Bankruptcy is a legal process designed to help individuals and businesses eliminate their debts with the protection of Federal Law. Bankruptcies are either described as “liquidation” (Chapter 7) or “reorganization (Chapter 11 and 13). Liquidation is where the bankruptcy filer asks the court to wipe out or “discharge” certain debts. In a reorganization under Chapters 11 and 13, a plan is filed with the court that proposes to pay certain debts over time. Most of the debts that remain are discharged once the bankruptcy filer completes the bankruptcy plan.

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• How do I decide if I need bankruptcy?

Examine your financial life for ongoing financial relationships and out-of-the-ordinary events. Events and relationships of these sorts influence the selection of a chapter and the timing of a filing. Gather up the details so a lawyer can assess your options, and try to prepare answers to the following questions:

1. Have you co-signed loans?
2. Do you have a lawsuit that has not yet been filed or is pending?
3. Do you appear on your parents’ or siblings’ property title?
4. Have you put your property in trust?
5. Are you entitled to an inheritance from someone who has recently died?
6. Are you likely to inherit money in the next year?
7. Are you getting a tax refund?
8. After answering questions 1-7, consider whether you can pay your debts in 3 years or less: Add up all of your monthly living expenses, such as mortgage payments or rent, car payments, food, utilities, etc., but don’t include your other existing debts.

Subtract that figure from what you take home each month, and ask yourself will you be able to pay the rest of your debts completely (down to zero) at current interest rates in three years or less. Ask yourself what expenses or luxuries you can do without, property you can sell, or additional money you can earn to achieve that goal. If you still will not be able to pay these debts in three years or less, consider bankruptcy.

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• If I file bankruptcy will I lose my home?

One of the biggest worries you may face when considering filing for bankruptcy is the possible loss of your home, car or other personal property. The Law in the State of Texas is among the most debtor-friendly in this country. Your general unsecured creditors (and the bankruptcy trustee) cannot take your house, your car, your furniture, your clothes, your appliances, etc. All of these things are exempt from creditors, and with a few exceptions, that means you keep them even when you file a bankruptcy. However, if you are behind on your house or your car, your mortgage or car creditor can foreclose or repossess, but you can stop them from doing this with a Chapter 13 Bankruptcy as long as you are able to pay the past due amounts over a period of 3-5 years.

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• What property will I get to keep? (exempt from collections)

Exemptions are generally as follows:
Equity in Your Home – including up to 10 acres in the city and 100 acres in rural areas.
Insurance – you usually get to keep the cash value of your policies.
Retirement Plans – pensions which qualify under the Employee Retirement Income Security Act (ERISA) are fully protected by the bankruptcy. So are many other retirement benefits.
Personal Property – you’ll be able to keep most household goods, furniture, furnishings, clothing, appliances, books and musical instruments. You may be limited up to $1,000.00 or so in how much jewelry you can keep.
Public Benefits – All public benefits such as, welfare, Social Security and unemployment insurance, are fully protected.
Tools Used On Your Job – you’ll probably be able to keep up to a few thousand dollars worth of the tools used in your trade or profession.
Wages – in most states, you can protect at least 75% of earned but unpaid wages.

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• Chapters 7, 11, and 13 - Which one is for me?

In Chapter 7 Bankruptcy, you are asking the bankruptcy court to discharge most of the debts you owe. In a Chapter 7, if you have any non-exempt property, the Trustee may elect to sell it and use the proceeds to pay off your creditors. Eligible consumers and businesses can file under Chapter 7 Bankruptcy, although changes in the bankruptcy laws instituted in 2005 have imposed new restrictions on who may qualify for Chapter 7.

In Chapter 13 Bankruptcy, you file a repayment plan with the bankruptcy court in which you propose to repay some or all of your debts over time. The amount you’ll have to repay depends on several factors, including how much “disposable income” you have, the value of property you own, and the nature of the debts that you have. Chapter 13 is less expensive and less complex than Chapter 11, but not everybody qualifies for Chapter 13 Bankruptcy.

Chapter 11 Bankruptcies are usually filed by high-income people who do not qualify for Chapter 7 or Chapter 13 or businesses attempting to reorganize instead of liquidating their assets to pay off their debts. Chapter 11 cases are typically more complex than cases under Chapters 7 and 13; Chapter 11 filers are required to prepare detailed monthly operating reports that are filed with the court. Like a Chapter 13, the debtor may propose a repayment plan, but unlike Chapter 13, the debtor’s creditors may also propose repayment plans. Also unlike Chapter 13, in Chapter 11, the creditors must approve the repayment plan before it will be approved by the Court.

DISCLAIMER: These descriptions are not intended as legal advice, but as a general overview of Chapters 7, 11 and 13 of the Bankruptcy Code. We will be happy to answer your specific questions about the difference between these Chapters (and which is right for you) at your initial consultation.

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• What happens in a Chapter 7 case?

In a Chapter 7 case, you file several forms with the bankruptcy court listing your income, expenses, assets, debts and property transactions for the last two years. The Court’s filing fee is $299. Before filing your case, you must obtain a credit counseling certificate. You can go to www.hbcce.org to obtain the credit counseling course and certificate before filing your case. After you have filed your case, you must also obtain a certificate of completion of a financial management course in order to receive a discharge of your debts (this course is also available at http://www.hbcce.org).

Within 45 days after filing, you will attend a “meeting of creditors” (a/k/a “341 meeting”) where the Chapter 7 Trustee assigned to your case reviews your forms and asks questions. These meetings last only a few minutes and creditors rarely attend. If the Trustee determines that you have any nonexempt property, the Trustee may require you to turn it over (or its value in cash). If the Trustee agrees that you do not have any non-exempt assets, or if you are able to reach an agreement with the trustee about any non-exempt assets you may have, you will receive a notice from the court that “all debts that qualified for discharge were discharged” approximately six months after your case ends. Then your case is over.

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• What happens in a Chapter 13 case?

Before filing your case, you will need to get credit counseling from an approved credit counseling agency. We recommend using Hummingbird Consumer Credit Education (www.hbcce.org), but you can use any credit counseling agency approved by the United States Trustee. We also strongly encourage you to complete our online questionnaire at www.stopmybills.com. This will speed up the process of filing your case dramatically. After you have completed the credit counseling and online questionnaire, we will prepare your bankruptcy schedules and have you in to our office to review your case and finalize your paperwork for filing.

In a Chapter 13 case, we file the same forms that are filed in a Chapter 7, plus a proposed repayment plan, in which you propose to make monthly payments to the Chapter 13 Trustee over a period of three to five years. The Chapter 13 Trustee then distributes these payments to the creditors who are entitled to receive a distribution under the bankruptcy laws. As a general rule, these payments must total at least as much as your creditors would have received in a Chapter 7 case.

In most cases, as long as you stay current with your plan payments and your payments to your secured creditors (i.e. house and automobile payments), you will keep all of your property, whether or not it is exempt. In your Chapter 13 case, you will continue to make payments until either your debts are paid in full or until the end of the three to five year period set out in the plan. After making all the payments called for under the plan, you receive a discharge, and creditors that you owed before you filed your case (pre-petition) can no longer attempt to collect on those debts.

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• How would bankruptcy affect my credit?

First off, remember: most lenders understand that there are many things that can happen in life that can cause one’s debts to become unmanageable. Lenders also know that these circumstances change and that people grow and learn from their experience; the fact that someone’s debts were out of control once does not mean that they will not be able to pay their debts.

That, being said, issuers of credit (banks and credit card companies) are free to consider bankruptcy filing in deciding whether to extend credit, and bankruptcy filings can be listed in credit reports for up to 10 years. Some issuers of credit might extend credit to you right away, regardless of your bankruptcy. Others may be willing to extend credit to you after a number of years have passed, or until the bankruptcy filing is no longer on the credit report.

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• Debts that cannot be discharged in Chpt. 7 or 13.

In a Chapter 7 bankruptcy, non-dischargeable debts remain when your case is over. In a Chapter 13, you pay your non-dischargeable debts (in full, is possible) during your plan, and if these debts are not paid in full, you still owe the balance after your case is concluded.

Debts That Cannot Be Discharged In Either Chapter 7 or Chapter 13 Bankruptcy – i.e. Debts You Still Must Pay Include:

▫Debts you do not list when you file bankruptcy (there are limited exceptions to this rule).
▫Debts for child support and alimony.
▫Debts for personal injury or death caused by driving under the influence of drugs or alcohol.
▫Debts for student loans, unless it would be an undue hardship for you to pay.
▫Fines and penalties imposed for violating the law, such as traffic tickets and criminal restitution.
▫Property taxes against property you want to keep.
▫Income Taxes if they are less than six years old.

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• How is B&B Different from other bankruptcy lawyers and law firms?

1. As a client of Bartholow & Bartholow, you will be represented by former Bankruptcy Trustee, Molly Bartholow (Chapters 7, 11, and 13). Molly has been a bankruptcy lawyer for over 25 years. She was the Standing Chapter 13 Trustee in Dallas from 1991 to 1996 and a Chapter 7 and 11 Trustee for many years before then. As Chapter 13 Trustee, she administered a caseload of over 10,000 active cases. Her experience means she knows the ins and outs of the bankruptcy courts and how to help people through them.

2. At Bartholow & Bartholow, we go to court. When a creditor or Trustee takes a position that’s not in your best interest, we will appear for you in Court to be sure that you are being treated fairly and your rights are protected.

3. At Bartholow & Bartholow, one of our attorneys will personally advise you and be there to help you prepare for anything that comes up in your case. Our experienced, friendly and helpful legal assistants will also be there to help you deal with the paperwork in your case and keep you informed of what’s happening.

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• What do I need to do to have a successful bankruptcy?

Be prepared for your Meeting of Creditors (341 Meeting):
   1. Bring a copy of your tax returns for the last two years. If you have not filed these taxes, you must do so before the 341 meeting. It does not matter if you can not afford to pay these taxes right now; you just have to file them before the 341 meeting. Bring your original Social Security card. If you do not have it for any reason, you must apply for a new one immediately.
   2. Bring the paystubs you have received since filing.
   3. Bring proof of insurance for your home and/or vehicle(s).
   4. Bring your Driver’s License / I.D. Card and your Social Security Card.
   5. Follow-up after your Creditors’ meeting. If the Trustee requests any additional documentation, it is crucial that you get it to us ASAP. It could be the difference between getting a discharge (a good thing) or getting dismissed (a bad thing).

Be on-time (or EARLY!)
   1. Make sure you arrive on time for the Meeting of Creditors and any court hearings that you need to attend.
   2. Make the necessary arrangements for time off with your employer, a babysitter for your children, etc, prior to your court dates.
   3. In a Chapter 13 Bankruptcy, make your monthly payments ON TIME – your case can be dismissed without a hearing if you miss payments!

Stay informed
   1. Sign up with the Trustee for online access to your case information.
   2. Sign up with the Court’s PACER system to monitor filings in your case.
   3. DON’T BE SHY: ASK US LOTS OF QUESTIONS!

Keep us informed
   1. If anything happens that could cause you to have a problem with your case, LET US KNOW IMMEDIATELY! At Bartholow & Bartholow, we understand that sometimes people cannot make their payments for one reason or another. The earlier we know about a potential problem, the better able we will be to help you deal with it – It is often possible to deal with changed circumstances by amending your Chapter 13 Bankruptcy plan. It is even possible in some cases to add debts to the plan even though they were incurred after the Chapter 13 case was filed. Let us know about any changes in your life that affect your financial situation, whether good or bad. IF you think you are going to have to miss a payment for any reason, let us know, no matter what the reason. We will work with you to help you get back on track if things go wrong.
    2. Similarly, sometimes good things happen to our clients that can have effects on their bankruptcy. For example, you may get a better paying job, inherit some money, or something else might come up that would allow you to pay off your debts more quickly. We will help you understand the effects of these changes on your bankruptcy and we will help you decide how to proceed. The important thing is that you keep us posted!
Finally, even after your plan is completed and you receive a discharge in Chapter 13, if unexpected circumstances arise that again make it impossible for you to deal with new bills, you may be able to file another bankruptcy case. As long as your case is not “dismissed with prejudice”, there is never any waiting period before filing another Chapter 13 case, and if you paid off at least 70% of your outstanding debt through a Chapter 13 plan, there is generally no “waiting period” before obtaining a Chapter 7 discharge.

Last but not least: STAY POSITIVE! Sometimes people have setbacks in their cases. This is relatively common. The important thing is to communicate with us and keep trying to get your discharge. Most of the time, we can get you through your bankruptcy and on to the rest of your life! Hang in there, you can do it.

Site Updated: 8-21-2008 10:51 PM CST

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