Attorney Eric Fox is mindful of the cost to you. Our law firm has a basic Chapter 7 attorney fee for simple cases, but also can tailor the fee downward (or upward) in exceptional circumstances. We are not a mill that only files simple Chapter 7 cases (and steers everyone else to Chapter 13), but rather our firm will work with every kind of debtor and take the time to explore all options and issues. We also offer payment plans for Chapter 7 bankruptcy. Our fee structure is as follows:
$1000 total attorney fee for basic Chapter 7. A basic Chapter 7 would be where the debtor is not self-employed and where the debtor is not reaffirming on more than one (1) secured debt (e.g. keeping a car or house payment). Car and House payments can generally be retained in Chapter 7 with a Reaffirmation Agreement. Additional reaffirmation agreements (after the first) are $100. A simple/basic Chapter 7 will also have fewer than 25-30 creditors. Deviations of the base Chapter 7 fee rarely go up or down more than $200 (we also lower the base fee quite often). Higher income families, debtors with self-employment histories in the last year, or debtors with assets above the exemptions may be quoted fee higher than $1300, but those are the exceptional cases. We will give you a quote on your fee (if not the base fee) at the conclusion of your free initial consultation.
The Court Fee for Chapter 7 is $338.00 as of 12/1/2020. You can pay the court fee prior to filing, or within 2 months of filing.
You can get some protection under the Fair Debt Collection Practices Act by retaining our firm for only $100 (which will be a down payment on your Bankruptcy Attorney Fee).
Chapter 7 bankruptcy clients can be put on a payment plan. The minimum fee to file a basic Chapter 7 on a Bifurcated payment plan is generally $600. The total Chapter 7 Attorney fee on a Bifurcated payment plan for a basic case is $1200. With Covid, we are offering also $0 up front for a basic Chapter 7 with $1400 on a payment plan. .
In Chapter 13 bankruptcy, you will not owe money up front. Rather, your balance will be paid through the repayment plan. In exceptional cases, I will ask for some of the attorney fee up front in Chapter 13. The total attorney fee in Chapter 13 is set by the court. You will need to make your first payment on any Chapter 13 within 3 weeks of us filing the case.
Typically, a collection agency begins its efforts with an introductory letter. This letter usually contains the required legal disclosures, which include:
The amount of the debt,
The name of the original creditor,
The period of time in which the debtor may dispute the validity of the debt (thirty days), and
The obligation of the collection agency to send the debtor verification of the debt if its validity is disputed.
In the original correspondence, the collection agency must also inform the debtor that it is attempting to collect a debt and that any information it gathers from the debtor or other sources will be used for that purpose. If this information is not included in the initial contact letter, the collection agency must provide it within five days.
Most lawyers recommend that debtors request verification of the debt because, in that case, a collection agency may not resume collection efforts until the information is confirmed with the original creditor. The collection agency may not, whether by threatening to destroy the debtor’s credit rating or by threatening to sue if payment is not received immediately, make a statement in the initial correspondence that overshadows the debtor’s right to dispute the debt for thirty days.
Under the Fair Debt Collection Practices Act, a collection agency may not act in the following ways:
Third-party communications. The collection agency cannot contact third parties other than the debtor’s attorney or a credit bureau for any reason other than to locate the debtor. Collection agents who contact third parties must state their names, and may only add that they are confirming or correcting information about the debtor. They cannot give the collection agency’s name unless asked directly. They cannot state that they are calling about a debt. Collection agents may not contact a third party repeatedly unless they believe an earlier response was wrong or incomplete and that the third party has revised information. Further, collection agents cannot communicate with third parties by postcard or by correspondence that uses words or symbols that betray their collection motive.
Attorney-represented debtor. A collection agency cannot contact the debtor directly if counsel represents him or her unless the debtor gives the collection agency specific permission to do so.
Debtor communications. Collection agents may not contact debtors before 8:00 a.m. or after 9:00 p.m., or at another inconvenient time or place. Collection agents also may not contact a debtor at work if he or she knows that the employer bans receipt of collection calls while on the job.
Harassment or abuse. Agents cannot threaten or use violence against the debtor or another person. They cannot use obscene or profane language. They cannot publish a debtor’s name on a blacklist or other public posting. Agents cannot call repeatedly or contact the debtor without identifying themselves as bill collectors.
False or misleading statements. Agents may not lie about the debt, their identity, the amount owed, or the consequences for the debtor. They cannot send documents that resemble legal filings or court papers. Agents cannot offer incentives to disclose information.
Unfair practices. Agents may not engage in unfair or shocking methods to collect, including adding interest or fees to the debt, soliciting post-dated checks by threatening criminal prosecution, calling the debtor collect, or threatening to seize property to which the agency has no right.
Debtors who have faced obstacles to paying off their debts when due have no doubt received more than their fair share of demanding letters and phone calls, and the thought of getting rid of their debts, and thus the constant demands, through bankruptcy can be quite appealing. Before making a decision to pursue that route, which can have long-term effects on credit rating and the ability to make large purchases, like a home, debtors should consider other, less drastic alternatives.
If the debtor’s financial problems are only temporary, he or she may want to ask creditors to accept lower payments or that payments are scheduled over a longer period of time. Creditors may be receptive to these ideas if the debtor has been a prompt payer in the past, or if the specter of bankruptcy is raised, since creditors know that once a bankruptcy proceeding is initiated they will probably collect only a portion of what is owed. In addition, creditors may wish to avoid the difficulties of a court proceeding to collect on the debt, which can be time-consuming and expensive.
Consumer credit counselors can also help creditors work out a repayment plan. Some of these advisors work for non-profit agencies, so they charge no fees. Many credit-counseling services charge a fee for their guidance, however, and it may not appeal to an already over-stressed debtor to add another debt to the stockpile.
If the debtor’s financial troubles are long-term or if the creditors will not agree to an alternative payment plan informally, bankruptcy may be the best way for the debtor to get out from under an insurmountable debt load. Although it is not without its adverse consequences, bankruptcy can be the right option to enable debtors to make a fresh start.
Although reputable credit-counseling agencies that actually provide valuable services to financially strapped consumers do exist, vulnerable debtors often fall prey to less scrupulous services. Tips that can help consumers avoid being victimized by scams include:
- Beware of promises that sound too good to be true; claims of helping you “get out of debt easily” are red flags.
- Deal with a reputable agency by checking with state consumer agencies and the local Better Business Bureau to make sure there have been no or few complaints against the counseling organization, and that the complaints that have been raised were favorably resolved.
- Verify that the organization provides counseling and education, as well as debt consolidation and payment services, to help consumers achieve financial stability and remain debt-free.
- Carefully read through and have your lawyer review any written agreement that a credit-counseling organization offers to make sure it describes in detail the services to be provided; the payment terms for these services, including their total cost; how long it will take to achieve the desired results; any guarantees offered; and the organization’s business name and address.
- Avoid paying up-front fees — reputable agencies do not charge big prepaid fees, but may take small monthly fees for debt-repayment services; initial consultations should always be free.
- Beware of any high fees or required contributions, like high monthly service charges, that may add to your overall debt load and defeat efforts to pay off bills.
Sometimes a debt-repayment service requires the consumer to periodically send the agency a lump-sum check that the service divides among the creditors. Debtors who enter into these types of arrangements should verify with their creditors that the payments are actually being made.
If a debtor’s financial troubles are long term, or if his or her creditors will not informally agree to an alternative payment plan, bankruptcy may be the best way for the debtor to get out from under an insurmountable debt load. Although it is not without its adverse consequences, bankruptcy can be the right option to enable some debtors to make a fresh start. Talking through these options with an experienced bankruptcy attorney at our firm can help make sense out of the myriad complex and confusing choices that must be made at an already stressful time.
Educational loans are generally not discharged by a Chapter 7 or Chapter 13 bankruptcy. They may be dischargeable, however, if the court finds that paying off the student loan will impose an undue hardship on the debtor, and his or her dependents. In order to qualify for a hardship discharge, the debtor must demonstrate that he or she cannot make payments at the time the bankruptcy is filed and will not be able to make payments in the future.
The Bankruptcy Code does not specifically define the requirements for granting a hardship discharge of a student loan. Courts have applied different standards, but they often apply a three-part test to determine eligibility:
(1) income — if the debtor is forced to pay off the student loan, the debtor will not be able to maintain a minimum standard of living for himself or herself, and his or her dependents;
(2) duration — the financial circumstances that satisfy the income test in (1) will continue for a significant portion of the repayment period; and
(3) good faith — the debtor must have made a good-faith effort to repay the loan prior to the bankruptcy.
A Chapter 7 filing should have no effect on such collections.
Although filing bankruptcy stops, or stays, all efforts to collect debts, the Bankruptcy Code excludes actions to collect child support or spousal maintenance from the stay unless the creditor attempts to collect from the property of the estate. In a Chapter 7 proceeding, property of the estate includes all possessions, money, and interests the debtor owns at the time he or she files. Money earned after the bankruptcy is filed, however, is not property of the estate. Since most child and spousal support is paid out of the debtor’s current income, the bankruptcy should have little impact.
A debtor under Chapter 13 must pay all domestic support obligations that fall due after the petition is filed. Failure to do so could result in dismissal of the case.
Neither a Chapter 7 nor a Chapter 13 discharge affects future child or spousal support obligations. In other words, even at the conclusion of the bankruptcy proceeding, these on-going obligations remain.
The rules pursuant to which debts are discharged, or eliminated, are different depending on which type of bankruptcy is filed. A Chapter 13 discharge nullifies most debts. Exceptions to Chapter 13 discharge include claims for spousal and child support; some educational loans; drunk-driving liabilities; criminal fines and restitution obligations; civil liability for damages from malicious injury to another; debts not included in the bankruptcy in time for the creditor to properly respond; certain tax liability; debt from fraud, larceny or embezzlement; and certain long-term obligations, such as home mortgages, that extend beyond the term of the plan.
In a Chapter 7 proceeding, the following debts are not discharged:
- Debts or creditors not appropriately listed on the schedules, unless some narrow exceptions apply
- Most student loans, unless repayment would cause the debtor and his or her dependents undue hardship
- Recent federal, state and local taxes
- Child support and spousal maintenance (alimony)
- Government-imposed restitution, fines or penalties
- Court fees
- Debts resulting from driving while intoxicated
- Debts not dischargeable in a previous bankruptcy because of the debtor’s fraud
- In addition, a debt from one of the following categories is discharged unless the affected creditor requests that the court formally determine the debt falls into one of these categories after notice and hearing, and the court so finds: Debts from fraud, including certain debts for luxury goods or services incurred within 60 days before filing and certain cash advances taken within 60 days after filing
- Debts from willful and malicious acts
- Debts from embezzlement, larceny or breach of fiduciary duty
Items that the debtor usually has to give up include:
- Expensive musical instruments, unless the debtor is a professional musician
- Collections of stamps, coins, and other valuable items
- Family heirlooms
- Cash, bank accounts, stocks, bonds, and other investments
- A second car or truck
- A second or vacation home
Certain types of property are exempt, however, which means that the debtor can keep them. Exempt property can include:
- Motor vehicles, up to a certain value
- Reasonably necessary clothing
- Reasonably necessary household goods and furnishings
- Household appliances
- Jewelry, up to a certain value
- A portion of the equity in the debtor’s home
- Tools of the debtor’s trade or profession, up to a certain value
- A portion of unpaid but earned wages
- Public benefits, including public assistance (welfare), Social Security, and unemployment compensation, accumulated in a bank account
- Damages awarded for personal injury
One of the debtor’s major concerns in a consumer bankruptcy is the thought of losing the family home. Although that is possible in some cases, loss of the debtor’s home need not always happen in a bankruptcy filing.
If the debtor in a Chapter 7 liquidation bankruptcy is behind on his or her mortgage payments, the home could be lost. The mortgage lender in such cases usually asks the bankruptcy court to lift the automatic stay so that it can institute foreclosure proceedings in which case the home will be sold and the proceeds used to pay off the debt. Whether a debtor who is not behind on mortgage payments will lose his or her house depends on how much equity the debtor has in the property and the amount of the state homestead exemption. If the amount of debt owed on the home is less than the home’s market value, the debtor could lose the house unless the homestead exemption entitles the debtor to most of the equity.
In a Chapter 13 proceeding, however, even if the debtor is behind on mortgage payments, if the wage-earner plan includes paying back any missed mortgage payments and the mortgage is otherwise current, the debtor should not lose his or her home. If the debtor is current on his or her house payments, the home will not be lost if the debtor continues to make payments when due.
If the debtor is a renter rather than a homeowner, the law is complex and the advice of an attorney important. Under most circumstances if the landlord wins the right to evict the debtor-tenant before the bankruptcy is filed, the automatic stay will not stop the eviction proceedings. An eviction may also survive the automatic stay if the tenant is endangering the property or using illegal substances on the premises. However, these provisions may apply differently to those with public-housing leases.
Usually a residential lease can be assumed in bankruptcy and the debtor-tenant can continue to live there and pay rent according to the lease terms, but certain deadlines may have to be met for the lease not to be considered rejected.
A consumer credit report may include Chapter 7 and Chapter 13 bankruptcy information for ten years from the time the case is filed. One major consumer credit reporting agency is said to remove Chapter 13 information after only seven years, but it is not legally required to do so.
Most other credit information can be included in a consumer credit report for seven years. Civil suits, civil judgments, and arrest records, however, can be reported for at least seven years, and longer if the information is relevant for a longer time period. For example, if the civil judgment against the debtor is valid for ten years, it can be reported for credit-rating purposes for the same time period.
These time limits on reporting credit information do not apply to reports for credit transactions that involve or are reasonably expected to involve a principal amount of $150,000 or more, the underwriting of life insurance involving or reasonably expected to involve a face amount of $150,000 or more, or the employment of a person at salary that is or is reasonably expected to be at least $75,000 annually.
Because both the Fair Credit Reporting Act, which controls what a credit-reporting agency may include in a consumer’s credit report, and the Bankruptcy Code are federal law, the same rules apply in all states. There may be some differences, however, in relation to the more-than-seven-year information, since most of the relevant time periods or statutes of limitations are found in the individual states’ laws.
The Bankruptcy Code requires that the debtor contribute his or her projected disposable income toward the plan payments for the duration of the plan. Although the law imposes this requirement only when the trustee or a creditor demands it, in reality the trustee always requires it, at least at the beginning of the plan. Whether changes in salary will change the payment plan depends on a complete consideration of all of the circumstances.
If the debtor’s income changes after the case has been filed but before the court has confirmed the plan, making it binding on the creditors (which can take as much as six months), the trustee will closely scrutinize the debtor’s disposable income to make sure that the payments and the income are consistent and will incorporate any necessary changes into the plan. If the debtor’s income changes during the duration of the repayment plan, changes in income may not necessitate any changes in payments. However, the trustee may ask that payments be adjusted if the debtor’s income increases significantly. The trustee does not closely monitor the debtor’s income, and it may actually be outside the scope of a trustee’s duties to do so.
The trustee will consider not only the salary increase, but also whether there has been a corresponding increase in disposable income, on which the payments are based. Disposable income is the amount of the debtor’s salary that is left after deducting all reasonable living expenses. If the debtor’s salary increases but so do his or her expenses, there may be no increase in disposable income and therefore no change in the payment plan. If there is a significant increase in disposable income, the trustee may ask for an increase in payment amounts.
Preferences and fraudulent conveyances are two ways in which a debtor facing the prospect of bankruptcy may attempt to show favoritism to a particular creditor or close family member or associate, or even set aside some property for himself or herself to avoid losing it to the bankruptcy estate.
A preference occurs when a debtor treats one creditor more favorably than the debtor treats the other creditors. If a debtor has only $500, for instance, and owes that same amount to both First County Bank and First State Bank, but the debtor pays all $500 to First County Bank, that bank has received a preference. Bankruptcy law disfavors preferences if they are made for the benefit of a particular creditor and for a debt owed prior to filing bankruptcy, if the debtor is insolvent at the time of the payment, and if payment is made within 90 days before filing (or one year, if made to an insider like a family member or an officer of a corporate debtor). Creditors receiving preferences may be required to return the amount paid to the debtor’s estate, so that it can be added to all the other assets and appropriately divided among all creditors.
A fraudulent conveyance is another vehicle by which a debtor may attempt to defraud creditors. An example of a fraudulent transfer of property in the bankruptcy context might be the debtor’s free conveyance of real estate to a relative for the purpose of keeping the property in the family, protecting it from being sold to satisfy debts in an upcoming bankruptcy. The Bankruptcy Code is complicated in this regard, but the main fraudulent transfer provision allows the trustee to make void any transfer of the debtor’s assets within two years prior to the bankruptcy filing with the “intent to hinder, delay, or defraud any entity to which the debtor was … indebted …”; if no reasonable exchange of equivalent value occurred; and when the debtor was insolvent. Some exception is made for reasonable charitable contributions.
The best and perhaps the easiest way to find out whether a debt is a secured debt is to review the documents signed at the time the debt was incurred. If the debt is secured, the documents will say so and will describe the creditor’s security interest, which is usually in the property that is the subject of the financing.
Sometimes, however, the type of debt itself will suggest whether it is secured. The following types of debts are often secured debts, which means that if the debtor does not make payments on the debt when due, the creditor can take back the property that secures the debt, sell it, and apply the proceeds to pay off the debt. (If the sale price is not enough to cover the full amount owed, the debtor may still be liable for the remainder.)
Home mortgages. Companies financing home purchases almost always require a mortgage on the house. If the borrower defaults on the mortgage payments, the lender can force a foreclosure, in which case the house is sold and the proceeds are used to pay of the debt.
Motor-vehicle loans. When a person purchases a car on credit, the lender puts a lien on the car, which allows it to repossess the car if the borrower defaults (i.e., fails to make payments on time).
Store purchases. Although many consumers are unaware of this, when they charge something that they purchase at the local department store, the store may retain a security interest in the item purchased based on the agreement that the consumer signed when he or she first opened the account. As a result, if the purchaser fails to pay according to the credit-card agreement, the store can take back the merchandise.
Finance-company loans. When a borrower obtains a loan from a finance company and is asked to list things that he or she owns, it is possible that the finance company will obtain a security interest in the items listed.
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