Some common questions regarding financial problems and filing for bankruptcy
- How much does a Chapter 7 bankruptcy cost? The fee paid to the United States Bankruptcy Court for filing a Chapter 7 bankruptcy case is presently $335, but is subject to change. Attorney fees can vary, but many of our clients qualify for a flat rate and can make installment payments on attorney fees.
- How much does a Chapter 13 bankruptcy cost? The fee paid to the United States Bankruptcy Court for filing a Chapter 13 case is presently $310, but is subject to change. The attorney fees in Chapter 13 cases tend to be higher than those charged for Chapter 7 cases. In most cases, attorney fees can be paid partially through the Chapter 13 Plan.
- Should I try any other options before filing for bankruptcy? Bankruptcy is often preferable to debt consolidation alternatives. Many people fear the stigma and process of bankruptcy and instead, choose to work with a credit counselor or debt consolidation company. For many, this can be a huge mistake. In fact, many people end up in worse financial shape than if they had filed bankruptcy from the onset. Others enter into work out plans that are more burdensome than if they had filed bankruptcy, often making payments for months or years with little or nothing to show for their sacrifice.
- Often, by claiming to be “non-profit” the agency gives the impression that it is working on your behalf. This may not be the case. Non-profit status doesn’t mean they are charities. A non-profit means the entity does not have shareholders that are paid from profits of the company. Often, the officers and those running the corporation are being paid exorbitant salaries and fees, which is one of the reasons many are investigated by the IRS.
- Some of these companies are funded, in part, by the creditors that you are trying to negotiate with! This should tell you that these companies do not hold your interest first. Some even receive a portion of the payments that they are able to extract from you.
- A debt consolidator will give no guarantees of success. Debt consolidation companies attempt to negotiate payment plans or reduce interest rates. Also, certain creditors may not work with these companies, so the proposed plan may fail before it starts.
- Should I use my retirement or 401k to pay my debts? Your retirement is for your retirement! It’s for when you are at an age when you are not able to work. It is not a piggy bank or liquid savings account. You may have to pay substantial penalties when taking funds out of retirement for hardship purposes. Further, the repayment of these loans often reduces your paycheck, making it more difficult to meet your ongoing obligations.
- Do I need a lawyer to file for bankruptcy? You are not required to be represented by an attorney, but the advice of an attorney is generally helpful in understanding your rights and the consequences of your bankruptcy case, particularly in light of the recent changes to bankruptcy law. If you decide to file a Chapter 7 or Chapter 13 bankruptcy case, the advice and assistance of an experienced bankruptcy attorney is considered a worthwhile expense.
- Can I keep my credit cards after filing? Whether you will continue to have and use any given credit card account is up to the issuer of the card. Some issuers may permit you to keep your account if you “reaffirm” payment of your debt to the issuer. There may be other alternatives available, such as secured or guaranteed payment cards that function more like debit than credit cards.
- Can I be fired for declaring bankruptcy? The Bankruptcy Code generally prohibits termination of employment or discrimination with respect to employment solely because an individual (1) has filed a bankruptcy case, (2) has been insolvent before the case was filed, or (3) has not paid a discharged debt.
- Can I Own Anything After Bankruptcy? Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
- Will Bankruptcy Wipe Out All My Debts? Yes, with some exceptions. Bankruptcy will not normally wipe out:
1. Money owed for child support or alimony, fines, and some taxes
2. Debts not listed on your bankruptcy petition
3. Loans you obtained by knowingly giving false information to a creditor, who relied on it in granting your loan request
4. Debts resulting from “willful and malicious” harm
5. Most student loans, except if the court decides that payment would be an undue hardship
6. Mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor)
- Will I Have to Go to Court? In most bankruptcy cases, you must appear at a hearing called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to appear. Typically, this is the only meeting and is a brief and simple procedure. The trustee will ask a few questions about your bankruptcy petition and your financial situation. Occasionally, if complications arise, or if a creditor chooses to dispute a debt, you may have to appear before a judge at a separate hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney. In the Western District, these hearings will be held in Eau Claire, Wausau, La Crosse, or Madison depending on your county of residence.
- What Else Must I Do to Complete My Case? Bankruptcy law requires each debtor to complete a credit counseling within six months before filing. After your case is filed, you must complete an approved course in personal finances. A certificate will be issued for each course. Attorney Mart Swenson’s office will provide a list of organizations that accommodate approved courses.
- Will Bankruptcy Affect My Credit? There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be affected. Bankruptcy will probably not make things any worse. The fact that you’ve filed a bankruptcy can appear on your credit record for ten years. However, because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills. You may be able to obtain new credit quickly and by maintaining a good credit history, restore your credit score in a short time.
- What Else Should I Know?
Each case is unique, some factors remain constant, such as:
- Utility services–Utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility company can require a deposit for future service, and you will be obligated to pay bills which arise after bankruptcy is filed.
- Discrimination–An employer or government agency cannot discriminate against you because you have filed for bankruptcy.
- Driver’s license–If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.
- Co-signers–If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may be obligated to pay the debt. If you file a chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan.
The links below provide additional information regarding bankruptcy:
- Consumer Information – Debt Collection: Federal Trade Commission
- Wisconsin Consumer Act – Wisconsin Department of Financial Institutions
- Avoiding Foreclosure – HUD
- Credit Counseling and Debtor Education Information – U.S. Trustee Program
- Student Loan Forgiveness – StudentAid.ed.gov
- Consumer Financial Protection Bureau
- Wisconsin’s New Automobile Repossession Law – State Bar of Wisconsin
- Repossession and Your Rights – Avvo.com
- Federal Poverty Guidelines – Wisconsin Department of Health Services
- Facing Foreclosure? – Federal Trade Commission