STEPHEN MARSHALL LAW

BANKRUPTCY ATTORNEY

HELPING YOU GET A FRESH START

BANKRUPTCY Q&A

What can bankruptcy do for you?

 The first question has to be what is bankruptcy?

Bankruptcy is a legal process where your debts are eliminated (Chapter 7) or you pay back a portion of your debt (Chapter 13).

 

 

What can bankruptcy do for me?

Filing bankruptcy can discharge unsecured debts, such as credit cards, medical debts, payday loans, and any tax debt which is more than 3 years old.

It can stop foreclosures on your house or mobile home and give you an opportunity to catch up on missed payments.

Prevent repossessions of a car or other property.

Stop wage garnishments.

Restore or prevent termination of utility services.

From the moment your case is filed with the courts your creditors can no longer call you, write to you, harass you, or sue you. All debt collection harassment ceases.

 

 

What is the difference between a chapter 7 bankruptcy and a chapter 13 bankruptcy?

Most people filing bankruptcy will want to file under either a chapter 7 or a chapter 13 bankruptcy.

 • Chapter 7:

 • In a chapter 7 bankruptcy your debts are discharged and you get a fresh start in about 100 days.

 • Chapter 13:

 • In a chapter 13 bankruptcy you enter into a repayment plan with the courts to repay a portion of your debts over a 36-60 month period.

 

 

What is the difference between a secured loan and an unsecured loan?

A secured loan is backed by collateral such as a home or car while an unsecured loan is simply backed by your signature.

 

 

If I file bankruptcy will my credit be ruined?

If you have reached the point of considering bankruptcy, chances are your credit is already ruined. But no, your credit should improve once your bankruptcy is complete. As long as you pay your bills in a timely manner after your bankruptcy, your credit should be very good after a year. The reason why your credit improves after bankruptcy is simple: the creditors know your debt to income ratio has improved dramatically and they know you can only file a Chapter 7 bankruptcy once every 8 years.

 

 

Will filing bankruptcy stop bill collectors from calling me?

Yes. When you file bankruptcy an automatic stay goes into affect which means any of your creditors are forbidden from contacting you by phone or by mail.

 

 

Can filing bankruptcy stop my wages from being garnished?

Yes. Any garnishment must be stopped once your case is filed. However, any funds garnished BEFORE your case is filed the creditor will retain.

 

 

Can I discharge Payday loans in a bankruptcy?

Yes, because it is a contract matter and not criminal. People are sometimes confused by this because they know that writing a bad check is criminal. However, when a payday loan is incurred a person gives them a post dated check and money is loaned: this is a civil matter. If you go into a store and write them a check for your purchase and the check bounces: this is a criminal matter.

 

 

Can I discharge medical debt in a bankruptcy?

Yes. Almost every bankruptcy I file includes at least some medical debt.

 

 

Can I discharge Tax debt in a bankruptcy?

Yes, but the tax debt has to be at least three years old. Any tax debt less than three years old is generally not dischargeable.

 

 

Can I discharge student loans in a bankruptcy?

Yes and no. Legally, student loans can be discharged under extreme situations. However, the standard for discharging student loans in bankruptcy is almost impossibly high and as a practical matter, for the vast majority of people, they can not be discharged.

 

If you are carrying a large student loan obligation I urge you to contact the Department of Education and enroll in the income contingent repayment plan. This plan consolidates all your student loans and your payment can be no more than 10% of your income, possibly much less!

 

 

What cannot be discharged in bankruptcy?

Debts the result of fraud or criminal activity. Also, child support or court ordered maintenance.

 

 

Can one spouse file bankruptcy alone?

Yes. If only one spouse has debt only the spouse with debt should file.

 

 

Does filing bankruptcy affect my 401/retirement plan?

No. Missouri and Kansas exempt most forms of retirement accounts. Usually, any funds you have in a retirement account you will still have after your bankruptcy.

 

 

I am on Social Security/and or disability what can I do?

If your only source of income is social security or retirement pension, and you have no other major asset, then you probably don't need to file bankruptcy.

 

A few years ago my Aunt Mary called wanting to file bankruptcy. I told her she did not need to file because her only source of income was social security and she had no other assets. Long story short: I filed her bankruptcy because she wanted to stop the creditor phone calls and letters and now she is stress and debt free.

 

 

Debt settlement or filing bankruptcy?

Generally speaking, debt settlement is a bad idea if you qualify for a bankruptcy. It is particularly a bad idea if you are paying someone to settle your debts. Usually, the debt settlement organizations charge for their services when most likely you could have done the settlement by yourself. If you qualify for a bankruptcy then the funds you have spent to settle your debt have been wasted because those debts will be discharged by the court. Sometimes debt settlement is your best choice, but only enter into a debt settlement after speaking with a bankruptcy attorney.

 

 

Should bankruptcy be considered as a last resort?

Absolutely not. Bankruptcy should be considered a financial planning decision and not a last resort option. Too many people I meet have drained their retirement accounts or home equity and still owe money to creditors. Many of these people should have filed before draining their assets. In many, if not most cases, if they had filed bankruptcy before draining their retirement accounts or home equity, they would still have these assets.

 

A tragic example: a few years ago a client filed a chapter 7 bankruptcy after he drained over $50,000 from his 401k and used the funds to pay his credit cards. Unfortunately, he still owed over $60,000. If he had filed his bankruptcy before touching his 401k he would still have all his 401k funds and all his debt would have been discharged by the court.

 

Bankruptcy is a business decision and has nothing to do with ethics or morals. General Motors filed bankruptcy a few years ago and now it is doing fine. You simply must treat the bankruptcy option as one of your methods of dealing with your debt.