Is what I read on the internet or my cousin/neighbor/friend told me true?
Sometimes! But please remember every case has its own unique characteristics. A situation that on the surface may seem similar to your situation can be in actuality totally different. It is best to reserve judgment and not jump to conclusions; utilize your free consultation with me and we will thoroughly review your financial information to determine what chapter of bankruptcy you should file, or if you should file at all.
How long does a bankruptcy last?
Chapter 7 bankruptcy cases are short lived; lasting on average about 90 days from the date of filing to the date of discharge. A Chapter 13 case can last from 3 to 5 years, but can be shorter if you find yourself able to pay all creditors who filed claims in full. Sometimes that is a possibility because either so few unsecured claims were filed, or your income drastically improves.
What is the cost to file a bankruptcy?
This depends on several factors. Both the Chapter that you are filing and the possible complexities (or lack thereof) of your case are reflected in the fees charged. My legal fees are always very reasonable.
The range for a Chapter 7 consumer case is $1,750 (the classic "elderly client on social security situation") up to an average of $2,000. The costs can be more if there are business related issues, and the usual ancillary complexities. I believe that my fees are very competitive relevant to my experience level, and in comparison to what many law firms are currently charging.
Chapter 13 fees are set by the Court; they average $4,000 to $4,500 and may be more depending on the debt structure and various issues in the case. Like most attorneys, I usually require a retainer and put the majority of the legal fees in the Chapter 13 plan. I am paid over time as the Debtor makes monthly payments to the Chapter 13 Trustee.
My fees are always very fair and competitive with other attorneys, especially in light of my experience level (26 years) and how complicated the bankruptcy laws have become. My main concern is helping you obtain relief from the pressures of financial uncertainty.
Will filing a bankruptcy resolve IRS debt?
It depends. Generally if you have filed your tax returns by their due date (which is extended by any filing extension granted) and the income tax debt is older than 3 years there is a strong chance the debt is old enough to be forgiven like it was a credit card debt or medical bill. The taxes must also have been assessed by the taxing authority at least 240 days before you file for bankruptcy, or not assessed at all. The actual assessment date is not always the same date as the filing date. Obtaining a tax transcript from the IRS aids in determining the date calculations.
A crucial tax tip - please always file your taxes on time - even if you owe taxes and cannot pay them! At a minimum obtain an extension and be sure to file your taxes prior to the expiration of the extension date! Filing the taxes late can cause taxes that would otherwise be dischargeable to NOT be dischargeable in your bankruptcy.
Will filing bankruptcy stop a wage garnishment?
Yes, the filing of a bankruptcy triggers the protection of the "automatic stay", which prohibits creditors from taking further collection activities against you. This applies to wage garnishments or bank garnishments. If you have either of those being enforced against you, please do not hesitate to call me at your earliest opportunity for a free consultation.
Does my spouse have to file bankruptcy with me?
Not necessarily. There is certainly no requirement that a spouse MUST file a bankruptcy if their spouse elects to do so. Strategically, they may chose to join their spouse in the case. It is non uncommon for both spouses have so much debt that they would be wise to file together (the cost to file is the same), and both then benefit from the financial advantage of obtaining a discharge in bankruptcy. It is not optimum for their relationship, or the future of the family unit, if one spouse obtains a discharge of their debts, but the non-filing spouse is still burdened with the stress of overwhelming debt. It is often financially wiser to file the case jointly and both enjoy the benefits of a discharge of their debts.
Even if it does make sense for a spouse to not join in the case, please be aware that the law does require the Debtor to disclose the entire family debt - and income - situation. So if you spouse files and you do not, your spouse will still need to ask that you provide recent paystubs, tax returns, and other relevant documents to establish the family income and expenses, and ownership of property.
What are Bankruptcy Exemptions, and how do they affect my case?
An exemption in the context of a bankruptcy filing means, literally, what property does the law allow you to exempt (protect) from your creditors when you file a bankruptcy case. In Texas, there are two exemption options generally available; Federal Exemptions or Texas Exemptions. If you own a home with any appreciable equity, you will usually select Texas exemptions, as they are much more generous when it comes to protecting home equity. If you do not own a home, you may find it is in your best interests to elect the Federal Exemptions. This topic is one of the primary discussions we will have together when you and I meet during your free consultation.
On a related topic, and to clear up a common misconception, even if you have equity in a house or car that can be protected from creditors, if you have debt on the asset, you will still need to continue to pay the secured creditor if you are keeping the property. Usually you will continue to pay the creditor directly, such as when you file a Chapter 7 case. Occasionally however there are reasons it may make sense to pay the remaining debt through a Chapter 13 bankruptcy.
One Issue to be very careful about regarding the Texas Homestead Exemption - be aware!
If you purchased your current home less than 1215 days prior to filing the bankruptcy, your home exemption (the equity that can be protected from creditors) may be impacted. This situation (home ownership when filing a bankruptcy) requires a very careful calculation and analysis of your financial history. The proper analysis of your the basis for your home equity, specifically how and when you obtained it, must be very carefully reviewed. A misstep can result in the Chapter 7 Trustee possibly being able to sell your home to pay creditors, even in Texas!