Frequently Asked Questions
When should I file bankruptcy?
Each person's case is different, but generally bankruptcy is sought after a debtor's financial situation has become so dire that it warrants the filing of a bankruptcy petition. Often times the debtor has outstanding debts that are unmanageable. A person may have creditors that are harassing them or annoying them by calling their homes at all times of the day. People often consider bankruptcy when they are incapable of paying their mortgages on their homes. Whatever the situation, it is important to seek legal advice to help you navigate the complex legal system.
Why do people and businesses file for bankruptcy?
People and businesses file bankruptcy primarily to achieve the "Fresh Start." A fresh start refers to a debtor who has successfully completed the bankruptcy and has his debts discharged. In addition, upon filing the petition an automatic stay is enforced which prohibits creditors from trying to collect from you until the bankruptcy case has concluded. This can be alleviating emotionally and economically. For individuals, the ability to keep essential assets while restructuring or eliminating burdensome debt is reason enough for filing bankruptcy. For businesses, bankruptcy allows a business to continue operating while the bankruptcy administrator restructures its debts.
Which chapter of bankruptcy do I choose?
Bankruptcy "Chapters" refer to which part of the Bankruptcy code your bankruptcy will be filed under. Chapter 7 can be filed by a person or a corporation and consists of a liquidation of assets to provide payment to the creditors. For a person the goal is to discharge all non-secured debts. Chapter 7 for businesses is similar but the liquidation of all its assets will legally dissolve the company, so if you want your business to continue to operate after the bankruptcy you will choose Chapter 11. Chapter 11 is primarily sought for businesses that want to continue operations while they restructure their debts with their various creditors. Chapter 13 is also a reorganization plan. Chapter 13 cases take 3-5 years and allow you to essentially restructure your debts to your various creditors. Choice of bankruptcy is not entirely voluntary, the legislature passed sweeping changes to the bankruptcy code in 2005. Under the new rules a person seeking Chapter 7 liquidation may not be able to because they did not pass the "Means Test." The means test essentially allows the US Trustee to move a persons case from Chapter 7 into Chapter 13 based upon a convoluted quagmire of factors. The means test is addressed in more detail here. The overall goal is to ensure that you pick the right Chapter for you or your business and I will help you by educating and advising you on the right course to take.
How long does a bankruptcy case take?
It depends on which chapter of bankruptcy you are filing. Chapter 7 cases are the fastest because they are liquidation cases and can be administered in less than year, sometimes 6 months. Chapter 11 and Chapter 13 are much longer because they are reorganization cases. For example a Chapter 13 case will last anywhere between 3-5 years depending upon financial factors.
Will bankruptcy hurt my credit or stop me from buying home?
Bankruptcy has a negative effect on your credit score. However, as the adage says, "time heals all wounds." A person or business can file for bankruptcy and still go on to lead a productive and financially fulfilling life (look at Donald Trump, he became the president several years after filing for bankruptcy). Purchasing a home after bankruptcy does provide some obstacles, but they are not insurmountable. Typically getting the financing for a mortgage will be through a conventional mortgage company (think credit unions and banks) or it is backed by the federal government. Most loans backed by the federal government are FHA, VA, or USDA. For the FHA and the VA, two years after discharge of a Chapter 7 is required for the USDA it is 3 years. For conventional mortgages the time horizon is 4 years from discharge of a Chapter 7. This is different under Chapter 13. Chapter 13 is a reorganization plan and if the debtor can show that they have made 12 consecutive timely payments into their 13 plan then they may qualify under a federal mortgage. However, under Wyoming law the Trustee and Bankruptcy Court must not object to a notice filed by the debtor asserting that they are seeking a new debt during the course of the chapter 13 plan. Generally, upon a successful discharge of under a chapter 13 plan, conventional mortgages require 2 years until they will grant a mortgage.
How much does a Bankruptcy cost?
Bankruptcy costs are case and chapter dependent.
Typically, a Chapter 7 non-business cases range anywhere from $1,500-$3,000 depending on the complexity of the debtors assets and amount of creditors. A chapter 7 for businesses or persons with complicated sources of incomes and numerous assets and creditors can cost in excess of $10,000. A majority of cases will likely be under $3,000. Your case will be evaluated after our initial consultation and for that reason fees are not discussed until I get a grasp on the situation we are dealing with.
A Chapter 13 case usually begins around $4,000. Again, depending upon the complexity of the case fees can exceed $10,000. However, a majority of cases will be around $4,000.
What do I do to start a bankruptcy?
First, come to my office for an initial consultation. We will discuss your situation and I will try and help you figure out the best path forward. After the initial consultation, we can discuss whether you want me to represent you and I will get you prepared to start a new chapter in your life. The initial consultation will last 1-2 hours, a non-refundable $300 fee is required for an initial bankruptcy consultation.