Bankruptcy FAQ
Why file for bankruptcy?
Stop foreclosure, eviction, or repossession
Keep bill collectors from calling
Clear out debts
Stabilize credit
Build wealth
What are common bankruptcy concerns?
Society perceives bankruptcy as a problem rather than a solution.
Bankruptcy is similar to rebuilding your finances from scratch.
Repossession, foreclosure, or eviction often comes to mind.
Bankruptcy may require selling some of your stuff.
Unlike most repossessions, this is a civil and negotiated process.
Certain possessions may be exempt.
For example: your house, furniture, car, or work tools.
What types of situations can a bankruptcy cover?
The purpose of bankruptcy is to clear as much debt from your name as possible. Many debts, such as credit card or medical debt, can be discharged in this way. Meaning you will not have to pay them back in the future. This usually results in a hit to your credit score, but with the benefit of being able to retain much of your property and your home.
What if you don’t have anything to sell or don’t want to sell your things?
Bankruptcy is not merely selling all of your possessions- it is a thoughtful and mediated process for restructuring your finances.
Are bankruptcies useful when you have no assets?
Bankruptcy is designed to put you in a position before you have debts. It’s a second chance.
What happens without declaring bankruptcy?
If you are in debt, they will try to collect by any means necessary.
Your credit score will take a hit
Any assets may be repossessed
A lien might be placed on your house or car
Your wages could be garnished
Putting off the inevitable debt collection can increase the debt you have to deal with when you finally manage it. The debt is not going anywhere anytime soon if you don’t do something about it. You have to deal with it eventually.
How do attorneys help with cases such as foreclosure?
It is a lawyer’s responsibility to stay on top of all laws regarding foreclosure.
Defenses can be complicated and are best argued by someone who studies law.
Because attorneys understand the laws involved, they are prepared for court procedure.
What types of bankruptcies are often filed?
There are two types of bankruptcy for individuals: Chapter 7 and Chapter 13. Many businesses file Chapter 11. Whether for personal or business, people often file and go on to have a successful financial life.
Chapter 7:
Chapter 7 is what most people are thinking about when discussing bankruptcy.
Non-exempt assets may be sold to pay your creditors, with certain assets being exempt, like your home, car, or work related tools.
Once the assets are sold, the remaining non exempt debt is discharged.
This is the best method to quickly get a fresh start and avoid repaying debts you may have incurred.
The bankruptcy will remain on your credit report for 10 years, but you will not have to worry about the discharged debts otherwise.
Chapter 13:
Chapter 13 is closer to organizing a payment plan rather than what most people think of when discussing bankruptcy.
Typically we will negotiate a repayment plan with the court, in which you agree to repay some or all of your debt, often with your debt being reduced.
At the end of the repayment plan, all non exempt debts will be discharged.
So long as you follow the payment plan, you should be able to retain most, if not all, of your assets.
Chapter 13 usually has less of an impact on your credit score, remaining on your credit report for only 7 years.
Chapter 11:
Individuals can file for Chapter 11s, but it is usually in their best interest to file Chapter 7 or Chapter 13.
Chapter 11 bankruptcies are filed at the location of primary place of business.
The business may continue with their normal business operations, but the court must approve some regulatory decisions such as:
Any sale of assets
Entering into or breaking any leases
Mortgage arrangements
Expansions or consolidations in operations
Entering into any contracts or agreements
Including but not limited to vendors, licenses, unions, attorneys, and other professionals
The business has the right to submit a reorganization proposal.
Can be a lengthy process.
Confirmation of a plan discharges a debtor from any debt that arose before the date of confirmation.
Who can file bankruptcy?
Individuals
Arrange assets and payment plans for both car and housing
Renters
Owners
Companies
You may file bankruptcy for your business if your business organization relieves you from personal liability
Corporations
Partnerships
What is the difference between bankruptcy chapters?
Chapter 7 is what most people are thinking about when discussing bankruptcy. Chapter 13 is closer to organizing a payment plan rather than selling assets. Chapter 11 also provides reorganization, usually involving a corporation or partnership.
Worried about Foreclosure? Here’s what happens in Louisiana...
Most mortgages provide a provision for repossession of property whenever payments are not being made within a given time frame.
How does having an attorney stop bill collectors from calling?
Instead of dealing with debt collectors, you can choose to keep all discussions of your case with an attorney.
What are legal considerations lawyers address?
An attorney can identify any mistakes made by the parties involved in debt to protect you
Avoid risk of procedural error costing the case or worse (i.e. prosecuted for fraud)
Awareness of all exemptions, the means test, and deductions owed by law
Rest easy knowing your financial future is secure
No longer be contacted by debt collectors
Not only do lawyers offer debt relief, but they also provide experience:
Having an attorney can be one of the best ways to save money in the long run. Without legal representation you might not have inside information on the court system, or the laws that apply to your case.
A lawyer’s job is learning the system in order to help you not be exploited by it. Call (504) 226-2292, and book a free consultation with an attorney to discuss more.
Glossary:
Term: Discharge of Debt
LA Code of Civil Procedure: CCP 588-590
LA Revised Statutes: RS 9:5175, RS 10:3-601, RS 10:9-406
Definition: Cancellation of debt.
Example: David Bowie’s discharge of debt through bankruptcy was a stepping stone on his path to become a multimillionaire.
Term: Exemptions
LA Revised Statutes: RS 8:313, RS 11:1403, RS 11:3229, RS 13:3851.1, RS 13:3881, RS 20:1
Definition: Certain assets can be protected against creditors when you file bankruptcy such as your home, insurance, pensions, personal property, public benefits, tools of trade, and wages.
Example: If you get a disability check it would not be taken from you through bankruptcy as an exemption.
Term: Non Dischargeable Debt
LA Revised Statutes: RS 9:5701
Definition: Some debts cannot be discharged such as student loans, child support, debts for personal injury or death caused by dui/dwi, fines or penalties from breaking the law.
Example: Even if you declare bankruptcy, your student debt would not be discharged.
Term: The Means Test
Bankruptcy Form: 122 A-2
Definition: Income guidelines for filing for Chapter 7 provide that you not exceed certain levels of income: Medians in Louisiana (for their household size): (1) $45,634 (2) $55,410 (3) $63,039 (4) $82,282.
Example: Alisha had to file Chapter 13 bankruptcy due to the conditions of The Means Test for Chapter 7.
Term: Writ of Seizure and Sale
LA Code of Civil Procedure: CCP 323, CCP 2294, CCP 2294.1, CCP 2331, CCP 2638, CCP 2721, CCP 2722
LA Revised Statutes: RS 6:966, RS 13:3851, RS 13:3852, RS 13:3886, RS 13:3889, RS 13:4283, RS 33:4720.110.1, RS 47:1676, RS 47:2158, RS 47:2232, RS 47:2238.4, RS 47:782, RS 47:818.58, RS 47:818.130
Definition: This is the order that allows property to be repossessed and resold.
Example: After other methods of collecting a debt have been explored, a judge may issue a writ of seizure and sale.
Term: Insolvency
LA Revised Statutes: RS 10:1-201, RS 51:2388
Definition: A state of inability to pay debts.
Example: The U.S. is insolvent.
Term: Dissolution
LA Revised Statutes: RS 12:253, RS 12:418, RS 17:2819
Definition: The dismantling of an organizational structure.
Example: Debts may be dissolved through bankruptcy.
Term: Automatic Stay
United States Code: §362
Definition: A court order that stops bill collectors from having the right to reach out.
Example: An automatic say can come into place for your debts when you file bankruptcy through The Law Office of Christopher Szeto.
**Disclaimer: This content is not legal advice and does not create an Attorney Client relationship.
If you are seeking assistance from a lawyer in New Orleans, please book a free consultation at (504) 226-2292.