General Bankruptcy FAQs | Stephen Behrends Law Office

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Stephen Behrends Law Office | Bankruptcy | Eugene, OR

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Bankruptcy FAQ Law

Frequently Asked Bankruptcy Questions

Q:    I have a wage garnishment. Should I be worried that they will take money from my bank account as well? Can a bankruptcy stop garnishments?

 

A:    If you have a judgment against you or if you owe money to the IRS or Oregon Department of Revenue, you should go immediately and get your money out of your bank account. You could easily lose all of the money in it if your bank is notified to freeze your account to pay your bill with the creditor or the taxing agencies.

       As soon you file bankruptcy, garnishments are stopped. We contact your employer, your bank and the creditor trying to collect to tell them that you have filed bankruptcy and that the garnishment is no longer effective. If money is turned over to a bill collector on a garnishment after the case is filed, we help you recover it.

 

Q:    I’ve heard that in a Chapter 7 the trustee takes assets and sells them to pay my bills. I have seen it called a “liquidating” bankruptcy on other websites. Does this mean that I would lose my car, my home or any of the things I own? Does someone come to my house to see what I have that could be sold to raise money?

 

A:    The vast majority of people who file bankruptcy keep all of their things. You are very unlikely to lose anything that you own. Except in extremely rare circumstances, no one is going to come to your home to see what you have. Most people can keep their car, their home and all of their possessions. This is because of the list of “exemptions” is fairly broad and generous. If you have a question about something specific that you have, please call or email to ask about it.

 

Q:    How much does a bankruptcy cost?

 

A:    I recognize that it is difficult for you to pay for the legal fees for your bankruptcy and so I try to work with you to make payment arrangements so that you can afford to file.

       I offer 10% discounts for seniors, members of the military, vets, public safety officers, teachers, single parents and new clients who are referred by someone.

 

      A typical Chapter 7 case is $1,500.00 but in some cases the fees are as low as $1,250.00 or as high as $2,335.00 depending on how complicated the case is going to be. The fee for a Chapter 7 case is a flat fee that covers everything that usually happens.

      A typical Chapter 13 case is started with $500.00 to $1,810.00 but additional fees are paid from the plan payments. The fee for a Chapter 13 case is an hourly fee based on the work actually needed and performed on your case.

 

      After the initial consultation or evaluation, I will tell you exactly how much it would cost to get your case filed. I will send you a fee agreement that describes exactly what is covered and what is not covered and how much the fees will be.

 

Q:   What is the difference between Chapter 7 and Chapter 13 and why should I care which one I do? I hear that people file Chapter 13 so that they don’t lose their home, business or other assets. However, I also heard that you have to pay your creditors back when you file Chapter 13.

 

A:   It seems funny to start talking about luck when you are thinking about bankruptcy but it is literally “lucky number 7” and “unlucky number 13”. The biggest difference is that Chapter 7 is the one you would prefer to file and Chapter 13 is the one that you would rather not file.

 

Why? It is “the long and the short of it” which means that we like Chapter 7 because it is done in a matter of months and we don’t like Chapter 13 because it means that you are tied up with the bankruptcy for years, usually 5 years.

 

The worst part is that you can’t really start to rebuild your credit until you reach the end of your case and get your bills wiped out with the bankruptcy discharge. That is just 3-4 months in a typical Chapter 7 but 3 to 5 years in Chapter 13.

 

Q:    If the choice is between being done in 3-4 months or being tied up in the bankruptcy for 3-5 years, why would anyone file Chapter 13? Will I have better credit sooner if I try to repay my creditors in a Chapter 13?

 

A:    No, you actually will have better credit sooner by getting the debts wiped out sooner in Chapter 7. Getting the bankruptcy discharge is what gives you the bounce that lets you start to rebuild your credit.

 

Q:    So why does anyone file Chapter 13?

 

A:    There are reasons why people choose to file Chapter 13 and for a few people, there are reasons why it is the only alternative available if they want bankruptcy court protection. For these people we say that the door to Chapter 7 is closed.

 

Q:    Who would choose to be tied up with the court for 5 years if you don’t have to file Chapter 13 to keep your home or business?

 

A:    Here are the reasons why people voluntarily choose to file Chapter 13. Please call or email if you have questions about whether any of these apply to you.

 

The biggest reason for filing Chapter 13 is to stop a foreclosure on your home. You can cure the mortgage payments you missed over the 5 years you are in Chapter 13 and be able to save your home!

 

The next most common reason to file Chapter 13 is to take care of big tax debts. This means owing more in taxes than you could handle on your own after a Chapter 7 but a small enough amount that you could pay it over the 5 years you are in Chapter 13. This is because you can be protected from collection efforts by the IRS and ODR while you pay just the taxes and interest through the plan. The penalties can be discharged with the rest of your unsecured debt like credit cards and medical bills.

 

The next reason why people file Chapter 13 is because of some of the things that you can do in Chapter 13 that you can’t do in Chapter 7. One main reason is to remove a 2nd mortgage from your home if the value of the house is less than what you owe on the 1st mortgage. You have to complete the Chapter 13 plan but this can be a large benefit to someone with a large second mortgage and a home that went way down in value during the slump in the real estate market.

 

Another thing that can be done in Chapter 13 is known as a “cram-down.” This means that you can pay off a car or business collateral for what is it worth not what you owe. This can also save thousands of dollars for people with cars that are upside down or business loans secured by equipment that is worth a fraction of what you owe. You can also use the cram-down to reduce the interest rate if you have a car or other secured loan with unreasonably high interest.

 

Q:    Why is the door to Chapter 7 closed to some people?

 

A:    First, if you filed a Chapter 7 less than 8 but more than 4 years ago, you are allowed to file a Chapter 13 but not another Chapter 7.

      Second, you might not be able to file Chapter 7 if you “make too much money.” This is very complicated so if you make a decent income, we will have to analyze your last 6 months earnings, your tax returns and your budget carefully. You may still be able to file Chapter 7 even if your income is high, depending on your budget and your debts but it is an involved process to see if you might have a chance to file Chapter 7. You might want to get a second opinion from me if you have been told you have to file Chapter 13 because of your income. It is possible that a complete review of your budget would show that you might be able to try to get a discharge in Chapter 7.

 

Q:    What is reaffirmation? I have heard that I have to have a reaffirmation agreement to be able to keep my car.

 

A:    You have to sign a reaffirmation agreement but you may end up being able to keep your car even if the Court does not approve it. Reaffirmation means promising to pay the car loan despite filing bankruptcy. What it really means is that you are back on the hook for what the lender can’t get by selling the car if you give it back or it is repossessed after you file bankruptcy.

 

      Many attorneys won’t get involved in the reaffirmation process and send their clients to the reaffirmation hearing, the second court hearing, without representation. We always go with our clients to these hearings. At this hearing, the Judge probably will reject the reaffirmation agreement. This is a good thing because it means that you can keep your car if you make all of the payments but if you can’t and you give it back or it is repossessed, you are not on the hook and can walk away from what you still owe.

"Mr. Behrends has been amazing to work with. He has always treated me with respect and has been incredibly helpful in working through difficult financial circumstances over the last few years. I have recommended him to friends and will continue to do so in the future."

- Timothy H.

Call the Stephen Behrends Law Office for a FREE consultation for bankruptcy.

 

541-344-7472

Call the Stephen Behrends Law Office for a FREE consultation for bankruptcy.
 
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