What types of bankruptcy are there?

There are six types of bankruptcy, but the most common types for individuals to file are Chapter 7 and Chapter 13.    A Chapter 7 is sometimes called a "liquidation" bankruptcy and can be filed by a person or a business. The bankruptcy laws that went into effect in 2005 made it harder for some people to qualify for a Chapter 7 if their income exceeds a certain level. Still, most people will qualify.  Most people will not lose any property during this kind of bankruptcy even though it is a “liquidation.”   A Chapter 13 is like a debt repayment plan over time. You set up a plan to pay a certain amount toward your debts each month. If you complete your plan, the remaining debts are discharged. This type of bankruptcy makes sense if, for example, you make too much money to qualify for a Chapter 7 or you need time to catch up on a mortgage payment.

Are there alternatives to bankruptcy?

In some situations, it makes sense to consider settling a debt. Creditors will sometimes agree to accept a lesser amount in full satisfaction of your debt. I can help you negotiate with your creditors to bring about this result. Generally, though, this works best if you have only a few creditors and if you have the means to make a lump sum payment to each creditor. Please be very cautious if you choose to do business with a private debt settlement agency.   Additionally, some creditors, especially government agencies, will consider offers in compromise of the total debt you owe.  For example, if you owe back taxes to the I.R.S. or if you are behind on a loan from the Small Business Administration, that government agency may be willing to forgive your debt if you make a certain payment or meet certain criteria.

What type of bankruptcy should I file?

There are two things to consider: what type of bankruptcy do you qualify for, and what are your goals.  Your eligibility for each type of bankruptcy depends on a number of factors, such as your income, whether you've filed bankruptcy before, and how much you owe.  For example, to determine whether you make too much money to qualify for a Chapter 7, we'll compare your household income to the median income earned by a family of your size in the state you live in.   If you make less than the median income, you likely qualify for Chapter 7.  If you make more than the median income, you may need to consider Chapter 13.  Once we know what you qualify for, it's important to consider your goals.  A Chapter 13 allows you to catch up on secured debts, like car or home loans, over a period of time. If you are looking to save your house, car, or other secured collateral, Chapter 13 may be your best option.

How much will it cost to file bankruptcy?

Generally, your initial consultation meeting with me will be free. Once I know the specifics of your situation, I can give you a firm quote. I charge flat fees, not hourly fees, for bankruptcy representation. That means you will pay one price for a bundle of services, and will not be billed hourly. The flat fee for a Chapter 7 bankruptcy is often around $1,200. The court also charges a filing fee of $335. Both of these fees must be paid before we file. The flat fee for a Chapter 13 bankruptcy is often around $4,000. For a Chapter 13, the Court charges a filing fee of $310. One of the advantages of a Chapter 13, though is that most of the attorneys fees can be paid over several years.

Will anyone find out I filed for bankruptcy?

Only a limited group of people will receive notice of your bankruptcy. Anyone listed as a creditor or a co-debtor will get notice of your bankruptcy filing. Anyone else–employers, friends, family, neighbors–will not be notified. Newspapers in Eastern Iowa and Southwest Wisconsin generally do not publish notices of bankruptcy filings. Bankruptcy cases are technically public records, but in practice, a person would have to be fairly knowledgeable and persistent to find it.

What will happen to my credit score?

Bankruptcy will go on your credit report and will stay there for 7-10 years. It will lower your credit score in the short run. For many people, though, bankruptcy stops the monthly flood of negative credit reports based on missed payments, overdue bills,

Do I have to file on all of my debts?

You have to list all of your debts on your bankruptcy papers, whether you want to continue paying on the debt or not.  After you bankruptcy is closed, you can continue to repay a certain debt if you choose to do so ( for example, a personal loan from a friend or family member), but you are not legally required to.

What happens to student loans in bankruptcy?

Student loans are one of the few categories of debts that are generally not dischargeable in bankruptcy. Like every other debt you owe, they must be listed on your bankruptcy papers.  Unlike other types of debts, though, any balance you owe on them will not be discharged when your case is closed unless you can show that repaying the loans would be an “undue hardship” to you.  Courts have set a very strict standard for showing “undue hardship,” such as when someone is totally unable to work or has a significant disability or injury.

Often, your best bet is to consider other ways to manage your student loans. You might consider asking your lender for a deferment or forbearance. If you have federal loans, you can also consider whether you qualify for an alternative repayment schedule. For example, your federal student loans may qualify for repayment plans that cap your payments at a percentage of your income. These plans include Income Contingent Repayment, Income-Based Repayment and Income Sensitive Repayment.

Can I keep my stuff if I file?

Generally, yes.  Most people do not lose any property in bankruptcy. State and federal laws give each person exemptions that shield certain types of property.  A bankruptcy attorney can review your property, alert you about any potentially non-exempt property, and discuss your options.

What happens in bankruptcy if I want to keep paying my mortgage or car loan?

In Chapter 7, you can generally reaffirm secured debts like auto loans and mortgages.  That means signing a new agreement with your lender laying out the terms of the loan.   If you are current on your loan, your lender will usually be willing to let you reaffirm. By doing so, you are taking on some risk because you will once again be personally liable on that debt.  In other words, if you decide to walk away from the debt later, the creditor can pursue you for any deficiency.

Are there things I shouldn't do if I'm going to file bankruptcy?

Yes! You should avoid repaying more than $600 toward any debt you owe to an unsecured creditor (that includes family members and friends who have loaned you money informally).  You should avoid taking out cash advances on credit cards, making any significant purchases on those cards, or transferring any credit card balances.  Don’t change the ownership of any property you own, including car titles or deeds to your home.  The bottom line is, talk to an attorney who can advise you of your options if you are seriously considering bankruptcy.