Bankruptcy FAQ

List of Frequently Asked Bankruptcy Questions (see below for questions & answers):

1. What types of bankruptcy are generally available to individuals and couples?

An individual or a couple may file a Chapter 7, Chapter 11 Chapter 12 or Chapter 13 bankruptcy case, depending on the facts and circumstances of each individual case. However, over 99 percent of the bankruptcy cases filed in Georgia by individuals or families are filed as either a Chapter 7 case or Chapter 13 bill consolidation.

Individuals can file a Chapter 11 case to reorganize their debts. However, because of the expense and complexity of filing a Chapter 11 case, it is often impractical for an individual or family to file a Chapter 11 Reorganization. Chapter 11 Reorganizations are generally filed for corporations, business partnerships, or individuals who cannot otherwise qualify for a Chapter 7 or Chapter 13 case. Chapter 12 cases are restricted to farmers.

2. How do I know under what Chapter I will qualify to file?

It is sometimes difficult to determine immediately whether an individual should file a Chapter 7 or Chapter 13 bankruptcy case. Each individual or family case must be analyzed separately given the unique facts and circumstances of that case. Generally, we first determine whether someone qualifies for a Chapter 7 case. If the client does not qualify for a Chapter 7, then we look at the effect of a Chapter 13 case. Under current bankruptcy law, an individual can usually qualify for a Chapter 7 case if the average household income per family of the same size does not exceed the “median income” in Georgia. The median income tables are routinely updated, and can be reviewed at http://www.thebklawyer.com/thebkblog/current-median-income-table-for-georgia/l. If a household median income is less than provided for Georgia in the tables, the individual will generally qualify for Chapter 7. However, even in cases where the household income exceeds the median income, it may be possible to qualify for Chapter 7 relief. However, a detailed analysis of the facts and circumstances would be required.

3. Will a bankruptcy case stop a garnishment of my wages, repossession of my car, foreclosure against my house or a lawsuit that has been filed against me?

Filing a bankruptcy case under any chapter of the Bankruptcy Code automatically prevents a creditor from moving forward with repossessing your automobile, foreclosing on your house or obtaining a judgment against you. It can also immediately stop a garnishment of your wages if a creditor has already begun that process. In the event of a repossession of your automobile, it is possible that even after the automobile is repossessed, a bankruptcy filing can force the creditor to return the vehicle to you. In the case of a home foreclosure, you must file your bankruptcy case prior to the scheduled foreclosure sale. Once the foreclosure sale occurs, it is too late to save your house through a bankruptcy filing. In the event you are facing a repossession of your automobile, foreclosure of your home, lawsuit or garnishment of your wages, you should contact us at the earliest possible time to protect your assets. Bankruptcy case preparation is not as easy and fast as it has been in the past; it takes more time, effort and information to have a petition prepared. Therefore, you should not delay until the last minute to protect your assets.

4. What facts determine whether a Chapter 7 or a Chapter 13 will provide the most relief?

In addition to determining under what Chapter of bankruptcy you may qualify, we also analyze the effects of both a Chapter 7 and Chapter 13 on your individual situation. Every case is unique, but there are general rules of thumb that impact the decision regarding which Chapter to file. Generally, clients are better off filing a Chapter 7 case when the client:

• maintains high credit card balances with no reasonable expectation that they can have them paid off within a reasonable time;
• maintains high medical bills that cannot be repaid;
• is served with an unexpected lawsuit that may result in a garnishment of wages;
• has had a significant change in circumstances such as a loss of job or recent divorce.

A Chapter 13 is most often utilized when a client:

• is facing a mortgage foreclosure and would like to catch up on the past-due payments and keep the house;
• is facing repossession of an automobile and needs to restructure payment of the loan;
• had a temporary interruption in income and needs to restructure the repayment of outstanding debts;
• is unable to qualify for a Chapter 11 discharge based upon too much equity in property or too much household income;
• wishes to repay as much of the debt as possible.

Please contact us to schedule an appointment with a board-certified bankruptcy law attorney to discuss the particular circumstances of your case and what chapter of bankruptcy may be right for you.

5. If I file bankruptcy, will my spouse have to file bankruptcy as well?

No. It is not required that both a husband and wife file bankruptcy if one of them files bankruptcy. In some cases, it is necessary and advisable for both spouses to file because both the husband and the wife are liable for the debts. However, just because one spouse files bankruptcy the other spouse does not always have to file bankruptcy. Additionally, even if one spouse files bankruptcy, that bankruptcy filing will not affect the credit rating of the other spouse unless the nonfiling spouse has debts jointly with the filing spouse and does not make payments on those debts.

6. Will notice of a bankruptcy filing be published in the newspaper?

No. Bankruptcy court filing information is considered public information. However, the notices of filings are not generally published in the newspaper. The only entities that receive regular notices of a bankruptcy filing are those listed as creditors or other interested parties in the bankruptcy schedules.

7. What are the costs for filing bankruptcy?

The filing fees and court costs are determined by the courts. The attorney fees for filing a bankruptcy case vary based upon the individual facts and circumstances of each case. For Chapter 13 cases, the United States Bankruptcy Court for the Southern District of Georgia has set a standard fee of $2,500. Some or all of this fee may be paid in installments through the Chapter 13 Plan of Reorganization. Chapter 7 attorney’s fees are not set by the court and normally run between $800 and $2,000. However, this is just a rough estimate, as each case must be analyzed differently based upon the individual needs of the client.

8. How do I choose a bankruptcy attorney?

It is necessary for you to choose a bankruptcy attorney with whom you will be comfortable. Todd Boudreaux has previously served as staff attorney for the Honorable John S. Dalis, United States Bankruptcy Court Judge for the Southern District of Georgia, Augusta Division. He has been in practice for almost 20 Years and has been certified as a consumer bankruptcy law specialist by the American Board of Certification. He is also a member of the American Bankruptcy Institute and has handled thousands of individual and business bankruptcy cases. A list of attorney’s certified as specialists in bankruptcy can be found at www.abcworld.org.

In addition to finding an attorney who is qualified to handle your specific case, it is also important to find a law firm that provides you individual attention from its attorneys, rather than staff members. At Shepard, Plunkett, you will meet with an attorney, not a secretary, to review the facts and circumstances of your specific case. Although we have many staff people who will contact you for information and will be working on your case, everything prepared for your case is reviewed under the supervision of our attorneys who are responsible for handling your legal needs.

9. How do I get started with the bankruptcy process?

Please contact us for a free initial consultation regarding your specific needs. At your initial consultation, you will meet with an attorney who will need to obtain from you the information contained on our short-formed questionnaire. Based upon the information you provide, we will give you general advice regarding your legal rights regarding the benefits and costs of filing a bankruptcy case. After the initial consultation, we will ask that you provide to us the information required under our long-form questionnaire. The information from the long-form questionnaire will provide us the information to handle your specific case. Please feel free to contact us to get specific information regarding the process to file bankruptcy.

10. What effect will filing bankruptcy have on my credit?

The answer to this question varies from person to person. However, if you have already had a series of late payments on credit cards, car payments or your mortgage, it is likely that your credit score has already been impacted. Bankruptcy filing will often not significantly lower your credit score much more than it has already been damaged. Information regarding a bankruptcy case filing is listed on your credit report for up to 10 years after your discharge. However, that does not mean you will not be able to obtain credit during those 10 years. Often, a Chapter 7 case filing will shorten the time that it takes to improve your credit score, as it provides a discharge of all of the outstanding past due debts that have been lingering for years and allows you to start over. If after receiving a Chapter 7 discharge you stay current on any car payments, house payments or utility payments that are in your name, you will be able to rebuild your credit within a couple of years. At that time, creditors view you as a good credit risk, as you have already discharged all of your debts, and may otherwise have good income to pay additional loans. Additionally, they know that you will not be able to file bankruptcy again for a period of time, further protecting their new loans. Because every case is different, please contact us so that we can discuss the impact a bankruptcy case will have on your credit.

11. What are the most common mistakes people make when faced with a potential bankruptcy case filing?

Despite the fact that most people who file bankruptcy do so not because they have acted irresponsibly or are cheating the system, the media and credit card companies attempt to portray people who are in need of bankruptcy relief as doing something legally or morally wrong. In fact, most people who are required to file bankruptcy do so because of unexpected circumstances such as a severe medical condition, loss of job, divorce, or some other unforeseen circumstance. When people find themselves in these unforeseen and unavoidable circumstances, they often take action that they think may help them avoid bankruptcy or they think will make the bankruptcy go more smoothly. But in fact, some of those steps hurt more than they will help. The most common mistakes we see are listed below:

A.Taking out a 401(k) loan, pension loan or retirement account distribution to pay credit card debts.

Credit card companies and collection agencies will often call and send letters over and over again in an attempt to intimidate individuals into paying debts. One solution the debt collectors often propose is for the individual to take a distribution or loan from a retirement account. Retirement accounts cannot be involuntarily seized by a creditor, whether or not you file bankruptcy. Laws have been written to protect retirement accounts in almost every circumstance. Therefore, if you take a loan or distribution from a retirement account to pay a credit card bill, you will lose an exempt asset to pay a debt that is dischargeable in bankruptcy. Prior to taking a retirement account distribution or loan against a 401(k), please contact us to speak with a bankruptcy attorney to discuss the effects of that distribution.

B. Making large purchases or cash advances on a credit card immediately prior to filing.

The Bankruptcy Code gives protections to credit card companies when an individual makes a cash advance or purchase within 60 days of the case filing. This can include balance transfers from one credit card to another. If you have made significant purchases, cash advances, or balance transfers on your credit card, it may be necessary to delay the filing of a bankruptcy case. However, even if those events have occurred, you should contact us to discuss your financial situation without waiting for those transactions to clear.

C. Repaying family loans prior to filing.

Often when an individual is in financial hardship, they turn to family members or friends for financial help. When a person faces bankruptcy, they often attempt to pay those friends and family members prior to filing. That is often not advisable, because a trustee in bankruptcy may be able to pursue those family members or friends to recapture the money that was paid to them prior to the bankruptcy case filing. It is better to wait to repay those family members and friends after the bankruptcy case is discharged (even though a person receives a bankruptcy discharge of their debts, nothing prohibits that person from voluntarily repaying any of the discharged debts). If you are facing a tough financial situation where you think you may have to file bankruptcy, <contact us before repaying family members and friends to discuss the potential impact on a bankruptcy case filing.

D. Transferring assets before filing bankruptcy.

In an attempt to protect their assets from creditors, individuals often transfer assets out of their name prior to filing bankruptcy. However, all transfers of assets will need to be disclosed in your bankruptcy case. Additionally, a bankruptcy trustee has the power to avoid a transfer of assets made immediately prior to a bankruptcy case filing and to liquidate that asset for the benefit of creditors. Often, we can protect your assets with the available exemptions of property. The benefit of those exemptions disappears if you transfer away your assets prior to filing. Therefore, it is often better to leave the assets in your name so that you can exempt them rather than transfer them away, causing you to lose the protection of your exemption after you file bankruptcy.

E. Waiting until judgments are entered before filing bankruptcy.

If you have been served with a complaint or lawsuit seeking to collect a debt, it is advisable that you file a bankruptcy case before a judgment is obtained, rather than waiting until after a judgment is obtained. Once a judgment is obtained, it is recorded as a lien against all of your property. Although there are bankruptcy procedures that can remove that lien from your assets, it creates additional work and cost, and there is no guarantee that it will be successful. As soon as you have been served, you should contact us to discuss the possibility of bankruptcy prior to a judgment being entered against you.

F. Giving post-dated checks to creditors.

Giving a creditor a check when there are no funds in your checking account could potentially constitute a crime under the laws of the state of Georgia. Often, creditors will pressure a person to provide a post-dated check or a series of post-dated checks that are supposed to be held until there is money in your account to cover the check. However, even if you post-date the check, the creditor is entitled to deposit that check immediately, and is not required to wait until the date on that check. Instead of giving a creditor a post-dated check, it is better to insist upon giving a check to the creditor only when there are sufficient funds in your checking account to cover that check.

12. Isn’t credit counseling an alternative to bankruptcy?

Consumer credit counseling agencies are sometimes used by individuals as an alternative to filing bankruptcy. Additionally, attending a credit counseling session and obtaining a certificate is required for any individual who wishes to file bankruptcy. However, the benefits provided by a credit counseling agency are limited compared to the relief that can be obtained in bankruptcy. Any individual considering credit counseling should also schedule an appointment for a free bankruptcy consultation to be fully informed of the limitations and benefits of each option.

Credit counselor and debt-management plans are geared to steer people away from bankruptcy. However, according to the National Foundation for Credit Counseling, of the 3.2 million people who utilized certified credit counseling agencies, approximately one-third (1/3) received absolutely no assistance because they either had too little income, too little debt, or the wrong types of debt (medical bills instead of credit cards) and therefore could receive no assistance from credit counseling. Additionally, of the one-third (1/3) of individuals who were able to enroll in a debt-management program, the dropout rate averaged at least forty-five percent (45%). At best, fewer than twenty percent (20%) of people who contact credit counseling agencies are considered a success story.

13. What are the differences between the relief obtained from credit counseling as opposed to bankruptcy?

Credit counseling agencies can only assist clients with credit card bills, and only if all of the credit card companies agree to the proposed credit counseling plan. Credit counseling agencies are largely funded by grants from the credit card industry, and can only propose plans that meet the guidelines accepted by the credit card companies. The credit counseling agencies have no standing agreements with hospitals, doctors, other medical care providers, loan companies, banks, automobile financiers, home mortgage companies or other business lenders and therefore cannot adjust those debts.

Many individuals seeking credit counseling cannot afford the payments that the credit card companies will accept. Because the credit counseling is limited to adjusting payments on credit cards, it does not help an individual catch up mortgage payments that are past due, prevent repossession of an automobile or stop collection of medical bills or other past due accounts. On the other hand, a bankruptcy can address all of the issues faced by an individual in financial distress. A Chapter 7, 11 or 13 bankruptcy case can stop foreclosures, prevent repossession of automobiles and provide an opportunity for individuals to address all of their financial concerns.

14. What should I do if I think that we need to file bankruptcy?

When individuals begin to feel overwhelmed by their financial circumstances, the worse thing they can do is ignore the problem and hope that it will go away. As soon as individuals feel that their finances have gone out of control and they may need bankruptcy assistance, they should do the following:

1. Educate yourself about the process. Most individual bankruptcy attorneys will provide a free consultation to explain all of the options in bankruptcy. You can contact us for a free consultation with a certified consumer or business bankruptcy specialist who will evaluate your individual circumstances and explain all of the available options, benefits and limitations that the Bankruptcy Code can provide.
2. Pull your credit reports. A free copy of your credit report is available at http://www.annualcreditreport.com/ (not “freecreditreport.com”). Obtaining a copy of your
   credit report will provide more accurate information regarding the number and amount of past due debts outstanding.
3. Compile all of your paperwork. Filing bankruptcy requires a large amount of paperwork. You will need to provide for analysis of sixty (60) days of income information such as paycheck stubs, three (3) months of checking and savings account bank statements, tax returns for the previous two (2) years, statements from all brokerage accounts and retirement accounts, copies of recent monthly bills, copies of collection letters, loan contracts, lease contracts, home appraisals, and copies of any lawsuits, wage garnishments, divorce decrees, court orders and child support orders.
4. Don’t delay addressing the problem. Both bankruptcy and nonbankruptcy financial advisors repeatedly advise individuals not to delay seeking help. By seeking a free consultation before matters spiral out of control, you may receive assistance to either avoid filing bankruptcy or to maximize the benefits that bankruptcy can provide. By not seeking immediate advice from an experienced bankruptcy attorney, you may pay bills or debts that do not need to be paid. Contact us for a free consultation with a certified bankruptcy expert so that we can discuss many of the common mistakes people make when faced with a potential bankruptcy case filing.

15. Should I consider retaining the services of a debt consolidation company?

Many companies are advertising services for debt consolidation. The majority of these companies are for-profit companies, as opposed to legitimate nonprofit credit counseling agencies. The majority of these debt consolidation companies do not accurately or openly disclose the actual costs and fees paid to the consolidation company, and do not disclose that any settlement must be approved by the credit card companies, and will not be made until all of the fees for the debt consolidation company are paid. In many cases, individuals are sued by the credit card companies before the debt consolidation companies have even collected the full amount of their retainer. Before engaging the service of a debt consolidation company, please contact us for a free consultation to compare the costs and benefits of a bankruptcy filing prior to signing a contract with a debt consolidation company.