bankruptcy basics for lawyers
How hard is it to file bankruptcy and what to expect?
This persons income went down by half due to the economy so they can no longer pay debt incurred due to a year of not working. They’ve already had consumer credit counseling, which referred them to a lawyer to file bankruptcy. Do they get to keep their car and house? They really don’t have the money to pay accept for basics for living. Will they be made to pay back any of the credit card debt?
The difference in income means that the credit cards can’t also be paid along with living expenses (house, utilities, car).
Most people who can afford the payments and want to keep their house and their car are able to do so in bankruptcy.
The critical feature here is that if they want to keep the house or the car, they still must pay for it. There is no way to keep the asset without making the payments.
But if the individual can afford the payments and wants to keep the asset, any good bankruptcy attorney can help them achieve these goals and still file bankruptcy.
Whether or not they need to repay any of the credit card debt will depend on a number of factors, probably the most relevant one being the results of the bankruptcy “means test” (new, since the Bankruptcy reform act of 2005). This “means test” is actually very complicated, so it is impossible to predict the results of it from information provided on-line. I have seen “means test” info on the Internet that is very, very far from accurate. I have also seen assertions even in print media and on television news reports that are inaccurate.
A good bankruptcy attorney will be able to perform the means test accurately for your specific situation, and can tell you whether you qualify for Ch 7 (discharges all credit card debt) or must file Ch 13 (in which you must repay between 0% and 100% of unsecured debts depending on a number of factors including the means test). Note that even in some Ch 13 bankruptcies, it can turn out that you repay 0% of unsecured (i.e., credit card) debts, so don’t assume that if you are required to file Ch 13 it necessarily means that you must repay some huge amount of your unsecured credit card debts. This is one of the most common “bankruptcy myths” inaccurately perpetuated on the Internet.
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