Frequently Asked Questions: Chapter 13 Bankruptcy Law
Q: What is Chapter 13 bankruptcy?
A: There are usually two types of bankruptcy available for most consumer debtors. Chapter 7 bankruptcy and Chapter 13 bankruptcy. In Chapter 13, the debtor will be committed to a repayment plan. Under this plan, the debtor will pay all or a part of his debts during a period of three to five years. The debtor proposes a repayment plan which the court must approve. During this repayment period, the court prevents creditors from taking action to collect on the debts that are owed.
Q: Why is it called "Chapter 13" bankruptcy?
A: Title 11, which is the United State Bankruptcy Code, is broken down into Chapters. "Chapter 13" of Title 11 deals with adjustments of debts of an individual with regular income, i.e., consumer reorganization.
Q: Who may file for Chapter 13?
A: A person may usually file file for Chapter 13 relief if he is an individual, has a regular income, has fixed unsecured
debts of less than an ammount defined in the Bankruptcy code, and has fixed secured debts of less than an ammount defined in the
Bankruptcy code.
Q: What are some of the advantages of Chapter 13 bankruptcy?
A: One advantage is the ability to stop a foreclosure on your house, and to have a mortgage that has been accelerated declared
reinstated upon bankruptcy plan completion.
Q: What are some of the disadvantages of Chapter 13 bankruptcy?
A: Since Chapter 13 involves paying back at least some of your debts over time, it usually takes at least three years to complete a Chapter 13 bankruptcy.
Frequently Asked Questions: Chapter 7 Bankruptcy Law
Q: What is Chapter 7 bankruptcy?
A: There are usually two types of bankruptcy available for most consumer debtors. Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 is what most people think of when they hear the term "bankruptcy". Under Chapter 7, many of the debtor's debts will probably be eliminated. Furthermore, under Chapter 7, some of the debtor's assets may be taken away to satisfy some of the debts owed to creditors. The law only allows a debtor to declare Chapter 7 once in a certain, legally defined, period of time.
Q: Why is it called "Chapter 7" bankruptcy?
A:Title 11, which is the United State Bankruptcy Code, is broken down into Chapters. "Chapter 7" of Title 11 deals with liquidation bankruptcy.
Q: What are some of the advantages of Chapter 7 bankruptcy?
A: Chapter 7 bankruptcy will wipe out (discharge) most of the average person's debts, i.e., he will no longer be under a legal obligation to pay them.
Q: What types of debts are normally discharged in a Chapter 7 bankruptcy?
A: As a general rule, most credit card debt, medical, and court judgments are discharged. Debts that are typically not dischargable include debts incurred to pay nondischargable taxes, back child support and alimony, debts owed under a marital settlement agreement, debts for personal injuries or death resulting from your drunk driving, student loans, and court-imposed fines. Also, if the creditor objects, debts from fraudulent activities of the bankruptcy petitioner, debts resulting from willful and malicious actions of the petitioner that cause personal injury or property damage, and recent credit card charges for luxury items can survive bankruptcy.
Q: What are some of the disadvantages of Chapter 7 bankruptcy?
A: Chapter 7 bankruptcy can only be filed once within a Congressionally-mandated period of time. If the debtor gets into even worse financial trouble down the road, then he may not be able to obtain relief through Chapter 7 for his new financial problems. Another negative consequence of Chapter 7 bankruptcy is that some or all of the debtor's assets may be taken away by the bankruptcy court in order to pay off his debts. However, many of the debtor's essential assets are exempt from being taken away by the bankruptcy court. (Consult with your attorney for details.)
Q: What is a "homestead exemption"?
A: As was already mentioned, certain property is exempt from execution to satisfy a court judgment against you. In other words, that property cannot be legally seized to satisfy a debt. In Texas, most people's houses are subject to an unlimited exemption, known as the "homestead exemption" (See Texas Property Code Sec. 41.001 and 41.002). In Chapter 7 bankruptcy, Texans have the option of choosing their state property exemptions, which includes the homestead exemption. If you are eligible, this allows you to file for Chapter 7 bankruptcy in Texas and keep your house, no matter how much it is worth. You should consult with an attorney when deciding whether choosing your state property exemptions in a Chapter 7 case is right for you.
Q: How long does the typical Chapter 7 Bankruptcy take?
A: The average Chapter 7 bankruptcy process takes about 4 to 6 months.
Q: Do I have to go to court when I declare Chapter 7 Bankruptcy?
A: A couple of weeks after you file for bankruptcy, you will receive a notice from the bankruptcy court to attend a meeting of creditors. This meeting is scheduled under Section 341a of the bankruptcy code. The bankruptcy court will also notify the creditors you listed in your bankruptcy papers. A trustee runs the meeting and, after swearing you in, may ask you questions about your bankruptcy and the documents you filed. The questioning by the trustee usually only lasts for a few minutes. Although they are free to do so, creditors rarely attend this meeting, but, if they do, they will also have an opportunity to question you under oath. In most Chapter 7 Bankruptcy cases, this is the debtor's first and only visit to the courthouse.
Q: What is a "trustee"?
A: The trustee is an official appointed by the bankruptcy court to exercise control over your property and debts. The trustee manages your case while it is in the court. The trustee and his assistants will examine the papers you submit to the court and look for non-exempt property to sell for the benefit of your creditors.
Q: How soon after I file for Chapter 7 Bankruptcy can I expect to get any legal relief from creditors and bill collectors?
A: By filing your bankruptcy petition, a federal court order, known as the "automatic stay", is created that will require most of your creditors to stop all collection efforts.
Frequently Asked Questions: Bankruptcy Reform Act of 2005
Q: Is bankruptcy still available?
A: Yes. Many people still qualify for Chapter 7 Bankruptcy under the new law, and Chapter 13 is still available for those who no longer qualify for Chapter 7.
Q: What were some of the changes to the bankruptcy law?
A: For Chapter 7, the new major legal barrier to receiving a discharge is an income means test. If a debtor has made more than a certain amount of money in the past 6 months, and his debts are primarily consumer debts, then his case may be converted to a Chapter 13 case. (Consult with an attorney to determine what your options are.) Also, under the new law, a debtor must undergo credit counseling before filing a Chapter 7 or Chapter 13 bankruptcy case. Also, people who have recently moved to Texas may not be able to claim certain Texas property exemptions, such as the homestead exemption, in a bankruptcy case.
Q: Does the new law require lawyers to post certain language on their websites and advertisements?
A: Although some question its legality, attorneys are supposed to say this: "We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code."
