SHOULD I FILE PERSONAL
BANKRUPTCY?
What is bankruptcy?
Bankruptcy is the process of
organizing and dealing with your debts according to
the requirements of federal law. All debts and all
assets must be listed and reported and full disclosure
is absolutely essential to the process.
Am I filing in the right
district?
You must
file in the location where you have lived for the
greater part of the last six months.
What can my creditors do to me
after I file?
Creditors are forbidden from suing
or even contacting you or repossessing property after
you file (the "automatic stay"). If they need or want
to take some action they have to do it in the
bankruptcy court.
What do I need to bring to the
attorney the first time we meet?
You will need: (1) a list of ALL of
your creditors, including a specific mailing address
for the creditor, the amount owed, and a listing of
any collateral owed to the creditor; (2) a listing of
the monthly expenses you have to pay (food, utilities,
etc. ), before you pay other creditors; (3) evidence
of your income (pay stub, W-2, or letter from
employer.
Which chapter should I file?
The attorney will help you to
decide whether to file and what chapter would be right
for you. There are two chapters generally available to
individuals: Chapter 7 and Chapter 13.
Chapter 7 is also called
"liquidation" or "straight" bankruptcy. All of the
debts are forgiven, except nondischargeable debts,
such as some student loans and some tax obligations,
alimony and child support, and those debts where
creditors are holding collateral which the debtor
wants to keep. In those cases, the debtors, if behind
in their payments, will have to catch the payments up
and keep them caught up in the future, or make an
arrangement to refinance the debt. If you have very
little income and very little property, and don’t have
a problem with an arrearage on secured property,
Chapter 7 may be for you.
If you have money left over after
your rent or mortgage payment and your basic monthly
expenses, you may be eligible to file Chapter 13.
In this chapter, you will "refinance" your secured
debts and pay at least some percentage of your
unsecured debts over a period of three to five years.
The advantage is that you can avoid foreclosure or the
repossession of secured items through this procedure.
What about household goods?
Congress has decided that you
should not have to risk losing your household goods,
even if you pledged them as collateral, and these
liens can be set aside so they are treated like
unsecured creditors.
What property can I keep?
You may keep property allowed you
under the exemption laws. At the end of this
information, you will be asked questions about
non-exempt assets you may have.
If you own any property with net
market values above the exempt amounts, or if you fail
to list any property, you risk losing it to the
trustee and your creditors. Study carefully the
discussion of exemptions and exempt property which
follows. It is essential that you list the real market
values of your property, so that we can anticipate any
problems.
How should I value my residence?
As you will see, in North Carolina
debtors are allowed only $18,500.00 equity in a residence
($37,000.00 for joint debtors). This makes it essential
that you list an accurate value for your residence.
Tax values are some indication of market values, but
are not conclusive. Recent accurate appraisals,
comparable sales, and your knowledge of the condition
of your home should all be considered in your
determination of the market value. If you have actual
nonexempt equity, you risk losing your house (in Ch.
7) or may have a higher monthly plan payment (in Ch.
13.). This valuation is extremely important, both in
determining whether and which chapter to file, and in
how the trustee approaches your case. You will be
required to list the market value of your property,
and to justify those market values. Especially in the
case of your residence, and especially when you have
not procured a recent appraisal, determining this
market value can be difficult. We cannot furnish these
figures, and the figures listed on your petition are
yours alone.
What about tax refunds?
Be sure you list any tax refunds
you expect. You may be allowed to keep them, if they
are exempt and if you have disclosed your entitlement
to them. Make sure this information is on the
paperwork you complete for us, that it is on your
finished petition, and that you keep us updated in
writing concerning your entitlement to them. Do not
cash or use a tax refund without asking us first.
What are the fees?
In Chapter 7, the attorney's fee is
generally $1200.00, payable before the filing of the
petition. In Chapter 13, the fees are $3000.00; our
firm charges $750.00 before the filing of the
petition, and the balance will be due through your
payments into the plan. The Chapter 13 filing fee,
which goes to the court, is $274.00. The Chapter 7
filing fee is $299.00. In either chapter, these fees
cover "base" legal services connected with the filing
and preparation of your petition, appearance at the
first meeting, and other matters that go along with
those things. They do not cover expenses in connection
with later motions to be filed or later matters which
arise, and additional fees may be owed for these
matters. In a Chapter 13 case, you will be furnished a
disclosure form to read and sign, and this form states
what “base” fees are covered by initial fee; the
attorney may make application to the court for the
approval of additional fees to be paid as part of your
plan payment. In a Chapter 7 case, you may be billed
directly for additional fees. NOTE: Once you have paid
your fees, our office will be put to a considerable
amount of effort to set up your file, consult with
you, prepare the petition, and procure information.
Should you later decide not to file, or should we be
unable to file your petition because of deficient or
wrong information supplied us, or for any other reason
which makes filing impractical or not in your best
interests, your filing fee will be returned; however,
part or all of the attorney’s fees may be retained in
consideration of the work we have performed. Do not
retain us if you don’t want to file.
Your signature at the bottom of
this document CONSTITUTES A FEE AGREEMENT. It will
note your understanding and your consent to these
terms, should you decide to retain us.
What about our credit?
Some creditors may want to extend
credit in the future; some may not. You may be treated
better if you have filed Chapter 13 than if you have
filed a 7. In any case, if you plan to rely on credit
purchases in the near future, you should probably not
file bankruptcy; if you plan to continue to rely on
some particular type of credit, you must discuss it
with us first. Bankruptcy filings can be listed in
credit reports for up to 10 years after filing a
Chapter 7 case and for seven years after filing a
Chapter 13.
What about our credit report?
Many folks attempt to procure a
full listing of their debts by getting a copy of their
credit report. It is not meant to be a full listing,
and should not be relied upon to furnish us a listing
of all of your debts. Moreover, the filing of a
bankruptcy petition may or will not “take debts off”
your credit report. You are entitled by federal law to
an accurate credit report.
Where is the bankruptcy court
located?
The court is at 401 West Trade
Street, Charlotte. Other
places where first meetings of creditors are held are:
(for Lincoln County Residents) the federal building in
Wilkesboro and (for Cleveland County residents) the
courthouse in Shelby.
What notice will I get?
After your filing, you will
receive, within a week or so, a notice of a first
meeting of creditors to be held in your case within
the next few weeks. Please call our office when you
have received it to confirm that you have and to
assure us that you can be there. If you are not, your
petition can be dismissed.
What information do I give?
You must furnish all
information about all debts and all
assets. There are very serious penalties involved with
not making a total disclosure on your bankruptcy
petition. Debts garnished or withheld, including 401k
loans, are still debts and must be listed. Be very
sure that you tell the attorney about any unusual
aspects of your financial situation, including any
transfers of any sort made within the last year. When
you come back to review your petition before filing,
draw any errors or omissions to the attention of the
attorney, and make sure your information is accurate
as of the date of the filing. You will be responsible
for the information contained in the typed petition as
it is shown to you. Furnish all information to us in
writing and make sure it gets into your petition
accurately. Debts not listed will not be discharged.
CHAPTER 13
What payments would I have every
month?
Your payments will consist of: (a)
your payments of the regular expenses you put in your
budget; (b) your plan payment: (c) current mortgage
payments on a residence you own and want to keep. Your
regular mortgage payments, direct to the creditor, are
due beginning with the first month after filing,
regardless of the date of the first meeting of
creditors. Be sure to keep accurate records of these
payments. If you are behind on your mortgage payment
on the date of filing, this arrearage amount can be
included in your plan. The other debts will be paid
through the plan. If you file a Chapter 13 petition,
the first monthly plan payment will be due ten days
after the filing of the petition. Payment must be by bank or
cashier's check or money order. The Trustee will not
take cash.
Do I have to list all debts and
assets?
Absolutely. If you have a concern
about how to treat a specific debt, we can discuss it;
but you must list all debts and assets.
How and where do I make the
payments?
Payments are made every month, at
or before the first meeting of creditors, to a trustee
who will forward it on to the creditors. Payments are
to be made by certified check or money order, not in
cash. Keep your receipts.
The first month's payment must be
paid within 10 days of the filing of the petition. If
you do not have first money ready, your plan will be
dismissed.
Who gets paid, and how much?
Your plan will be designed to pay
all of your secured creditors (those holding
collateral) and at least 10% to unsecured
creditors (everyone else). Any attorney's fees
remaining or later ordered by the court are also paid
through the plan. The trustee is paid a percentage of
what you pay him.
What if I get behind?
If something happens and you cannot
make a payment, call us. It may be that we can ask the
court for more time to pay, a reduction in payment, or
convert to a chapter 7 proceeding. If you get behind
and take no action, your wages can be garnished and/or
your plan will be dismissed. If you get behind in your
current mortgage payments, the creditor can ask the
court to allow foreclosure.
Could the payment end up being
more than we propose to the trustee? YES.
The debts may be more than we planned, or the trustee
may want to treat some creditors differently. Our
proposed monthly payment is generally as small as we
can make it. You should expect that the trustee will
"up" the plan payment, perhaps considerably, from what
we have proposed.
How could I reduce my plan
payment?
The more secured debt exists, the
more the monthly payment must be to pay it. If you
allow the repossession of secured items, for example a
car with a lien on it, the payment can be reduced by
that amount.
Does the trustee have an
interest in our finances during the duration of the
plan?
Absolutely. You must report to the
trustee, through your attorney: any significant change
(of more than ten per cent) in your income; any
significant assets, inheritances, of gifts that come
into your possession; or anything that affects your
ability to make your plan payment. All new credit to
be incurred is subject to the approval of the trustee.
If you want to refinance or sell houses, cars, or
anything else, the trustee must approve prior to that
taking place.
What about student loans and
taxes?
Student
loans and taxes due must specifically be taken care of
through the Chapter 13 plan; otherwise, you may find
them due and owing after your discharge at the end of
the plan.
What about important financial
events during the course of the Plan?
Because your
income and expenses remain the concern of the Trustee
during the course of the Chapter 13, any important
financial change, such as: job changes, money
borrowed, new credit incurred, new purchases,
inheritances, accidents, insurance reimbursements,
401K withdrawals—--is subject to reporting
requirements. If you are planning such a change, it is
essential that you notify us first, and in writing.
Otherwise, you may have violated a rule of the Court
or created a problem which cannot be solved. If for
any reason you cannot follow this rule of the court,
you will not want to be in Chapter 13.
CHAPTER 7
Can I keep property held as
collateral?
You can usually either continue
regular monthly payments on secured property, if the
payments are caught up, or turn the collateral back to
the creditor.
What happens to the rest of my
property?
All property which is not exempted by
law becomes property of the estate. Allowable exemptions
are as follows:
* $18,500.00 equity in real property
used as a residence per debtor ($37,000.00 for joint
debtors);
* To the extent that the first
$5,000 of this exemption is not used, a “wild card”
exemption in any property;
* $3,500 equity in one motor vehicle
per debtor;
* 5,000 equity in household goods
per debtor.
Other exemptions for ERISA-qualified
accounts, retirement accounts, personal injury proceeds,
equity in insurance policies, tools of the trade, and
various other items. The attorney can discuss the
specifics of these exemptions; however, you need to know
that property owned and not specifically exempted will
become property of the trustee. The lawyer can tell you
exactly what exemptions you will be entitled to. If you
own anything not covered by these exemptions, you will
lose it to the trustee in Chapter 7. THE TRUSTEE CAN
ALSO TAKE PROPERTY CONVEYED TO SOMEONE ELSE OR PAYMENTS
MADE TO REPAY CERTAIN DEBTS TO FAMILY MEMBERS AND OTHERS
UP TO FOUR YEARS BEFORE FILING. If you have made any such
transfers, BE SURE AND TELL THE ATTORNEY and listen
carefully to his advice concerning the transfers.
Are all of the debts discharged in
a Chapter 7 bankruptcy?
No. Certain debts, such as taxes,
alimony, child support, penalties, and student loans,
are or could be "nondischargeable". Be sure to ask the
lawyer about these and to list them. If you had a recent
divorce settlement or are in a divorce, be sure and
disclose all facts.
I want to file. What should I do
next?
1. Call for an appointment;
2. Take this completed and executed
information sheet and your fees with you when you go to
the appointment. Note above: we do not take personal
checks.
3. The attorney or secretary will
give you additional forms to fill out and make another
appointment to have them returned and reviewed. If you
do not fill them out completely, we cannot complete your
petition.
4. Follow the directions on the forms
and the further directions of the attorney. We will
prepare the petition and you will have another
appointment to review thoroughly and sign. At or shortly
after that time, we will electronically file your
petition. Approximately a week later, you will receive
notice of a First Meeting of Creditors, at which the
bankruptcy trustee and interested creditors can ask
questions about your filing. We will be at the first
meeting and can offer direction in all of these steps in
the process.
5. Answer the following questions
thoroughly:
I have carefully read and
understand all of the foregoing and understand my
obligation to list all of my debts and assets in the
written information furnished to my attorney.
Yes___ No___
I believe I have property which may
be nonexempt, as follows:
I may
have more than $18,500.00 equity in real estate per debtor.
Yes__ No__Don't know ___
I may
have more than $3,500.00 equity per debtor in an automobile.
Yes__ No__Don't know ___
I may
have household items valued over $5,000.00 per debtor.
Yes__ No__Don't know ___
I have
any other substantial asset, including money in
accounts.
Yes__ No__Don't know __
I have
tools, life insurance, or other property.
Yes__ No__Don't know __
I am
entitled to a tax refund for the last year.
Yes__ No__Don't know __
I have additional questions about any
of the above information and need to speak to the
attorney about them.
Yes__ No__
I have consulted with another
attorney regarding filing bankruptcy. Yes__ No__
I understand all information
regarding fees and accept the above as a fee agreement
between myself and the attorney. I understand that
attorney’s fees paid today are nonrefundable.
Yes__ No__
(If Ch. 13) I understand that all
important financial changes during the Plan are subject
to reporting requirements.
Yes__ No__
I understand that I must discuss all
future intentions to rely on credit with the attorney.
Yes__ No__
I have not made any payment or
transfer of money or anything of value, outside of
ordinary payments to creditors, within the last year.
True_____ False _______
I have not given money or anything of
value to any family member or friend within the last
year (including a spouse if I am married and filing
singly).
True_____ False _______
I have had a
recent insurance, personal injury, or Workers
Compensation settlement or expect one in the future.
True______ False
_________
I (we) have
read and understand the above; specifically consent to
the terms regarding fees and understand them; and
understand that our signatures indicate our wish that
you proceed with the processing of our case.
__________________________
__________________________
Client Client
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