Answers to common bankruptcy questions
Image Source: Flickr User Alexander Henning Drachmann
Being stuck with debt you can’t afford is stressful and can rob you of quality of life and peace of mind. Bankruptcy is a potential solution to many (but not all) serious debt dilemmas. If you’re struggling with debt, you should ask yourself whether bankruptcy is right for you. A good starting point is with answers to these five common questions we’re asked by potential clients.
#1 What Exactly Is Bankruptcy?
Bankruptcy is a legal protection under federal law to help individuals, couples, and corporations that are buried in debt they cannot afford. It offers a fresh financial start. Based on the type of bankruptcy you choose (and whether you qualify), you can either try and catch up on past-due debt by going on a repayment plan, or get a clean slate by wiping out debt.
When debt is wiped out in bankruptcy, it’s called a “discharge.” Bankruptcy can help deal with unsecured debt including old utility bills, credit card bills, medical debt, personal loans, and some older tax debts. Depending on the type of bankruptcy you choose, you might also be able to get help with your mortgage, auto loan, and other secured debt.
#2 How Long Does Bankruptcy Take to Complete?
Chapter 7 bankruptcy is very fast. It takes three to four months from start to finish. If you don’t have a delinquent mortgage or auto loan, Chapter 7 might be the best solution for you. You simply bring in your financial documents, talk with a qualified, reputable bankruptcy attorney, complete your information, take care of your initial pre-filing credit counseling and then you’re ready to start.
With Chapter 13 bankruptcy, you can get started quickly, but the repayment plan will take three to five years to complete. The length of your plan is guided by how much secured debt you need to catch up on, your income, monthly living expenses, and other factors. Most plans are set up for five years, but it can be less. After you complete the plan, your Chapter 13 bankruptcy is complete.
#3 Can All Debt Be Taken Care of in Bankruptcy?
The short answer is no. If you owe child support and alimony, those debts cannot be reduced or eliminated in bankruptcy. There are also certain fines and fees owed to the courts that cannot be eliminated. Recent income taxes are also not eligible for discharge. Also, if you owe secured debt (such as a first mortgage or auto loan), you can’t keep the asset while discharging the debt.
However, you might be able to use bankruptcy to catch up on past-due amounts on your home or vehicle loan. Student loans aren’t routinely dischargeable in bankruptcy, but you can ask your lawyer to file an additional case called an adversary proceeding to try and get some relief. What debt you can discharge depends on your income, liabilities, and type of bankruptcy you file.
#4 Can You File Bankruptcy Without a Lawyer?
The short answer is yes - you can file bankruptcy without a lawyer. You can also defend yourself in a criminal case, but that’s not the wisest approach. Bankruptcy is a complex area of law, and without the proper knowledge of not only the law but the federal court system, you’re at risk of a poor outcome and less debt relief than is possible under the law.
The filing fees are the same whether an attorney files for you or you file for yourself, but the cost difference is the attorney fee. However, if your case is rejected because of your lack of expertise and you must refile later, you’ll pay more fees. And if you don’t prepare your petition properly, there’s a chance your debt won’t be discharged as it could have been, which can also cost you money in the end.
If you’re considering bankruptcy or are unsure whether bankruptcy is an option for you, the best approach is to set up a free bankruptcy consultation with a well-reviewed local attorney to discuss your debt, finances, and find out if bankruptcy is a solution that’s workable for you. Reputable lawyers offer a free consultation and will tell you if bankruptcy is a fit for your financial dilemma or not.
To find out more, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.