Bankruptcy

INTRODUCTION

If you find yourself in a financial crisis, there may be a way to get help. Filing bankruptcy can allow you to get out of debt and get a fresh start on life. Of course, no one should take this step lightly, and it should only be used as a last resort, but sometimes there is no other way out.

BEWARE "DEBT MANAGEMENT" & "DEBT REDUCTION" COMPANIES

There are "debt management" & "debt reduction" companies out there that claim they can work with your creditors to reduce your debt load and avoid a total default. However, we urge people to be very wary of such companies, because some of them are not offering legitimate services. The money you spend with them might be better set aside to hire a bankruptcy attorney.

There are reports of some of these companies taking people's money and not providing them the protection they promised. One company located here in Texas even filed for bankruptcy itself after taking money from 1000's of people to help them negotiate with their credit card companies to reduce their debt! And don't think that simply negotiating with your creditors will automatically protect your credit report rating.

We urge you to contact our office for a free consultation before you consider hiring any of these companies to help you. We can sometimes even provide the same type of services that they promise to offer if you are not ready to file bankruptcy.

Unfortunately, even when these companies are legitimate, the reductions they offer is still not enough for some people. Some people find that they still continue to get behind on the reduced payments each month. If that is where you find yourself, you may want to consider filing for bankruptcy. You may need someone to help you eliminate your debt, instead of merely reducing it.

DIFFERENT TYPES OF BANKRUPTCY

If you are an average consumer, there are two basic types of bankruptcy you could file. The first is called a "Chapter 7" and usually results in wiping out or "discharging" all of your unsecured debt. This typically includes credit cards, payday loans, medical bills, etc. (There are exceptions for money owed to the government, student loan debt, etc.).

In addition, you generally get to keep all of your standard household possessions and your homestead property, and up to 2 vehicles, because they are "exempt" from seizure under Texas law. There are certain exceptions, such as if your credit card agreement specifically cites certain property that is "secured", or if you have used some of your other property as "collateral" to obtain the debt you want to discharge..

The other general type of bankruptcy from average consumers is called "Chapter 13." In this type of bankruptcy you enter into a repayment plan with some or all of your creditors. The plan typically lasts a maximum of 5 years. During this time your interest rates may be reduced or eliminated altogether.

CHAPTER 7 BANKRUPTCY

Most people prefer to file under Chapter 7 because it allows them to eliminate much of their debt and truly get a clean start. However, there are some situations in which Chapter 7 cannot fully protect you. One primary example is if you are behind on house or car payments and want to keep them. These types of property are generally "secured", meaning that if you do not make your payments, the creditors have a right to repossess them. This is generally not the case with the "unsecured" items people typically buy with their credit cards. If you are behind in this situation, the only long-term protection may be filing Chapter 13.

Under the Bankruptcy Reform Act of 2005, the U.S. Congress made filing a Chapter 7 much more difficult. They also limited the eligibility of many people who previously did qualify to have their debts liquidated. In addition, a person must now take a bankruptcy counseling course before they file (with certain emergency exceptions), and a credit counseling course before they finish their bankruptcy. A person must also be prepared to turn over the last 2 years tax returns and the last 6 months worth of bank statements to the Trustee assigned to the case.

          "MEANS TEST" - AVERAGE MONTHLY INCOME

The court looks at a person’s income very carefully. If their family income is below the median average for the county they live in, they have a good chance of getting their bankruptcy approved. However, if their income is above the median average, their financial situation is analyzed in much more detail using a method called a “means test.” Under this “means test” a certain set of standardized deductions are subtracted from their income, and they have the opportunity to document if they have special needs and expenses beyond the normal. However, these must be backed up with proof of some kind.

          "AUTOMATIC STAY" - IMMEDIATE PROTECTION OF CREDITORS

Once the bankruptcy papers or "petition" is initially filed, you get immediate protection from creditors as a result of the "automatic stay" that is imposed. During this time creditors cannot make any attempt to collect a debt from you, as you sort out your affairs. This "stay" is temporary, and can be taken away or "lifted" in certain situations, but it generally lasts until your debts are wiped out.

          YOU CAN GENERALLY KEEP YOUR STUFF

The average person ends up able to keep most of their property, ever after they file bankruptcy. This includes your home, 2 vehicles (or more if you have more than 2 drivers in your household), basic household furnishings and possessions, and retirement funds. This is because most of the average person's property is "exempt" from seizure under state and federal law.

Property that you may have to give up includes: a 2nd piece of real estate other than your main homestead, large sums of cash, or other valuables that exceed the basic family exemption list. Also, you will have to give up your secured debt (such as your home and cars), IF you still owe money on them AND you don't want to pay for them anymore, OR are so far behind on your payments that you will nor be able to get caught up. If you are not behind on your payments, and you are willing to continue to make payments on them, you can typically keep them.

          WE ARE A "DEBT RELIEF AGENCY"

Because we help out people with banruptcy cases, our law firm is technically classified as a "Debt Relief Agency". We can help you decide if filing bankruptcy is the right solution for you. We can help you organize your financial data, and even pull up a credit report for you to review to make sure we have all the correct information. We can walk you through the process and accompany you to court to explain your situation. We understand that money is tight, and so we offer payment plans to help you get started with the process.

Bankruptcy Cases - General Info

Bankruptcy Forms & Information Sheets

Bankruptcy Information Sheet

Bankruptcy Questionnaire

Credit Counseling Agencies

Instructions for Filling out Paperwork

Lawyer Stephen Gordon | Lawyer Criminal Defense

Lawyer Stephen Gordon | Top Attorney Criminal Defense