Take a Close Look at Bankruptcy & Debt Relief!
Donald A. Davis
Attorney at Law
A Federal and State Approved Agency providing DEBT RELIEF under Federal Bankruptcy Law for over 30 years!
You need a helping hand from an expert, but first you need to get the facts.
Can our monthly payments be reduced to an amount we can afford?
Can We Stop Our Car or Other Possessions From Being Repossessed?
1. What are Bankruptcy and Debt Relief?
Bankruptcy and debt relief refer to certain laws created to help you get out of debt. For one reason or another, you may find yourself over your head in debt and in need of help. The purposes of these laws are to give you a "fresh start." Bankruptcy court offers two main paths for people who are deep in debt. One is called Chapter 13, which gives people time to pay a percentage of their bills while there're protected from their creditors. A court-appointed trustee supervises repayment in monthly installments over three to five years. The other is called Chapter 7, which legally erases debts on which creditors do not hold liens such as credit card balances and hospital bills. A lien is a legal claim on property that allows it to be sold to satisfy the debt.
Here are six things you need to know:
Number 1: First and foremost, bankruptcy and debt relief can get rid of the stress and pressure. If you are over your head in debt, you are no doubt under a lot of stress. Some of the stress is caused by having more bills than you can pay. Most of the stress is caused by creditors who harass you for payments. Filing for bankruptcy or debt relief can get rid of this stress - without delay. You may be relieved of any obligation to pay or you may work out a plan for extending and repaying debt through a Chapter 13 reorganization without the pressure.
Number 2: You should not believe what most people tell you about bankruptcy law. There are many misconceptions and "old wives tales" about this area of law. Don't believe them. Get professional advice.
Number 3: Most people believe that if you file bankruptcy, you lose all of your property. This is simply not true.
Number 4: Most people say: "Don't file bankruptcy. It will ruin your credit." But the fact is, if you are already over your head in debt, your credit is already ruined or heading in that direction. If so, bankruptcy probably will not hurt your credit. In fact, as your attorney will explain, filing bankruptcy may be the first step toward fixing your credit.
Number 5: Bankruptcies are not published in the newspaper, and generally, the only way that your employer, family or friends would find out you filed is if you tell them. You cannot lose your job or be denied a license because of filing
Number 6: Going to see an attorney does not mean that you are going to file. That decision is yours. It does mean that you will find out information about your rights and the truth about bankruptcy or debt relief, in case you decide to file.
* Don Davis is one of the most experienced attorneys in this area in dealing with people's financial problems. He has been certified as an expert in this area of law by the N.C. State Bar.
2. Can our monthly payments be reduced to an amount we can afford?
There is debt relief available to most people under a Chapter 13, or what is frequently referred to as a Wage Earner Plan. All you need to qualify is some regular source of income. Chapter 13 is a payment plan where most or all of your debts are combined together into one monthly payment. You make that monthly payment to a Court appointed trustee, who in turn used that money to pay your bills. This includes payments on cars, furniture, appliances, taxes and student loans as well as credit card and other unsecured debt. The main advantages of a Chapter 13 for most people are 2 things; first, to reduce your monthly payments to a manageable amount that you can afford. Secondly, to keep your creditors off your back, while you are getting them paid. As long as you are making your payments under a chapter 13 plan, your creditors may not call you, write you, harass you, put collection agencies or lawyers on you, repossess, foreclose, or take any legal action against you. Their hands are tied. They have no choice. It's the Law! So a Chapter 13 can reduce your total payments and give you time to pay without losing any of your property and without the pressure and harassment from creditors while you are getting them paid. The amount of your payment plan will be set after consultation with your attorney. It is based on many factors that may vary from one individual to the next. But remember, your payment is determined by you and your attorney, NOT your creditors. Most plan payments run from 36 to 48 months. At the end of that time, assuming you have made your payments and completed your plan, you will be out of debt, and can get on with your life without ever having to worry about the debts that were included in your plan.
Most People will tell you if you file for bankruptcy or debt relief, you will lose all of your property. This is simply not true. The laws allow you to keep a substantial amount of property. This may include your house, your car, your mobile home and your furniture. It may include pension plans and cash in the bank. The list goes on and on . It just depends on your particular situation. You will probably be surprised to hear just how much of your property you can keep. Quite often, you can file bankruptcy and keep ALL of your Property. If there should be a problem with keeping your property, or if you have a lot of secured debts, you can still keep your property by filing a Chapter 13 reorganization plan. Bankruptcy can also help you get rid of property. For example, you may have a loan on a car with a big monthly payment you cannot afford to pay. Many times, the amount you can sell the property for is less than the amount needed to pay off the debt. If you end up having the property repossessed, you will likely be left with a large debt to pay. A bankruptcy or Chapter 13 Plan can solve this situation.
4. Can creditor harassment be stopped?
When a person gets behind in paying his debts, creditors begin to take various actions to collect such as telephone calls at home or work; personal contact by bill collectors creating embarrassment in front of family and friends, fellow employees or your employer. Cosigners may be called upon to make payment. Foreclosure proceedings may be started against your home. Cars, furniture, jewelry, appliances, or other personal items may be repossessed. If you owe the IRS or other taxing authorities, they may garnish your wages, put a lien on your property, seize your bank account or even close your business. Lawsuits can be filed and judgments can be taken against you. The filing of bankruptcy or chapter 13 Plan automatically stops a creditor from further collection efforts - no more phone calls, letters, bills, bill collectors, lawyer, foreclosures, repossessions, garnishments, or seizures by the IRS, lawsuits or judgments. The court tells your creditors to leave you and your property alone! They have no choice. You can sleep at night and do your job without stress and worry. You have protection provided by the law.
5. How Will My Credit Be Affected?
If you are already over your head in debt, your credit is probably already ruined or headed in that direction. If so, bankruptcy or Chapter 13 cannot hurt your credit rating. In the long run, it may help. The availability of credit is the most important consideration. If you already have repossessions, foreclosures, lawsuits, judgments, or bad debts reported on your credit report, or if you are simply over-extended, credit is probably not available to you anyway! In terms of credit, you have nothing to lose! Believe it or not, bankruptcy or Chapter 13 may be the first step towards re-establishing credit. If you cannot pay your debts, your credit record will get no better. By filing bankruptcy, you get rid of most of your debts. Or, by filing a Chapter 13, you can get your debts paid off and clear up your financial record. Furthermore, after filing bankruptcy or Chapter 13, there are still ways to get a major credit card, buy a new car, or purchase a home. It depends entirely on whom you are dealing with and your financial circumstances at that time.
6. Can We Stop Our Car or Other Possessions From Being Repossessed?
Certain types of debts are called "secured". Secured means you have listed some property as collateral for the debt. Examples are car or mobile home loans, where the creditors hold your title until the loan is paid. These are types of secured debts, and should not be confused with debts like MasterCard or VISA debts which are "unsecured". When you get behind on a payment of a debt that is secured, the creditor can repossess the collateral. Usually, this means that the creditor can just come to your house and take the collateral. The creditor does not have to go to court first. Once an item is repossessed, the creditor will sell the item and apply the proceeds of the sale to payment of your debt. Generally, the proceeds of the sale are not enough to pay the whole debt. The outstanding balance - which can be very large - is called a deficiency. You can still be required to pay this deficiency even though you no longer have the property. Like any other debt, the creditor will pursue collection and this means the harassment starts all over again. A Chapter 13 reorganization Plan is usually the best protection available. If you want to keep your property, filing a Chapter 13 prior to repossession will stop the creditor and give you an opportunity to pay the debt over a reasonable period of time without losing your property. If the repossession has already taken place, filing bankruptcy can get rid of the deficiency debt and get rid of the stress involved in dealing with the creditor. In some circumstances you may be able to get your property back by filing a Chapter 13 if you act quickly. If your payments on a secured debt are behind, you must act! Quick actions can save your property.
7. Can Home Foreclosure Be Prevented?
When you get behind on your house payments, your mortgage company may foreclose on your house. The number of months you are behind may vary, but at some point in time, the creditor may refuse to accept monthly payments unless you pay all of the overdue payments in full. If you cannot, the creditor will find you in default and start foreclosure. The foreclosure process takes about 2 months and leads up to the day that your house is sold at auction. At the foreclosure auction, your home will be sold. The proceeds from the sale are then applied toward payment of your debt. In this case, the creditor may pursue collection and the harassment starts all over again. In any event, you have lost your home and any equity you had in it, and you will have to find somewhere else to live. There are only two ways to stop a foreclosure and save your home. One is to pay the amount you owe in full. The other is to file a Chapter 13 Plan. Filing Chapter 13 will stop the foreclosure and give you the opportunity to pay the overdue payments over a reasonable period of time. If you do not want to keep your home, filing bankruptcy can get rid of any deficiency debt and give you more time to find a place to live. If your mortgage payments are behind and you want to keep your home, you must act quickly. There is something you can do. Quick action can save your home.
8. What Can We Do About Lawsuits and Judgments?
The filing of a bankruptcy or Chapter 13 Payment Plan prevents any lawsuits from being filed or judgments taken against you. If you file and a lawsuit against you is pending, it can go no further. If a judgment has been taken, its enforcement can go no further. If there are potential lawsuits against you, the bankruptcy court offers a way of having the dispute rapidly settled, thus avoiding the time and expense of litigating the matter in state court. If a judgment has already been taken against you, you may either be relieved of the obligation to pay the judgment debt, or you may be able to arrange payment and satisfaction of the debt over a period of time through a Chapter 13 Plan, without harassment or loss of property. If lawsuits or judgments are either a threat or a real problem, there may be relief available for you.
9. Can Co-Signers Be Protected?
Certain co-signers can be protected, if you file for debt relief under what is known as Chapter 13. You may include a debt on which you have a co-signer. The co-signer is protected if the Chapter 13 Plan repays the co-signed debt, under the following conditions:
The debt must be a consumer debt, and
The debt must not be a debt incurred in the course of a business, and
The co-signer must not have gained a benefit from the proceeds of the debts.
If the conditions are met, as long as you keep up your Chapter 13 Plan payments, the creditors cannot do anything to collect the debt from your co-signer, without first getting permission from the bankruptcy court. Permission will not usually be granted by the bankruptcy court if your Chapter 13 Plan has been approved and if you are making the payments required by the plan. This protection is called "Co-Debtor Stay". The purpose of this protection is to allow YOU a chance to repay the debt without worrying about the creditor contacting your co-signer for payment or taking any action, legal or otherwise, to collect from your co-signer. The co-debtor stay only applies in a Chapter 13 Plan. If you file a complete bankruptcy under Chapter 7, the creditor CAN still collect from any co-signer.
There are two types of debt relief generally available to the public. One is Chapter 7 or "regular" bankruptcy. The other is Chapter 13, commonly known as the "Wage Earner Plan". Each of these works on taxes in a different way. In a Chapter 7 bankruptcy case, the only taxes that can be eliminated are "income" taxes. Chapter 7 does not have any effect on withholding or sales taxes. Chapter 7 can get rid of income taxes under certain conditions. One of these conditions is that the income taxes must be at least three years old. If you have older income taxes due, it may be worthwhile to at least talk to a bankruptcy attorney. When Chapter 7 eliminates tax due for a particular year, it also gets rid of the interest and penalties on that tax. For other types of taxes and more recent income taxes, Chapter13, as opposed to Chapter 7, may be the way to go.
Number 1: Chapter 13 provides a structured repayment period not exceeding 5 years. Generally this means lower and more manageable payments than what the IRS will generally agree to.
Number 2: A Chapter 13 case puts the IRS under control. Once a Chapter 13 case is filed, the IRS cannot garnish your wages, seize your bank account, close your business, file a tax lien or take any other action against you or your property to collect a debt.
Number 3: Quite often, the amount a person can pay on their tax bill is only enough to pay the interest and penalties. This means that the underlying tax bill never gets any smaller. While Chapter 13 does not get rid of the taxes, it may stop the IRS from adding some interest or penalties to your tax bill. This benefit alone can make a big difference. There may be relief for you, even if you owe the IRS! The same applies to State taxes.
11. Will I Have To Go To Court?
You will have to make a brief court appearance, about 4 to 6 weeks after your papers are filed. This is not a court like others you have been in, or seen on TV - there is no judge, no jury, generally no cross-examination by lawyers. You, your attorney, and the court appointed trustee will be seated around a table. He will ask you a few questions based on the paperwork you have already submitted. The questions are usually simple and easy. If your paperwork is accurate, there is simply no reason for you to lose sleep or be stressed out over the court appearance. In typical cases, it will take no longer than 3 to 5 minutes once your name is called. (You may have to wait awhile for them to reach your case.) It will be a large room and there will be other people present - but most of them will be people who are there for the same reason you are! Your creditors have the right to be there, but most of the time, they don't bother, or they may be there simply to observe what happens. Again, the court appearance in an Chapter 13 or bankruptcy case is a necessary formality, but is generally nothing for you to be worried over.
12. How Can I Be Sure My Lawyer Knows What He Is Doing?
Many lawyers advertise that they handle bankruptcy and Chapter 13 cases. Others will tell you they are "experts". How can you be sure? First, before you hire a doctor, lawyer, or any other professional, you are entitled to know their qualifications. You would not go to a foot doctor for brain surgery! You should be equally careful about your lawyer. Bankruptcy and debt relief has become a very specialized and complex area of the law. If you are considering a lawyer, there are many things you may want to know: How long has he or she been practicing? How long have they been handling bankruptcy cases? Do they specialize? What portion of their cases are bankruptcy cases? How many bankruptcy cases do they handle in a month, a year? When you hire the lawyer , will you actually get to see the lawyer in person or will you simply deal with his or her staff? Most importantly has the attorney been certified as an expert or specialist by an independent agency? The N.C. State Bar certifies lawyers as specialist in bankruptcy law. To be certified, the attorney must have specialized in the field for at least 5 years, must have attended courses, must have been recommended by other lawyers and judges, and most importantly must have passed a written examination. Only a lawyer who has been so certified may refer to himself as a specialist certified by the N.C. State Bar.
First, filing bankruptcy or for debt relief is a complex procedure. Cost should not be your first consideration. On the other hand, money (or lack of it) is exactly the problem anyway! Most attorneys who practice in this area of law will give you a free consultation at no cost to you and with no obligation on your part. After talking with you, they can recommend what legal steps, if any, are appropriate for you, and they should at that point be able to give you a complete explanation of all of the costs involved. Ask! You are entitled to know. Attorney's fees in debt relief and bankruptcy cases are monitored by the court, so any attorney must keep his fees reasonable. Nevertheless, there may be a substantial variation of fees from one lawyer to another. Typical fees in a personal Chapter 7 complete bankruptcy case may vary from $850 to $1,200, plus court filing fees. The average in North Carolina for 1997 was $915.00. Most experienced bankruptcy attorneys require their fees to be paid in advance. Many attorneys, who handle Chapter 13 debt relief or "Wage Earner Plan" cases, will only require a small portion of the fee, plus court filing fees, to be paid in advance. The balance of the fees, which are set and approved by the court, will be paid over a period of time from the plan payments. Even though you are pressed financially, most people who need help CAN find a way to file either Chapter 7 bankruptcy or a Chapter 13 Wage Earner Plan. Do not let your fear of talking to a lawyer or of having to pay some "huge" fee hold you back from at least getting the advice you need.
* Don Davis is one of the most experienced attorneys in this area in dealing with people's financial problems. He has been certified as an expert in this area of law by the N.C. State Bar.
This information is provided by the law offices of Donald A. Davis. Please contact our office for further questions or to set up a FREE consultation.
Donald A. Davis
Attorney at Law
5400 Atlantic Springs Road Suite A Raleigh, N.C. 27616(919) 878-5125
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