Bankruptcy Frequently Asked Questions
- What is Bankruptcy?
Bankruptcy is a legal process that allows a person to legally declare that they can no longer afford to pay their debts. This process is not intended to be simple, and limitations do apply. Most people who file Bankruptcy are consumer debtors that file under Chapter 7 or Chapter 13 of the US Bankruptcy Code (Title 11).
- How Much Will I Pay to File Bankruptcy?
Legal fees for a bankruptcy depend upon the firm or attorney you hire, although a fee can be questioned by the Bankruptcy Trustee assigned to your case if it appears to be unreasonable. Generally, that fee will range from $750 for a simple case to $2500 for complex cases and cases involving motion hearing, or for cases that are out of the ordinary. The court also charges a filing fee of $274 for Chapter 13 petitions and $299 for Chapter 7. Debtors filing for Chapter 13 bankruptcy pay additional legal fees during their bankruptcy plan. Debtors must attend a credit counseling course which costs approximately $50. It may be prudent to obtain your credit reports as well, which may require an additional cost of around $25.
- What Type of Bankruptcy Should I File?
This can only be determined after a consult with an attorney, and depends entirely upon the Debtor's situation. Chapter 7 is the type of bankruptcy filed by most consumers and is based mostly on consumer debt. Chapter 7 bankruptcy takes the least amount of time and the Debtor must meet certain income requirements in order to file. The amount of debt is an important consideration, but whether a Debtor may file for relief under Chapter 7 depends upon certain income requirements that must be met to be able to file this type of bankruptcy.
Chapter 13 bankruptcy is used mainly for the consumer debtor and is the second most commonly filed type of Bankruptcy. This type of bankruptcy takes longer than a Chapter 7 and usually ranges from 3 to 5 years and the person filing bankruptcy is required to pay off a certain amount of their debt before a discharge is granted by the bankruptcy court.
- How Does Bankruptcy Affect My Credit?
Naturally, lenders are going to be quite wary of debtors who have filed Bankruptcy in the past. Bankruptcy DOES severely and negatively affect a consumer's credit score. This is in part why Debtors are permitted to "reaffirm" debt in certain situations. However, the negative effects do wear off over time, and most Debtors already have experienced a large drop in their credit score by the time they consider filing bankruptcy. As a result, filing bankruptcy generally helps a Debtor's credit score over time, and significant improvement can generally be seen in two to three years. However, the fact that a Debtor filed bankruptcy can remain on the credit report for ten years. The first two years will generally be the most difficult in terms of getting new credit for a person who files bankruptcy.
- Is there any way to stop creditors from harassing me?
Yes. When a person files Bankruptcy, the bankruptcy court will automatically enter an order prohibiting creditors from contacting him or her and from attempting to collect from the debtor at all. Even foreclosure and repossession activity must stop until the creditor gets permission to continue from the Court. This is not automatically given to the creditor. All phone calls, wage garnishments, and foreclosures will stop as a result of this automatic stay Creditors that ignore the automatic stay can face severe penalties.
- Can I keep my house, car and personal property?
Generally, yes but certain limits in value do apply. the amount of property you are allowed to keep varies by state. In Missouri, a person can retain equity in a house of $15,000, equity in a car of $3000 and can generally keep personal property and effects. These values can apply in various ways depending on several factors. A consult with an attorney is necessary to determine the individual debtors exemptions.
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