Article by:
Augusta Massey, Esq.
After my last article, I got some great questions regarding filing for bankruptcy and so I would like to address that here. If you did not read my last article, please grab the March edition of The Urban Voice. In this article, I will address the 10 most common bankruptcy questions that I received. Declaring bankruptcy is a big decision that no one really prepares for. But when you find yourself in such a situation, it is important that you ask your attorney as many questions as you can so that you get a good view of what you are getting into. When you file for bankruptcy, you could lose your property, credit cards, and credit score. With these questions, you can know if filing for bankruptcy is the right thing to do.
1. Will I retain ownership of my property after filing for bankruptcy?
When you file for bankruptcy, there is a high chance that you would lose some of your property, that is if you file for Chapter 7. This is one of the two types of personal bankruptcy and the most affordable option. If you file for Chapter 7, your assets will be liquidated to pay off your debts. However, you can exempt a certain amount of property from the liquidation process. If you go for Chapter 13, you can keep your property and still pay off your debt.
2. Will I ever build my credit score filing for bankruptcy?
When you declare bankruptcy, your credit score takes a hit which will stay on your credit report for 7 to 10 years. A low credit report usually means difficulty in getting a loan but when coupled with a bankruptcy filing, it could get even worse. However, you would be able to build back your credit score and gain back the trust of borrowers. All you must do is make better financial decisions that would boost your credit score. Most people recover their credit score within 2 years.
3. Which type of bankruptcy should I file for?
As an individual, you can file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is also known as straight bankruptcy and is the cheapest option to go for. If you want to go for Chapter 7, you should have mostly or only unsecured debts. These types of debt are loans taken without collateral. If you are unable to pay back and you file for bankruptcy, your assets will be sold off to pay your creditors and your debts will be discharged. If you have more secured debts than unsecured debts and you want to save your property, then you can file for Chapter 13. Rather than discharge your debt, you will set up a repayment plan. This plan would help you repay your debts within 3 to 5 years.
4. Will bankruptcy clear my debts?
As stated earlier, Bankruptcy can clear most of your debts, but not all, and that would depend on the type of debt. Unsecured debts are debts without collateral like medical bills, credit cards, and personal loans. These debts can easily be discharged. Secured debts like car loans and mortgage will not be discharged by the judge and you would have to pay up or lose your asset.
5. What does it cost to file for bankruptcy?
Filing for bankruptcy isn’t free and could cost you a couple of hundreds of dollars. However, that is not the main cost to worry about. Getting a lawyer to handle your case is usually expensive. On average, attorneys charge $1,500 and up for Chapter 7 bankruptcy while Chapter 13 costs more at $3,000 and up. If you are filing for Chapter 7, you will be required to pay your attorney fees upfront.
6. How long does the automatic stay order lasts?
An automatic stay refers to an injunction that goes into effect immediately when you file for bankruptcy. This means that your creditors will cease every debt collection process whether by calls, texts, or lawsuits. Generally, an automatic stay lasts until your bankruptcy case is completed.
7. What properties can be exempted from my bankruptcy case?
When you file for Chapter 7, you can exempt some of your properties from being sold off. Properties that can be exempt are usually those that are necessary for living. If you own valuable musical instruments (except you are a professional musician), stocks, several bank accounts, a collection of valuable items, another car, and another home, you may lose them all when filing for bankruptcy. The things that you are likely to keep include your main motor vehicle, public benefits, household appliances, clothing, and household goods. It is always best to consult with an experienced attorney who can walk you through the process and guide you on what property can be exempted from bankruptcy.
8. What does it take to qualify for chapter 7?
To qualify for Chapter 7, you would need to pass a “means” test. This test will determine if you can pay all your debts without filing for bankruptcy. It is best to get an attorney to assist you with calculating the means test. If you pass the means test, then you can go ahead with the bankruptcy process. If you fail, then that means you can pay off your debts with the right financial counseling. In that case, Chapter 7 bankruptcy is not right for you.
9. How can I get a bankruptcy lawyer?
There are many lawyers ready to take up a bankruptcy case so finding one in your area should not be hard. Thanks to the internet, you can get a lawyer with just a few clicks. All you must do is use the “Find an Attorney”: tool on the National Association of Consumer Bankruptcy Attorney’s website to get a bankruptcy lawyer within your region. You may have to try out different attorneys till you get one that can fit your budget. Note that the fees charged by attorneys vary. Fees depend on the type of bankruptcy you want to file for, the complexity of your case, the attorney’s experience, and the state you are filling in.
10. Anything to worry about?
While most people would not want the world to know about their financial affairs, you would have to give the world a peek into your finances when you file for bankruptcy. Immediately you make this decision, all your submitted files will be made available to the public for everyone to view. This means anyone – who knows what they are doing – can check up your income, debts, and assets.
Conclusion
While you can file for bankruptcy without an attorney, it would be unwise to do so. You may end up losing property you thought you could keep because you misinterpreted the law. Also, you would need an attorney to guide you through the process and determine if you really need to declare bankruptcy. I hope these short answers help you in deciding about filing for bankruptcy.
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ABOUT THE AUTHOR: Augusta Massey is the Founder and Managing Member of Massey & Associates Law Firm, PLLC, where she practices in the firm’s business law, bankruptcy, litigation, and estate planning department, among other areas. While in law school, Ms. Massey served as the Regional Director of the Thurgood Marshall Mock Trial Competition for the Southern Region Black Law Students Association, the President of the International Law Students Association, and President of the Association for Trial Lawyers of America. Ms. Massey was also the Champion of the Freshman Moot Court Competition, received a Best Legal Memorandum Award and three CALI Awards for Excellence in Trial Advocacy, Cyber Law, and International Business Transactions. Currently, Ms. Massey is President of the Las Vegas Chapter of the National Bar Association, a Nevada State Advisory Committee Member appointed by the U.S. Commission on Civil Rights, Top 40 under 40 award recipient of the National Bar Association, and a Judge Pro Tempore in Small Claims Court, Las Vegas, Nevada. To contact Ms. Massey, please visit www.masseylawvegas.com or www.mylegalbestfriend.com.
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