Bankruptcy


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Frequently Asked Questions

Q: How do I get started?

A: Call Dana A. Ehrlich and set up an appointment. Dana A. Ehrlich is a bankruptcy specialist who lives and works in San Angelo, Texas. He has lived in the Concho Valley and San Angelo, Tom Green County for many years. His practice is primarily consumer bankruptcy law and he is a board certified bankruptcy specialist for Chapter 7 and Chapter 13. He may be reached at 325-655-5351 or at dana@wcc.net.
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Q: How Do I know if it's Time for me to File?

A: When you’re getting sued or you are tired of getting harassing calls and letters.
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Q: What documents and things do I need to get started?

A: Dana A. Ehrlich will need to know your income, your debts and your assets. Get your paystubs for the last six months. Get all of your bills and letters together. Get all of your house and car papers and house and car loans. Get all your installment loans. Get last year’s tax return. Make a list of your assets with an estimate of values (see Fair Market Value). This will be enough to get started. Call Dana A. Ehrlich and set up an appointment.
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Q: How long will my bankruptcy case last?

A: In chapter 7, your case will last approximately 120 days. In chapter 13 you repay your debt over a 3-5 year plan. Dana A. Ehrlich will discuss the length with you.
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Q
: How many times must I attend court during the course of my bankruptcy case?

A: Generally, the average debtor will not have to appear in court. In both chapter 7 and chapter 13, you must attend you’re “meeting of creditors” that is presided over by a Bankruptcy Trustee. It is not a formal court and the Trustee is not a judge. It is a meeting to discuss your financial issues. Dana A. Ehrlich will attend the meeting with you. The meeting itself is usually simple, easy and brief.
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Q: When is a Chapter 13 a better alternative than a Chapter 7?

A: There are several situations where a chapter 13 is preferable to a chapter 7. A chapter 13 bankruptcy is normally for people who have too much income to file a Chapter 7 bankruptcy or have the kind of debt that is non-dischargeable in a Chapter 7 (e.g. certain taxes). Also, people file Chapter 13 because they are behind on their mortgage or business payments and are trying to avoid foreclosure. A chapter 13 bankruptcy allows them to make up their overdue payments over time and to reinstate the original agreement. Also, where a debtor has valuable non-exempt property and wants to keep it, a chapter 13 may be a better option. However, for the vast majority of individuals who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice.
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Q: What if I can’t make my Chapter 13 plan payments?

A: If you are unable to make the payments, then the trustee may request that your case be dismissed. If you can not keep up with your payments, then you need to contact your attorney to review your options. It may be possible for you to have your case converted to Chapter 7 or to have your case simply dismissed. But keep in mind that if your case is dismissed, then you will still owe all of your creditors and you still risk repossession and foreclosure.
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Q: I don’t want to pay for anything. Will bankruptcy help?

A: 
Secured debts
 such as a purchase money loan on furniture, appliances, an automobile or a home are treated much differently in bankruptcy than unsecured claims such as credit cards. On most secured purchase money debts, you will have to keep making the payments if you wish to keep the collateral. If you fall behind on the payments, or if you do not make the payments after the filing of the bankruptcy, then the creditor may have a right to repossess the collateral. Many people have a misconception that if you file bankruptcy then you may keep the collateral securing the loan without paying for the collateral. This is simply an urban legend, or myth. You may not file Chapter 7 bankruptcy and keep the collateral securing a loan without re-paying the loan. You must either: (1) keep the collateral and continue making payments, (2) surrender the collateral to the creditor or (3) redeem the collateral in one lump sum by paying the creditor the fair market value of the collateral.
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Q: I want to repay my debts. Can I pay after bankruptcy?

A: Some people want to pay their debts even if they file Chapter 7. There is nothing wrong with wanting to pay your debts and if you file Chapter 7 you may voluntarily repay any debt at any time. You may pick and choose which debts you wish to repay. You may pay as much or as little on any debt that you wish. By paying one debt, you do not revive the debt or make it a legally enforceable obligation against you simply because you may have paid on it. More importantly, paying one debt does NOT revive the other debts!
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Q: Do I have to pay my bills during the bankruptcy proceeding?

A: For unsecured debts like credit cards and medical bills, no you do not have to pay. For property that is collateral that you wish to keep such as your car loan or your house, yes you should probably continue to make payments if you can afford them. Also, for day to day expenses such as rent and utilities you should also continue to make payments. You should stop making payments on other old debts incurred prior to the bankruptcy such as credit card debts.
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Q: Will Filing Bankruptcy Stop My Bill Collectors from Taking Action?

A: Yes, When you file bankruptcy, federal law imposes an "automatic stay" which precludes your creditors from taking any action to collect debts against you including court judgments and tax debts during the pendency of the bankruptcy. For instance, if you have been served by one of your creditors to appear in court over a debt, the bankruptcy filing will stop this lawsuit.

Any wage garnishments or repossession efforts are also halted. However, once the bankruptcy is over, a creditor holding a claim that was not discharged may proceed to collect on the debt. Also, under some circumstances a secured creditor may proceed to collect on the lien he has on the filer's asset during the bankruptcy proceeding, but may only do so by filing a court motion and by getting the approval of the bankruptcy court first.
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Q: Must I list all of my creditors on my bankruptcy petition?

A: Yes, every single creditor by law MUST be listed on the bankruptcy petition.
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Q: How quickly will my creditors get notice of my bankruptcy?

A: Within a couple of weeks of the filing of your petition, the bankruptcy court clerk mails your creditors notice of the filing and the imposition of the automatic stay. Until the creditors get notice, it may be necessary for you to supply the creditor with the docket number and date of your bankruptcy. Once they have been given notice, they must stop collection efforts against you or may be liable for court sanctions. Thankfully, for the vast majority of people, once their bankruptcy petition is filed that is the last they hear from their unsecured creditors.
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Q: I don’t want to list all my property. I don’t want anyone to know that I own the property.

A: You must list all property. You cannot refuse to disclose property. You cannot give away or sell your property to friends and relatives with the intent of defrauding your creditors (see fraud). The schedules are very important because deliberate concealment of assets is a bankruptcy crime. And fraud is not only a crime, but may also result in the denial of bankruptcy relief. Therefore, it is very important that the schedules, statements, and all other bankruptcy papers be completely, totally and accurately prepared.
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Q:
What property do I get to keep?

A: The bankruptcy laws are not designed to punish people by taking away all of their property. Rather, the Bankruptcy laws are designed to give honest but unfortunate debtors a “fresh start”. The reasonable and necessary things that people own, such as a home, an automobile, the typical household goods and furnishings in a normal home, clothing and many other personal items are exempt and will not be taken away. Everyone needs housing, food, transportation and other normal necessities, and it is rare that a bankruptcy debtor loses any property. However, not all property is exempt. Some property is non-exempt. If you own non-exempt property, then you could lose the non-exempt property if you file Chapter 7 Bankruptcy, though it is rare. In Chapter 13, most debtors keep their non-exempt property, but your plan payments may be higher because of the non-exempt property.

    Regardless of the kind of Bankruptcy that you file, you are required to claim certain exemptions on your property. In most cases the laws of the State of Texas and the Bankruptcy Code determine what exemptions you may claim.

    If you have moved from another state within the last 730 days, then you may be required to use the exemption laws of the state of your domicile for the greater part of the last 730 days.

    The Texas exemptions are called the “state” exemptions. The federal exemptions, under the Bankruptcy Code are called the “federal” exemptions. If you live in Texas, you can elect either the Texas exemptions or the federal exemptions. You must elect one or the other, but not both. The Texas exemptions are specifically stated in the Texas Property Code. The federal exemptions are stated in the Bankruptcy Code. You must elect either the federal or the Texas exemptions and in a joint case, one spouse cannot elect the Texas exemptions and one spouse cannot elect the federal exemptions. You must elect either the Texas exemptions or the federal exemptions.
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Q:
So what happens if my property is exempt?

A: In general, if all of your property is exempt, then the bankruptcy court and trustee will declare your case to be a no-asset case and will close your case as a no asset case. Thus, you will get to keep all of your exempt property. In an asset case you will be required to turn over such nonexempt assets to the bankruptcy trustee for liquidation and sell to pay your creditors.
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Q:
I don’t want to file on my house or car. Will I lose them?

A: I often hear clients say: “I don’t want to file on my house or car. I don’t want to lose my house or car”. Relax. You are not going to lose your house or car if you keep making your payments and stay “current” on your home or car loan. You must list all debts, even the debt on your house and car. You must live up to the agreement and stay current, and perform all obligations of the deed of trust or security agreement and mortgage, such as keeping the property insured and paying any taxes due. You also may have to reaffirm the debt. And, if you are delinquent on your home or car at the time of filing, then you may be required to file a Chapter 13 in order to “de-accelerate” or “cure” the debt and develop a plan to save your home or car.
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Q:
Can I keep any of my existing credit card accounts?

A: The credit card accounts that you have a zero balance on are not technically creditors and thus are not discharged in bankruptcy. Often these creditors will allow you to keep your credit with them. If you do have an outstanding balance when you file, these are usually cancelled.

Dana A. Ehrlich’s usual admonition to all potential debtors is to stop getting and stop charging on credit cards. Stop buying things. Stop incurring debt. Now. Learn to live on a cash basis only.
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Q: Will everyone find out about my Filing?

A: Not unless you tell them or they go out of their way to check the public records. Bankruptcy filing are not normally published in newspapers, therefore the only people who usually find out that you are in a bankruptcy are creditors whose debts you have listed on the petition or who you apply for credit with.
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Q: Should I feel ashamed to file bankruptcy?

A: Many of my clients report feelings of guilt, shame, anger, sadness and depression. These feelings are hard to deal with, but they are normal for most people. These are real legitimate feelings and they are there for many reasons. However, they will soon go away when the overwhelming burden of dealing with impossible debt has gone away. They will soon vanish and will be replaced by feelings of financial peace and security.
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Q: Will I be fired for filing for bankruptcy?

A: The Bankruptcy Code contains an anti-discrimination provision that provides that you may not be terminated from your job for the sole reason of filing a bankruptcy. However, certain jobs are highly sensitive with respect to security matters. For example, in the military, certain jobs require a "security clearance" that requires the employee to show financial stability. There are many other areas of employment that require a showing of financial stability, as well. Bankruptcy could have a negative effect with respect to those jobs, making it more difficult to obtain those jobs if you do indeed file bankruptcy.
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Q:
People often have a misconception about bankruptcy and their credit report. I often hear clients ask, "Will this be taken off of my credit report when my case is discharged?"

A:
It is often believed that if you file a chapter 7 bankruptcy, that you will have a "clean" credit report after the bankruptcy process. This is far from the truth. Your credit report will still reflect very negative matters such as delinquent payments, slow payments, all charge-off accounts, closed accounts, and even balances still owed on the account. Many times the information reported on your credit report is inaccurate or misleading. You have certain rights under the Fair Credit Reporting Act to have accurate information in your credit report, but please understand that the bankruptcy process does not "fix" your credit report. To the contrary, the bankruptcy process will harm your credit report. Moreover, your bankruptcy attorney is not being employed for the purpose of providing you with a clean credit report. At best, your bankruptcy attorney will only obtain a discharge of your debts so that you are not legally obligated to pay your dischargeable debts. The attorney is NOT responsible for the information that appears in your credit report, nor is he or she being employed for the purpose of "fixing" your credit report.
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Q: Does bankruptcy devastate my credit?
A: Although the record of filing bankruptcy may technically stay on your credit for up to 10 years, often by making payments on time subsequent to your bankruptcy you can regain a decent credit rating after discharge.

    Ironically, in many cases filing bankruptcy may actually help your credit score because discharging your debts greatly improves your debt to income ratio which is a major criteria creditors use in judging your "creditworthiness" (see below). In fact, many people report a flood of pre- approved credit cards within weeks of a bankruptcy discharge.

    By all accounts, bankruptcy no longer has stigma attached to it that it once did. Perhaps, this is one of the reasons that the number of filings has been dramatically increasing over the last several years.
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Q: Will I be able to borrow money in the future?

A: It is lawful for creditors to consider bankruptcy when deciding whether to grant you future credit. You may find it difficult to get any kind of loan for a car through a conventional lending source. You may be denied loans for the simple reason that you have filed bankruptcy. It goes without saying that your existing credit cards that you list on the bankruptcy will be canceled. However, with the advent of overzealous credit card marketers, many people who file bankruptcy are offered credit cards even after they have filed bankruptcy.

    Credit card and mortgage loan decisions are made on the basis of a credit score, yet consumers have no right to review their credit scores, and the Fair Credit Reporting Act does not require that credit bureaus to disclose a credit score with a consumer’s credit report. The credit score carries heavy weight in nearly all mortgage loan decisions about whether a consumer will receive the loan and at what rate of interest. The current law is that the creditors are not required to disclose the credit score with the credit report. However, the Fair Credit Reporting Act does require a creditor to disclose a credit report if that credit report contains information upon which the creditor based their decision to deny credit.
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Q: Will filing for bankruptcy affect my ability to obtain further credit and loans?

A:
Bankruptcy, regardless of 7 or 13, will harm your credit. The fact that you have filed a bankruptcy in a chapter 7 may be reported on your credit history for up to 10 years. The fact that you have filed a chapter 13 bankruptcy may be reported on your credit history for up to seven (7), and sometimes even as much as ten (10) years.

    It is very difficult, and sometimes impossible, to obtain credit while you are in bankruptcy. While it may be possible though quite difficult to obtain credit while you are in a chapter 13 bankruptcy, the trustee and the bankruptcy judge generally disfavor incurring any additional debt while you are in chapter 13 bankruptcy. After all, credit is what got you into bankruptcy in the first place, and the court is very concerned about incurring any additional credit debt while you are in bankruptcy.

    You may also face other problematic factors, such as having to pay higher interest rates, and creditors may require more down payment prior to financing your purchase. In addition, you may even be denied credit because you have filed bankruptcy.
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Q: Is hiring a bankruptcy petition preparer or a “paralegal” at a so called bankruptcy lawyer’s office to help me file my bankruptcy petition a smart move?

A: No. Call Dana A. Ehrlich, a board certified specialist, and set up an appointment. Dana A. Ehrlich is a bankruptcy specialist who lives and works in San Angelo, Texas. He has lived in the Concho Valley and San Angelo, Tom Green County for many years. His practice is primarily consumer bankruptcy law and he is a board certified bankruptcy specialist for Chapter 7 and Chapter 13. He may be reached at 325-655-5351 or at dana@wcc.net.
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