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Vermont Bankruptcy Services

Law Office James Palmisano
417 Barre Street
Montpelier, Vermont 05602
Phone: (800) 585-3169
Phone: (802) 229-4001
Fax: (802) 229-2733

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.:Frequently Asked Questions about Bankruptcy:.

Q: What Is Bankruptcy?

A: Bankruptcy is a federal law that provides individuals and businesses the ability to either liquidate or reorganize their debts, provided that the individual or business meets the criteria set forth in the Bankruptcy Code. One main purpose of the bankruptcy laws is to allow an individual to address his or her debts, and to get a "FRESH START" from financial problems.

Q: What Types of Bankruptcy Are There?

A:The most common types of consumer bankruptcies are Chapter 7 and Chapter 13. Other chapters include Chapter 9 (municipalities); Chapter 12 (family farmers), Chapter 11 (business reorganization) and Chapter 15 (cross-border). Most consumers choose to file for relief under Chapter 7 or Chapter 13.

Q:  How Long Does the Entire Bankruptcy Process Take?

A:A typical Chapter 7 process takes about 3 to 4 months from the time of filing until the debts are discharged. A Chapter 13 is a longer bankruptcy because it is designed to restructure your debts and allow you to repay some, or all of your creditors based on what you can afford. Chapter 13 cases may vary in length, but typically are 36-60 month plans.

Q:  Is Bankruptcy Right for Me?

A:There is no magic formula for deciding when bankruptcy is the right choice. It is an option you might consider if you:

  • Are paying only minimum amounts on your bills
  • Can't budget yourself out of debt within five years
  • Are getting notices that your mortgage or loans are being foreclosed
  • Have had a severe financial setback, such as losing your job or a major client, a divorce or a costly illness

Q:  What is the Bankruptcy Means Test?

A: The bankruptcy means test is a formula that determines whether a person should file Chapter 7 or Chapter 13. The means test compares your income to the median income in your state for a family the same size as yours. If your income is below the state median, then you are presumed eligible to file Chapter 7.

If your income is above the state median income, then the second part of the means test applies. The second part subtracts from your income your monthly allowable expenses in order to determine how much disposable income you have left. If your disposable income is less than $100.00 per month, then you pass the means test and are eligible to file Chapter 7. If, however, your disposable income is either: (1) greater than $166.00 per month; or (2) greater than $100.00 month and sufficient to pay at least 25 percent of your unsecured debts over a five years, then it is presumed that you should file Chapter 13.

Q:  What Happens When I File for Bankruptcy?

A:You file a bankruptcy petition, which contains schedules listing debts, assets, expenses, and income. An individual is assigned to administer your case, and this person is called a trustee. About a month after the filing, there is a meeting of creditors where the trustee reviews your case and asks basic questions regarding your petition. In a chapter 13 case the debtor files a plan in which he or she proposes a repayment schedule for his or her debts. At the meeting of creditors, the trustee will review the proposed plan.

Q: Will Filing Bankruptcy Stop Harassing Phone Calls from Creditors?

A:Yes, when you file bankruptcy, an automatic stay goes into effect that will stop creditor harassment. The automatic stay prohibits virtually all creditors from taking action to contact you, or attempting to collect debts you owe.

Q:  Will Filing Bankruptcy Stop Foreclosure on My House?

A: Yes. You can stop foreclosure by filing Chapter 13. In Chapter 13 you would pay back your missed mortgage payments over three to five years. Chapter 13 can also be used to give you more time to sell your property in order to pay off the mortgage.

Q:  Will Filing Bankruptcy Stop a Tax Sale on My House?

A: Yes. Filing bankruptcy will stop the sale if it is filed before the "redemption date" of the the tax sale. In Vermont, the redemption date is one year after the tax sale was held. If you are substantially behind in your taxes, filing Chapter 13 will give you up to five years to pay them back. If the amount is smaller and can be paid back pretty quickly – usually within 30 days, then Chapter 7 may be a better choice.

Q:  Can I Keep Any Credit Cards?

A:Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card they will cancel the card unless you reaffirm the debt. Even if you have a zero balance the credit card company might cancel the card.

Q:  Can I Pick and Choose Who to List in My Bankruptcy Case?

A: Absolutely not. I don't know where people get this idea. You must list all your assets and all your debts in ANY chapter of bankruptcy. You may voluntarily repay anybody you want after your case is concluded (and you are required to repay any debts that are not discharged), but you are still required to list all your creditors.

Q:  Can I File Bankruptcy with My Spouse?

A:Yes. may be advantages or disadvantages to a joint filing with your husband or wife. We'll help you decide based on the type of debts and the assets you need to protect.

Q:  Does My Spouse Have to File Jointly with Me?

A:No. lf all or most of the debts are in your name only, your spouse may not want to file. Creditors usually cannot pursue a non-filing spouse, unless he or she is legally a co-debtor on the debt. Additionally, the bankruptcy should not be reflected on the non-filing spouse's credit report.

Q:  Can I File for Bankruptcy Protection If I Own a Business?

A: Yes, but it depends on how the business is owned, the value of your business, and other factors including what you intend to do with the business. The business itself may require bankruptcy protection; if you are a sole proprietor, or have guaranteed your business' debts, you may require bankruptcy protection for yourself, as well.

Q: Is a Debt Discharged in Bankruptcy considered Income and will I have to pay Taxes on it?

A: No, the bankruptcy laws specifically protect you from this. 26 USC Sec. 108. If, however, without filing bankruptcy you had a debt cancelled by a creditor, that creditor could then send you a 1099-C, and in that case you'll have to pay taxes on it, unless you qualify for the insolvency exception.

Q: Are Spousal Maintenance or Alimony, and Child Support Obligations Dischargeable in Bankruptcy?

A: 2005 changes to the federal bankruptcy laws provided that "domestic support obligations" like "alimony" and "child support" are not dischargeable, nor does the filing of a bankruptcy petition stay most court proceedings dealing with family law issues. However, if the divorce obligation is in the nature of "property settlement", whether it gets discharged is a good bit less certain. Such property settlements can be discharged, if, for instance, the debtor can show that discharging the debt would result in a benefit to the debtor that outweighs the harm that would be caused to the former spouse by having the debt discharged. 11 U.S.C. §523(a)(15).

Q:  How long does a bankruptcy stay on your credit report?

A: A chapter 7 is reported for 10 years. A chapter 13 will be there for 7 years.

Q:  Will I be able to get credit after bankruptcy?

A: Credit repair is an industry unto itself. Generally, one starts with secured credit cards, and rebuilds their credit from there. Usually, if bankruptcy is on the table, your credit is already bad.

Q:  Will I lose my job if I file for bankruptcy?

A: No. Your employer cannot legally discriminate against you if you have filed for bankruptcy. It is also illegal for a company to refuse to hire someone who has filed.  11 U.S.C. §525(a) and (b).

Q:  Are other types of discrimination prohibited?

A: Yes. The bankruptcy code also prohibits discrimination in the areas of student loans (See 11 USC 525(c)) and public housing (See 11 USC 525(a)) .

Q:  What Does It Cost to File for Bankruptcy?

A: The current court filing fees for bankruptcy (eff November 1, 2011) are $306.00 for Chapter 7 and $281.00 for Chapter 13. THIS FEE DOES NOT INCLUDE LEGAL FEES. OUR LEGAL FEES ARE REASONABLE AND WILL BE QUOTED TO YOU ONCE WE HAVE EVALUATED YOUR CASE.

 

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