Most Frequently Asked Questions and Free Initial Consultations
1. Will I lose my house or car in Bankruptcy?
Most people don’t lose their house or car in bankruptcy if they are current on the payments and can make payments in the future. In Maine, an individual can protect between $47,500 and $95,000 in value above the debt in his or her residence. Individuals can protect up to $5,000 of value in one motor vehicle. A married couple could protect $95,000 in their home and $5,000 each in two cars. If there were excess value, a Chapter 13 reorganization offers the time to pay that value over up to 5 years. If you cannot afford to make ongoing payments, you may surrender the property and you won’t owe the creditor anything afterwards.
2. Can I repay my family before filing or give away property?
You should not make any large payments to a friend or family member or transfer any property in exchange for less than full value within one year before you file your case. In addition, Maine has a 6 year fraudulent transfer law that would allow your creditors or the Trustee acting on their behalf to sue the recipient to recover the money or property. Moreover, transfers like this can be considered a sign of bad faith which the court could use to deny you a discharge altogether.
3. Do I have to list all my debts?
You must list everyone to whom you owe money. If you do not list a debt, it may be excepted from discharge. However, if someone gave you a gift and does not expect to be repaid, you are not required to list the donor.
4. Will a bankruptcy get rid of all my debt?
No. Chapter 7 bankruptcy does not normally discharge student loans, recently filed or unfiled tax obligations, trust fund or employee taxes or debts pursuant to a divorce decree. Creditors can also bring lawsuits to prevent debts from being discharged if incurred through things like fraud or willful personal injury. In some instances, a separate lawsuit can be filed to discharge student loans.
5. Will my credit be ruined forever if I file bankruptcy?
No. I generally tell people if the choice is between making all of your credit card payments on time or filing bankruptcy, your credit score will benefit from doing the former. That said, if you are missing payments fairly regularly or thinking of doing debt consolidation or settlement, bankruptcy is no worse and may be much better for your credit. A Chapter 7 can stay on your credit report up to 10 years, a Chapter 13 7 years from discharge. However, if you settle on an account a negative notation will be reported for 7 years. If it takes you 5 years to settle all your accounts, you will have the negative notations a total of 12 years. Moreover, if you file Chapter 7, you can start rebuilding your credit in 90-120 days. That means you will have no debt (debt to income ratio is important in determining a FICO score) and can start fresh with new creditors. If you reaffirm a house or car debt, that reporting will help rebuild your score even more quickly.
6. Will I be able to get a car or house loan after Bankruptcy?
Bankruptcy will affect your ability to get a house or car loan. However, most people can get a car loan within 6 months of getting a discharge (if they have the income to support the payments) and a house loan through the government after 2 years ( remember, your debt to income ratio will be very good). However, if you don’t have the income and don’t actively seek to rebuild your credit, getting approved for that loan will take longer.
7. Should I “max out” my credit card balances before filing?
No. While you will likely be able to discharge your debt, any charges totaling more than $500 for luxury goods or services incurred within 90 days or cash advances of more than $750 within 70 days are presumed to be nondischargeable if a credit brings a lawsuit to prevent their discharge. Creditors can also bring lawsuits outside the 90 day period if they believe they can prove you acquired the debt without the intent to pay it.
8. What does filing bankruptcy cost?
My fees range depending upon the complexity of your case. My fees can range from $1,000 to $1,800, but are usually around $1,350 plus filing fees and credit counseling fees. Chapter 13 cases involve additional fees paid through your monthly plan payments. While we cannot file a case until the whole amount is received (seeking payment after you file violates the law), we can accept payment plans and you can refer creditors to us once we receive a portion of the balance.
9.How do I pay you?
This is the most common question anyone asks me. I understand that if you had that much extra money, you would pay it to your creditors. But then, 2-3 months later, you would be in the same place, with just about the same balances. Many clients pay me from their earnings or tax refunds. Under Maine law, you can protect only $400 in cash, savings, rights to payment, like tax refunds, or other nonexempt property when you file. If you have more, chances are your creditors will get it. Some clients get gifts from family members. Sometimes we try to pressure the debt settlement companies to refund some of the money you paid them. And sometimes, clients sell the boat, snowmobile, or extra car they can’t protect in the bankruptcy (be careful not to sell to friends or family members for less than full value, be sure no creditors are secured by the boat, snowmobile or car).
10. What do I have to do to get a discharge?
Generally, you have to review and sign a petition based upon a questionnaire I provide you, attend a short meeting with me and your trustee, and complete a pre-filing and post-filing counseling courses.
11. Will everyone know if I file?
No. Bankruptcy is technically a public process and your newspaper could report. However, it has been several years since newspapers in Southern Maine or Central Maine, have reported them. In all likelihood, the only people who will learn of your bankruptcy are your creditors, the trustee, and other people attending their own meetings with the trustee the same hour as yours.
12. Can I repay a creditor after I file bankruptcy?
Yes. You must list everyone to whom you owe money, and you will discharge any legal obligation to repay them, but you can voluntarily repay anyone you wish after your case is filed. You should not repay someone before your case is filed, because that is known as a “preference,” and the trustee may sue that person to recover the funds paid.
13. How often can I file?
You can file chapter 7 every 8 years. You can file Chapter 13 four years after a prior bankruptcy.
14. How do I re-establish my credit?
The best way to re-establish credit is to make payments every month on a secured loan, like a car or house. You should also open up credit card accounts as they are offered. It might even be wise to pay more than the minimum, but less than the full balance each month because the lender may view that as a sign that you need a higher maximum available balance. Good credit history (payments made every month) and a higher available credit to debt owed, are the best ways to rebuild your credit.