W. Chris McGough,
Attorney at Law
50 N. Florida Street
Mobile, Alabama 36607
Phone: (251) 478-1187
Toll Free: 1-877-478-1115
Fax: (000) 000-0000
If you or a family member is suffering from serious debt problems, please contact
us for an initial consultation and review of
Bankruptcy Law Frequently Asked Questions
The Law Office of W. Chris McGough prepares “Frequently Asked Questions”
for the convenience of our users to provide access to a variety of sources addressing particular
points of law. These are general legal information sources, and are not to be
construed as a substitute for personal legal advice.
Contact W. Chris McGough, Attorneys at Law
if you would like
help on determining the applicability of any of the
information in these resources to your specific situation.
Frequently Asked Questions About Filing Bankruptcy
What is bankruptcy?
Bankruptcy is a federal court process designed to help consumers
and businesses eliminate their debts or organize a plan to repay
How do I determine if I should consider filing for bankruptcy?
If you are considering filing for bankruptcy, you are not alone. Many people
have and will continue to file for bankruptcy based upon the times with
corporate layoffs, downsizing and continuing business failures. Although
not inclusive, the general guidelines below will help you determine if you
should consider filing bankruptcy.
You should consider filing for bankruptcy when:
You cannot reasonably pay your bills.
If your income does not sufficiently pay off or pay down your bills.
If your monthly debt is 1.5 times your monthly income. For example, if
you have a monthly net income of $2,800 but your monthly expenses are about
If you cannot budget yourself out of the debt within four years.
If you are more than two months late on your bills.
If your loan or mortgage has been "called" or accelerated.
If you get a foreslosure notice from the bank or a lender.
If you have withdrawn from your savings account for two months
If you are depressed about your financial situation
If you have a severe financial setback such as the loss of a job, major surgery
without medical insurance..etc...
You have a job loss or loss of primary means of support.
You have been laid off from your job.
You have been demoted or given a significant pay cut.
You have excessive major credit card problems.
You have catastrophic medical-doctor bills from an uninsured major
surgery or illness such as terminal cancer.
You have desperate financial situations with little hope.
What are the different kinds of bankruptcy?
Bankruptcies can generally be described as liquidation or reorganization.
Liquidation bankruptcy is known as Chapter 7. Under Chapter 7 bankruptcy,
a consumer or business asks the bankruptcy court to erase (discharge)
the debts owed. In exchange for the discharge of debts, the assets or
the nonexempt property is sold (liquidated), and a bankruptcy trustee uses
the proceeds to pay off creditors.
There are several types of bankruptcy reorganization. Consumers with
secured debts under $871,550 and unsecured debts under $269,250
can file for Chapter 13. Family farmers can file for Chapter 12. Consumers
with debts in excess of the Chapter 13 debt limits or businesses can file
for Chapter 11 - a complex, time-consuming and expensive process. In
any reorganization bankruptcy, you file a plan with the bankruptcy court
proposing how you will repay your creditors. Some debts must be repaid
in full; others you pay only a percentage; others aren't paid at all. Some
debts you have to pay with interest; some are paid at the beginning of
your plan and some at the end.
What happens during the bankruptcy process?
When filing under Chapter 7, you file several forms with the bankruptcy court
listing income, expenses, assets, debts and property transactions for the past
two years. A court-appointed trustee is assigned to oversee your case. About
a month after filing, you must attend a meeting of creditors where the trustee
reviews your case and asks questions. The meeting typically lasts about five
minutes, and creditors rarely attend. If you have any nonexempt property,
you must give it (or its value in cash) to the trustee. Bankruptcies are typically
discharged three to six months later.
When filing under Chapter 13, you file all the same forms plus a proposed
repayment plan, in which you describe how you intend to repay your debts
over the next three to five years. A trustee is assigned to oversee the case,
and you will be required to attend a meeting of creditors about one month
after filing. Often one or two creditors attend this meeting, especially if they
don't like something in your plan. After the meeting of the creditors, you
attend a hearing before a bankruptcy judge who either confirms or denies
your plan. If your plan is confirmed, and you make all the payments called for
under your plan, you often receive a discharge of any balance owed at the
end of your case.
What are the alternatives to filing bankruptcy?
There are several alternatives to filing bankruptcy, including debt consolidation and
credit counseling. Debt consolidation combines all of your debts into one loan, usually
lowering your monthly payment. Credit counseling helps you work out a plan to manage
and repay your debts without the assistance of the bankruptcy court.
Does it really take seven years to regain good credit after filing bankruptcy?
Your bankruptcy will likely remain on your credit report for seven years. However,
there are steps you can take up to, during and following your bankruptcy to improve
your credit rating.
What do I get to keep?
You will not likely loose any property if you file under Chapter 13.
Exempt property under Chapter 7 varies from state to state.
If you are behind on your mortgage payments, you will almost certainly
lose your house if you file a Chapter 7 bankruptcy. Your mortgage lender
will ask the bankruptcy court to lift the automatic stay to begin or resume
foreclosure proceedings. In a Chapter 13 bankruptcy, you will not lose
your house if you immediately resume making the regular payments called
for under your agreement and repay your missed mortgage payments
through your plan.
If you are current on your mortgage payments, you will not lose your
house if you file for Chapter 13 bankruptcy, as long as you continue
to make your mortgage payments. In Chapter 7 bankruptcy, whether
or not you will lose your house depends on the amount of equity you
have in the property and the amount of any homestead exemption
(which varies state-to-state) to which you are entitled. If the total
amount of debt against your house is less than the market value, you
may lose your house unless a homestead exemption entitles you to all
or most of the equity.
Will I be able to get new credit cards after I file?
Yes. There are many companies that offer secured credit cards to assist in rebuilding
your credit after you file your bankruptcy.
Will filing bankruptcy stop harassing phone calls from creditors?
When you file bankruptcy, an automatic stay goes into effect. The automatic
stay prohibits virtually all creditors from taking any action to collect the debts
you owe them unless the bankruptcy court lifts the stay and lets the creditor
proceed with collections.