keep a job, save money and pay your bills timely, the quality of your credit will improve drastically. Generally, if a filer has not re-established good credit in 2 to 3 years, it’s not because they filed bankruptcy. It generally means that something else has happened after the bankruptcy to hurt their credit.
Myth #5. Filing bankruptcy will hurt your credit for 10 years:
Not true. You are getting the fact that bankruptcy is reported on your credit report for 10 years mixed up with the effect that reporting will have on your credit. Just because something is reported on your credit report does not mean it will have a negative effect on your credit standing. The truth is by the time you need to make an appointment with us your credit is already in bad shape. This being the case, you have no credit for bankruptcy to hurt. Furthermore, as noted above, if a filer has not re-established good credit in 2 to 3 years, it’s not because they filed bankruptcy. It generally means that something else has happened after the bankruptcy to hurt their credit.
Myth #6. If you are married, both you and your spouse have to file bankruptcy:
Not true. In many cases, where both husband and wife have a lot of debt, it makes sense and saves alot of money for them to both file, but it is never a requirement under the law. With us it makes sense for both spouses to file together because both can file for nearly the same price as one filing.
Myth #7. It’s really hard to file for bankruptcy.
No, it is not. The decision to file is always the toughest part of the process. However, once the decision is made and we are hired, we will guide you through every step of the way. It’s not difficult and is very straightforward. If you are willing to cooperate with us, this only makes the process that much easier.
Myth #8. Only losers file for bankruptcy:
Not true. Most of the people who file bankruptcy are good, honest, hard-working people who make the decision after months or years struggling to pay the bills left over from some life-changing experience, such as a divorce, the loss of a job, a failed business venture, a serious illness or some family emergency, or because they honestly and mistakenly fell into debt at a young age before they knew better. Consider this: Donald Trump and his casinos have been in bankruptcy, as have United Airlines and US Air. The perception of these successful companies did not change because they filed for bankruptcy.
Myth #9. Filing bankruptcy means you are a bad person:
There’s a reason nearly 2,000,000 Americans file bankruptcy each year, and it’s not because they’re bad people. Lots of good, honest, hard-working people fall on hard times. The bankruptcy laws were created with this in mind to make sure you have a way to get free from the burden of debt so that you and your family can have a second chance at a “fresh start”.
Myth #10. Filing bankruptcy will hurt your credit:
No, it will not. The truth is by the time you need to make an appointment with us your credit is already in bad shape. This being the case, you have no credit for bankruptcy to hurt. In actuality, bankruptcy is the first step in the process of re-building your credit. In the majority of cases, filing bankruptcy raises your credit score immediatley.
Myth #11. Even if I file, creditors will still harass me and my family:
This is not true. The minute you file bankruptcy, the Bankruptcy Court issues an order telling all of your creditors to leave you alone. No more phone calls. No more collection letters. No more lawsuits. No repossessions. No foreclosures. Nothing. This order has a name. It is called the “automatic stay”; and it is issued pursuant to 11 United States Code, Section 362. The automatic stay prohibits you from any and all collections actions. After you file bankruptcy, creditors are not even allowed to talk to you. In addition, creditors must stop any collection attempts already started. The automatic stay is very powerful, and puts the full weight of the law to work for you. If a creditor violates the automatic stay, you have the right to bring that creditor before the Court for Contempt of Court, and to be compensated accordingly. Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences. The second you receive a call or letter, let us know and we will take it from there. We take pride in taking overzealous creditors to Court and will ensure that you are adequately compensated for any wrongdoing which violates your rights.
Myth #12. If I file, it will add to the burden I am already facing in my marriage and might result in divorce:
This is not true. Filing bankruptcy is not the problem. The problem is not being able to pay your bills. All good, honest, hard-working people feel a strong need to pay their bills and not being able to do so causes them to feel tremendous stress. Unless you do something to relieve this stress, the stress can quickly build to the marriage breaking point. Bankruptcy is designed to get you out from under the burden of debt, to protect your property and to lower your stress level. Bankruptcy is a crucial first step in repairing your relationship which in turn gives your marriage a great chance to survive.
Myth #13. You can’t get rid of taxes through bankruptcy:
We can help you get rid of old income taxes. “Old” means income taxes that are more than 3 years old. Under the law there are 3 or 4 qualifications that must be met, but once these are met the old taxes are gone. We can advise you whether your taxes qualify for discharge.
Myth #14. You can only file once for bankruptcy:
False. You can only file for Chapter 7 once every eight years. You can file a Chapter 13 at any point in time, even if you have just completed a chapter 7. This is sometimes referred to as a "Chapter 20".
Myth #15. You can pick and choose which debts and property to list in your bankruptcy:
No, you can’t. Doing so would be against the law. Under the law, when you file bankruptcy you have to list all your property and all your debts. Most people want to leave out a debt because it is their intent to keep paying on it. The good news is that you can achieve the same goal, although you have to list the debt. After bankruptcy you may pay back whomever you want. In fact, after you file bankruptcy there are some debts you have to keep paying on. For instance, if you have a car, truck or house loan, even though you list the debt in your bankruptcy, if you want to keep the car, truck or house you have to keep paying on the debt. As long as you stay current on the loan and keep the property properly insured you are protected under the law and get to keep the property.
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