Jack E. Withem, PC
Attorney at Law
Houston, TX
(713) 462-8887
JACK E. WITHEM, P.C.
ATTORNEY AT LAW
FREQUENTLY ASKED BANKRUPTCY QUESTIONS
The following information is not intended as legal advice and it does not create an attorney-client relationship. Bankruptcy law is very complicated, and you should consult with an attorney before taking any action. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may classify Attorney as a debt relief agency and require that an Attorney state conspicuously We are a debt relief agency. We help people file for bankruptcy relief under the United States Bankruptcy Code. To avoid misunderstanding you are advised that Jack E. Withem is licensed to appear in the State Courts of Texas, The U.S. District Courts and Bankruptcy courts for the Southern, Eastern, Western and Northern Districts of Texas as well as the U. S. Supreme Court.
WHAT ARE MY RESPONSIBILITIES IF I ELECT TO FILE UNDER CHAPTER 7?
You must provide accurate information and documents. Honest mistakes may be correctable. Intentional misstatements in bankruptcy documents or false testimony may be a violation of Federal criminal laws.
WHAT DOES BANKRUPTCY DO FOR ME?
Bankruptcy will wipe out most debt and give you a fresh financial start. In some instances we are able to work out arrangements with creditors to avoid filing under Chapter 7.
AM I ELIGIBLE FOR CHAPTER 7?
You must pass a means test. This means test calculation is very complicated and may yield artificial numbers that have little resemblance to your financial situation. However, it is the law and we must do the calculations accordingly. If you are not eligible to file a chapter 7 you can file a chapter 13 where you pay a trustee a sum each month for five years and when the payments are completed you receive a discharge from all dischargeable debts.
Step One:
At the time of writing of this document, if your current monthly income as defined by the bankruptcy code is less than $56,278.00 yearly or $4,689.84 monthly for a family of four in Houston, Texas you may file a Chapter 7.
Step Two:
You still may qualify if your current monthly income is too high if after deduction of expenses allowed by the Internal Revenue Code and statute, you have less than $166.77 per month left. If you are above $166.77 further calculations must be done.
Step Three:
If you do not qualify for a Chapter 7 you will probably have to pay a monthly amount to the trustee for five years and then receive your discharge.
Step Four:
As of October 17, 2005, the Bankruptcy Code requires credit counseling both prior to filing a Chapter 7 and again prior to being discharged.
WHAT IS THE BASIC CONCEPT OF CHAPTER 7?
The debtor surrenders all nonexempt assets in exchange for a discharge of debts under Chapter 7.
EXEMPT PROPERTY
You may choose either the Federal or the State exemptions but you cannot pick and choose items between the two.
STATE EXEMPTIONS
Texas law exempts your urban home regardless of value if you have owned it for 1215 days or have rolled over equity from a prior home and your combined ownership totals 1215 days. If you have not lived in the home for the requisite period your exemption is limited to equity of $125,000.00 per debtor, $250,000.00 in a case with a husband and wife. By example, a property worth $400,000.00 that has a $350,000.00 mortgage has equity of $50,000.00.
In addition to the real property exemption, a Debtor who is single is entitled to a personal property exemption of $30,000.00. If the Debtor is a married person, the limit is $60,000.00. These assets include home furnishings, provisions for consumption, tools, equipment, books used in a profession or trade, wearing apparel, jewelry not to exceed $15,000 for a married couple, two firearms, athletic and sporting equipment, a motor vehicle for each person who holds a license, two horses, 12 head of cattle, 60 head of other livestock, 120 fowl, household pets.
Retirement plans of almost every type are also exempt as are most annuities and life insurance.
FEDERAL EXEMPTIONS
The Federal exemptions are limited to the following:
The debtor's equity interest in real property used as a residence not to exceed $18,450 ($36,900 for a couple filing a joint petition).
Items kept primarily for personal or family use have monetary limitations:
Motor vehicles;
Real property (house and/or land);
Household goods and furnishings;
Clothing;
Books and musical instruments;
Pets and animals producing family use products;
Crops such as garden produce;
Burial plots;
Tools or books necessary to make a living;
Cash value on life insurance policies;
Social security, unemployment, public assistance, veterans or disability benefits;
Pension, profit sharing, 401(K), IRA or other similar plan;
Alimony or child support necessary for support;
Certain personal injury settlements.
In some cases it is possible to exempt cash or other liquid assets under Federal exemptions up to a maximum of $9,650 ($19,300 if married and filing jointly).
WHAT ARE THE ADVANTAGES OF CHAPTER 7?
The automatic stay provided for under the Bankruptcy Code, with some exceptions, prevents creditors from attempting to collect any debt you owe to them. Exceptions to the automatic stay include divorces, child support matters, landlords who have obtained a judgment for possession and criminal prosecution. Other limitations exist if you have filed more than one bankruptcy case within a year. The automatic stay can be lifted by Court order or upon validation of a lien on certain property that you hold (such as an automobile, computer, home, or the like). A creditor may foreclose that lien and recover that property if payments are not properly made.
You have a fresh financial start free from oppressive debt and harassment by creditors.
WHAT DEBTS ARE NONDISCHARGEABLE?
Student loans;
Divorce/family law obligations;
Criminal fines and restitution;
Debts that are incurred by acts of fraud, deceit and misrepresentation;
Debts that relate to breach of a fiduciary capacity;
Debts that relate to a willful and malicious injury by the debtor to another;
Some tax obligations are not dischargeable.
WHAT ARE THE MAJOR STAGES IN A CHAPTER 7?
You must obtain credit counseling certificates, credit reports and file all the necessary statements and schedules with the Court.
At the creditor's meeting the Debtor is examined by the Court appointed Trustee, whose job is primarily to make sure that all of the provisions of the law have been complied with. This normally takes 40 to 80 days after the date of filing.
The Court normally enters the Order of Discharge five months after the filing and requires that you obtain the necessary pre-discharge credit counseling.
WHAT DOCUMENTS MUST BE FILED WHEN I FILE A CHAPTER 7?
A petition requesting relief under Chapter 7,
A means test calculation,
A list of all debts that are secured debts and the proposed disposition of those debts,
A list of monthly expenses and income on the date of filing,
A statement as to the attorney's fees that are being paid and how they are paid,
A statement of affairs, which is a questionnaire concerning your past,
Applicable schedules of debts that are owed and assets that are owned,
Tax Return Transcripts,
Your credit counseling certificates,
There may be additional papers depending upon the type and complexity of the case.
WHAT OPTIONS EXIST AS TO SECURED DEBT?
Generally the Debtor may agree to surrender the property and seek a discharge or reaffirm the debt and obligation and remain liable to pay it.
WHAT IS THE TRUSTEE?
The Trustee is an individual, who is charged by the Court to do basically three things:
1. Examine the statements, schedules and documents filed by the Debtor to determine if the rules have been followed and conduct a meeting of creditors,
2. Sell and dispose of non-exempt property for the benefit of creditors,
3. Recover any preferential payments to creditors prior to filing bankruptcy.
HOW SHOULD I HANDLE CREDITORS AFTER I HAVE FILED BANKRUPTCY?
Give them your case number, date of filing, and ask them to call your legal counsel.
WILL MY EMPLOYER DEMOTE OR FIRE ME BECAUSE I HAVE FILED FOR BANKRUPTCY?
This is prohibited by law.
MAY I KEEP MY BANK ACCOUNT IN MY PRESENT BANK?
It is generally best to change banks contemporaneously with the filing of your bankruptcy.