Answers to Common Bankruptcy Questions
How will bankruptcy affect my credit?
Well, bankruptcy is always a bad mark on your credit report, and it will stay on your credit report for seven to ten years. But, frankly, by the time most people seek bankruptcy, their credit report is already pretty bad — or will be shortly! At that point, declaring bankruptcy sometimes can actually improve the credit report since, upon receiving your discharge, you are no longer legally liable for the discharged debts.
Will I ever be able to buy a house or car after I file bankruptcy?
Yes. You will be eligible for most VA and FHA loans, as well as many conventional mortgages, two to five years after your discharge. Many car lenders will finance a car for you immediately after your discharge, and in Chapter 13 bankruptcy, often even during your plan if the Chapter 13 Trustee approves. Please understand, however, that you will still need to otherwise qualify for these loans and you will probably be charged higher interest than a person with good credit, but you will be given the opportunity to begin rebuilding a good credit rating and to get a fresh start.
If I am married, does my spouse have to file bankruptcy?
No. While a married couple has the right to file a joint bankruptcy, just because you are married doesn’t mean your spouse must file too. In many instances, the spouse has little debt and good credit. In my worksheets, you must identify the holder of each debt, whether husband, wife, or joint. When I see that one spouse has relatively little debt, I generally advise that spouse not to file, even if the original idea was a joint filing. In most cases, the non-filing spouse’s credit will not reflect the bankruptcy of the filing spouse.
Is debt “settlement” or “consolidation” better than filing bankruptcy?
Generally not. Most of these programs cost substantially more than a bankruptcy, most of them fail, and some are outright scams. They often take longer than a bankruptcy and can leave your credit scarred even after all the payments are made. And if the creditor who received payment reports the reduced settlement payment to the IRS, you may end up owing taxes on the amount forgiven. The Internal Revenue Code contains special provisions which prohibit the IRS from taxing debtors for debts discharged through bankruptcy.
Can I discharge my child support or alimony in bankruptcy?
No, you will remain liable for these obligations after your discharge. However, in Chapter 13 past-due child support and alimony can be paid through your plan over 3 to 5 years and blocks the holder of the claim – either your ex-spouse or the state Attorney General’s office – from garnishing your wages to collect the past-due amounts. You are required to stay current on your regular support payments in Chapter 13, and your case will be dismissed if you get behind on these payments.
Can I discharge my traffic tickets and other government fines in bankruptcy?
Generally, fees and fines owed to a government – whether local, state or federal – are not dischargeable, e.g., traffic violations, parking tickets, toll fee violations, and criminal restitution.
Can I file for bankruptcy if I am not a U.S. citizen?
Yes. You must be a resident of the United States, but citizenship is not required. People holding Green Cards are also eligible to file bankruptcy. All persons filing bankruptcy must present a Social Security card at the 341 meeting. If you have lost your card, you should request a replacement card from the Social Security Administration as part of your bankruptcy preparation.
Can I file for bankruptcy more then once?
Yes. The time period between filings depends on whether you received a discharge in the previous case or your case was dismissed prior to discharge. It also depends on the Chapter you previously filed and the Chapter you want to file, and on any special timelines the Court issued in an order of dismissal.
If you received a discharge in your prior Chapter 7 bankruptcy, you are eligible to file another Chapter 7 eight years following the petition date of your first case; if you want to file a Chapter 13 after a Chapter 7, you are eligible to file four years after the petition date of the prior filing.
If you received a discharge in a Chapter 13, you are eligible to file a Chapter 7 six years following the petition date of your prior bankruptcy, and can file another Chapter 13 two years after receiving a discharge in the prior Chapter 13 bankruptcy.
If you file a Chapter 13 and it was dismissed, you may file another chapter 13 bankruptcy at any time if you can show a change in circumstance since the prior filing unless the order of dismissal in the prior case bars you from filing for a specified time period (often 180 days) which can happen if you voluntarily asked for the case to be dismissed after a motion for relief from stay was filed or for other grounds the court may specify.
Will I be able to get credit after bankruptcy?
Yes, you will be able to get credit after you file bankruptcy. Most people find that shortly after filing bankruptcy they receive many credit card offers which, if used properly, will help you rebuild your credit.
Will bankruptcy discharge ALL my debts?
Probably not. First, bankruptcy discharges your personal liability on unsecured debts — if you do not make payments on a secured debt, such as your house, car, or furniture, that creditor still has the right to repossess its collateral. In Chapter 13, these secured debts can often be restructured or the past-due payments paid back through your Chapter 13 plan. Also, not ALL unsecured debts are dischargeable in bankruptcy. For example, many taxes, child or spousal support, most student loans, and restitution obligations are not dischargeable in any Chapter in bankruptcy, although they may be repaid through a Chapter 13 Plan. In Chapter 7 bankruptcy, there are even more debts that are not dischargeable. When you come in for your free consultation we will review these 'problem' debts and decide what Chapter will help you the most.
How quickly can I file bankruptcy?
Many attorneys respond "the same day you first see us". While this may be true, it may NOT be best for you. When you come to my office for your free consultation, we will review your problems and decide what best suits your needs.
How much will it cost?
That depends on your individual problems. But our legal fees are regulated by the Bankruptcy Courts to ensure that they are fair and reasonable.
How can I pay for my bankruptcy?
I offer low monthly installment plans to all my clients, with payments custom tailored to each client at the free consultation. In Chapter 7, all fees must be paid prior to filing the case; in Chapter 13, you have the option pay part of the fees through the Chapter 13 bankruptcy Plan.
And here's one question people rarely ask, but should:
You're a Dallas bankruptcy attorney — you make a living by filing bankruptcies. Would you tell me if I didn't need a bankruptcy?
Yes! First, bankruptcy won't solve every financial problem. Also, based on your income and expenses, you may NOT be able to solve all your problems within the framework of the Bankruptcy Code. In these cases, a bankruptcy won't work. Beyond that, you may not need to file a bankruptcy to solve your financial problems. There may be other ways of dealing with the debts or at least to try to deal with the problems before you should file a bankruptcy. Bankruptcy was designed to be a last resort in dealing with overwhelming financial problems, not a first choice for people who just don't want to pay their debts. Finally, Chapter 13 bankruptcy puts many restrictions on your personal living expenses, e.g., you will not be permitted to pay for private schools or college (except if ordered through a divorce decree or if your child has special needs) during the course of your plan - that money must be first directed to pay your creditors. Many parents who may need a bankruptcy will choose not file - or will delay filing - in order to fund their child's education. When you come to my office, we'll review all your options and I may suggest other ways to attempt to deal with your problems if I think something else might work.
But honestly, by the time most people even begin to consider bankruptcy, they are in overwhelming financial trouble. They have already tried to deal with their debts — many have already been to consumer credit counseling services — or withdrawn their savings and retirement accounts to pay down debt — or withdrawn home equity or taken out bill consolidation loans. And still the problems remain, and the debts grow from late charges, penalties and accruing interest. Or the problem could be fixed if they could get out from under high car payments or give back the big-screen TV but the creditors won't let them out of their obligations. Or the IRS wants more money than they can pay without going further into debt on their other bills.
Most people file bankruptcy because something has happened to disrupt their former income — they lost a job or don't make as much as they used to, or went through a divorce, or got hurt or sick — or maybe they had to help another family member financially. Several years a go, a book came out called “When Bad Things Happen to Good People.” Well, bankruptcy is for when bad financial things happen to people. And that's when I can help.
