Frequently Asqued Questions
This is information is brought to you by GANDY LAW OFFICES, P.C. We are licensed to practice law and provide legal advice in the State of Iowa, USA, only. You are advised that the following information is general in nature, and may apply differently to each person, depending upon their circumstances. You are also advised that bankruptcy laws change from time to time changing, so you may want to speak directly with an experienced bankruptcy attorney to find out how the current bankruptcy laws apply to your specific situation.
What is bankruptcy?
When to consider bankruptcy?
What is Chapter 7 bankruptcy?
What happens if I file a Chapter 7 bankruptcy?
Who can file a Chapter 7 bankruptcy petition?
What is Chapter 13 bankruptcy?
Who can file a Chapter 13 bankruptcy petition?
Will the bankruptcy stop creditors from calling?
How long after filing will the creditors stop calling?
Who deals with my creditors during the bankruptcy?
Will my employer or landlord find out about my bankruptcy?
Can my employer fire me for filing bankruptcy?
Can I go to jail if I file bankruptcy or don't pay my debts?
Does the spouse of a married person also have to file bankruptcy?
What is an "Exemption"?
Will I lose my Property?
What happens to my personal property, real property and other assets?
Can I keep my home and automobile?
Are pension plans and 401(k) plans exempt?
Are IRA accounts exempt?
Which debts are non-dischargable debts?
Can I keep any credit cards?
How will my credit be affected?
Can home foreclosure be prevented?
Will I have to fill out forms?
Will I be required to go to court?
Are there alternatives to bankruptcy?
What should I do to prepare for filing bankruptcy?
Can I file a bankruptcy for my debts, but not include my assets?
Can I file bankruptcy to delay a creditor?
Do I have to disclose all of my assets?
What if I do not list a creditor on the bankruptcy papers?
Why choose the GANDY LAW OFFICES, P.C. team to represent you?
What is bankruptcy?
Bankruptcy refers to the federal law that permits certain entities to obtain permanent relief from many debts and obligations. The intent of the bankruptcy law is to enable debtors to get a fresh start in their financial affairs. The bankruptcy law underwent a major revision in 1978, making it easier and more beneficial for debtors to take advantage of the fresh start opportunity. Once a bankruptcy has been concluded, the debtor is discharged from many debts, meaning the debtor is no longer legally obligated to pay those dischargeable debts.
When to consider Bankruptcy?
The most common sign that you may need to file for bankruptcy is that you cannot pay your debts as they come due. If you are borrowing on credit cards, using loans to make your monthly payments, or if you are considering a consolidation loan, you may need to consider filing some form of bankruptcy, generally either a Chapter 7 or a Chapter 13 bankruptcy. Another common sign, is if collection agencies are calling or writing you, or if you are being sued, or garnished. If you are already being garnished, a bankruptcy can stop it, and can sometimes even get back the money that was taken from you. If you are behind on mortgage payments, or if your home is threatened with, or in foreclosure, a Chapter 13 Bankruptcy can prevent a foreclosure and you get you a year or more to bring the payments current. Chapter 13 Bankruptcy may be the only way to save your home. If you are behind on car payments or if the creditor is threatening repossession, a Chapter 13 bankruptcy can stop that. If you owe taxes and the IRS is threatening to garnish or seize your assets, a Chapter 13 bankruptcy maybe the only effective way of dealing with the IRS. If your debts are overwhelming and can you can see no way out, bankruptcy can give you a fresh start. If your income has declined so that you can't meet your obligations, bankruptcy can reduce your obligations, or possibly eliminate some of them. So you can support yourself in a reasonable and dignified manner.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is often is often referred to as straight bankruptcy or liquidation bankruptcy. It is a known as a liquidation bankruptcy because the Trustee in bankruptcy can liquidate any non-exempt or unprotected assets to satisfy the demands of your creditors. In a Chapter 7 bankruptcy, most debts are wiped out, and the debtor generally loses only non-exempt property. Despite the term liquidation bankruptcy, rarely is property liquidated, because most property is protected by exemption under State Law. When an asset is exempt from legal process, a bankruptcy trustee cannot take the property. The purpose for filing a Chapter 7 bankruptcy is to discharge a debt or to cancel some debtor obligations. A Chapter 7 petitioner does not have to make payments out of his or her future income to have debts discharged. A Chapter 7 asks the court to erase your debts forever. In exchange you might have to give up some of your property, such as non-exempt assets. It is important to understand that some debts cannot be discharged in a Chapter 7 bankruptcy. For information regarding debts that are non dischargeable, please click HERE.
What happens if I file a Chapter 7 bankruptcy?
A Chapter 7 bankruptcy proceeding is commenced by filing a petition with the bankruptcy court. The person filing a Chapter 7 is referred to as the debtor. The debtor is required to disclose to the court all of its property and debts and turn over all nonexempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors. The debtor then receives a discharge of all dischargeable debts.
Who can file a Chapter 7 bankruptcy petition?
Almost any individual, partnership, or corporation may file a Chapter 7 bankruptcy petition if he or she resides, has a domicile, a place of business, or property in the United States. If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition.
If you were granted or denied a Chapter 7 discharge in a prior case within the last 6 years or completed a Chapter 13 plan in a prior case, you might not be entitled to receive a discharge in bankruptcy and probably are not a candidate for a Chapter 7 bankruptcy proceeding. This rule does have some exceptions.
What is Chapter 13 bankruptcy?
Chapter 13 is an adjustment or consolidation of debts into one repayment plan and allows an individual to reorganize debts by lowering their monthly payments. It also protects the debtor from creditors while the debt is being paid off. Unlike Chapter 7 bankruptcy, a Chapter 13 petition does not ask for an immediate discharge of debts. Instead, he or she offers a plan to repay at least part of those debts over a period of time. Usually three to five years, depending on the debtor's disposable income. While a Chapter 13 plan is in place, the petitioner is protected from lawsuits, garnishments, and other creditor action. The Chapter 13 debtor's plan must be approved by the court. A person who files Chapter 13 bankruptcy remains in bankruptcy until all of the payments in the plan have been made, and the judge issues a discharge of the debts. It is critical to know that Chapter 13 does not require all your debts to be paid 100%, or dollar on the dollar. As in Chapter 7, some debts cannot be discharged in Chapter 13 unless they are paid off in full. Simply stated, a Chapter 13 reorganization can help you reduce debts, reduce interest charges, and spread payments over time. If you are behind in mortgage payments, a reorganization can help you catch up on back payments over time without losing your home. A Chapter 13 plan of reorganization may allow you to keep property that you may have been forced to liquidate or turn over to the court in a complete Chapter 7 liquidation bankruptcy.
Who can file a Chapter 13 bankruptcy petition?
Individuals may file Chapter 13 bankruptcy petitions if they:
- Reside, have a domicile, a place of business, or property in the United States
- Have a source of regular income
- On the date the petition is filed owe less than $269,250 in non-contingent, liquidated, unsecured debts and less than $807,750 in non-contingent, liquidated, secured debts.
Corporations and partnerships may not file a Chapter 13 bankruptcy petition.
If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition.
Will the bankruptcy stop creditors from calling?
Yes. The automatic stay law prevents creditors from taking any action to collect debts. When a person gets behind on paying his or her bills, creditors often take various actions to collect. Creditors may call home or work, family, friends, fellow employees or even your employer. Co-signers and guarantors may be called upon to make payments. Mortgage holders and other creditors may initiate foreclosure or repossession of cars, furniture, and appliances or other items. Lawsuits and collection procedures may be started. Garnishment of wages or seizure of property or bank accounts may begin. The filing of a bankruptcy or reorganization automatically stops collection efforts against you and your property. Once you file for bankruptcy creditors must stop all collection efforts, including phone calls, collection notices, and garnishments. Foreclosures must stop and repossession action must cease. If you file to reorganize your debts, instead of a complete bankruptcy, collection action can also be stopped against co-signers and guarantors on consumer type debts. Only a few actions are not halted by a bankruptcy. Criminal proceedings cannot be stopped. An action to collect child support, or alimony cannot be halted. However, a reorganization plan may provide a viable means of catching up on past due child support or alimony.
How long after filing will the creditors stop calling?
If you choose to retain GANDY LAW OFFICES, P.C. for the service, you can have all creditor calls directed to our office. This way, creditors will no longer be able to call you at home or at work as soon as you meet the retainer fee. Otherwise, once a creditor becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with your case number. In urgent cases, we will contact the creditor immediately upon filing the bankruptcy petition, especially if a lawsuit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy it may be liable for court sanctions and attorney fees for this conduct.
Who deals with my creditors during the bankruptcy?
If you choose to retain GANDY LAW OFFICES, P.C. for this service, we will deal with your creditors once we undertake your representation, which starts once the retainer fee is paid, and we accept you as a client.
Will my employer or landlord find out about my bankruptcy?
Bankruptcy petitions are public records. However, under normal circumstances, unless your employer or landlord is a creditor, it will not know you filed a bankruptcy petition. If your employer or landlord is a creditor it must be listed as a creditor on the schedules and will receive notice of the bankruptcy proceeding.
Can my employer fire me for filing bankruptcy?
No. The law prohibits government units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.
Can I go to jail if I file bankruptcy or don't pay my debts?
No. There are no debtor's prisons in the United States.
Does the spouse of a married person also have to file bankruptcy?
No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, it might be advisable to have only one spouse file.
What is an "Exemption"?
Certain property is protected from creditors in bankruptcy. This property is known as exempt property.
Will I lose my Property?
Under Iowa law, certain assets are exempt from legal process. This means that they are protected, and cannot be taken from you if you own them, or to the extent that you have equity in them. For example, each person who files can protect one motor vehicle up to a fair market value of $5000. If you owe $2000 to a creditor for the vehicle and it is worth $5000, you can protect the $3000 of equity with your exemption. Generally speaking, most people can protect most, if not all of their household goods and furnishings, their clothing, the cash value of their life insurance, retirement and pension plans, and the tools of their trade up to a maximum value of $10,000. To obtain further information on the complete list of exempt property and whether you could lose any property if you filed a bankruptcy, it is recommended that you contact an experienced bankruptcy attorney. If property is not exempt, then it is not protected, and a Chapter 7 bankruptcy trustee could sell this property and pay creditors with the proceeds. If a person owns a significant amount of non-exempt assets, they may be able to retain them by the filing of a Chapter 13 bankruptcy, and paying their unsecured creditor at least the value of these assets.
What happens to my personal property, real property and other assets?
All of the property you own at the time of the filing bankruptcy, and your right to receive property in the future, become the property of the bankruptcy estate. This means that the bankruptcy trustee may take control of this property and liquidate it to satisfy your creditors.
Certain property is exempt and you will be able to keep that property. Iowa has a schedule of exemptions which allows the debtor to keep most if not all personal property through the bankruptcy. More times than not, all of your assets can be protected.
Can I keep my home and automobile?
In many cases you can retain your home and automobile in a Chapter 7 bankruptcy proceeding. You will keep your home or automobile in a Chapter 7 if (1) you are current in making payments on a loan secured by the home or automobile; and (2) the home or automobile does not have equity (a liquidation value in excess of the amount owed to creditors with liens against the property) in excess of what you are allowed to exempt. Iowa has a separate exemption which allows each debtor to claim $5,000 in equity on one vehicle. So in the case of a joint filing, the husband and wife each have a $5,000 exemption in which to protect a car through bankruptcy. In the event you want to keep your home or automobile, you must continue to make payments after your petition is filed. If you are in arrears on your home home or automobile, you can consider filing a Chapter 13 petition, which allows you to develop a plan for repaying your creditors without necessarily liquidating assets.
Are pension plans and 401(k) plans exempt?
The United States Supreme Court has held that pension plans, 401(k) plans, and other "ERISA-qualified plans" are generally "excluded" from the bankruptcy estate.
Are IRA accounts exempt?
Unlike 401(k) plans, IRA accounts are not ERISA-qualified plans and are only exempt in certain circumstances and to a limited extent. You will want to speak with an experienced bankruptcy attorney if you need to find out more, since the law in this area in Iowa has recently changed.
Which debts are Non-dischargable debts?
Not all debts can be discharged by bankruptcy. Examples of non-dischargable debts include recent taxes, government fines, and debts to spouses, former spouses, or children for support, maintenance, or alimony. In addition, debts to creditors that are not informed of the bankruptcy proceedings are also non-dischargable. For example, if you forget to list a creditor, that creditor will not be discharged. As a general rule, student loans are non-dischargable unless the debtor meets specific guidelines. If you have a student loan it is a good idea to talk to an attorney to see if your particular case meets these guildlines. Certain debts incurred through intentionally deceptive or malicious behavior of the debtor. Also debts that arise from damages or injuries to another involving drunk driving are non-dischargeable. Generally, under Chapter 7, these debts cannot be discharged, however, Chapter 13 allows one to repay these debts over an extended period of time. There are also some limited exceptions where these types of debts can be discharged in Chapter 7.
Can I keep any credit cards?
Under some circumstances you may be able to keep some credit cards if the creditor agrees. There are many factors which must be considered, including the credit card balance at the time of the bankruptcy, what terms the credit card company is willing to accept and your ability to pay the present and future credit card debt.
How will my credit be affected?
Many people believe that filing a Chapter 7 or Chapter 13 bankruptcy will ruin their credit for seven or ten years or longer. Most credit reporting agencies will keep a Chapter 13 bankruptcy on your credit report for seven years. A Chapter 7 bankruptcy will usually stay on a credit report for ten years. One of two circumstances usually applies when a person considers filing a bankruptcy. Either they are in financial difficulty, or anticipate it, and are looking for a way to avoid it. In either of these two cases, a bankruptcy may not hurt ones credit, but may in fact be the first step towards repairing a bad credit situation. Probably the most important situation for which you might need credit is buying a house. Federal regulation may allow you to get a mortgage two years after bankruptcy if you are otherwise eligible. Many people buy a house less than two years after bankruptcy by assuming a mortgage, or buying a house on contract. Nearly anyone can obtain a bank credit card even if they have just filed bankruptcy, by depositing money in one of the banks that offers secured credit cards. You use the card just like any other credit card, but the bank uses the money you deposited to assure that you make the payments. People forget that someone lending money is primarily interested in knowing whether you can, and will, pay them back. If you get yourself out of debt by filing a bankruptcy, you are better able to pay any new money you may borrow. Many creditors noting a bankruptcy or Chapter 7 or Chapter 13 reorganization on a credit report, are more interested in knowing what you've done since completing the bankruptcy to make yourself a good credit risk.
Can home foreclosure be prevented?
When you get behind on your house payments, the creditor may elect to call the loan in default, accelerate the debt, and begin foreclosure proceeding. When a debt is accelerated, the full balance of the note, not just the monthly payments, is due in full immediately. This is usually preceded by the creditors refusal to accept monthly payments. In the event a creditor begins foreclosure, you will receive notice of the commencement of the foreclosure proceeding. Unless the creditor is willing to accept payments to reinstate the loan, you will either have to pay the full balance remaining on the loan, or file for protection in bankruptcy to stop the foreclosure sale. The commencement of the bankruptcy case prior to the foreclosure sale date will stop the foreclosure sale from taking place, unless or until the creditor receives permission from the bankruptcy court to proceed with the sale. Under a Chapter 13 plan, you make regular monthly payments and are given a reasonable period of time to bring your loan payments current in order to save your property. It is strongly recommended you review your bankruptcy options as soon as you realize that you are behind on your mortgage payments.
Will I have to fill out forms?
Filing bankruptcy means filling out forms. Our staff will help you through the worksheets and answer any questions that you may have. We have created the forms to make it as painless of a process as possible. We will ask you to fill out forms to provide us with the information needed to prepare the bankruptcy petition. We will use the information you provide to complete the official forms, using a specialized computer program that complies with all the Court's requirements.
Will I be required to go to court?
About 30 to 40 days after filing the bankruptcy petition, you will have to attend a 15 to 20 minute hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but an individual appointed by the United States Trustee to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters. My associate Attorney Al Garrison will be there right by your side to answer any questions and to help the process go as smoothly as possible. Creditors will also be permitted to ask you questions, although in the majority of cases creditors do not ask questions at the First Meeting of Creditors. After the initial meeting you normally do not need to return to court.
Are there alternatives to bankruptcy?
Yes. Sometimes payment plans can be negotiated with creditors. Obtaining loan extensions, compromises and workout agreements require negotiation skills and experience. These alternatives may alert your creditors to the existence of nonexempt property that the creditor could reach and can involve considerable expense. You also have the option of doing nothing. In any event you should seek professional advice in dealing with most of these alternatives.
What should I do to prepare for filing bankruptcy?
First, you should consult with an attorney. An attorney can help you plan for the bankruptcy, decide when to file a bankruptcy petition, or even avoid filing for bankruptcy. A few specific items are worth mentioning.
If you intend to file bankruptcy you should stop using your credit cards. If you borrow money with the specific intent of discharging the debt in bankruptcy instead of paying it back, the debt is not dischargeable. In addition, (a) certain luxury purchases over $1,075 within 60 days of the bankruptcy filing are presumed non-dischargeable; (b) cash advances aggregating $1,075 taken within 60 days of the bankruptcy filing are presumed non-dischargeable; and, (c) debts involving materially false financial statements are non-dischargeable under certain circumstances.
Don't transfer your assets to friends, family and business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge.
Don't destroy any business or financial records. You can lose your right to a bankruptcy discharge as a result.
Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away. We can advise you on what debts should and should not be paid while you prepare to file a bankruptcy petition.
Can I file a bankruptcy for my debts, but not include my assets?
No. By Federal law you are required to include all debts and assets.
Can I file bankruptcy to delay a creditor?
The Rules of Bankruptcy Procedure require you or your attorney to certify that your petition is not filed for any improper purpose, such as to harass or to cause unnecessary delay. Bankruptcy is intended as a tool for dealing with debts that can not otherwise be paid. You should not file a bankruptcy petition for the sole reason of delaying a creditor's actions.
Do I have to disclose all of my assets?
Yes. If you knowingly and fraudulently conceal an asset from the court you have committed a felony and can be fined up to $5,000, imprisoned for up to five years, or both. In addition, the court can deny you your discharge, or dismiss or convert your bankruptcy proceeding. If you have any questions please do not hesitate to ask.
What if I do not list a creditor on the bankruptcy papers?
You are required to list all creditors. If you intentionally omit a creditor from your schedules, it is perjury and you may lose your bankruptcy discharge. However, if a creditor is not known to exist at the time the schedules are filed, you may amend your schedules at any time the case is open to add an additional creditor.
Why choose the GANDY LAW OFFICES, P.C. team to represent you?
You may be deciding whether to have the GANDY LAW OFFICES, P.C. team represent you in getting a fresh start for you and your family by using the bankruptcy process. Please know that the GANDY LAW OFFICES team will work very hard to do an excellent job for you. Attorney Gandy and his staff strive to be both competent and caring. They are never judgmental of clients and truly understand the problems they are facing. They want to be of help. They have walked a mile in your shoes.
To give you some idea of why you would want to chose their team to work for you, you'll want to know that Attorney Gandy is profiled in Who's Who in American Law and admitted to practice before the Iowa Supreme Court and the United States Supreme Court. He has been licensed to practice in Iowa since 1987, and since 1991 his practice has been dedicated to representing consumers in straight bankruptcy under Chapter 7 and bill consolidation cases under Chapter 13 of the bankruptcy code. Attorney Gandy holds degrees from Harvard University and the University of Texas School of Law. He practices primarily in Debt and Bankruptcy Law from his central office in Fairfield, Iowa, and maintains a satellite office in Des Moines managed by his associate, Attorney Al Garrison. To further demonstrate his commitment to this field and develop his competency in it, Attorney Gandy has become the first practicing attorney in Iowa to be Board Certified in Consumer Bankruptcy by the American Board of Certification. GANDY LAW OFFICES conducts its consumer bankruptcy law practice throughout Iowa by telephone, mail and in-office client contact.
GANDY LAW OFFICES knows you have a choice in deciding in who and how you will be represented in getting a fresh start, and their team appreciates the trust and confidence you show by considering them. Ask yourself, Is the attorney you may be choosing board certified?
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