Get Your Bankruptcy Questions Answered

There are two parts to the cost of filing bankruptcy: attorney fees and filing fees.

The Law Office of David A. Bhaerman requires an $850 retainer to file either Chapter 7 or Chapter 13 bankruptcy. That typically covers the attorney fees of filing Chapter 7 Bankruptcy, Chapter 13 requires a great deal more work, so additional fees are charged, usually paid as part of the repayment plan. We provide a complete disclosure of costs in the process of preparing your case.

Initial payment of filing fees, paid directly to the United States Bankruptcy Court, are due within 30 days of filing, and are payable in installments. Follow the links for more details on the installment schedule and payment details.

Usually, any time a creditor tries to collect a debt that you owe as of the filing of your case, or to repossess your property without the bankruptcy court’s permission, are violations of the “automatic stay.”

If the creditor repossesses any of your property, i.e. a car or boat, after you file a bankruptcy case, the creditor is required to return the property to you.

The court may decide to punish a creditor who violates the automatic stay. The creditor may be liable to the debtor if any harm is caused.

This is one reason why it’s so important to list all your creditors on the schedules filed with your case. The court sends out notices of the automatic stay, and if a creditor isn’t on your list filed with the court, they may not receive a notice of the bankruptcy.

If a creditor contacts you after you have retained an attorney, you should give the creditor your attorney’s contact information. Just inform them that you are filing, or have filed, bankruptcy. Usually an above-board creditor will ask for your attorney’s contact information.

If you forget to include a creditor on the list you provide to your attorney before filing bankruptcy, you should immediately notify your attorney as soon as possible. You’ll need to know the amount of the debt, the type and value of any collateral (for a secured debt), and most importantly, the name and address of the creditor.

Omitting a debt on your schedules might result in that debt not getting discharged, meaning you’ll must pay it in full after your bankruptcy case is completed.

If the creditor whom you omitted demands payment of the debt, inform the creditor of your bankruptcy right away and refer them to your attorney.

Absolutely. For several reasons, you must list all your debts and include the name and address of the creditors when you file bankruptcy. First, it allows creditors to get on the notification list and receive any case updates (giving them the ability to object to their debt being included in the case, or ask for a return of merchandise purchased). In no case should you omit a creditor if you want to continue to pay a particular creditor, this a direct violation of bankruptcy law. You can always choose to repay a debt voluntarily, even if it gets discharged under bankruptcy law. There is no legal obligation to make payment. For your protection, creditors are forbidden from taking any collection action against a debtor to collect a discharged debt.

Yes, you must provide the bankruptcy trustee (the office that manages the details of a bankruptcy case) with copies of your federal tax return for the year just prior to filing. Not providing your returns could result in your case being dismissed.

In addition, you must also provide copies to the bankruptcy court of any federal tax returns filed during the case.

A taxing authority may request dismissal of your bankruptcy case if you fail to file all required tax returns during your bankruptcy case.

An important part of a Chapter 13 bankruptcy case is the repayment plan that describes how, and how much, you will pay to the court (who then pay the creditors) over the time period of your case. The plan must provide that you pay creditors, at a minimum, what they could have received in a chapter 7 bankruptcy (liquidation) case. Essentially, that means creditors must receive payments equal to the value of your non-exempt assets. (It’s important to have a knowledgeable attorney prepare your plan for you).

The Chapter 13 plan requires that you contribute all “disposable income” to the plan, for repayment of your debt.

Disposable income is the amount of money you receive beyond what is necessary to support you and your family.

In many cases, the “means test” formula determines the amount of reasonable disposable income. The means test is a complicated formula that requires you to average your income over the past six months, deduct any allowed expenses, then see what’s left to pay creditors. This is a complicated process, again, requiring a knowledgeable attorney to complete it properly.

Chapter 13 plans last for a minimum three- to five-year period, or until your debts are paid in full, whichever occurs first. Should your income be below Ohio’s median income, the maximum plan period without an exception from the court is three years. If your income is at or above Ohio’s median income, creditors may attempt to insist the debtor pay a five-year plan.

Your first chapter 13 payment must be made within 30 days of filing your petition. Payments are made to the bankruptcy trustee, who then distributes payments to the creditors.

After you file a bankruptcy petition, whether Chapter 7 or Chapter 13, you must attend a creditors’ meeting (also called a ‘341 meeting,’ named for the section of bankruptcy law that requires the meeting). The Chapter 13 Trustee will conduct the meeting and will ask you questions under oath about your paperwork filed for your case. Usually, a Chapter 13 creditors’ meeting will last a bit longer than one in a Chapter 7 case. The trustee may question you about your income and expenses, and may ultimately require additional documentation be provided to them.

Typically attending the 341 meeting are you (and your spouse, if applicable), your attorney, the Chapter 13 Trustee, and any creditors who wish to attend. If there is no additional documentation required, and/or no problems with your case, the court will “confirm” or approve your plan.

After you complete payments under the plan, and you complete the required financial counseling, debts included in the plan will be “discharged” and your case will conclude.

The requirements for a Chapter 7 case are fairly simple. In most cases, you’ll have to attend a creditors’ meeting, then wait for notification of the discharge of your case by mail.

The creditors’ meeting (also known as a ‘341 meeting, named after the section of federal bankruptcy law that requires the meeting) is run by the Bankruptcy Trustee. During the meeting, the Trustee will question you, under oath, about all the information included in your case documents.

If you file with a spouse (known as a ‘joint petition’) both you and your spouse must attend the creditors’ meeting and answer any questions. In some cases, the Trustee may request additional documentation or records regarding your case, and it’s important to provide those as quickly as possible.

In most simple cases, the 341 meeting may literally last around five minutes. All of your creditors have a legal right to attend the meeting, but it’s rare for any to actually show up.

You must bring identification to the meeting, usually a driver’s license or other government-issued ID, and proof of your Social Security number.

If there are no problems with your case, you’ll receive notification from the bankruptcy court about 60 days after the 341 meeting. This document serves as proof that your eligible debts have been discharged. You’ll want to store it in a safe place, such as a safe or bank deposit box.

Certain forms must be filed in a Chapter 7 Bankruptcy case. To properly complete those forms, your attorney will request you provide certain information. Below is a list of information you should provide to your attorney to assist in expediting your case filing.

Information You Must Provide When Consulting Your Bankruptcy Attorney

• Copies of all bills and any correspondence you have received from creditors or collection agencies
• If you have been sued, supply a copy of any lawsuit or pleadings
• To document your income, you must provide your most recent pay stubs. You must also provide pay stubs for your spouse, whether or not he/she is part of your filing
• Include deeds to any real estate you own, or are purchasing, even if you have only a partial interest
• Provide copies of titles for any vehicles you may own, including cars, trucks, motorcycles, mobile homes or motor homes you own outright or are purchasing with a loan. Your attorney will help compute fair market value of these assets.
• If you already have them available, provide appraisals of any assets, like jewelry, your home, etc.
• Provide copies of whole life insurance policies on you, your spouse, or any other member of your family. Check with your insurance agent to see if your policy has any “cash surrender value” and provide that to your attorney.
• Federal Income tax returns you and your spouse filed in the previous two years

Your attorney will prepare these forms for your Chapter 7 bankruptcy case:

• the bankruptcy petition
• a list of all of your creditors
• a list of all of your assets and liabilities
• the amounts of your current family income and monthly expenses
• a financial statement
• your attorney will provide a certificate show that you received a notice describing the bankruptcy chapters, as well as services available from credit counseling agencies.
• A disclosure specifying that anyone who fraudulently or knowingly conceals assets from the court, or makes false statements under oath, is subject to fine, imprisonment or both.
• Pay stubs for you and your spouse (if applicable) for the 60 days preceding your filing
• State of your monthly net income, with details showing how it’s calculated
• If you anticipate an increase in income over the next 12 months, a statement disclosing that expected increase

You must file all of this information soon after filing the petition. If you fail to file it, the court will dismiss your case. This is why it’s important to hire an experienced bankruptcy attorney to file your case.

If your case is dismissed, you lose the benefit of the automatic stay and creditors may resume their collection efforts (including repossession).

In addition, you must file the following documents with the court.

• Any debt that is secured by property (like a car or home loan), you must provide a Statement of Intention indicating whether you plan to keep or surrender the property.
• You must provide a certificate from an approved budget and counseling agency that describes the services provided to you, and a copy of any debt repayment plan developed by that agency.
• A detailed analysis of the means test.

First, you must carefully consider whether bankruptcy is the correct solution for your situation; then, gather the paperwork needed to file your case.

You must attend a live or online/phone credit counseling course within 180 days prior to filing your case.

Bankruptcy law requires that you must receive a briefing that outlines the opportunities for credit counseling and help with a budget analysis.

You may attend the course alone, in a group, in person, on the phone, or online.

When you retain a bankruptcy attorney, he or she will refer you to a provider for a pre-filing approved course.

You’ll find a list of approved non-profit credit counseling and budget agencies at the office of the United States Trustee, at the bankruptcy court clerk’s office, or online on our resources page [LINK].

Bankruptcy law allows you to file again unless you’ve been in a bankruptcy within the past six months and either of the following:

• Your case was dismissed because you did not follow the orders of the bankruptcy court, or did not attend required hearings when you were supposed to
• You requested the court to dismiss your case after a creditor moved for relief from the Automatic Stay.

If you’ve been in a bankruptcy case within the past year, you may not get the full protection provided by the Automatic Stay. If the automatic stay may not apply, it may not be worth filing another bankruptcy. We recommend you discuss your situation with an experience bankruptcy attorney.

Having your debts discharged by a bankruptcy filing gives you a fresh start. If you’ve received a bankruptcy discharge in the past, you may not be eligible for another discharge right away.

If you filed a previous Chapter 7 bankruptcy:

• If you filed within the previous four years, you will not be able to receive a Chapter 7 or Chapter 13 discharge if you file today.
• You will not receive a Chapter 7 discharge if you filed within the past eight years.

If your last bankruptcy was a Chapter 13, and:

• If you filed within the past two years, you will not receive a Chapter 13 discharge if you file today
• If you filed within the past six years, you will not receive a Chapter 7 discharge unless you paid your creditors a minimum of 70% of what they were owed In your Chapter 13 plan

Again, we recommend you consult an experienced bankruptcy attorney on whether it makes sense to file another bankruptcy.

In most cases, not all debts will be discharged through a bankruptcy case. A bankruptcy case only discharges debts that were owed at the time of filing, and included in the list of debts you provided to your attorney. Any debts incurred after your case is filed will not be discharged.

There are a number of non-dischargeable debts in a bankruptcy case, including the following:

• Unpaid income taxes and property taxes
• Any debts to creditors that were not included in the list of debts provided to your attorney
• If you have domestic support obligations (child support or alimony), any unpaid arrears will not be discharged as part of your bankruptcy case
• If you owe fines to a governmental unit, such as a city or state, those will not be discharged
• Any restitution imposed by a criminal court as part of a criminal sentence
• Any students loans

If you’ve incurred other debts as through fraud, or by willful or malicious actions, those debts will not be discharged. For example, if you incurred debt on a loan that you knew you could not repay. In addition, some credit card debt incurred prior to immediately filing bankruptcy may be considered fraudulent by the court, in particular if you used the card to pay for “luxury” goods or services. If the creditor doesn’t ask the court to exclude these debts, they will likely be discharged.

When a debt gets discharged, the debtor no longer has an obligation to repay the debt, and the creditor is not allowed to attempt to collect on that debt any longer.

Not all debts in a Bankruptcy case will be discharged. Unpaid tax bills and student loans is two types of debt that may not be discharged in a Bankruptcy case.

In the case of a debt that has a co-debtor (co-signer) the obligation of the co-borrower is not discharged in a Bankruptcy unless the co-signer is included in the case. If you have property that is collateral for a loan (like a car) the credit may still be able to repossess that property if the loan is not repaid.

The moment you file for bankruptcy, an Automatic Stay immediately goes into effect, protecting you from your creditors. They must stop calling you or sending letters to you to collect the debt. If a creditor sued you, that lawsuit is also stopped. The automatic stay also prohibits creditors from repossessing your property or foreclosing on your home.

Eligibility for Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is designed for individuals who primarily have consumer debt (i.e. credit card debt). If you wish to have that debt discharged under bankruptcy law, your attorney will take a look at your financial picture to see if you can afford to pay your creditors. He will apply the state’s “Means Test,” essentially comparing your income and living expenses against a set formula to see if you qualify. If you earn too much, it’s possible you will not qualify for Chapter 7.

If your income is at or below the median income for your state (the Means Test), you will be permitted to file Chapter 7. If your income is above that amount, you may be eligible for filing Chapter 13 Bankruptcy.

The Means Test compares your monthly income, less your permitted living expenses, to the amount of your unsecured debt to determine how much you could repay to creditors if you were in a Chapter 13 Bankruptcy.

Eligibility for Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a court-managed repayment plan for some of your debts. To qualify for Chapter 13, first you must have regular income. This doesn’t necessarily need to be from a job, but can be from benefit payments like disability or unemployment, or from rental income. Second, your debts cannot exceed $1,184,200 in Secured Debt (i.e. home mortgages and auto loans) and $394,725 in Unsecured Debt (like most consumer credit or credit card debt. These numbers increase every three years to reflect changes in the consumer price index.

There are essentially four types of bankruptcy available to individuals:

• Chapter 7, which can discharge most consumer debt, and allows you to keep certain “exempt” property. Any property excluded from exemption is sold by the Bankruptcy Trustee to pay a portion of your debt. This type of bankruptcy can take up to six months to complete.
• Chapter 13, in which you agree to a Trustee-supervised repayment plan to repay a portion or all of your debt. This type of bankruptcy can last three to five years.
• Chapter 12 is similar to Chapter 13, but it’s only available to family farmers and fishermen.
• Chapter 11, a much more complex process utilized primarily by business debtors. It’s sometimes used by individuals with substantial debts and substantial assets.

The two most common types of bankruptcy cases for consumers are Chapter 7 and Chapter 13. Both types of filings allow for some possible payments to creditors, a discharge of those debts, and supervision by a court-appointed Trustee. In both types of bankruptcy, most creditors are prohibited from collecting on any debt included in the case by a protection built into bankruptcy law called the “Automatic Stay.”

A Chapter 7 Bankruptcy may involve surrendering some of your property in exchange for a discharge of your debt. The Bankruptcy Trustee sells the property and pays your creditors from the resulting money collected. In Chapter 13, you keep your property but you must commit to a three-to-five year repayment plan, after which you receive a discharge of most of the debt not paid in the plan.

United States bankruptcy laws serve two primary purposes: a fresh start for the debtor who is honest but who may have encountered unfortunate circumstances; and, equal treatment of creditors. When you file for bankruptcy and follow the rules, bankruptcy gives you a fresh start by canceling (or “discharging”) many of your debts. Bankruptcy allows you to pay your creditors a portion of what they are owed, depending on what you are able to pay. After your bankruptcy case is complete, the discharge protects you from your creditors attempting to collect any remaining balance of your original debt.

Chapter 13 Bankruptcy is a court-managed repayment plan for some of your debts. To qualify for Chapter 13, first you must have regular income. This doesn’t necessarily need to be from a job, but can be from benefit payments like disability or unemployment, or from rental income. Second, your debts cannot exceed a certain amount in Secured Debt (i.e. home mortgages and auto loans) and a certain amount in Unsecured Debt (like most consumer credit or credit card debt). These numbers increase every three years to reflect changes in the consumer price index.

Yes, you may voluntarily repay a discharged debt. Keep in mind this is entirely voluntary, and you have no legal obligation to pay a debt that was discharged as part of your bankruptcy case. Often, people do repay debts to family members or friends. In any case, creditors are not allowed to take any action to entice you to repay the debt.

A reaffirmation agreement is an agreement between the debtor and creditor to repay a debt, even though the debt would normally be discharged as part of your bankruptcy case. The debt may be renegotiated, but most reaffirmation agreements require you to pay the debt in the originally agreed amount.

Usually, debtors reaffirm a debt so they can keep property given as collateral for the debt, like a car. Most reaffirmation agreements relate to secure debt, and are entered into to keep the creditor from repossessing the property. A reaffirmation agreement is a binding legal obligation to repay the debt, which would normally be dischargeable. If you eventually default on the payments, the creditor is allowed to repossess or foreclose on the property as well as seek a personal judgement against you.

You and your creditor must both sign the agreement and file it with the bankruptcy court prior to receiving the discharge. The court and/or your attorney must determine that the agreement doesn’t impose any “undue hardship” on you. There are a number of other requirements for legal reaffirmation agreements included in the Bankruptcy Code.

You and your creditor must comply with all the terms of the reaffirmation for it to be binding. If the creditor violates those terms, you would have no personal obligation to make payments under the agreement.

Reaffirming debt should be carefully considered, as it severely limits your bankruptcy discharge.

Certain debts, like home mortgages or auto loans, are secured with collateral to ensure repayment for the loan. When you file Chapter 13 bankruptcy, payment for those debts are included as part of the three- to five-year payment plan.

Of course, you must make your regular payments on time. Without bankruptcy, the law allows the creditor to foreclose or repossess the property. If you get behind and include the payment as part of a Chapter 13 case, the regular payments get made by the Trustee, as well as the arrearage.

If you take out a loan to purchase a vehicle for personal use within approximately 2.5 years of filing for bankruptcy, it’s required to pay that loan in full in your Chapter 13 payment plan. If you gave a lender any collateral for a loan obtained within a year before filing for bankruptcy, you must also pay that loan in full as part of the Chapter 13 payment plan. You may be able to negotiate and reduce the interest rate of this type of secured debt.

Chapter 7
You have three options soon after filing your Chapter 7 petition: declare that you will return the property, purchase it from the creditor or enter into a Reaffirmation Agreement with the creditor. If you don’t do one of these actions, the creditor may repossess the property (and the stay is lifted for that property).

Chapter 13
In most cases with a Chapter 13 plan, you will be able to retain the property even if was given as collateral for a loan. In some cases, you can modify loan obligations by stretching out payments and/or reducing interest rates. As long as you continue to make payments under your Chapter 13 plan, the lender will not be allowed to foreclose or repossess the property.

When your attorney files a bankruptcy petition for you, an “automatic stay” goes into immediate effect against all collection efforts. Creditors must immediately halt all efforts to collect the debt from you. They may not call you, send a letter, or continue any lawsuit to collect.

On secured debt, the automatic stay stops foreclosures and repossessions of collateral from moving forward. You must continue to make house payments, otherwise the creditor has the right to continue the foreclosure after your bankruptcy case is completed.

There are two important exceptions to the automatic stay:

• Alimony or Support Obligations – the creditor can continue making collection attempts with the approval of the court
• Criminal Suits – Are exempt from the automatic stay.

The automatic stay is a temporary move to give you time to work your way through your Bankruptcy case. In no case will bankruptcy allow you to retain collateral for a secured loan without making payments on the loan. If you get behind on the payments, and/or the value of the property is insufficient to satisfy the debt, or a risk of loss exists, sometimes secured creditors may obtain permission from the bankruptcy court to seize and sell the property.

In a Chapter 7 Bankruptcy case, when the case is closed, the automatic stay is lifted, and the secured creditor may immediately proceed with foreclosure or repossession if you are behind on the payments.

Keep in mind if your biggest debts are secured, you will probably benefit more with filing a Chapter 13 instead of a Chapter 7 bankruptcy. The Chapter 13 payment plan will allow you to pay of the past-due secured debt during the three- to five-year term of the plan.

Different from Chapter 7, the automatic stay in a Chapter 13 also protects co-debtors (i.e. co-signers) from collection during the case.

In a typical bankruptcy case, secured creditors have “extraordinary rights.” This means that bankruptcy may delay secured creditors from collection during the bankruptcy case. Most voluntary liens must be satisfied (“paid”) by either paying the creditor or surrendering the property to the creditor.

With “involuntary” liens, it’s possible to have them removed as part of your bankruptcy case.

Liens in a Chapter 7 Bankruptcy
It’s possible to have involuntary liens removed, except for liens securing alimony or support obligations, as well as some voluntary liens, particularly on exempt property. You can have voluntary liens removed on certain household goods (i.e. one television, one radio), your “tools of the trade” and any professionally prescribed health aids like a hearing aid or wheelchair.

Liens in a Chapter 13 Bankruptcy
In a Chapter 13 Bankruptcy, you can remove liens by completing payments under the plan. Often, the plan will reduce the amount you must pay, or extend the time period over which the debt must be paid. The ability to change the payment terms on home mortgages or auto loans is very limited.

When property is offered as collateral to guarantee repayment of a debt, that debt is considered “secured.” This typically includes auto loans, home mortgages, and other large purchases. These are considered “voluntary liens” on your property, meaning you agreed to the lien in exchange for the creditor lending you the money to buy the item.

When you borrow money without the creditor having any sort of specific interest in the property, that is considered “unsecured.” Most consumer debt (like credit cards or consumer loans) are unsecured.

An unsecured debt gives the creditor no guarantee that it will be repaid, and one reason why your creditor score is factored into receiving unsecured debt.

To get paid on unsecured debt, the consumer must voluntarily pay. If they don’t the creditor may sue you and attempt to place a lien on certain property you own until the debt is satisfied. A court judgement against you is considered an involuntary lien.

The secured creditor always has greater protection to be paid because the lien on your property stays in place even in the case of bankruptcy.

Chapter 7 Exemptions
Leaving you without a place to live, no clothes to wear or a vehicle to get to work doesn’t serve the purpose of bankruptcy, so the US bankruptcy code and each state has their own individual exemption laws that allow you to keep some necessities, even if you don’t pay your creditors.

Most states allow you to keep clothes, household goods, a car of relatively limited value, any tools you use in your trade, and some other property.

In some states (but not Ohio) you can opt to use the state’s bankruptcy exemptions or use the US Bankruptcy code exemptions. The idea is that one set of exemptions may work great for one person, but not so well for another.

In a Chapter 7 bankruptcy case, you must surrender all your non-exempt assets to be sold by the bankruptcy Trustee, to pay a portion of your pre-petition debt. It’s rare for people to have property in excess of the allowed amount of exempt property; if that’s the case, you will not be required to surrender any property.

No matter what exemptions you claim, you will always have to pay secured debt if you wish to keep the property given as collateral to secure the debt. Exemptions do not affect these claims.

Chapter 13 Exemptions
In a Chapter 13 bankruptcy, most people keep all of their property. To keep their property, the debtor commits to repaying a portion of their debt under a three- to five-year repayment plan, which includes payments on secured debt.

A successful Chapter 13 Bankruptcy filing allows you to save your home from foreclosure. The automatic stay stops the foreclosure from proceeding immediately upon filing. This allows you time to catch up on overdue payments over time, as well as keeping up with current payments.

The automatic stay, in most cases, prevents your landlord from evicting you right away. You must assume your lease, which means you must promise to make up any missed payments and to make future payments on time. As with any debt, you must make all payments when they are due to avoid losing your apartment.

However, there are two exceptions to the bankruptcy eviction rule. If the landlord has already sued you for eviction, and the court has granted them the right to take possession of your apartment, you can be evicted 30 days after you file for bankruptcy. The second exception is if the landlord has already started eviction proceedings because your endangered the property or used illegal drugs on the property, the landlord can continue those eviction proceedings 15 days after you file your bankruptcy petition.

US Bankruptcy Code explicitly prohibits an employer from terminating you solely because you file for bankruptcy or because you did not pay a debt discharged in bankruptcy. If you were fired for other reasons, your filing for bankruptcy will not otherwise protect you.

Any bankruptcy filing will appear on your credit report for seven years when you file for Chapter 13 bankruptcy, and for ten years when you file for Chapter 7 bankruptcy. Of course, lenders use credit reports in deciding whether to approve a loan, and a bankruptcy doesn’t mean you will never be able to borrow again. It may be difficult to get credit at a reasonable interest rate, however.

Often, credit is easy to obtain just after a Chapter 7 case is completed, as lenders know that you won’t be able to file again for several years. Be wary of jumping back into borrowing again just after completing a bankruptcy case, so you don’t end up with too much debt again.

At the conclusion of an individual bankruptcy case, the Court enters an order closing the case, and a hard copy of the order is sent to you by mail.

In Chapter 7 cases, cases are closed fairly quickly (unless the Trustee has assets to distribute to creditors). In Chapter 13, the Court will not close the case until after you finish making plan payments or the court dismisses the case. You must make payments to the Trustee on time or your case can be dismissed.

Debtors must complete an instructional course in personal financial management from an approved agency prior to receiving a discharge.

If you owe domestic support obligations (like alimony or child support) in a Chapter 13 case, you must certify to the Court you have paid all amounts due.