CONSUMER BANKRUPTCY

 

Overview

The purpose of bankruptcy is to give an honest debtor a fresh start in life by wiping their slate clean of debt and providing a harassment free way to repay their creditors to the extent that a person has property or income available for payment. Some bankruptcy cases are filed to allow a debtor to reorganize and establish a plan to repay creditors, while other cases involve liquidation of the debtor's property.

Each client’s circumstances are unique, and the experienced bankruptcy attorneys at Steinhilber, Swanson, Mares, Marone, & McDermott will meet with you personally to explain and explore the options available to you under the Federal Bankruptcy Law. You will receive professional and personalized representation from attorneys who care about your situation and who can assist you in gaining relief from debt under the Bankruptcy Code.

Bankruptcy is complex but Steinhilber, Swanson, Mares, Marone, & McDermott is a debt relief agency committed to finding the best bankruptcy and non-bankruptcy options available in each of our clients’ unique situations. If you have questions regarding debt relief or whether you should file for bankruptcy please call our office for an appointment with one of our bankruptcy attorneys.

More Information on Consumer Bankruptcy


A. Chapter 7 / Debt Liquidation

Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts. Debtors whose debts are primarily consumer debts are subject to a “means test” designed to determine whether the case should be permitted to proceed under Chapter 7. If your income is greater that the median income for your state of residence and family size, in some cases, creditors have the right to file a motion requesting that the court dismiss your case under Section 707(b) of the Code. It is up to the court to decide whether the case should be dismissed. In such a case, there may be an option to convert to a Chapter 13 reorganization.

Under Chapter 7, you may claim property as exempt, up to a given value, under governing law. A trustee may have the right to take possession of and sell the remaining property that is not exempt or otherwise pledged and use the sale proceeds to pay your creditors.

The purpose of filing a Chapter 7 case is to obtain a discharge of your existing debts. If, however, you are found to have committed certain kinds of improper conduct toward your creditors as described in the Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you filed the bankruptcy petition will be defeated.

Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore, you may still be responsible for most taxes and student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; debts resulting from death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drugs. Also if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

B. Chapter 13 / Debt Repayment

Chapter 13 is a wage earner repayment plan. It is designed for individuals with regular income who would like to pay all or part of their debts in installments over a period of time. You are only eligible for Chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code. Under a Chapter 13, you must file a plan with the court which proposes to repay your creditors all or part of the money that you owe them, from your future earnings. The period allowed by the court to repay your debts may be three years or five years, depending upon your income and other factors.

The court must approve your plan before it can take effect. After completing the payments under your plan, your debts are generally discharged except for domestic support obligations; most student loans; certain taxes; most criminal fines and restitution obligation; certain debts which are not properly listed in your bankruptcy papers; certain debts for acts that caused death or personal injury; and certain long term secured obligations.

A Chapter 13 bankruptcy filing may:

  • Allow you to stop foreclosure on your home
  • Give you time to catch up on your house payments
  • Stop repossession of your vehicle
  • Stop the IRS from garnishing your wages




Frequently Asked Questions

Will my bankruptcy be published in the paper?

A bankruptcy is on the public record. However, most newspapers no longer publish bankruptcy information. While they still publish foreclosures and court actions, bankruptcy is a federal action and is generally only available on the United States Bankruptcy Court’s website.

Will I lose my vehicle?


If you have a loan secured by your vehicle and are up-to-date on your payments, your bank and the court may allow you to reaffirm the original contract on the vehicle. If you are behind on payments you will need to get them up-to-date or possibly enter into a Chapter 13 bankruptcy to cure any defaults.

If I surrender my home or vehicle will I be responsible for the difference between the loan amount and the amount my home or vehicle sells for?

Generally speaking, outside of bankruptcy you could be held liable for the deficiency. However, these deficiencies are discharged in bankruptcy, and you will not be responsible for repaying them.

Is there a court hearing?

You will have to go to what is called a “Section 341 hearing.” This hearing is also called a trustee meeting or a meeting of creditors. Generally, you will meet with the trustee for a 5-10 minute hearing. Your attorney will be there with you and as the name implies, creditors are allowed to attend and ask questions. The trustee will verify that you are who you say you are and put you under oath to answer the questions concerning your bankruptcy filing. This meeting is generally where the trustee determines whether your case is an “asset case” or a “no asset case.” Most cases are determined to be a no asset case, which means the trustee determines that there is no property of yours that can be sold for the benefit of the creditors.

Could I lose my job because I filed bankruptcy?

It is illegal to discriminate against a person because they filed bankruptcy.

Will the trustee take my furniture, retirement, or other personal assets?

You are required to disclose all of your personal and real property and make a reasonable inquiry into the values of those items. There are federal and state exemptions that your attorney will go over with you to protect most if not all of the equity in your personal and real property.

What will happen to my credit score after I file bankruptcy?

There are many factors that go into the determination of your credit score. A person's credit score and credit report can fluctuate within the course of a week. Here are some of the factors that influence your credit score:

1. Payment History: This has the largest impact on your credit score. Missing higher payments will impact more than missing lower payments. Delinquencies in the past two years have a greater impact.

2. Outstanding Credit Balances: The ratio between outstanding balance and available credit is one-third of your credit score. Keep the ratio under 10%.

3. Credit History: This is the length of time a credit line was established. A long record of consistent payments on older accounts is positive, while there are small penalties for closing old accounts.

4. Type of Credit: Auto loans and mortgages will have the highest impact on your score. A mixture is best and store cards have minimal impact compared to bank credit cards.

5. Inquires: The number of inquires on a consumer’s credit report within a six month period will affect your score. The most a score can be reduced is by 50 points, if it shows 10 inquiries or more.

Should I try to consolidate my debt first with a Debt Resolution Firm or Debt Consolidation Agency?

Be extremely cautious if you decide to work with a Debt Resolution Firm or Debt Consolidation Agency. There are some reputable ones out there but most are just frauds. Check with the Better Business Bureau and the Consumer Protection Agency in your state before sending them your money.

Things to consider when you want to consolidate your debt:


1. You may owe 1099-C income taxes on the entire amount of “forgiven debt”.

2. You will continue to accrue late fees, over limit charges, and any other penalties while you are in the consolidation program.

3. You will continue to get harassing phone calls at home, work and at your neighbors and friends house while you are in these programs.

4. You will get sued and possibly garnished by your creditors while you are in the programs.

5. The Firms and Agencies get their money from you upfront through your first few months of payments to them while they do nothing on your behalf with your creditors.

6. Generally, these agencies do not do anything that you cannot do yourself. If you wait long enough you will be offered the same settlement that the Firms and Agencies will eventually get you.

7. The overwhelming majority of people who enter consolidation programs do not stick with the payments long enough to get a settlement.

Key Points of the New Bankruptcy Law Include


A. Credit Counseling:

Credit counseling from a non-profit budget and credit counseling agency is now a prerequisite for filing bankruptcy.

1. The first session of credit counseling must be completed within 180 days prior to filing, and may be completed by phone, internet, or in person.

2. Debtors must also complete an instructional course on financial management in order to receive their final discharge. This course may be completed over the phone, internet, or in person after filing bankruptcy no later than 30 days after the meeting of creditors.

B. Means Test:

All individuals, who are not in business, and are seeking bankruptcy relief, will be required to qualify under the new “means test.” This test is complicated and requires the comparison of an individual or joint debtor’s gross income to the average income of other families of the same size.

C. The Act Gives the U.S. Trustee Program New Responsibilities:

1. To implement the new “means test” to determine whether a debtor is eligible for Chapter 7 (liquidation) or must file under Chapter 13 (wage-earner repayment plan)

2. To supervise random audits and targeted audits to determine whether a Chapter 7 debtor’s bankruptcy documents are accurate

3. To certify entities to provide the credit counseling that an individual must receive before filing bankruptcy

4. To certify entities to provide the financial education that an individual must receive before discharging debts

5. To conduct oversight in small business Chapter 11 reorganization cases

D. Domestic Support Obligations (Child Support, Maintenance, etc):

In most circumstances a domestic support obligation will not be discharged in a Chapter 7 bankruptcy. There are instances where the obligation could be discharged in a Chapter 13. The trustee assigned to the debtor’s case is obligated to provide notice of the bankruptcy to the person receiving the support and to any agency acting to obtain the support on behalf of the child.

What You Will Need to File Bankruptcy


1. Names, correspondence addresses, the approximate date when debt incurred and for what, and the amount owed to all creditors

2. Personal Income Tax Returns for the last 2 years

3. Most recent 6-months of paycheck stubs from all employers, as well as any unemployment income information and social security income.

4. Copies of real estate tax bills for any land or homes

5. Copies of all recorded mortgages (copies may be obtained from the Register of Deeds in the County in which the real property is located)

6. List of Monthly Household Expenses

7. List of assets, including all household goods with actual cash values (i.e., rummage sale prices) and appraisals of real property if available

8. Copies of titles to all cars, trucks, boats, and recreational vehicles

9. Credit Counseling Certificate (we will help you with this)

Our Attorneys Who Practice Consumer Bankruptcy

  • Paul G. Swanson
  • Douglas K. Marone
  • Julie E. Furman Stodolka
  • John W. Menn