Answering All Your Bankruptcy Questions
When a catastrophic event puts your future at risk, anxiety and uncertainty will cause you to have a million questions. What can you do? How can you provide for your family? Will you recover?
Allow the extensive experience and knowledge of the Packard Law Firm put your worries to rest. Come learn the answers to your questions and see how we can help pull you out of the depths of uncertainty.
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Are my Retirement Savings Safe From Bankruptcy?
If you are considering bankruptcy, you may be concerned about the impact bankruptcy might have on your retirement savings. In many cases, however, your retirement savings may be protected in case of a bankruptcy. This depends on how your retirement funds are saved and whether you are considering chapter 7 or chapter 13 bankruptcy.
401Ks are safe from bankruptcy as are other less-used retirement-specific accounts. As a general rule, if your retirement account is tax exempt it is probably bankruptcy protected. 401(k)s, 403(b)s, 457(b)s, Keogh accounts, other profit-sharing and money purchase plans, and defined-benefit plans are all protected in case of either chapter 7 or chapter 13 bankruptcy.
IRAs are similarly protected in case of bankruptcy, but only to a certain limit. Today that limit is $1,283,025. It is set to increase in 2019. The limit applies to the combined value of all your IRA accounts.
Money in savings accounts is not exempt from bankruptcy even if you have personally earmarked those funds for future retirement. If you have kept all or some of your retirement savings in a savings account and are now considering bankruptcy, you may be tempted to move your savings into a protected account. Do not do this until you talk to an attorney. Moving significant funds into a protected account right before declaring for bankruptcy could put that entire account into jeopardy.
In general, property is safe in chapter 13 bankruptcy but not in a chapter 7 bankruptcy. There are, however, many property exemptions available for chapter 7 bankruptcy. These exemptions depend on your state. Consult with an attorney to determine how your property will be affected in your individual situation.
Retirement Savings Being Used
Once you start using your retirement savings, it is much more vulnerable to bankruptcy. In chapter 7 bankruptcy, any retirement savings beyond what you need to support yourself is vulnerable. In chapter 13 bankruptcy, your retirement income will be used to determine your payback schedule.
Social security is safe from bankruptcy, but it could potentially be garnished once it is in a bank account. Keep social security funds safe by creating a bank account exclusively for social security. If your income is made up primarily from social security, however, bankruptcy may not be the best idea, since it’s not usually at risk to creditors even without bankruptcy.
The best thing you can do to make the most informed decision on how your retirement savings will be affected by bankruptcy is to consult with a bankruptcy attorney. The Packard Law Firm is committed to helping individuals who are considering bankruptcy make the best decisions for them and their families. Reach out to us today.
What is a “Pro se” Debtor Expected to Know?
The courts will expect the person filing a bankruptcy (even if they are without a lawyer) to follow the federal court’s Rules of Bankruptcy Procedure and the United States Bankruptcy Code. In addition, those filing pro se must follow all the local rules of court where the case is ultimately filed. In Bexar county, a printable copy of local rules can be found in the court's website here in San Antonio.
The actual Bankruptcy Forms are free to the public. A quick side note is that forms numbered in the 100 series are for people and forms numbered in the 200 series are for organizations/companies.
An Overview of the Process for Filing a Chapter 7
- Perform Means Test: Generally, the first step is to conduct a “Means Test” to see if you even qualify for Chapter 7.
- Obtain Your Credit Reports: It’s a good idea to obtain credit reports from one or more credit bureaus in order to ascertain that you have a comprehensive list of all your debt. These credit reports can be obtained by following the instructions here.
- Take a Credit Counseling Course: You have to complete a credit management and financial literacy course. The U.S. Trustee Program has a list of approved credit education agencies on its website.
- File the Correct Bankruptcy Forms: This can be the most complicated and time-consuming part. With a little money, you can download a bankruptcy forms package to save some time and hassle. You can also get them online from the court website here. Once complete, submit the paperwork to the bankruptcy trustee pursuant to the court’s local rules.
- Important Note About Responding to Your Trustee: Your trustee will probably reach out to you. You must respond in a timely fashion to any form of communication from the bankruptcy trustee. If you don't, you will probably get your case dismissed.
- Attend a Creditors Meeting: Once filed, you will have a meeting with your trustee about your debts and creditors.
- Take a Personal Financial Management Instruction Course: Within 45 days after your creditors meeting, you must attend a post-filing Personal Financial Management Instruction Course. It must be complete prior to the timing of discharge, otherwise your case will be closed without discharge. You can go to the U.S. Trustee Program’s website to find courses that are approved in your area.
- Obtain your Decision: Once you have completed these steps, normally after 60 days from the completion of your meeting of creditors, barring there being any objection to discharge or motion to dismiss, you will normally receive your chapter discharge.
Filing a Chapter 13
The process for filing a Chapter 13 bankruptcy is much more complex. The bankruptcy forms package for filing a Chapter 13 can be downloaded here. However, in addition to many of the steps described in a Chapter 7 bankruptcy, you will have to create a repayment plan explaining, in detail, how you will repay your creditors. Having an experienced attorney help you navigate through these legal steps is invaluable.
Bankruptcy is very complicated and the legal ramification are significant. Although there may be some people that might be able go it alone, most need a lawyer’s perspective. If you are considering filing for bankruptcy, call the Packard Law Firm to schedule your free consultation with a board certified bankruptcy attorney located right here in San Antonio, Texas.
Why did you decide to become a bankruptcy lawyer?
First of all, I have a passion for taking the legal structure, the bankruptcy code and matching it with peoples lives. I customize a Chapter 13 plan in a way that will match the lifestyle and the obstacles that people are going to have and enable them to keep the things that they will absolutely need.
That is fun for me. I enjoy doing that. I enjoy crunching the numbers. I enjoy working with my staff to customize a bankruptcy plan that will succeed in court and will have a real result that will really help reorganize their life.
"David is a great lawyer. He has been doing bankruptcy for over 20 years. He doesn't pressure people. He talks about the options, lays it out in front of them and explains the different outcomes for the different paths that they can take. If you have questions, give David a call and he will lay out your options in front of you and get you a resolution to your financial problems."
-- Michael Packard, Partner, Bankruptcy Attorney
What is the difference between a Chapter 7 and a Chapter 13 bankruptcy?
Chapter 7 Bankruptcy Allows You to Eliminate “Unsecured” Debt
Basically, a Chapter 7 is a way for a person to eliminate their unsecured debts. What they are seeking is a fresh start, a clean slate. They want to continue to pay for certain secured debts, like their house note or their car note, but discharge or eliminate their unsecured debts like credit card bills, medical bills or signature loans.
Chapter 13 Bankruptcy Is a Way to Reorganize Debt over Time
Chapter 13 by contrast is a way for a debtor to reorganize their debts over a plan of 3 to 5 years. What that means is, you are going take the back payments on your house note, the vehicle note, any kinds of loans you have for appliances, lump those all together into a monthly plan payment and pay that out monthly over an extended period of time. That usually allows a person to keep the things that they have worked hard to get in the first place and pay it out and pay their creditors as much as they can afford.
How does Chapter 13 Allow You to Keep the Things You Need While Lowering Your Monthly Payments?
A Chapter 13 bankruptcy allows a person to reorganize their debt by making payments that are significantly less, in most cases, than what they were paying before. And it does it in several ways:
- First, you are only required to pay a certain interest rate to most creditors and right now in most cases it is 5.25%
- Secondly, in many instances you are able to lower the amount that you pay down to the value of the collateral rather than the balance that is owed. So that usually reduces the principal that you pay out.
- Thirdly, you are often able to increase the term over which you pay your creditors to a period up to 5 years.
- And finally, debtors are often able to lower the amount that they pay to their unsecured creditors down to literally pennies on the dollar, if they qualify. At any rate, you are able to pay your unsecured creditors often at zero percent interest.
So with those four tools, a Chapter 13 debtor has the ability to lower their payments to a budget that they can afford while continuing to keep the things that they need in order to reorganize.
Get Help Reorganizing Your Debt
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Can I File Bankruptcy Without An Attorney?
One of the first questions we are asked about bankruptcy is entirely legitimate, ”how can I afford an attorney if I’m bankrupt?” The very reason for considering bankruptcy in the first place means that folks are (and should be) very particular about attorney fees. So how should one go about dealing with the fee issue?
Consider The Outcome
For starters, filing bankruptcy “pro se” (without an attorney) is certainly permitted by law. We have seen it done many times, sometimes successfully, especially if it’s a chapter 7. If you know most of the common issues, and if you have a knowledgeable person assisting you, we think you will succeed about half the time if it’s a chapter 7. Therefore, your decision needs to consider the likelihood of successful outcome and the cost if it doesn't turn out so well.
Most often, we believe you should still get an attorney even if it's a straightforward chapter 7. Our concern is that often you don't really know if not hiring a lawyer was a mistake until after the fact. The sheer magnitude of the cost of some mistakes often dwarf the attorney fee. (Most attorneys, including our firm, can get you in and out of most chapter 7 cases for a fee of under $2,000, which although is still a lot, it’s smaller than the cost of many common mistakes).
Make Sure You Fit These Criteria Before Filing On Your Own
Are there any exceptions? Is it ever “non-crazy” to consider filing pro se? Rarely, but yes. In our view, if you happen to fit the following profile, then perhaps you should at least look into doing a straightforward chapter 7 on your own:
- You have a relatively high tolerance for risk. You’re the kind of person, for example, who would be genuinely comfortable electing to not have any insurance on a home you own. You feel good about the savings more than you lose sleep over the risk.
- You’re good at numbers. And you’re good at understanding how to read complex instructions. For example, you prepare relatively complex tax returns without needing help from a tax specialist, and you’re confident that you will get it right.
- Your own time is not expensive. The time it takes for even fast learners to adequately understand the relevant laws, prepare the forms, and ascertain that nothing is left undone can be significant and should be factored in.
Even if all of the above exist, your decision to go pro se on your straightforward Chapter 7 consumer case should be made only after careful evaluation and reflection. Here is a list of what you should know if you chose to move forward on your own.
What about Chapter 13? We think you should never go a Chapter 13 alone. I have never seen a Chapter 13 case, filed in good faith and lasting longer than a few months, where I thought the Debtor was made better off financially because they saved on attorney’s fees. If filing the Chapter 13 is the right decision, then we believe it is always worth it to get a competent and honest attorney to represent you. No exceptions in chapter 13; you can file pro se, but you really shouldn’t.
Seek Help From a Texas Bankruptcy Attorney
There are times when we as a society are overly concerned. Sometimes we over-purchase warranties and even insurance. However, when it comes to filing for bankruptcy, it is not being overly cautious to seek competent legal counsel who knows not only the law, but the local practices and procedures in San Antonio. Contact a bankruptcy attorney at Packard Law Firm today by calling 210-880-9395, or fill out a contact form to schedule a free consultation.
Will Bankruptcy Wipe Out All of My Debts?
Yes, with some exceptions. For example, bankruptcy will not normally wipe out:
- Money owed for child support or other domestic support
- Most fines and penalties owed to government agencies
- Most taxes and debts incurred to pay taxes which cannot be discharged
- Student loans, unless you can prove to the court that repaying them will be an "undue hardship"
- Debts not listed on your bankruptcy petition
- Loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan
- Debts resulting from "willful and malicious" harm
- Debts incurred by driving while under the influence
- Mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor)
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What Will Happen to My Home and Car If I File for Bankruptcy?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in Chapter 13.
However, some of your creditors may have a "security interest" (or lien) in your home, automobile, or other personal property. This means that you gave the creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy generally does not make these security interests go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property during or after the bankruptcy case.
There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Often, you are given the right to pay the value of the collateral even if it is much less than what is owed. In some cases involving fraud or other improper conduct by the creditor, or sufficiently old debts, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.
Speak to San Antonio bankruptcy lawyer David Packard today if you need assistance. Call us, or submit a contact form and a representative from our office will reach out to schedule a free consultation.
Can I Own Anything After Bankruptcy?
Yes! So many people think they can not own anything (at least for some period of time) after filing for bankruptcy. This just is not true.
Exempt Property: Exemptions are an essential part of every bankruptcy filing. You can protect and keep property determined to be “exempt” both during and after bankruptcy. This is typically personal items, such as your car, furniture, or real property used as your home. Learn more about what property you can keep in a bankruptcy case.
Property obtained after you file: In general, you are allowed to keep any property you obtain after a chapter 7 bankruptcy is filed, (subject to a few important exceptions, noted below). This means you are free to not only protect your exempt property (which, in Texas, it usually turns out to be everything you own) but also it means that if you acquire property afterward, you may keep that property as well (subject to most inheritances within 6 months of filing a chapter 7). If you file Chapter 13, the rules are much different, and although you usually may keep all your property, the discharge of debt may depend on what you do with any property you acquire after you file chapter 13.
Exceptions: There are some notable exceptions, mostly having to do with inheritance. If someone should pass away within 6 months of filing your case, and as a result, you become entitled to money or property, then such may be considered property of the estate, and unless exempt, may be claimed by the trustee to pay your creditors.
If you are considering filing bankruptcy and need help understanding your legal options, call the Packard Law Firm. Schedule a free consultation with a board certified bankruptcy attorney right here in San Antonio.
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How Can I Afford to Pay the Attorney's Fees if I am Bankrupt?
This is a very common question, and, fortunately, there are some good answers. Many bankruptcies are not filed on an emergency basis. You may retain your bankruptcy attorney by paying a small down payment, while your case is being prepared. When you are ready to file, your case is prepared and all or most of the fee is paid, the case may be filed. Until that time, you will have been represented during the planning process. Many cases are filed for emergency reasons such as to stop a foreclosure or repossession threat. Fortunately, in these Chapter 13 cases you may pay a very small portion of the fee down (usually $150), with the balance to be paid in your monthly plan payment. In other words, your attorney fee is "consolidated" with your other debts and paid over a 36 to 60 month period. These arrangements make paying attorney's fees in bankruptcy much more realistic.
Speak with a Texas Bankruptcy Attorney Today
Contact us today for a free consultation at 210-340-8877 if you have more question about filing for bankruptcy.
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