Can bankruptcy help me?
If you are over your head in debt, probably the bankruptcy laws can help you. One of the major aims of the bankruptcy code is to assist a financially distressed person to get back on his own feet and become a productive member of society again. Your bankruptcy case normally results in the discharge or release from obligations of your debts -- or, at least, of many of them -- so that no further legal action can be taken against you on those debts. In short, your discharge in bankruptcy gives you a fresh start.
"But" many people ask, "Won't I have to give up all of my property if I file bankruptcy?" The answer is no. Tennessee law recognizes that some things are necessary for a person's comfort and survival. Certain property, including your working tools, insurance, household furnishings, radio, television, musical instruments, some bank, savings and loan or credit union accounts, your home, and other property that you own, may be exempt from unsecured creditors -- which means you will be allowed to keep them -- if the value of your equity in them does not exceed certain amounts, and if proper steps are taken to claim the exemption. Most debtors have no assets that exceed the exemption amounts.
Many debtors have purchased cars and other personal property on installment sales contracts. Such debts are called "secured" and the exemptions generally do not apply to them. Under the bankruptcy code, the court must approve any reaffirmation of consumer debt. If you want to keep the collateral, the court will only approve reaffirmations that are in the best interest of the debtor. You may expect that the court will approve , reaffirmation agreements with secured creditors only if income after bankruptcy allows you to make the payment in the agreement. Some liens on furniture and household goods may be avoided by bankruptcy if they were used as security for a personal loan that was made after you had purchased the furniture or household goods. Loans made to you to purchase assets normally may not be avoided.
Debts secured by a mortgage or deed of trust, on your home or other real estate, generally will not be affected by a liquidation-type bankruptcy if you have little or no equity in the real estate -- you will have the choice of keeping the property and paying that debt or surrendering the home to the lender. If you are seeking to avoid foreclosure of your home, you should consult an attorney about filing a Chapter 13 or Chapter 11 bankruptcy case.
Some debts are not discharged by either type of bankruptcy. These include most taxes, child support, spousal support, most student loans, and debts resulting from submission of false financial statements or other similar fraudulent conduct and debts arising from the willful or malicious injury to another's person or property. A debtor faced with this type of debt should review his situation with his attorney to determine the best way to deal with these debts.
In a Chapter 13 case, the debtor proposes for court approval a plan to pay all or some part of his debts. The court may approve the plan if it is proposed in good faith and will result in the unsecured creditors receiving at least as much as they would receive in a Chapter 7 bankruptcy case. It must also meet certain other requirements. These include submission of part of the debtor's future earnings to a trustee to use in completing the plan. Even some small businessmen can use Chapter 13 now.
Most of us try to plan our affairs so that debts do not get out of hand. Sometimes, though, unexpected expenses or losses can upset our plans. Others of us are just careless. Whatever the cause, if you find yourself hopelessly in debt, bankruptcy may give you an opportunity to start over. However, if you have received a previous Chapter 7 discharge, there is an eight (8) year limit before you may file for another Chapter 7 discharge. If you had a previous bankruptcy, there are other time limits that may affect the protection you receive from filing a Chapter 13 bankruptcy.
There are alternatives to bankruptcy which you should investigate. Financial counseling is available through Consumer Credit Counseling. They provide budget counseling and voluntary repayment programs between clients and creditors. You may contact them at 490-5620. Additionally, you may want to consult with your creditor about working out a payment plan instead of filing bankruptcy. Most creditors would rather work something out than force someone into bankruptcy.
Under recent changes to the law, all debtors must undergo credit counseling from a court-approved credit counseling provider before filing for any type of bankruptcy. Each debtor must also undergo a personal financial management course before becoming eligible for a discharge in any type of bankruptcy case. A list of these providers and the cost of the program is available on the Bankruptcy Court website – www.tneb.uscourts.gov.
If you want to know more about bankruptcy, as well as the proper procedure for filing a bankruptcy petition, call back and request LAWLINE Number 1201, entitled "How Do I File a Bankruptcy Petition?"
How do I file a bankruptcy petition?
What are the procedures involved in filing a petition for relief under the Bankruptcy Code? The procedures for filing a bankruptcy are as follows:
- The individual filing bankruptcy must have received credit counseling from an approved, non-profit budget or credit counseling agency within six months prior to filing of the bankruptcy and proof of that counseling must be filed with the Court.
- A bankruptcy petition, schedules of assets, debts and an accurate mailing list of your creditors must be filed with the Bankruptcy Court on approved bankruptcy forms.
- A statement of financial affairs involving your finances for the last two to three years must be filed with the Bankruptcy Court on approved bankruptcy forms.
- In addition, information from your previous two years tax returns as well as paycheck stubs for all wage earners for the sixty (60) days before bankruptcy will be required to be filed.
- A filing fee of $299 for a Chapter 7 and a filing fee of $274.00 for Chapter 13 , must be paid. If you cannot afford the fee, you may apply to the Court for permission to pay the filing fee in installments, but generally not for a period of time longer than 90 days.
The Court will notify your creditors of your filing, and you will be required to attend a meeting of your creditors at which you will be required to answer questions about your assets and financial affairs. This is a face-to-face meeting generally held approximately 30 days after filing and all individuals filing bankruptcy are required to attend this meeting. In a Chapter 7 liquidation case, the Court will appoint a Trustee, whose duties will include reviewing the financial information you have filed, selling non-exempt assets, reviewing any claims filed by creditors, and dividing the proceeds of asset sales among your creditors. The Trustee will question you about your property and the schedules you have filed at the meeting of creditors.
Some of your property may be exempt from the claims of your creditors. These exemptions are governed by Tennessee Law and the following is a list of SOME of the exemptions but not all of them: certain retirement plans and IRAs are completely exempt, some insurance benefits including health, accident or disability benefits, tools of the trade, the debtor’’s interest in personal property up to a value of $4,000 per person and certain homestead exemptions may be available in real estate that the debtor owns and resides in at the time of filing.
It is vitally important that you keep the Court advised in writing of any changes in your mailing address, as notices are mailed.
You will have certain duties which you must perform if you file a petition for relief under the Bankruptcy Code. You must do everything reasonably necessary to cooperate with the Trustee by attending required court appearances, providing truthful testimony and truthful disclosures in your bankruptcy papers and preserving financial information and providing that financial information to the Court or to the Trustee as required. If the Trustee or a creditor were to file an objection to your discharge, you may have to appear in Court in response to that filing.
You may wonder if you need an attorney in order to file bankruptcy. The law does not require an individual to have an attorney. However, your bankruptcy may be complicated depending on your individual situation and an experienced attorney can help you determine what is best in your situation. Depending on when your petition is filed, you may find that the assets you have transferred to your creditors, friends or family may have to be returned to a bankruptcy Trustee. The Bankruptcy Code provides the Trustee strong remedies to reverse transfers of assets that have occurred within various time periods prior to the filing of the bankruptcy. Recent changes to the bankruptcy law have made the filing more complicated, therefore requiring a more thorough review before the bankruptcy is filed. Further, you will not be permitted to file bankruptcy for a Chapter 7 discharge again for eight years. Omitting or improperly listing creditors can result in you still owing these debts after the bankruptcy has ended.
Some of your property, which can be made exempt from the Trustee's taking, will be exempt only if you take certain steps to complete the exemption before you file bankruptcy. Appropriate insolvency planning before your petition is filed can often save you money in the long run. Moreover, there may be problems with respect to the discharge of certain debts. These problems should be discussed with an attorney before Bankruptcy is filed, as they may make it unwise to file Bankruptcy at this time.
A Chapter 13 Wage Earner Plan can be used to avoid many of the difficulties debtors formerly encountered under prior Bankruptcy Law. It allows you to repay creditors out of future earnings while retaining your property. A Chapter 13 requires the debtor to submit a proposed plan to pay his/her debts over a period of time not to exceed five years. Your attorney should be able to assist you in choosing whether a Chapter 13 Wage Earner Plan would be better for you than a Chapter 7 Liquidating Bankruptcy.
If you are facing a foreclosure or if you own a business that is in financial trouble, you must address the matter immediately because some of the requirements for filing a bankruptcy may not be able to be met before the foreclosure. You and your attorney will need to address these issues as soon as possible to try to have the bankruptcy filed before foreclosure occurs.
Guidance in deciding what type of case, when or if you should file, and other problems, may well require the attention of an attorney, preferably one with substantial experience in Bankruptcy Law.