Frequently Asked Questions About Chapter 7 Bankruptcy and Chapter 13 Bankruptcy
Q: Will a Person Lose All of His Or Her Property?
A: Usually not. Certain property here in Texas, such as a homestead, household furnishings, a car (per driver), clothing, certain retirement benefits, and more are exempt and may not be taken by creditors. Exempt property is property protected by law from claims of creditors.
Q: What is a Trustee in a Chapter 7 Case and What Does He Do?
A: A trustee is a person appointed by the United States Trustee to examine the person who filed the case, collect the person’s non-exempt property (if any) and pay the expenses of the estate and claims of creditors. In addition, the trustee has certain duties in a Chapter 7 case and is responsible for seeing to it that the debtor filing performs the required duties in the case.
Q: What if a Person has no Non Exempt Property for the Trustee to Collect?
A: If it appears after filing that the debtor has no nonexempt property, a notice will be sent to the creditors advising them that there appears to be no assets from which to pay creditors, that it is unnecessary for them to file claims, and that if assets are later discovered, they will then be given an opportunity to file claims. This type of case is referred to as a no-asset case, and most Chapter 7 cases filed by consumers are no-asset cases.
Q: How Long Does a Chapter 7 Case Last?
A: A chapter 7 case begins with the filing of the bankruptcy forms and ends with the closing of the case by the court. If there are no non-exempt assets for the trustee to collect, the case will be closed shortly after the person filing received his discharge, which is usually about 3 months after the case is filed. If there are non- exempt assets for the trustee to collect, the length of the case will depend on how long it takes the trustee to collect the assets and perform his other duties.
Q: Are Your Attorney Fees Comparable to Other Bankruptcy Attorney Fees in the South- Central Texas and San Antonio Area?
A: Yes. We also offer payment plans. The fees for each bankruptcy case vary, depending on the complexity of the case. We will evaluate your case and let you know the cost to represent you. Our initial consultation is free.
Q: Will Filing Bankruptcy Ruin My Credit?
A: Although a bankruptcy filing will appear on your credit report for 10 years, you must look at your situation logically and unemotionally. Ask yourself, what will your credit look like if you continue to miss paying your bills on time, allow judgment for debts to accumulate and creditors to keep harassing you and attempting to collect from you even if your don’t have a realistic method of repaying them? Many times, because your credit score is already low or will be in the near future because of your inability to pay your debts, this question might even be immaterial. Many clients who have gone through bankruptcy have later reestablished their credit after discharging debts they could no longer pay.
Q: How Does a Chapter 13 Case Differ from a Chapter 7 Case?
A: The basic difference between a Chapter 7 case and a Chapter 13 case is that in a Chapter 7 case the debtors nonexempt property is liquidated to pay as much of the debtor’s debts as possible, while in Chapter 13 cases a portion of the debtor’s future income in used to pay as much of the debtor’s debts as is feasible under the debtor’s circumstances. As a practical matter, in a Chapter 7 case the debtor loses his non-exempt property (if there is any) and receives a discharge which releases the debtor from liability for most debts. In a Chapter 13 case, the debtor usually returns his or her non-exempt property, but must pay off as much of his or her debts as the court deems feasible and receives a Chapter 13 discharge, which is slightly broader than a Chapter 7 discharge and releases the debtor from liability for a few types of debts that are not dischargeable under Chapter 7. However, a Chapter 13 case normally lasts much longer than a Chapter 7 case and is usually more expensive for the debtor.
Q: When is a Chapter 13 Case Preferable to a Chapter 7 Case?
A: Chapter 13 is usually preferable for a person who 1) wishes to repay all or most of his unsecured debts and has the income with which to do so within a reasonable time 2) has valuable nonexempt property or has valuable exempt property securing debts, either of which would be lost in a Chapter 7 case. 3) is not eligible under means testing to maintain a Chapter 7 case, 4) is not eligible for a Chapter 7 discharge, 5) has one or more substantial debts that are dischargeable under Chapter 13 but not under chapter 7, or 6) has sufficient assets with which to repay most of his or her debts, but needs temporary relief from creditors in order to do so.
Q: How much of a Debtor’s Income Must Be Paid to the Chapter 13 Trustee under a Chapter 13 Plan?
A: Usually all of the disposable income of the debtor and the debtor’s spouse for a 3 year or 5 year period must be paid to the Chapter 13 trustee. Disposable income is income received by the debtor and his/her spouse that is not deemed to be necessary for the support of the debtor and his dependents.
Q: What If the Debtor is Temporarily Unable to Make the Chapter 13 Payments?
A: If the debtor is temporarily out of work, injured or otherwise unable to make the payments required, the plan can usually be modified so the debtor can resume the payments when he is able to. If it appears that the debtor’s inability will continue indefinitely, the case may be dismissed or converted to a Chapter 7 case.
Q: What if the Debtor Later Decides to Discontinue the Chapter 13 Case?
A: The debtor has the right to either dismiss a Chapter 13 case or convert it to a Chapter 7 case at any time for any reason. However, if the debtor simply stops making the required Chapter 13 payments, the court may compel the debtor or the debtor’s employer to make the payments and comply with the orders of the court. Therefore, a debtor who wishes to discontinue a Chapter 13 case should do so through his or her attorney.
Q: What Happens if a Debtor is Unable to Complete the Chapter 13 Payments?
A: A debtor who is unable to complete the chapter 13 payments has three options: 1) dismiss the Chapter 13 case 2) convert the Chapter 13 case to a Chapter 7 case or 3) if the debtor is unable to complete the payments due to circumstances for which he or she should not be accountable, close the case and obtain a partial Chapter 13 discharge.