Bankruptcy: What do you do when the wolves comes knocking at your door?

The picture of bankruptcy: Ma and Pa sitting on the street corner, while all their possessions are auctioned off for pennies on the dollar. Homeless, broke, and hungry? Is this what you imagine can happen to if you are in Bankruptcy?

  Fortunately, that is not what happens when financial circumstances lead you to seek shelter from your creditors by using the United States Bankruptcy Code. Bankruptcy is a way of protecting your possessions while allowing you to get a fresh start and a new financial beginning.

What is Bankruptcy?

  The bankruptcy law is a federal law that allows you to file a petition in federal court to discharge your debts. The two most common forms are Chapter 7, which is often referred to as "straight bankruptcy" and Chapter 13, which is referred to as the "Wage Earners" or "Reorganization" plan. Chapter 11 involves primarily businesses, while Chapter 12 helps the family farmer. You should consult with an attorney before deciding which chapter of the bankruptcy code is right for you.

Will I have to give up all my property and live with my in-laws if I declare bankruptcy?

  In bankruptcy, you may be allowed to keep certain types of property, while reorganizing your payments on that property. If you are behind on your house payment, you may be able to catch up on those payments and prevent foreclosure by using the protection of the bankruptcy code. Certain items are "exempt" under Federal and Texas law, allowing the consumer to keep their homestead, vehicles and other personal property, while reorganizing and paying those debts for a longer period of time through a bankruptcy plan. Often parties who are experiencing problems with high interest rates can find relief from that burden through the bankruptcy code.

Will the phone stop ringing with rude bill collectors?

  Yes! Once you have filed bankruptcy and let your creditors know, they are by law prohibited from contacting you again while you are in bankruptcy and after you have successfully discharged the debt that you owe. The creditors are prohibited from foreclosing and repossessing property by what is called an automatic stay. Violation of the "automatic stay" can result in stiff penalties by the bankruptcy court against the creditor, including high fines.

I owe back federal income taxes. With all the interest and penalties, what can I do?

  If you are experiencing difficulties with IRS penalties and interest, you may wish to consult with an attorney in the office of Monte J. White and Associates. Many tax problems can be worked out through a Chapter 13 plan, stopping or limiting the amount of penalties and interest the IRS will charge you.

What will my payments be?

  Each individual's financial situation is different. You should sit down with one of our attorneys and discuss your financial situation. When you have your free initial consultation with us, you should bring a list of all your creditors, the amounts you owe, the amounts you are behind, and the amounts of your monthly payments. By having information about your budget, such as what you spend each month on shelter, food, utilities, insurance, and other expenses, you and your attorney can map out a plan of action for your filing.

  In a Chapter 13, for example, once you file, you make one payment to the trustee, who then in turn pays your creditors with that money. In a Chapter 13, some of your creditors may be paid in full, while others may be paid only a percentage of what is owed to them. Also we include the majority of our attorney fees in the plan and we receive payment from the trustee. Most clients find their monthly plan payment is far less than the bill payments they were making prior to bankruptcy.

  A Chapter 7 bankruptcy is considered a liquidation bankruptcy, in which your debts are totally discharged. However, this does not necessarily apply to those debts that are secured. It is very important to consult with an attorney to decide which is best for your situation.

Will bankruptcy hurt my credit?

  Yes. Credit reporting bureaus may list a bankruptcy on your report for up to ten years after you file. People often ask us, which is worse, all these bad debts that I am not making payments on, or bankruptcy? Neither one is good; however, bankruptcy can and will solve the dept problem. It will bring finality to a bad debt situation which can go on for years if ignored. Bankruptcy can even prevent a creditor from obtaining a judgment against you and can also avoid a judgment which has already been taken.

  Even better, if you file a Chapter 13 and complete your plan successfully while paying back your creditors 85% or better of what you owe, you may qualify for credit rehabilitation. With credit rehabilitation, the trustee can recommend you for financing through a car manufacturer and credit card financial program, allowing you to get a new line of credit established quicker than you normally would.

  Ultimately a bankruptcy can help you recover and reestablish a solid foothold on life allowing you to go forward away from the quagmire of overwhelming debt and relentless bill collectors.