Thinking of bankruptcy? Below is an outline of some basic questions and answers that may help you have a better understanding about bankruptcy and how it works.
Q. Is credit.org approved by the Executive Office for United States Trustees?
A. Yes. Credit.org is approved to issue Pre-filing Credit Counseling and Pre-discharge Debtor Education certificates in compliance with the bankruptcy code. Approval does not endorse or assure the quality of an agency’s service.
Q. Do I need to meet with an attorney before I can speak to a counselor at credit.org?
A. No, you can talk to a counselor at credit.org before or after you meet with an attorney.
Q. How long will I have to wait for a counseling appointment at credit.org? (see our business hours)
A. We have counselors standing by to take your calls. No appointment is necessary. Simply call us at 1-888-425-3453 to speak directly to a bankruptcy counselor.
Q. How long will the counseling session take?
A. Under the bankruptcy law, The Executive Office for United States Trustees requires that you participate in a counseling session that may take up to 90 minutes or longer. Sessions may be shorter or longer, depending on your situation, amount of information to be gathered, number of questions you ask, etc.
Q. How long will the debtor education course take?
A. Under the bankruptcy law, The Executive Office for United States Trustees requires that you participate in a 2-hour pre-discharge debtor education course.
Q. How much does credit.org charge for their services?
A. Credit.org charges $55.00 (covers single filers and joint filers if counseled in the same session) for the Pre-filing Credit Counseling completed over the phone with one of our certified counselors and $45 if the counseling is completed online. Credit.org charges $55.00 (covers single filers and joint filers if completed at the same time) for the Pre-discharge Debtor Education course. Returning clients may qualify for a discount on the education course. Both courses include completion certificates. These fees cover single filers and joint filers, if counseled in the same session. In some cases, the fees may be waived. Combination discounts are also available if you purchase the Pre-filing Credit Counseling from us and return to our agency (after filing bankruptcy) for your Pre-discharge Debtor Education you will receive a discount on the Debtor Education course. Click here to see our Fee Wavier Policy and combo prices.
Q. How long are the certificates good for?
A. The Pre-filing Credit Counseling completion certificate is valid for 180 days and the Pre-discharge Debtor Education is valid until your court ordered completion date for discharge.
Q. If I have questions in the future, can I call credit.org for help?
A. Yes. Our counselors are always happy to assist you with questions you might have in budgeting, financial education, etc.
Q. When I file bankruptcy, do I have to go to court?
A. Yes. Whether you file a Chapter 7 or 13 bankruptcy petition, you have to attend a § 341(a) Meeting of the Creditors in either chapter. These usually last less than one hour, but can last all day in a Chapter 13.
Q. What happens when I go to court?
A. In the § 341(a) Meeting of the Creditors, some creditors such as a department store, electronics store, or other type of credit grantor may show up and ask about the property you bought from them. There is a trustee who reviews your bankruptcy petition and determines if you have any assets to give the unsecured creditors in Chapter 7’s. Your attorney, in most cases, will assist you with those creditors at these meetings.
Q. Should I use an attorney to help me file bankruptcy?
A. For Chapter 7’s, that depends on your experience in reading forms, interpreting the U.S. Bankruptcy Code, and talking under pressure. For most people, the answer is yes. Attorney’s do more than fill out the forms. They also advise clients on the application of the law to their particular situation, attend the 341 (a) Meeting of the Creditors, negotiate with the creditors there and in their office, advise clients about offers to take or reject, and give legal advice in general. A paralegal can fill out the forms under a client’s direction, but cannot represent the debtor or give legal advice about how to fill out the forms, or what the law says about your particular situation. You can also find help at websites like www.findlegalhelp.org or www.lawhelp.org. These resources are available to assist low and moderate income individuals and families find low or no-cost legal aid programs in their communities, and answers to questions about their legal rights.
Q. What Is a Reaffirmation Agreement?
A.Even if a debt can be discharged, you may have special reasons why you want to promise to pay it. For example, you may want to work out a plan with the bank to keep your car. To promise to pay that debt, you must sign and file a reaffirmation agreement with the court. Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law. Reaffirmation agreements:
- must be voluntary;
- must not place too heavy a burden on you or your family;
- must be in your best interest; and
- can be canceled anytime before the court issues your discharge or within 60 days after the agreement is filed with the court, whichever gives you the most time.
If you are an individual and you are not represented by an attorney, the court must hold a hearing to decide whether to approve the reaffirmation agreement. The agreement will not be legally binding until the court approves it. If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.
Q. Can I keep a credit card out of my bankruptcy?
A. In most cases, you must include all your credit cards. There are some instances where you can keep a credit card, but you will want to discuss each situation with your attorney.
Q. If I’m married, do we have to file together?
A. No. Sometimes only one spouse files, but that is an exception. You may be able to file without your spouse if you have been married a short time or have all the debt in your name alone. Your spouse will be involved in a Chapter 13 whether their name is on the petition or not.
Q. How long do bankruptcies take?
A. In a Chapter 7, you attend the § 341(a) Meeting of the Creditors approximately one month after you file your bankruptcy petition. You then receive the discharge about two months after that.
Q. A creditor is threatening to take my wages. Can they do that?
A. Yes! They can take up to 25% of your take-home pay, and may be more depending on your state’s laws. Filing bankruptcy may stop the wage assessment and, in some cases, wipe out the creditor’s claims entirely. Keep in mind that there are some debts that you may not be able to wipe out, such as; most taxes, child support, alimony, most student loans, court fines and criminal restitution; and personal injury caused by driving under the influence of alcohol or drugs.
Q. How does bankruptcy affect my credit?
A. It hurts your credit, but if you are reading this, chances are your credit is already affected. Bankruptcy draws a line in time when you start to rebuild your credit. When your bankruptcy is over, you can tell people that your credit was bad, but you’ve been rebuilding it since the bankruptcy. Just don’t get behind on anything again!
Most people have difficulty obtaining credit within one year of the bankruptcy. You can buy a car at a high interest rate with a substantial amount down. After one year, things get easier, and easier still after two years. Many mortgage lenders will grant you a loan at their lowest interest rates four years after the bankruptcy. Bankruptcy stays on your credit reports 7 to 10 years.
Q. Can a bankruptcy stop creditors from calling me?
A. Yes! No creditor may contact you in any way after you file your bankruptcy petition. In most cases, your attorney will notify your creditors prior to filing the bankruptcy petition so the creditors stop calling you.
Q. What is a bankruptcy discharge and how does it operate?
A.One of the reasons people file bankruptcy is to get a “fresh start”. A discharge is a court order which states that you do not have to pay most of your debts. Some debts cannot be discharged. For example, you cannot discharge debts for:
- most taxes;
- child support;
- most student loans;
- court fines and criminal restitution;
- personal injury caused by driving under the influence of alcohol or drugs.
The discharge only applies to debts that arose before the date you filed. Also, if the Judge finds that you received money or property by fraud, that debt may not be discharged. It is important to list all your property and debts in your bankruptcy schedules. If you do not list a debt, for example, it is possible the debt will not be discharged. The Judge can also deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, or lie, or if you disobey a court order. You can only receive a Chapter 7 discharge once every eight years. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign a reaffirmation agreement or any other kind of document to do this. Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car). You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.
Q. What is a Debt Management Plan?
A. A Debt Management Plan (DMP) consolidates the payments for a consumer’s unsecured debts only and is structured to pay off those debts in five years or less by taking advantage of concessions offered by the creditors. These concessions typically include lowered interest rates, waivers of late and/or over-limit fees, and re-aging of delinquent accounts. A DMP is not a loan. A standard DMP allows a consumer to enroll all or most of their credit cards, medical bills and other unsecured debts and to make one monthly payment to credit.org. That payment is then disbursed among the creditors each month for the term of the DMP. A consumer would still be responsible for negotiating terms with their secured creditors – such as a mortgage or auto lender.
Q. What is a “60/60 Plan”?
A. A 60/60 Plan is another type of DMP. A 60/60 Plan is a Less Than Full Balance (LTFB) DMP. Under the new bankruptcy law an approved nonprofit budget and credit counseling agency may propose to a creditor a payment plan on unsecured consumer debts of at least 60 percent of the debt over a period not longer than the original loan, or reasonable extension with a maximum repayment period of 60 months – hence a 60/60. Submitting a LTFB DMP proposal to an unsecured creditor does not guarantee acceptance and the creditor may counter with an amount they would accept that is higher than the 60% proposal. Secured accounts like your house and car do not qualify for a 60/60 Plan. While some creditors may reduce interest rates in a DMP or 60/60 they usually do not eliminate the interest. Some creditors refer to the LTFB DMP as a Pre-Bankruptcy DMP. Credit.org’s 60/60 Plan (™ applied for) will be available when the EOUST (Executive Office for United States Trustees) issues guidance on the administration of these.
LEGAL DISCLOSURE: IF YOU WANT MORE INFORMATION OR HAVE QUESTIONS ABOUT HOW THE BANKRUPTCY LAWS AFFECT YOU, YOU MAY NEED LEGAL ADVICE. THE INFORMATION YOU OBTAIN AT THIS SITE IS NOT, NOR IS IT INTENDED TO BE, LEGAL ADVICE. YOU SHOULD CONSULT AN ATTORNEY FOR INDIVIDUAL ADVICE REGARDING YOUR OWN SITUATION.