Bankruptcy FAQ

Answers from a Knowledgeable Houston Bankruptcy Lawyer

Get answers to all of your questions about bankruptcy with the help of Phillip H. Trueba, Attorney at Law. With 20+ years of experience, Attorney Trueba is a trusted, skilled advocate for our clients. We strive to help people alleviate their financial circumstances by providing effective bankruptcy solutions. Phillip H. Trueba, a Houston bankruptcy attorney is accessible, dedicated, and committed to helping you improve your financial health.

What Is Chapter 7 Bankruptcy?

A common form of bankruptcy is Chapter 7 bankruptcy, sometimes referred to as "straight bankruptcy" or "liquidation." It is a process in which a consumer asks the bankruptcy court to wipe out (discharge) the debts owed, essentially giving consumers a fresh start. However, certain debts cannot be discharged. Chapter 7 is available to partnerships, married couples, individuals, and corporations. Businesses cannot receive a discharge under Chapter 7, while individual debtors typically receive their discharge within 4-6 months of filing the case. Any wages earned after the case is filed are the debtor's, beyond the reach of creditors who had existing claims on the date of filing.

What Are the Most Common Reasons People File for Chapter 7?

People most commonly file for Chapter 7 due to unemployment, overextended credit, disability, marital problems, large medical bills, or other large, unexpected expenses. When they qualify under the means test, this is usually the best option for them in bankruptcy.

What Is Chapter 13?

Individuals with regular income and secured and unsecured debt of certain amounts are eligible for a repayment plan under Chapter 13. Under Chapter 13, the debtor is able to keep a majority of his or her property while making consistent payments to the trustee over a period of 3-5 years. While some debts must be fully repaid, others can be partially or completely discharged.

Depending on the type of debt, you may have to pay with interest, at the beginning of your plan or at the end. The level of repayment depends on the debtor's income and the composition of the debt. Some debts can be discharged in Chapter 13 that cannot be discharged in Chapter 7. Chapter 13 enables the prevention of repossessions and foreclosures, and enables individuals to catch up with secured debts.

What Is a Chapter 13 Plan?

This is the agreement with the court stating what your obligations are and how much you must pay each month. It is a several page document that we prepare for you as part of the bankruptcy filing.

Must All Debts Be Paid in Full in Chapter 13?

No. Unsecured debts are usually paid only a percentage of what is owed. Secured debts that are to be retained must be paid 100% of what is owed. However, some secured debts are subject to certain exceptions under the bankruptcy code where the Court will allow a lesser amount to be paid than what is owed to the creditor to satisfy the debt. Typical secured debts are your house and automobile.

Will My Spouse Need to File Bankruptcy with Me?

No. A married person may file as an individual, and the filing does not necessarily adversely affect the credit of the other spouse. However, there are often advantages to filing together with your spouse even though Texas is a Community Property state. This is a legal and personal decision you should make after full consultation with an experienced bankruptcy attorney.

Can My Employer Legally Fire Me for Filing?

No. This is illegal.

What Is a Secured Debt?

A secured debt is one where the creditor has a lien on the property you purchased from them or some other property you own. This is a form of collateral. The most common item used for security in a secured loan is an automobile.

What Is an Unsecured Debt?

An unsecured debt is where the creditor only has your promise that the loan will be repaid. It does not involve collateral. Some examples of unsecured debts are credit cards, department store cards, medical, and utility bills.

Should I File for Bankruptcy?

There are several bankruptcy options that might help improve your financial well-being and give you a fresh start. A free consultation is offered to determine the solution that is right for your unique financial situation.

How Will Filing Affect My Credit?

If you're already receiving phone calls or letters from collection agencies, or if you have charge offs, payday loans, car repossessions, or foreclosures on your credit-your credit history has already been affected. A bankruptcy eliminated debt and clears the path for rebuilding with a fresh start, and in many cases will actually improve your credit score based on your debt to asset ratio.

Is Chapter 7 or Chapter 13 My Best Option?

Usually, Chapter 7 bankruptcy clears your debts within about 4 months, but if you're delinquent on your car or house, or owe the IRS, Chapter 13 bankruptcy might be the best option for you. But, since everyone's financial circumstances are different, we will meet with you at no charge to review your situation and determine the best solution for you.

Why Should I File a Chapter 13 & Not Chapter 7 Bankruptcy?

• Because you wish to repay all or most of the debts and you have to income to do so.
• You have non-exempt property that you wish to keep that would be lost in a Chapter 7.
• You are not eligible for a Chapter 7.
• You have debts that are dischargeable under a Chapter 13, but not under a Chapter 7.
• You are behind on your home payments and need the court to force the bank to accept payment on the arrearage.

Can Bankruptcy Filing Stop Foreclosure?

A bankruptcy can stop the foreclosure sale of a debtor's home due to the imposition of the automatic stay, however, the debtor must take further steps to address the basis for the foreclosure, or the creditor may proceed with its state law remedies after seeking relief from the stay.

How Does the Automatic Stay Help in Bankruptcy?

A benefit of filing for bankruptcy relief is that it may, although sometimes temporarily, stop a lawsuit. This is accomplished through what is called the automatic stay.

How it works: Once a bankruptcy petition is filed, the bankruptcy clerk mails notices to all the creditors listed. All creditors must cease contacting you. Until the stay ends, they cannot call, send bills, threaten you, file a lawsuit, or continue with an ongoing lawsuit.

Can I Keep My Tax Refunds?

Generally, yes. However, the refund will need to be exempted.

If I Am Surrendering My Home, How Long Can I Stay in It?

It depends on a number of things. We will need to review your situation and will help you determine the date you'll need to vacate the home.

What Happens When the Case Is Filed?

The court immediately invokes an automatic stay when you file. The court order prohibits creditors from calling, sending you letters, or contacting you in any way. They cannot attempt to collect money from you by any means,.

What If I Have Been Sued & Have Judgments Against Me? Can I Still Discharge Debt?

Yes, you can still discharge the debt. The fact that you've been sued or have a judgment doesn't stop the bankruptcy from discharging the debt.

Will Creditors Appear at My Meeting with the Trustee?

It's not likely. Creditors are allowed to appear to observe the testimony, but interrogation is not allowed. The creditors meeting is not a trial or a hearing, but simply a review and verification of the facts of your unique situation.

How Much Will My Plan Payment Be?

In most cases, all extra income above your family's basic necessities will be paid into the plan. Determining what your basic necessities are is one area in which having a good attorney can benefit you.

If I Am Self-Employed, Can I File for Chapter 13 Bankruptcy?

Yes. Eligibility requirements are the same for the self-employed as everyone else.

Can I Add Creditors Where I Incurred New Debt During the Plan?

No. There are a couple of very narrow exceptions, but do not expect to be able to do so.

Can I Keep My Vehicle?

Your vehicle is considered a necessity, so the court generally will allow you to do so provided the vehicle payments are not beyond reasonable. You do need to continue making payments on your vehicle. This is one of the things we can discuss in your free consultation.

Can I Keep My Home?

Generally, yes, provided it is current in payments in a Chapter 7 bankruptcy or any arrearages that exist on the date of filing the bankruptcy are addressed in a Chapter 13 plan of reorganization that the bankruptcy court determines is realistic and affordable for you.

What Is an Exemption? What Property Is Exempt?

Exempted property can't be taken by creditors or the trustee. An exemption is the amount of value in a given item of property that the court determines that a person filing bankruptcy is allowed to keep. Property which is in excess of the allowable exemptions must be turned over to the trustee.

Can I Keep My 401k, Pension Plan, Profit Sharing Plan, etc.?

Usually, yes. "ERISA-qualified plans" are excluded. There is no limit on the amount you have in these plans.

Will Someone Come to My Home & Take My Property or Look to See What I Own?

Not unless the court has reason to believe you have lied about the value of your property.

Do I Have to Disclose All of My Assets?

Yes. All debts and assets must be disclosed by law and noted in your petition.

How Long After Filing Will Creditors Stop Calling?

After your bankruptcy petition is filed, the court mails a notice to all your creditors. Typically it takes a couple of weeks for the contact to stop. You can also get creditors to stop calling if you tell them you have filed bankruptcy and provide them with your case number. If a creditor continues attempting to collect from you once they've been informed of your bankruptcy, they could be liable for court sanctions and attorney's fees.

Should I File On Debts Where I Am a Co-Signer?

Yes, you should file on those debts as well; doing so will have no effect on the other parties. Also, if they default at some point in the future, the creditor can't try to collect from you.

What if Someone Co-Signed on a Loan with Me?

If you file bankruptcy, the other party will then be stuck paying your debt.

Can I Discharge Student Loans?

There are two exceptions:

• The student loan may be discharged if it is neither "insured or guaranteed by a governmental unit" nor "made under any program funded in whole or in part by a governmental unit or nonprofit institution."
• The loan may be discharged if it imposes an undue hardship on the debtor or the debtor's dependents. It is extremely difficult to prove that a hardship case exists and it takes a special hearing to do so.

What Debts Are Not Affected by Bankruptcy?

Bankruptcy doesn't get rid of all debts. You are still responsible for:

• Alimony
• Child support
• Recent back taxes
• Student loans
• Recent large purchases
• Fines or penalties of government agencies
• Fraudulent debts

Liquidation: Does It Mean You Lose Everything?

When you file for bankruptcy relief under Chapter 7 (liquidation), the bankruptcy trustee can take your non-exempt assets and sell them to pay off your unsecured creditors. The ability under bankruptcy to exempt items from liquidation and administration by the panel trustee essentially protects you from the enforcement of judgments and creditors. This is the foundation of bankruptcy law, premised on the understanding that people need certain items in order to live and obtain a fresh start.

How Do I Surrender Items in Bankruptcy?

When you file for bankruptcy relief, you must evaluate all your secured assets, if any, and determine which ones you can afford to keep. If you must return assets, you must return them through a procedure called "surrender." Secured assets are items that the seller can repossess from you if your written agreement states the seller may take the items if you fall behind on your payments.

Surrender can be voluntary. You can simply decide that you cannot afford to keep the assets and return them. However, if you try to keep the assets and the creditor or trustee determines that you cannot afford them, or that they are merely luxury items, you may be forced to give them up to your secured creditors. In general, it's not advisable to surrender a secured asset before filing a bankruptcy case unless the value of the asset is less than the amount of the seller's lien.

Can You Keep Assets?

The bankruptcy code permits you to keep secured assets through reaffirmation of purchase agreements, or through redemption. If you are not in the financial position to reaffirm or redeem an asset, you may have no other option but to surrender the asset to the secured creditor.

How Can I Re-Establish My Credit Rating After Bankruptcy?

Re-establishing good credit is as simple as making consistent monthly payments. A record of unpaid bills is worse than a record of a having filed bankruptcy, but making good payments afterwards. Additionally, since you can't file Chapter 7 bankruptcy again for a long time, creditors may be more willing to work with you.

Although your bankruptcy will stay on your credit report for 10 years, it will have less impact the more that time goes by. However, many people benefit from filing in terms of their credit score because of the impact on their debt to income ratio.

After I File, Can I Obtain New Credit?

Yes. Some creditors may discard your application for credit due to your bankruptcy; however, others will allow you credit because you have no remaining debt and are able to pay a new loan. If court and trustee approval is obtained and certain rules are followed, you can often secure credit while in Chapter 13 bankruptcy.

Will My Bankruptcy Appear on My Credit Reports?

Yes. Your bankruptcy can be listed in credit reports for a period of up to 10 years.

Do I Need an Attorney to File Bankruptcy?

Federal law does not require you to have an attorney. You are allowed to file pro se, in other words, on your own without an attorney. However, without the assistance of an attorney, it is extremely difficult to do so successfully. Hiring a competent attorney is highly recommended.

What Paper Work Should I Bring to the Consultation?