Answers to Your Most Frequently Asked Questions
You're probably full of questions right now—and that's okay, because we have answers! Check out some of the questions we hear the most about bankruptcy, divorce, and child custody from clients just like you.
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What types of information can & can't be included in my credit report?
Your credit report contains a massive amount of data, and it can be overwhelming trying to determine which tidbits of personal information will be included. The guide below outlines the different types of information that will and won’t be included on your credit report.
What Can Be Included:
- Identifying information, including full name, current & previous addresses, employment information, date of birth and social security #
- Trade lines – your list of current and recent past debts and obligations
- Credit inquiries (any time you give a potential creditor permission to view your credit report)
- Judgments, liens and garnishments
- If a bankruptcy was ever filed
- Account information when accounts are voluntarily closed by the consumer
- Dispute information if a consumer has properly disputed credit information
- Any key risk factors adversely impacting the credit score
What Cannot Be Included:
- Your income and/or net worth
- Your private medical information, although if you have medical debt, the debt may appear
- Criminal record unless it involves a financial blunder
- Debts of your spouse that are separate from your own
- Information older than 7 years
- Personal information such as race, age, ancestry, sex, ethnicity or political affiliation
Concerned about the impacts bankruptcy will have on your credit report? Don't be! Call us today at (757) 320-2010 for your free consultation.
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If I file bankruptcy, how will that effect the economy?
A concern we hear often is that debtors feel that if they file bankruptcy, there will be negative implications on the economy. It’s great to be socially responsible and have concern regarding your decision to file. What most debtors don’t realize is that in most cases, the decision to file bankruptcy is actually beneficial for the economy.
The basis of our economic system stems from the ability to buy goods and services.
If your funds are tied up paying creditors and high interest rates, you are unable to buy additional goods and services to help stimulate the economy. By having debts discharged or significantly reduced, that frees up money to put back into the economy which is actually more favorable that paying a few creditors with high interest rates.
The inability to have debts forgiven does not increase a debtor’s likelihood to pay their debts; however the ability to discharge debts ultimately allows for more money to circulate and fuel the economy. Additionally most creditors realize that a percentage of the money they lend will not be repaid, and that is accounted for in their high interest rates.
Filing individual bankruptcy is only detrimental to the economy when it happens in mass, which typically stems from a recession and/or depression. While this has happened in recent history, our economy has seen an uptick in the last few years.
If your decision to file bankruptcy has been halted because you are concerned that it will have an overall negative impact on the economy, you can rest easy. Bottom line – if you are drowning in debt and want to help the economy, it may be most beneficial all around if you actually file for bankruptcy.
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Should I File a Chapter 7 or a Chapter 13 Bankruptcy?
If you're buried in debt, your best option may be to file for Chapter 7 bankruptcy. This type of bankruptcy is designed for individuals who do not have the ability to repay their creditors. The vast majority of our clients are able to protect all of their assets so that they do not lose anything. However, in order to allow you to keep your belongings, the necessary documents must be correctly prepared and filed. Don't lose your assets. Before you attempt to file, consult with an experienced attorney.
If you fallen behind on your mortgage payments but now have the ability to make your regular monthly payments, cover your living expenses and make a payment to catch up what you are behind, a Chapter 13 bankruptcy can help you to keep your home. If you have missed payments on your car and the repo man is on his way or just took your car, a Chapter 13 bankruptcy can help you get it back. If you have tax debt or debts that can not be discharged in a Chapter 7 bankruptcy, there's a good chance that Chapter 13 bankruptcy could be a good option for you. Chapter 13 offers a repayment plan over three to five years that helps you pay the debts that have to be paid in a way that you can afford and helping you to become debt free.
If you are struggling to repay your creditors, I can help you. Call me today at (757) 320-2010.
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What Are the Top 5 Reasons To File Bankruptcy?
There is a misconception that people file bankruptcy because they overspend and use credit cards irresponsibly. Although that can be the case, it is only #3 on our list.
Medical Expenses - Serious and/or rare illnesses that come with hefty medical bills covered by insurance typically also come with hefty co-pays. According to a Harvard University Study, medical expenses account for 62% of bankruptcies. Out of these, 78% of bankruptcy filers had medical insurance. With rising health coverage costs and co-pays, a serious hospitalization can cause severe debt. Once savings has been exhausted, the only option left to deal with medical bills may be bankruptcy.
Job Loss – Termination, layoffs and resignations are the second leading cause for bankruptcy. Most Americans don’t have enough money in savings to survive an unexpected job loss (especially without severance), and therefore turn to credit cards for survival. Even once a new job is obtained, sometimes the debt incurred in between jobs is too much to catch up on.
Excessive Credit Card /Unsecured Debt – This is third on the list. Although the debt to income ratio may be considered excessive, it doesn’t necessarily equate to irresponsible spending. An expensive car repair or medical bill charged on a credit card with high interest can get out of hand quickly for a person with a low income.
Divorce – When one household suddenly becomes two, you’re essentially doubling expenses without doubling the income. Combine that with the associated legal costs, alimony and child support, the bank account dwindles quickly.
Unexpected Disasters – These are the rare occurrences that most people don’t think about or plan for… and assume if they do happen, their assets would be covered under insurance. These include natural disasters like hurricanes or earthquakes, and other disasters such as death. Most people don’t realize that property loss under these circumstances isn’t covered under most home owner insurance policies – typically separate insurance policies must be purchased in order to cover property & asset loss under these circumstances – in addition to covering the cost of new clothes and shelter.
If any of these sound like your situation and you are struggling with debt, WE CAN HELP YOU! Contact us today at (757) 320-2010.
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When is the best time to file a Chapter 7 bankruptcy?
You would think that the best time to file a Chapter 7 bankruptcy is as soon as you can no longer afford to pay your bills. However there are many different factors to consider when deciding the best time to file a Chapter 7 bankruptcy. Here are a few of the factors to consider.
1. You have tax debt for several years. Many people, accountants included, believe that tax debt cannot be wiped out or "discharged" in a Chapter 7 bankruptcy. That is not correct. After a certain period of time, taxes become dischargeable. Filing a Chapter 7 bankruptcy too soon could leave you responsible for thousands of dollars of tax debt that could have been discharged if you had waited a few months. You should talk to an experienced bankruptcy attorney if you owe several years of taxes to find out when is the best time for you to file. The attorney will need to know how much you owe for each tax year and when the tax returns were filed for each year.
2. You have anticipate receiving a large tax refund. Filing before you receive the refund could prevent you from keeping the refund. I have seen many people who filed a bankruptcy, without the assistance of an experienced bankruptcy attorney, lose thousands of dollars because they filed their bankruptcy before they received their refund.
3. You are being sued over a debt. When a creditor obtains a judgment against you, they have several options for collecting on that judgment. One of the most frequently used method is to initiate a garnishment. While bankruptcy will stop a garnishment, there are times where you need to file before the creditor can start the garnishment process.
As you can see from these three examples, the decision as to when to file a Chapter 7 bankruptcy is not always simple. Before you file a Chapter 7 bankruptcy, you need the assistance of an experienced bankruptcy attorney. Contact Hampton Roads Legal Services at 757-320-2010 to schedule a free consultation with our experienced bankruptcy attorney.
Can I keep my house if I file a Chapter 7 Bankruptcy?
There are two factors that must be considered when you want to keep a house when filing a Chapter 7 bankruptcy. The first factor is whether there is equity in the house. When you file a Chapter 7 bankruptcy, the court appoints an individual, called the trustee, whose job is to try to find assets that he can sell to pay something to your unsecured creditors. If you own real estate, the trustee will determine if he thinks there is equity in the property. This means that he wants to see if he could sell your house for more than is owed on it. If the trustee thinks that he could sell the house for more than is owed on the mortgages and for enough to also cover the costs of selling the house, he will market the house. An experienced bankruptcy attorney will normally determine if there appears to be enough equity in the house that could cause the trustee to attempt to sell the property. Many people owe more on their mortgage than their house is worth so it is unlikely that a Chapter 7 trustee will attempt to sell the property.
The second factor that will play into whether you can keep your house after filing a Chapter 7 bankruptcy is the status of your mortgage. If you are behind on the mortgage payments when you file a Chapter 7 bankruptcy, the mortgage company may elect to proceed with foreclosure. In a Chapter 7 bankruptcy, there is no way to prevent a mortgage company from foreclosing if the payments are not current. Your mortgage company may be willing to work with you through either a loan modification or forbearance agreement but that is the mortgage companies choice. You can not force them to work with you after filing a Chapter 7 bankruptcy. If you are behind on your mortgage payments and you want to keep your house, you should consider filing a Chapter 13 bankruptcy.
If you own real estate and are considering filing bankruptcy, you need to consult with an experienced bankruptcy attorney. Contact Hampton Roads Legal Services and we will schedule you a free consultation to discuss how bankruptcy may be able to help you.
What should I expect from my first meeting with a bankruptcy attorney?
Most attorneys offer a free consultation to discuss the bankruptcy process and how it can help you in dealing with your debts. If this is a free consultation, the attorney will normally not spend a great deal of time going over the specifics of your case with you. This is more of a time for you to decide if this is something you want to do and for the attorney to decide if your case is one that he/she will take. When you go to this first appointment, you should have an idea of what types of debts you have and how much you owe. You should also be able to tell the attorney if any of your debts are co-signed with someone else. The attorney will need to know what your income has been over the last few months and from what source you receive income.
I have a short questionnaire that I ask individuals to complete before I meet with them. This questionnaire has been designed to give me a quick summary of the person's debts and areas that I need to discuss with them. We also ask what is the main problem when you schedule your appointment so I have an idea of what your concerns are. This allows me to focus on what will help you the most.
Regardless of your situation, the attorney should explain at least what a Chapter 7 and a Chapter 13 bankruptcy will do and how they would apply to your situation. The attorney then should recommend a course of action for you and explain to you why that is the best option for you. It may be that bankruptcy is not the best option and the attorney should tell you that if that is the case. I know of some attorneys who will try to fit everyone into the same chapter of bankruptcy regardless of their situation. I believe that each situation is different and you should know what will be best for you, not what fits my practice the best. While bankruptcy is Federal Law, the procedures may vary based on where you live. The attorney should be able to advise you what the procedures are in Virginia.
Finally the attorney should explain the cost of the bankruptcy to you and explain the process that you will need to go through to file a case. This should include the timeline for the case. I believe that you should be in charge of this process. When I meet with you, I will give you options so you can decide what best fits your budget and timeline.
Can you remove a lien on real estate in a Chapter 7 Bankruptcy in Virginia?
There are three ways that a creditor can place a lien on real estate. First, you can consent to the lien when you borrow money and pledge your real estate as collateral. This is normally a mortgage or home equity line of credit. However, you may also not realize that you are allowing a creditor to place a lien on your property when you borrow money to finance some type of home improvements. Many times, individuals sign what is called a deed of trust as part of the financing arrangements for a home improvement loan. This is recorded in the land records and gives the creditor a lien against your property that is treated the same way as a mortgage.
The second way that a creditor may obtain a lien against your real estate is by obtaining a judgment against you and then having the judgment recorded in the city or county where you own real estate. In Virginia, if the Judgment is obtained in the same city or county where you own real estate, it automatically attaches to your property.
The third way that a creditor can obtain a lien against your property is by a statute or law that allows them to have a lien on your property. For instance, the IRS can file a tax lien in the city where you live and it will attach to your property. The city can also place a tax lien against your property for unpaid real estate taxes.
In a Chapter 7 bankruptcy in Virginia, you may not remove a voluntary lien such as a mortgage or home equity loan. However, you may be able to remove an involuntary lien such as a tax lien or a judgment lien. If your property is worth less than you owe on the mortgage(s) or if it's value is very close to the amount owed, you may remove an involuntary lien from the property. There are two major factors that must be considered when seeking to remove an involuntary lien. First, is the value of the property. You will have to have an appraisal done to show the actual market value of the property. The second factor is the date that the lien was recorded. The liens attach to the property in the order of the date that they were recorded. I have seen cases where a client had a judgment lien and a second mortgage. The judgment lien was recorded before the second mortgage and could not be removed because the property was worth more than was owed on the first mortgage, even though the property was worth less than the two mortgages combined.
It should be clear that the removing a lien from your property is something that requires the assistance of an experienced bankruptcy attorney. Before you can even seek to remove a lien, you must know if there is one. I have a lien search done for any of my clients who own real estate that they want to keep so we find out if there are any hidden liens out there.
If you have tax debt or have been sued over a debt and you own real estate, contact me or call my office today at 757-320-2010. I will meet with you to evaluate if you can remove a lien from your real estate in a Chapter 7 bankruptcy.
What is redemption?
When you file a Chapter 7 bankruptcy, one of your options for keeping collateral, like a car, that secures a loan is to do what is called redemption. A redemption is based on the premise that if the collateral was returned to the creditor, all they would be able to recover is the market value of the collateral when they sell it. Since the bankruptcy would prevent them from recovering any additional money from you, they recover is limited to what they can sell the collateral for. The Bankruptcy Code allows you to redeem the collateral by paying the creditor the current market value of the collateral in full satisfaction of their lien. However, you have to make one lump sum payment to the creditor. Most people do not have the ability to make a very large lump sum payment on something like a car but there are creditors who will loan you the money necessary to redeem a car under certain circumstances.
If you have a car that is worth far less than what you owe on it, redemption may be a good option for you instead of reaffirming a debt. Don't agree to pay back far more than you have to in order to keep a car.
For more information or to request an appointment, please contact Hampton Roads Legal Services at (757) 320-2010 to see if redemption is a good option for you.
What is a Reaffirmation Agreement and should I sign one?
When you file a Chapter 7 bankruptcy, you will have to notify your secured creditors (car loans, furniture loans and mortgage companies) as to what you intend to do about the loan. For loans that are secured by personal property (a car or furniture) , you have to indicate whether you intend to reaffirm the debt, redeem the property or surrender the property. I will address redemption in another post. A reaffirmation Agreement is an agreement to repay the creditor according to the terms of the reaffirmation agreement. Some creditors will offer better terms to get you to reaffirm the debt. For instance, one furniture loan company will cut the interest rate on the loan in half and reduce the monthly payment also. If you sign the reaffirmation agreement and it is entered by the court, you are bound to pay the debt as if you had not included it in the bankruptcy. This means that if you default on the debt, the creditor can take you court, get a judgment against you and garnish your wages or bank accounts. Some car companies take the position that if you do not reaffirm on the car loan, you have defaulted under the terms of the original loan and they can repossess the car even if you are current on your car payments.
You are not required to reaffirm on a mortgage loan since the collateral securing the loan (the house) is not personal property. It is not a good idea to reaffirm on a mortgage loan unless the creditor has offered you some type of loan modification to do the reaffirmation.
If you are concerned about a decision to reaffirm, contact your attorney to discuss your options. Every situation is different, and your attorney can give you the best advice for your circumstances.
Do I qualify for Chapter 7 bankruptcy in Virginia?
Filing for Chapter 7 bankruptcy can be a great option for many people who are severely in debt, but you do have to qualify for it.
The main idea of Chapter 7 is that you can have many of your debts discharged. Who wouldn't want that? Prior to 2005, all you had to do to qualify for a Chapter 7 bankruptcy was to show that your living expenses equaled or exceeded your income. There was a perception that people who had the ability to repay some part of their debts were abusing the system by filing a Chapter 7 bankruptcy. Congress made it harder to file a Chapter 7 with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Determining your eligibility to file for Chapter 7 generally comes down to how much you make. Your income is compared to the median income in Virginia. If you make more than the median amount, you have to take a "means test." The means test will look at how much you make, but also what deductions you can claim. Some of the deductions are set by the IRS and some of them are based on your actual expenses. If there are enough deductions, you could still qualify, even though you make more than the average income level.
If the means test shows that you still do not qualify for Chapter 7, don't worry! You still have other options. A more popular choice for someone who earns too much to qualify for Chapter 7 is Chapter 13 bankruptcy. Chapter 13 bankruptcy takes your debt and helps you repay it in manageable monthly payments.
If you are thinking about filing for Chapter 7 bankruptcy in Virginia, contact the Virginia Beach bankruptcy attorneys at Hampton Road Legal Services. Call us at 757-340-3100 to schedule a free, no-obligation consultation.
How Long Will I Be In Bankruptcy if I file a Chapter 7?
Chapter 7 Bankruptcy usually takes about 4-5 months, although your creditors cannot attempt to collect on the debts once your case is filed. Once your case is filed, the Bankruptcy Court sends out a notice to all your creditors with certain dates on it. One is the date for your Meeting of Creditors, normally referred to as a 341 hearing. A second date listed is the date for objections to discharge date. This is a date by which your creditors and the the trustees must decide if there is an issue with you receiving a discharge. If no objects to your discharge, the Court will normally send it out shortly after that date. The Court may hold the discharge if there are matters pending in your case such as a reaffirmation hearing.
One requirement to receive a discharge in a Chapter 7 bankruptcy is completing a Personal Financial Management Workshop and filing the certificate of completion with the Court. Another requirement, and one of the main reasons for people not receiving a discharge, is cooperating with the Chapter 7 Trustee's requests for documents or for turnover of property.
Don't lose your discharge because you don't understand what is required. Let us guide you through the process. Contact us today or call us at 757-320-2010.
Can you stop a garnishment in a Chapter 7 bankruptcy?
Yes. When we file a Chapter 7 bankruptcy, any garnishments must be stopped. In addition, we may be able to get back the money that has been withheld from your wages or bank account. Garnishments normally run for 90 to 180 days and at the end of the garnishment period, there is a hearing. If your case is filed before that hearing date, we can normally recover any money that has been withheld during that garnishment period. However, these funds must be protected for you and must come out of your wildcard exemptions which has a lifetime limit on it. For more on protecting assets, check out my article on "Keeping your things in Bankruptcy".
It is important that you meet with an experienced bankruptcy attorney if you are currently being garnished. If not handled correctly, you could lose hundreds of dollars. Contact me or call my office today at 320-2010. I will meet with you and discuss how to stop the garnishment and recover the money for you.
Can I sell or refinance my home in after filing a Chapter 7 bankruptcy?
When you file a chapter 7 bankruptcy, everything you own becomes part of what is called "the bankruptcy estate". The Chapter 7 trustee, who is appointed by the court to review your case, controls the bankruptcy estate. Until the trustee releases his or her interest in an asset, you may not do anything with the asset. This includes selling an asset or borrowing money against the asset such as refinancing a house. There are two ways that the trustee can release the interest in an asset. One is by formally abandoning their interest in the asset. This can be done at the Meeting of Creditors or later through the court. The trustee may also issue a no asset report. This tells the Court and everyone else involved in the case that the trustee has reviewed the case and does not believe that there is anything the trustee wants to take to recover money for the asset. Until the trustee has taken one of these actions, you may not sell anything you own or refinance a loan.
For more information on the trustee's role in a Chapter 7 bankruptcy, read my article on the role of a Chapter 7 trustee.
If you are considering filing a Chapter 7 bankruptcy, do not attempt to do this on your own. Contact me or call me today at 757-320-2010 to schedule a free consultation on how bankruptcy can help you.
How does bankruptcy affect my credit?
A Chapter 7 Bankruptcy will remain on your credit report for up to 10 years. However, you can immediately begin re-establishing your credit after your case is filed. Due to the fact that you are wiping out your debts and cannot file again for 4 to 8 years, credit companies want to be first in line to extend credit to you again. By not filing Bankruptcy, your credit report may show negative information for 7 years from the time you become current. By filing a Chapter 7 bankruptcy, negative reporting stops immediately. This allows you to begin re-establishing credit faster by keeping house, auto or other payments current. One of the best ways to rebuild your credit is by making payments on Student loans.
If you have filed a Chapter 7 bankruptcy, you should check your credit report after your case is discharged to insure that everything has been corrected on the credit report. After that you should check your credit report once a year to make sure that you are getting positive reporting. Normally you should have your credit score over 620 (acceptable credit) within one year after your discharge and you may be able to get your score over 700 within two years after your bankruptcy.
What kinds of debts does Bankruptcy eliminate?
There are some debts that cannot be eliminated or discharged in bankruptcy. For example, child support and spousal support obligations cannot be eliminated nor can arrears on those payments be discharged. Taxes for the most recent three tax years cannot be discharged. Student loans cannot be discharged except under extreme circumstances.
If you have liens on real estate or a vehicle, you will have to deal with those liens. If you have purchased furniture and financed it, you may also need to deal with that debt to keep the furniture.
You should discuss your specific debts with an experienced bankruptcy attorney before you attempt to file a bankruptcy to make sure that you know what debts will not be discharged.
Contact Hampton Roads Legal Services at 757-320-2010 to schedule a free consultation with our exprienced attorney.
Do I have to list all my creditors in a Chapter 7 bankruptcy?
Yes. You must list all creditors when you file a Chapter 7 bankruptcy. There are no exceptions. You must list everyone that you owe money to including taxes and student loans. However if you have a $0 balance on an account, you don't owe that creditor money and they don't have to be listed. If you no longer owe an individual or company money, they are not a creditor. Our office will assist you in obtaining a credit report so that you are certain to list all your creditors. It is important that you review your credit report carefully and list any additional creditors that do not appear on the credit report. There are many companies that do not report to credit reporting agencies, such as medical providers, taxes and pay day loans.
In a Chapter 7 bankruptcy, if you leave off a creditor, like a medical bill, they will still be included in your bankruptcy. However, since they did not receive notification of the bankruptcy, they may still try to collect from you. It is very important to list everyone that you think you owe money to so that you don't have problems later with a creditor trying to collect because they were not notified about your bankruptcy.
Will all of my debts be forgiven if I file a Chapter 7 bankruptcy?
Many people mistakenly believe that filing a Chapter 7 bankruptcy will “wipe the slate clean" and free them of all their debts, but that is not necessarily true. There are some debts that will still be owed after a Chapter 7 bankruptcy. Even if you file, you will still need to pay your child and spousal support and any arrears on the support (late fees, etc), most back taxes, student loans, debts that you agreed to pay in a Separation Agreement or were ordered to pay in a Divorce Decree or criminal fines or restitution payments. In addition, a creditor may seek to have a debt declared non-dischargeable in your bankruptcy under certain circumstances. If you are not clear on which debts will and will not be discharged, speak with an attorney or reputable credit counselor before filing.
If you have debts that may not be discharged, you may have other options. Contact us or call us today at 757-320-2010 to schedule a free no obligation consultation. We will discuss your debts with you and advise you of the best course of action for you based on the debts you have.