Bankruptcy is a legal process by which you can deal with your debts when you can no longer pay them.
If you are struggling to pay your bills or are experiencing some of the financial warning signs, you should consider bankruptcy as a possible option to your financial situation.
The purpose of filing a bankruptcy case is to get a discharge of most, if not all, of your debts, so that you can wipe out those debts and you never have to repay them! This means that you are relieved of the legal obligation to repay those debts.
Lucy Hebron handles each bankruptcy case personally, ensuring that you receive confidential service tailored to meet your own unique circumstances.
What is bankruptcy?If you are struggling to pay your bills or are experiencing some of the financial warning signs, you should consider bankruptcy as a possible option to your financial situation. If you’ve been harassed by creditors calling you at home or work, or you’ve been sued by a creditor or credit card company, you should know about your options for how to deal with the situation. Bankruptcy is a legal process by which you can deal with your debts when you can no longer pay them. By filing bankruptcy, most people find that they are able to get most of their debts “discharged.” Discharge is a fancy word meaning those debts are wiped out or legally forgiven while you get to keep most, if not all, of your property (chapter 7) and/or you get extra time to pay certain bills if you have a regular source of income (chapter 13). The person or entity who files the case is called the “debtor.” If you file an individual case, you will be the only debtor. If you and your spouse file together, your case is filed as one case (with one filing fee), but your case is called a “joint case,” with both individuals being the “co-debtors.” The purpose of filing a case is to get a discharge of most, if not all, of your debts, so that you can wipe out those debts and you never have to repay them! This means you are relieved of the legal obligation to repay those debts. A lot of clients tell us that they hate to include the debts owed to their family doctor or dentist and that they don’t want to include those debts in their bankruptcy (which are unsecured, dischargeable debts in a chapter 7 case) because they don’t feel right not paying their health care providers. We advise our chapter 7 clients that, while bankruptcy relieves them of the legal obligation to pay that debt, if after the bankruptcy is over, they would like to repay the debt (and have the means to do so), they may do so. Once your bankruptcy case is filed with the Court, creditors are prohibited by law from contacting you to collect debts or to sue you during the bankruptcy. If you already have a pending collection lawsuit where a creditor or collection agency is suing you before you file bankruptcy, that lawsuit is stopped once you file bankruptcy. With a few exceptions, creditors have no right to collect from debtor’s future income or assets.
Should I file bankruptcy?You should consider bankruptcy when… you are taking cash advances on your credit cards to pay current bills you are you paying for food, groceries, small items, or everyday expenses with credit cards you are behind on any of your debts you are behind on any of your secured debts (mortgage, car payments or other loans for which you have pledged some sort of property as collateral) you have taken out a “payday loan” or otherwise borrowed money to pay bills you are usually late in paying your bills you are tossing bills in a pile without even opening them, let alone paying them this month’s bills are coming in before you have paid (any or all) of last month’s bills you are losing sleep or constantly worried about your finances you are unable to make the minimum payments on your credit cards your credit card balances go up each month even though you’ve stopped charging you are avoiding telephone calls, messages, letters, or process servers who are seeking to collect from you or serve you with court papers you are forced to reduce or cut out debt payments so that you can pay for food, medicine or housing expenses money arguments have increased in your household you had a recent decrease in income, job loss/hours cutback, divorce, or medical emergency you are being contacted at your home or at work about unpaid bills you are paying more than 20% of your take-home pay/income for installment debts and credit card debts you have outstanding bounced check charges or collection lawsuits pending against you If even one of the above applies to you or your family, you should take a closer look at your budget and either trim expenses or increase income. If more than one of the above applies to you or your family, it means you may need help preventing debt problems. Consider going to the “Consumer Credit Counseling Service” (CCCS) in your area. CCCS is the only non-profit credit counseling service that most bankruptcy attorneys recommend as an option prior to making the final decision to file bankruptcy. If four or more of the above applies to you and your family, it means you are definitely in trouble and should call Hebron Law Firm, 903-569-5829, to see what your options are.
What type of bankruptcy should I file?You are not going to know what type of bankruptcy you should file. As your legal representative, it is our job to analyze your assets (all the property you own), your current and past income, your debts, and your monthly expenses. Depending on all these factors, we will recommend whether bankruptcy is an option and, if so, which bankruptcy chapter is right for you and your situation. Basically, there are three main types of bankruptcy: chapter 7, 11, and 13. The numbers refer to the specific section of the U.S. Bankruptcy Code that provides for the particular case. The most common types for individuals are chapter 7 and chapter 13. (Businesses may not file chapter 13). Chapter 7 is also called a “liquidation case” which means that in exchange for you getting a discharge of most or all of your debts (meaning you no longer owe them), you must turn over certain property (called non-exempt property) to the Chapter 7 trustee. The trustee is the person who is like an umpire in your case. He is appointed by the court to oversee the administration of the case on behalf of creditors. The law allows you to keep or protect certain property in order to have a fresh start after bankruptcy. You cannot be forced to give up this protected property which is referred to as exempt property. In most chapter 7 cases, all property is exempt, so that you can keep all of your property. These types of cases are called “no asset” cases because there are no assets available above and beyond the exempt property from which to pay creditors. If you have more property than can be exempted, you will have non-exempt assets which you may lose in a chapter 7 case, but you would get to keep in a chapter 13. (That is why it is important to disclose all of your assets and all of your property so that your attorney can determine which type of bankruptcy would allow you to keep the most property). A trustee may sell non-exempt assets and use the money to pay creditors. Sometimes there is not enough money to pay for anything more than the costs of administering your case, leaving nothing to creditors. The big advantage to chapter 7 is that you can discharge or wipe out most, if not all, of your unsecured debt (except for non-dischargeable debts) including credit card debt, medical debt, store card debt, gas card debt, judgment debts or deficiency judgment debts. You never have any future legal obligation to repay these debts. Non-dischargeable debts cannot be discharged. They include: debts for child support or alimony, certain types of tax debt, debts incurred through fraud, certain criminal fines/penalties, and debts incurred through bad acts or bad behavior (DWI/DUI’s, embezzlement, fraud, etc.) Chapter 7 is only for certain types of debtors—that is, not everyone can file a 7. Chapter 7 is like a movie theater. If a corporation wants to liquidate or shut down, it can file a chapter 7 automatically, it gets a ticket and can go in; it need not qualify. Individuals, however, have to get a ticket to get into the movie (chapter 7). Whether you get a ticket depends on a complicated financial formula called “the means test” which looks at your monthly income, your family size, where you live, and your monthly expenses. If you make under a certain amount of gross income for your size household, you automatically get a ticket and can get into the movie/chapter 7. If, however, your gross income from all sources is above the magic number, the Court will examine your gross income and certain allowable living expenses, and if you have less than the threshold limits of disposable monthly income, you can still get a ticket and can go into the 7. However, if you have more than the threshold limit of disposable monthly income, the Court will presume that you have enough money to pay back a portion of your debt to your creditors, and therefore you will not get a ticket into chapter 7, but will be forced to file a chapter 13 instead. Chapter 13 is the repayment bankruptcy. If you are behind on your mortgage or car payments, you cannot file a 7, you must file a chapter 13 which will allow you to make up missed payments and pay them out over time. Chapter 13 is also for people with assets which can’t be protected in a chapter 7. In a 13, the debtor promises to pay all or part of his or her debts from future income over a 3-5 year period. If the Court approves the debtor’s repayment plan, the debts can be paid in this manner even over the objection of some creditors. If the debtor makes these plan payments over time, he or she gets to keep all of his or her property. You must continue to make plan payments in order to keep your property (and stay in bankruptcy). If you can’t continue making plan payments (maybe you lose your job, your hours are reduced, you get sick, or have unexpected new debts that must be paid) until the end of your plan, you can lose your property, you can lose the protection of the bankruptcy, and your case can be dismissed as if you had never filed bankruptcy (allowing creditors to pursue you again for debts or to collect their collateral). Our firm focuses mainly on chapter 7 bankruptcy. Should you need to file a chapter 13 case, we will be happy to refer you to an attorney who handles chapter 13 cases in your area. The only way to know for sure which type of bankruptcy you may be eligible for is to talk with an attorney.
What can bankruptcy do for me?Bankruptcy allows you to have some breathing room and protection from creditors while you straighten out your financial house. It will stop the creditor calls, letters, demands for payment, and any lawsuits. If you’ve had a foreclosure in the past and defaulted on certain government loans, any tax refund you may be entitled to receive may be seized from now until the whole amount is paid unless you wipe out the debt in a bankruptcy. If you can never afford to repay the delinquency, then consider a bankruptcy. Otherwise, you’ll never see another tax refund. If you’re divorced and your credit is being ruined by an ex-spouse who agreed to pay the credit card debts but has stopped paying, consider bankruptcy if you cannot pay those debts. That is the only other way to deal with those debts. If you’re a senior citizen or on a fixed income and are swamped with medical or prescription debts of yours or your spouse and you’ll never be able to catch up or repay those debts, then consider the peace of mind you’ll get by filing bankruptcy, keeping all of your existing property, getting rid of the debts while having more money in your pocket for the things that really matter. Because the eligibility requirements for filing a chapter 7 depends on your income, if you lost your job, have suffered an injury, or you’ve been off work and your income has been greatly reduced in the past few months, consider filing for bankruptcy now, while your average gross monthly income is low and you can automatically be eligible for a 7. Once your income increases with a new job or higher paying job or working more hours, you’ll be less likely to be able to qualify for a chapter 7 if you’re a high-income individual. You’ll get to keep any wages you earn or property that you get after bankruptcy. So, even if you file now with a low-paying job, you can keep any additional monies received within months of filing (with certain exceptions). Your chapter 7 case is over in 4-6 months! Within this time, you stop the threats, stop the financial stress, and get to start over with a financial fresh start! Bankruptcy can also help you sleep better at night! Now that you’ve decided to file, you’ve dealt with your financial demons, made a plan, took some action, and you know the results are just around the corner—a fresh start, a do-over with your Order of Discharge. Most of our clients tell us they wish they had filed sooner and started the process much earlier, as it would have saved them grief, anger, marital strife, aggravating phone calls from creditors, and harassment. You get the idea.
Are there alternatives to filing bankruptcy?Other than the obvious (repaying your debts) which most clients just can’t do, workable options that we can recommend are limited. A lot of clients ask us about “debt settlement” companies which are all over late night and early morning television and who can afford to advertise heavily through television, radio and direct mail to consumers. We cannot endorse any of these companies who continue to prey on the desperate consumers who fall victim to marketing ploys and schemes, hoping to settle their debt for pennies on the dollar, without having to file bankruptcy, and at very low cost to them. These claims are simply not true. We repeatedly speak with consumers who have tried these companies. We’ve had dozens of people who have signed up with these companies (which are always out of state!), pay huge amounts of money into a fund to be used for “possible settlement negotiations,” and then never hear anything about their debts being settled. When the consumer runs out of money and can’t make the “settlement payments,” the companies stop paying the creditors and then the creditors sue. Once a lawsuit is filed, the desperate consumer contacts the company who conveniently fails to respond to calls and letters. Sometimes consumers are in these schemes for several years, struggling to make payments while no debts are ever negotiated. By the time the consumer comes to us, they are out thousands of dollars (we’ve had clients who have lost as much as $7,000), have no debt settlements with any creditors, and one or more collection lawsuits pending. Do the math. For a couple of thousand dollars in legal fees and filing fees to the bankruptcy court and 4-6 months of your time, you could’ve just filed bankruptcy and had immediate relief from creditors, certainty about your finances, and closure within 4 months, usually (in our jurisdiction). Contrast the debt settlement company with a credit counseling service. Most attorneys will suggest that if you have any disposable income, you first consider meeting with Consumer Credit Counseling Service, the only credit counseling service most attorneys would recommend their clients try before considering bankruptcy. CCCS has offices all over the country and they are well worth the time it takes to meet with them to see whether they can formulate a workable budget for your financial situation.
Myth: “Everyone will see my name in the paper and know I filed bankruptcy.”Fact: Our office keeps all bankruptcy cases completely confidential: your name will not be published in the newspaper or online for the general public to see. The information is public record, but seeing that record requires a search in person at the court house or a paid subscription to an online resource.
Myth: “People who file for bankruptcy are bad people who haven’t met their financial obligations as they should.”Fact: The majority of bankruptcy cases are filed because people have suffered a traumatic event in their lives: loss of job; death of wage earner; serious illness or injury; forced retirement; or divorce. Bankruptcy is provided for us by law, and is also an accepted practice in the Bible.
Myth: “If I file bankruptcy, I’ll lose my house and other property.”Fact: Texas has favorable laws for those filing bankruptcy, including property exemptions allowing most people to keep their equity in the house, as well as most of their personal possessions.
Myth: “If I file bankruptcy, I’ll never be able to get credit again.” (Do I want credit again?)Fact: Although bankruptcy remains a part of your credit history (for up to 10 years), filing bankruptcy allows you to start with a clean slate and to start rebuilding your credit, if you want to go down that road (again). There are numerous credit/financial institutions who will be mailing you credit solicitations after your bankruptcy because they know you now have money to work with (because you wiped out prior debts). You can rebuild your credit slowly and cautiously and you will have credit again if you want it! Alternatively, you might choose to live debt-free and credit-free like many of Dave Ramsey’s fans who have taken the Financial Peace University courses.
When bad finances happen to good people ...
In his 1981 book “When Bad Things Happen to Good People,” Rabbi Harold Kushner explains his reaction to a personal tragedy which provokes a crisis of faith. His book is for people who have been hurt by life through no fault of their own and provides a guide for how to get through their troubles.
Believe it or not, the U.S. Bankruptcy Code gives us a guide and a roadmap for how to get through your financial troubles. Like the book notes, sometimes there is no reason for “bad stuff” or your bad finances. It is what it is.
Further, there is no exception for nice people, moral people, or Christian people or religious people. There is no moral judgment involved in your bankruptcy. Sometimes stuff just happens: you lose your job, your health, the economy tanks, your business goes south. That’s why we have the Bankruptcy Code. So use it!
Yes, you feel ashamed, embarrassed, and like you’re a failure and wonder what will people think? These are normal feelings.
Remember, our office keeps all bankruptcy cases completely confidential: your name will not be published in the newspaper or online for the general public to see. The information is public record, but seeing that record requires a search in person at the court house or a paid subscription to an online resource.
So, take action, get informed, take the first step to your financial freedom and call us today!