These questions and answers are based on Ms. Owen's experience as an Omaha Bankruptcy Lawyer and Papillion
Bankruptcy Lawyer in Nebraska. If you live in another state, the answers to these questions
may be different and you should talk to a bankruptcy lawyer near you.
- What is the difference between a Chapter 7 and a Chapter 13 bankruptcy?
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In a Chapter 7 bankruptcy, the bankruptcy trustee takes any non-exempt (unprotected) property you have and gives it to your creditors. All of your dischargeable debt goes away when the Court enters your discharge order. Your attorney can tell you before you file a Chapter 7 if you have any non-exempt property; if all your property is exempt, the Trustee will not take anything from you and you will still receive a bankruptcy discharge.
A Chapter 13 bankruptcy includes a plan in which you make monthly payments to the Trustee, who distributes this money to your creditors. People file a Chapter 13 when they make too much money to file a Chapter 7, or if they are late on payments on secured debt (like a car or house) but want to keep the property, or have a type of debt which will discharge in a Chapter 13 but not a Chapter 7. You must have a regular monthly income, with some money left at the end of the month to make your plan payments, to be a Chapter 13 debtor. You must make monthly plan payments for at least three years, up to five.
- Who can file a Chapter 7 bankruptcy?
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Any individual who has completed an approved credit counseling class within the last six months the day before filing bankruptcy, and in whose case the presumption of abuse of the bankruptcy system does not arise based on the debtor’s current monthly income and the median income in the debtor’s state. A debtor can only receive a Chapter 7 discharge if he or she has not filed another discharged Chapter 7 case in the last eight years.
If your income is below the median income for the State of Nebraska, and you are otherwise eligible, you can file a Chapter 7 bankruptcy. As of October 15, 2007, the median income for a one person household in Nebraska is $36,179 a year.
If your income is above the median income, you may still be able to file a Chapter 7 bankruptcy, but only in cases in which you have expenses which significantly reduce the disposable income potentially available to your creditors in a Chapter 13 bankruptcy.
There was widespread confusion in the media after Bankruptcy law changes in 2005 about who could file bankruptcy; many people got the mistaken impression that they could no longer file a Chapter 7. You should consult with an attorney to see if you are eligible to file bankruptcy.
- What debts discharge in bankruptcy?
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It depends on which Chapter bankruptcy you file. In a Chapter 7, unsecured debts like medical bills and credit card charges discharge. There are a few types of debt which you cannot discharge in a Chapter 7, like: secured debt (like a car loan or mortgage), child support or other domestic support obligations, most delinquent taxes, or debt your creditors prove to the Bankruptcy court you obtained due to fraud. These are just a few examples of non-dischargeable debt.
In a Chapter 13, any debt which remains to unsecured creditors after you complete your plan payments will discharge, along with some types of tax debt, and a property settlement debt ordered in a divorce decree.
You should make sure you understand what debt will discharge, and what will not, before filing any type of bankruptcy.
- How much does it cost to file bankruptcy?
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The filing fees are $299 for Chapter 7 and $274 for Chapter 13. The filing fee in your case is the same whether you file individually or with your spouse. You must also complete a credit counseling class before you file bankruptcy and a personal financial management course after you file bankruptcy. Both of these usually cost the debtor, although some agencies will waive their normal fees in some circumstances. Attorney’s fees depend on the complexity of your case.
- How long does it take to complete a bankruptcy?
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The typical Chapter 7 bankruptcy takes about 4 months from filing to receive your discharge order, which is what gets rid of your dischargeable debt.
A Chapter 13 bankruptcy lasts from three to five years from filing.
- How long will a bankruptcy stay on my record?
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It is reported by the credit reporting agencies for up to 10 years. You may have to report it yourself for longer when you honestly and fully respond to any subsequent applications which ask if you have ever filed bankruptcy.
- How will bankruptcy affect my credit and the ability to buy a car or a home in the future?
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Some people have been able to purchase homes and cars within several years of doing a bankruptcy. Others have been denied credit, for many years because of the bankruptcy. It is fair to say that a bankruptcy will have a dramatic negative effect on your credit rating and your ability to get credit for a long time. How creditors will view the bankruptcy on your record will depend on the creditor, and how you handle your credit after your bankruptcy filing. The Law Office of Katherine Owen does not offer credit repair services after your bankruptcy case closes.
- Do I have to give up my car?
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You can't file a Chapter 7 bankruptcy and expect to keep your car if: you are behind on your car payments OR you can't afford the car when the Court looks at your basic living expenses and monthly income, and sees that the car payment doesn't fit in your budget. You may not want to file a Chapter 7 bankruptcy if you have equity in your car which you can't protect from your creditors. But, if you are current on your car payments and you don't have too much equity in your car (which most people with a car loan don't) then you should be able to keep your car if you want to reaffirm the debt.
- Can I leave the debts I want to pay out of my bankruptcy?
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NO! You must list all debts you owe and all property you own when you file bankruptcy. But that doesn't mean you have no choice over what happens after bankruptcy. If you have a debt that you really want to pay for whatever reason, you can do so after your bankruptcy discharge. Do NOT make a payment to a creditor right before bankruptcy though without talking to your bankruptcy lawyer first - you may be making a preferential payment which the Trustee will want to reclaim for the benefit of your other creditors.
- Do I have to go to Court?
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Yes, you'll have a Meeting of Creditors at the federal courthouse. For bankruptcy cases filed in Omaha, Nebraska, you'll go to the federal courthouse located downtown at 18th and Douglas Streets. Some bankruptcy cases will involve other hearings, but most do not.