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Why should I file bankruptcy?
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Can’t I just walk away from my debts?
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I cannot pay for my mortgage and I want to deed it back to the mortgage company.
Will that satisfy my debt?
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I want to settle with my credit card companies for less than I owe. Is this not
better than bankruptcy?
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What is the difference between a chapter 7 and a chapter 13?
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What are the new restrictions on filing a chapter 7?
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Can I exclude some of my debts from the bankruptcy?
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Once I finish my bankruptcy, can I sell my house and keep the money?
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After I file a chapter 7 bankruptcy, can the court get any money I receive after
my bankruptcy?
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My spouse is filing bankruptcy, my name is not on the credit cards but I have
used them. Will I too need to file bankruptcy?
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Can a couple in Texas protect each other from community debt?
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Will the court come to my home and take inventory of my assets if I file chapter
7?
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Will I ever have good credit if I file bankruptcy?
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Can I ever finance another car?
Top
Q. Why should I file
bankruptcy? Can’t I just walk away from my debts?
A.
I often have clients that would rather ignore their debts than file
bankruptcy. This is not a good decision for several reasons.
1. Creditors can get a
judgment against you and levy on your bank account plus they will send the
sheriff out to levy on your non-exempt property.
2. When you file
bankruptcy, your credit report shows that the debts are discharged in
bankruptcy. You can then start over with a clean slate as opposed to having
unpaid debts on your report. It is easier to rebuild your credit if you file
bankruptcy then if you ignore your debts. Just ask anyone in the mortgage
business.
3. If a creditor
charges off your debt, it does not mean that you do not owe the debt. Your debt
may have been sold to another creditor and that creditor will come after you.
4. If you ignore your
debts and a creditor cannot collect, the creditor will file a 1099 Tax
information report with the IRS and you will have to pay tax on the bill the
creditor charged off. This is called debt forgiveness income, the phantom income
trap.
BEWARE OF DEBT FORGIVENESS
YOU MAY OWE IRS TAX ON MONEY YOU LOST
BANKRUPTCY SOLVES THIS PROBLEM
Top
Q. I cannot pay for my
mortgage and I want to deed it back to the mortgage company. Will that satisfy
my debt?
A. Beware of the
Debt forgiveness trap----The Deed will not satisfy your debt unless the mortgage
company is able to sell your house for the amount you owe plus their costs and
attorney fees. Once they sell your house, they will try to collect the
difference from you. If you do not pay, then they will issue a 1099 Debt
forgiveness income statement to IRS and you will have to pay income tax on the
amount they lost. The way to avoid the income tax is to file a bankruptcy.
Top
Q. I want to settle with my
credit card companies for less than I owe. Is this not better than bankruptcy?
A. If you settle
with credit card companies for less than you owe and do not file bankruptcy, you
will get caught by the debt forgiveness tax. The credit card companies will turn
into IRS a 1099 income form and IRS will expect you to pay them income tax on
the money you though you saved.
Top
Q. What is the difference
between a chapter 7 and a chapter 13?
A. In a chapter 7,
all your unsecured debts like credit cards, may be cancelled or discharged. Your
secured debt, like house mortgages, car payments, will remain if you keep the
property. If you keep your car, you have to continue to pay the car creditor and
the same with your house. If you do not wish to keep the property, you can
return the secured property and that will cancel the debt.
In a chapter 13, you are repaying your debts with any income the court
determines is excess over your living expenses. You make a payment to the court
for 5 years and that is divided among your creditors according to their
priority.
Top
Q. What are the new
restrictions on filing a chapter 7?
A. The new
requirements apply only to individuals whose debts are primary consumer. The new
laws do not apply to persons who have primarily business debts or tax debts.
For consumer debts, the first step is to see if the income of your family
household is above or below the median income for your county. If it is below
the median, you can file a chapter 7 without any further test. If it is above
the median, then it is necessary to do the means test to determine if your
actual household expenses allow you to repay any portion of your debt. Many
people who have income above the median can qualify to file a chapter 7.
TO GET A VALID ANSWER TO WHETHER OR
NOT YOU CAN FILE A CHAPTER 7, IT IS IMPORTANT FOR AN ATTORNEY TO HELP EVALUATE
YOUR INCOME AND EXPENSES. The
procedure is complicated. Do not automatically determine that you cannot qualify
for a chapter 7. Get a consultation. I can give you a preliminary evaluation if
you go to CONTACT MARGUERITE , fill out the short four page form and fax it to
me at 817 457-6641.
Top
Q. Can I exclude some of my debts from the bankruptcy?
A. All your debts
must be listed on your bankruptcy however, some creditors will let you reaffirm,
continue to pay the debt, and keep your credit with them. This can be done by
contacting the creditor and making arrangements. If you want to be able to use a
certain credit card, be sure and discuss this with your attorney so this can be
arranged if the creditor agrees.
Creditors are always happy for you to reaffirm your home mortgage and your car
debts. If you pay as agreed, you will not lose your home or your cars.
Top
Q. Once I finish my
bankruptcy, can I sell my house and keep the money?
A. Most residences
in Texas are exempt which means than you can sell your residence after
bankruptcy and keep the funds.
Top
Q. After I file a chapter 7
bankruptcy, can the court get any money I receive after my bankruptcy?
A. After a
bankruptcy is filed, the court can recover any funds you may receive as a
windfall for only six months after the case is filed. A windfall could be an
inheritance, lottery winnings or other unexpected money you may get. You should
discuss this with your attorney and be sure you understand this. There are legal
ways to protect any inheritance you may get in this six months but they must be
done prior to filing the case.
Top
Q.
My spouse is filing bankruptcy. My name is not on the
credit cards but I have used them. Will I need to file also?
A. This issue
comes up often in Texas because this is a community property state. That means
that all debts and assets acquired during the marriage are presumed to be
community. Some excepting apply but it is important to discuss this with your
attorney and them make an informed decision. You may not be protected from
liability just because your name is not on your spouse’s credit card.
Top
Q. Can a couple in Texas
protect each other from community debt?
A. Yes. It is very
important for Texas residents to be aware of how to protect family assets from
business failures or debts of one spouse. This can be done after marriage by a
Property Partition Agreement. If you need more information on that, I will be
happy to discuss it with you.
Top
Q. Will the court come
to my home and take inventory of my assets if I file chapter 7?
A. Generally, an
officer of the court will not come to your house and take any inventory. It is
your responsibility to list all your assets and value them truthfully. Your
attorney can guide you in this.
You must list all your assets and hiding assets is a bankruptcy crime.
In Texas, they amount of property you can keep after bankruptcy will probably
include everything you own. Texas is one of the best states in which to file
bankruptcy. Because of the liberal exemption laws, most debtors lose nothing but
their debts.
Top
Q. Will I ever have good
credit if I file bankruptcy?
A. Your bankruptcy
stays on your credit report 10 years but this does not mean that you cannot get
credit.
Some credit card companies will solicit your business right after bankruptcy
because you are now debt free. Most mortgages companies want to see two years of
good payments after bankruptcy before they will refinance your home or make you
a new loan.
It is important to stay current on any debt you reaffirm after bankruptcy and
that most of all will get your credit back. The normal time to restore credit
after bankruptcy is about two years.
It is also important after bankruptcy to check your credit report and to be sure
the three credit bureaus properly show that your debts are no longer owed and
were discharged in bankruptcy. This will insure that your good credit will be
restored quickly.
It is often easier to restore your credit after a chapter 7 than a chapter 13
because you are debt free immediately.
Top
Q. Can I ever finance another
car?
A. If you have
continued to pay on your car loan during your bankruptcy, you should not have
any trouble financing another car. Often, the same creditor will finance another
car for you.
