Let a Roanoke, Virginia Bankruptcy Lawyer at Giles & Lambert, P.C. Help You Decide if Bankruptcy is Right for You.

Deciding to file for bankruptcy can be tough. It helps to get the facts from an experienced legal professional before you make your decision.

The bankruptcy attorneys at Giles & Lambert, P.C. know that the vast majority of debtors are honest folks trying to do their best. We all need a little help and advice sometimes, and we're here to help give you that advice. When we sit down and do a personal consultation with you, we may advise you that credit counseling is the best option for your situation. For other folks, Chapter 7 bankruptcy or Chapter 13 bankruptcy will be the best way out of their financial problems. Whatever problems you may have, Malissa Lambert Giles and Tracy Allen Giles will lay out the plan that fits your situation and guide you during every step on the path to financial and emotional well-being. Below is helpful information on bankruptcy.

Bankruptcy filings in 2008 rose 32% as compared to 2007 according to data from Automated Access to Court Electronic Records (AACER). There were just under 1.1 million total bankruptcy filings in 2008 as compared to 827,000 in 2007. Bankruptcies are on the rise due in large part to our struggling economy. What should you take away from this knowledge? That you are not alone; this economy has many of us struggling to make ends meet.

Frequently Asked Questions about Bankruptcy

Q: Why are so many consumers filing bankruptcy?

A: Most Americans with excess debt have acquired their debts over long periods of time. While they intend to repay the debts, they may find themselves unable to do so because of unanticipated changes in circumstances such as medical emergencies, job losses or failed businesses, disability, divorce or loss of spouse. Any of these circumstances, combined with late fees, over limit fees and the extraordinarily high interest rates that creditors now charge can result in insurmountable debt.

Q: What alternative courses of action are there to filing bankruptcy when facing overwhelming debt?

A: Short of bankruptcy, a debtor may attempt to mediate with creditors or negotiate workout agreements to extend due dates, lower interest rates, partially forgive debt or alter other terms. A debtor may execute an assignment of property for the benefit of creditors (ABC), wherein the debtor puts assets in the trust of a neutral third party to pay creditors. A business debtor can sell the business, negotiating the satisfaction of debt as part of the deal. Other creative options to bankruptcy exist. Many debtors, however, find that their creditors are unwilling to agree to reasonable terms or are completely unwilling to negotiate.

Q: How will bankruptcy affect my credit?

Some people don't consider bankruptcy because they're afraid it will ruin their credit.  If you're experiencing serious financial difficulties, filing bankruptcy may be the quickest way to improve your credit score.

If your credit cards are maxed out and you're facing garnishments or repossessions, your credit score is already suffering.  Filing bankruptcy isn't good for your credit, but it may be your best option.  Many creditors decide to lend to people who file have filed bankruptcy for two reasons: 

• Filing bankruptcy will discharge most -- if not all -- of your debts, making your finances much more manageable.
• If you've received a chapter 7 bankruptcy discharge, you won't be able to file again for eight years; however you can file for a chapter 13 repayment plan. To creditors, this actually makes you a better risk. It means your future debts will be collectible.

Most people with debt problems can expect a 50 to 75 point improvement on their credit score after their debts have been discharged in a bankruptcy.

Q: Will I lose my home if I file bankruptcy?

There are ways to protect your home under both Chapter 7 and Chapter 13 bankruptcies. Here at Giles & Lambert, P.C., we understand that the threat of losing your home is a major concern when you're considering bankruptcy, and we do everything we can to keep your family home protected. If you're facing a foreclosure, it's important to give us a call more than 2 weeks before the foreclosure date.  The more time you're able to give us in advance of your foreclosure, the more likely we'll be able to help.

If you're filing a Chapter 7, it's important to stay current on your mortgage payments.  If you're behind on your mortgage payments, keeping your home depends on the amount of equity you have in the property and the amount of the state homested exemption. 

In a Chapter 13 proceeding, however, even if the debyou're  behind on your mortgage payments, you can still keep your home if your payment plan includes paying back any missed mortgage payments, and you're able to stay current on your future mortgage payments. If you're current on house payments, and you continue to make your payments on time, your home should be protected. 

Q: Can bankruptcy stop wage garnishment?

Filing for bankruptcy can stop creditors from garnishing your paycheck (non-dischargeable debts, such as alimony or child support are exceptions). If you're planning to file bankruptcy and have received a garnishment summons, contact our office as soon as possible.  Filing your bankruptcy before the court date on your summons will ensure that we can return the garnished wages to you, and protect you from other creditors attempting collection.

Q: Which debts are non-dischargeable in a bankruptcy?

While bankruptcy can clear away most of your debt, it's important to know which debts are non-dischargeable in bankruptcy proceedings:

In a Chapter 7 proceeding, the following debts are not discharged:

• Debts or creditors not listed on the schedules filed at the outset of the case
• Most student loans, unless repayment would cause the debtor and his or her dependents undue hardship
• Recent federal, state, and local taxes
• Child support and spousal maintenance (alimony)
• Government-imposed restitution, fines, or penalties
• Court fees
• Debts resulting from driving while intoxicated
• Debts not dischargeable in a previous bankruptcy because of the debtor's fraud

In addition, the following debts are not discharged if the creditor objects during the case and proves that the debt fits one of these categories:

• Debts from fraud, including certain debts for luxury goods or services incurred within sixty days before filing and certain cash advances taken within sixty days after filing
• Debts from willful and malicious acts
• Debts from embezzlement, larceny, or breach of fiduciary duty
• Debts from a divorce settlement agreement or court decree, if the debtor has the ability to pay and the detriment to the recipient would be greater than the benefit to the debtor

Q: Are there any alternatives to filing bankruptcy?

Debtors who have faced obstacles to paying off their debts when due have no doubt received more than their fair share of demanding letters and phone calls, and the thought of getting rid of their debts through bankruptcy can be quite appealing. Regardless, you should always be aware of your alternatives.

If the debtor's financial problems are only temporary, he or she may want to ask creditors to accept lower payments or that payments are scheduled over a longer period of time. Creditors may be receptive to these ideas if the debtor has been a prompt payer in the past.  In addition, creditors may wish to avoid the difficulties of a court proceeding to collect on the debt, which can be time-consuming and expensive.

Consumer credit counselors can also help creditors work out a repayment plan. Some of these advisors work for non-profit agencies, so they charge no fees. Many credit-counseling services charge a fee for their guidance, however, and it may not appeal to an already over-stressed debtor to add another debt to the stockpile.

If the debtor's financial troubles are long-term or if the creditors will not agree to an alternative payment plan informally, bankruptcy may be the best way for the debtor to get out from under an insurmountable debt load. When the alternatives to bankruptcy won't satify your financial difficulties, bankruptcy can often be the right option to give debtors a fresh start.

The Do's and Don'ts of Bankruptcy

DO be aware of how creditors and the Trustee review a bankruptcy case. You should understand which of your assets are exempt, and can be retained, and which assets would be turned over to the Trustee in a bankruptcy.

DON'T borrow money or incur new debt after you've retained the services of a bankruptcy attorney. 

DO stay current on payments for property that you want to retain, such as your house or your vehicle.  

DON'T "borrow against yourself." If you have a 401k or IRA, it is generally unwise to borrow or take funds from the account if you're experiencing financial hardship. These assets are exempt, which means you can retain the funds when you file for bankruptcy.

DON'T pay relatives for debts that you owe them prior to filing bankruptcy. Any payment to a relative within 1 year of filing a bankruptcy is considered a preference and the Trustee may attempt to collect the funds from your relative.

DON'T transfer any property to a relative prior to filing your case.

DO be completely honest when you're filing a bankruptcy.  Failure to disclose information in your bankruptcy petition is a crime, and it prevents the attorney from properly evaluating your case.

DO include any claim you may have for an inheritance, law suit, or any other potential claim. 

DO include any property or funds awarded through a divorce settlement.  If you receive property or money within 6 months of filing your bankruptcy, you'll need to amend your petition and disclose this information to the court.

DO keep good records of your financial affairs. Keep track of your bank statements, pay stubs and statements you receive from creditors.

Bankruptcy - An Overview

Bankruptcy is a legal vehicle that provides relief to individuals and businesses in serious financial trouble and protects their creditors to the extent possible. Generally, the bankruptcy process assesses the debtor's assets and liabilities and provides a structure within which the debtor is allowed to keep some property and ordered to satisfy as many eligible debts as possible, according to an order of priority established by law. Remaining debts are discharged, except those of certain types, like domestic support orders, debt obtained by fraud and most tax debt.

The traditional stigma of bankruptcy has faded and been replaced by the view that it is a fresh start after a time of trouble. Most bankruptcy debtors have experienced unexpected and extreme financial shock, such as that caused by sudden events such as job loss, business failure, death, divorce or illness.

In such cases, filing bankruptcy may be the right answer. If you are facing serious financial challenges, it is very important to seek the counsel of an experienced bankruptcy attorney to help you to assess your legal options.

Bankruptcy law is primarily federal and administered by the federal courts. However, the various states' consumer and commercial laws do play important roles in certain bankruptcy issues and some circumstances.

Bankruptcy is an available option for individual consumers, businesses, farmers and municipalities. There are two major bankruptcy types: liquidation and reorganization. Since the imposition of means testing by bankruptcy reform in 2005, only relatively low-income and less stable debtors are allowed to liquidate. For practical purposes, many of these debtors have so-called no-asset cases where all of the debtors' property is exempt from the liquidation requirement and eligible debt is discharged without any property being sold.

Chapter 7

Chapter 7 of the Bankruptcy Code governs liquidation bankruptcy, available to individuals and businesses. Upon the filing of a Chapter 7 bankruptcy petition, the bankruptcy court issues an "automatic stay" that stops most collection proceedings against the debtor. A bankruptcy trustee is responsible for gathering the debtor's nonexempt property, if any, liquidating it and distributing the proceeds to the creditors in order of legal preference. This process often leaves some creditors' debts unpaid when there are not enough assets to cover liabilities.

For an individual consumer debtor, these remaining debts are discharged and no longer the responsibility of the debtor; however, certain types of debt are non-dischargeable and survive the bankruptcy, such as alimony or child support. For a business debtor, the liquidated business does not survive the bankruptcy.

Reorganization

A reorganization bankruptcy is more appropriate where there is ongoing income that can be used to pay creditors, at least in part. Reorganizations are governed by several chapters of the Bankruptcy Code. Chapter 11 generally controls reorganizations for individual debtors with high debts or for larger business entities. Chapter 13, on the other hand, generally covers individual consumer debtors with lower debts. Farmers can file for reorganization under Chapter 12 and municipalities under Chapter 9.

Filing for reorganization also generates an automatic stay of most collection activity. The debtor then develops a repayment plan to pay debts over a three- to five-year period through a bankruptcy trustee. At the successful conclusion of the payment plan, if certain conditions are met, remaining dischargeable debt is cancelled. If the debtor fails to make payments under the plan or fails to make alimony, child support or certain tax payments, however, the court may either dismiss the case or convert the reorganization to liquidation.

Involuntary Bankruptcy

In addition to bankruptcies filed voluntarily by debtors, creditors have a legal remedy through "involuntary bankruptcy" petitions under Chapters 7 or 11. If either a minimum level of debt is present or a minimum number of creditors, creditors can file a bankruptcy petition against a debtor to ensure that assets are distributed fairly among creditors through the bankruptcy process. Creditors must take care only to file meritorious involuntary petitions, however. Penalties for filing improper involuntary petitions can be steep.

Conclusion

Bankruptcy law can benefit debtors and creditors alike, depending on the circumstances. If you feel that a bankruptcy proceeding may benefit you or your business, you should consult a skilled bankruptcy attorney to help determine your best course of action. Experienced bankruptcy attorneys have the knowledge to help their debtor clients get out from under formidable debt and to assist their creditor clients in collecting what is rightfully theirs.

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