Each week, bankruptcy attorney Elizabeth Domenico spends time educating the community about their debt resolution options. This week, we got to hear from her colleague Jen Koss.
Debt Resolution Fridays is dedicated to answering your debt questions. See what Coloradans asked on July 24, 2020. (A transcript of the event is available below.)
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Good morning, and welcome back to Debt Resolution Fridays. My name is Jen Koss and I’m one of our bankruptcy attorneys here at Robinson & Henry along with my colleague Liz Domenico. We have some great questions that you guys have asked about bankruptcy. So I’m going to take some time to answer those for you today. Also, please be sure to submit your questions if you have any. And we’ll be sure to either answer them today or next Friday with Liz. You can also look at past weekly videos from our archives to see what other bankruptcy questions have been answered. You might find yours there. We’re here every Friday at 11:00 a.m. to answer your bankruptcy questions. As a side note, please remember that we also do offer free case assessments here at Robinson & Henry with both myself and Liz. And you can schedule it on our website at robandhen.wpengine.com, or you can call 303-688-0944. Alrighty, let’s go ahead and jump into the questions that we’ve received for this week’s video.
Do you have to include all your debts in a bankruptcy?
First question, do you have to include all of your creditors/debts in a bankruptcy? So yes, the short answer is yes, we don’t get to pick and choose which debts get listed in a bankruptcy. Any and all debts must be listed. So a few things to keep in mind here which your bankruptcy attorney can certainly help guide you on. If there’s a particular credit card, for example, with maybe a small credit line that maybe you want to keep so that you can have it for emergency purposes after a bankruptcy, you’ll want to maintain a $0 balance on that card on the date of filing so that it doesn’t have to be listed as one of your debts. Also, if there’s a particular doctor or dentist, for example, or another medical provider that you really like, you might want to pay that particular debt to that medical provider, because after you file a bankruptcy, they could refuse to see you as a patient if you end up causing them a loss through the bankruptcy.
Does your ex-spouse get notified if you file bankruptcy?
All right, next question. Does my spouse get notified if I file a bankruptcy since I pay her alimony and child support? Can I get back-due, so missed payments, on alimony or maintenance or child support discharge? So when you file a bankruptcy, we have to disclose what’s called a domestic support obligation. This is going to include alimony maintenance and child support that you might be ordered to pay. We have to list the holder of the domestic support obligation. So that’s going to be your ex-spouse or the other parent of your child. They will receive notice of your bankruptcy filing, just like your creditors do. They’re gonna receive notice of your case information and of your hearing. We do have to list the domestic support obligations, even if you are current on those payments, although you don’t need to be current on your domestic support obligations in order to file a bankruptcy. However, ultimately, we cannot discharge alimony maintenance or child support that is due in the future or back-due. Those are considered a priority debt.
Will filing bankruptcy stop my car from being repossessed?
All right, next question. My car is in danger of being repossessed. I’m considering filing for bankruptcy. If I file, will that help me keep my car? So it depends on what chapter of bankruptcy you file. So we’ll talk about both the 7 and the 13 scenario here. If you’re filing a Chapter 7 bankruptcy, filing the bankruptcy will stop the looming repossession, but ultimately if you’re behind on the payments, because there is no payment plan in a Chapter 7 case, the lender is going to then seek permission from the court to lift the automatic stay protection of the bankruptcy so that they can repossess the car. And the court’s usually going to grant this permission because they have an interest in that property. Now, with a Chapter 13 filing, this is also gonna stop any type of looming repossession if you file a Chapter 13 bankruptcy. But unlike the 7, it provides you an opportunity to also keep your car if you believe that you can make that car payment, that you can afford it moving forward. You would need to be able to stay current on the car payment moving forward in the Chapter 13 once it’s filed, but any missed payments, these are called your arrears. Those would get paid via your three-to-five year bankruptcy payment plan. For example, I recently had a client who was about four months behind on her car payment. So we filed a Chapter 13 bankruptcy for her, and she was able to stop a looming repossession that she knew was coming, which gave her a good peace of mind because she uses her vehicle to get to and from her new job. So this new job was going to allow her to afford her car payments moving forward. And any of those four months of missed payments are just gonna be made up via her Chapter 13 bankruptcy payment plan.
How soon after bankruptcy can I buy a house?
All right, next question. How soon after a bankruptcy can I file a house? So a bankruptcy will usually be completely erased from your credit report usually after seven to 10 years, but that certainly doesn’t mean that you need to wait seven to 10 years before buying a house. Most professionals are gonna advise that waiting probably about two years before applying for a home loan. And this also gives you more time to improve your credit score so that you can get a better interest rate. An attorney can also kind of give you some guidance on how to improve your credit score after a bankruptcy as well, especially if you have buying a home in the future on your to-do list. It’s certainly not a hard rule that you have to wait two years, but we find that this is the general industry guideline.
If I file bankruptcy, will it affect my spouse’s credit?
All right, next question. How will filing a bankruptcy affect my spouse’s credit? Will my spouse be responsible for my debts after I file a bankruptcy? Yeah, so we get a lot of questions about those from those who are concerned about how an individual bankruptcy could or might impact their spouse if their spouse is choosing to not file a joint bankruptcy with them. Let me first start by saying that your spouse is not required to file a bankruptcy with you. However, their income, your spouse’s income, and certain assets that your spouse might own just in their name, such as a piece of real estate, a vehicle, they’re still often taken into account in an individual bankruptcy. So something to keep in mind, just know that your attorney is going to still ask about information regarding your spouse even if only you are filing an individual bankruptcy. If you file an individual bankruptcy and have joint debt with your spouse and that debt is not paid via liquidation of your assets or via your Chapter 13 bankruptcy payment plan, then your spouse is still going to remain responsible for the balance on that debt. For example, if you file a Chapter 7 bankruptcy and you surrender a vehicle that has a loan in both you and your spouse’s name and you get a discharge via your Chapter 7 bankruptcy on the balance of that car, your spouse is still gonna remain responsible for it. That could result in your spouse being sued in civil court, getting their wages garnished. Of course, your spouse in the future is also able to file their own individual bankruptcy if they choose to. But any debts that you are individually responsible for, those are not the responsibility of your spouse. Also, you filing a bankruptcy, it’s not going to show on your spouse’s credit report regarding your individual bankruptcy.
How quickly can a bankruptcy be filed?
All right, next question. How quickly can a bankruptcy be filed? I’m at risk of losing my house, so I need to do something fast. So in some cases we can file what’s called a bare-bones bankruptcy filing where minimal information is filed with the court. And then we have to follow up. We have a certain amount of time to then provide the rest of the information to the court needed to complete your bankruptcy petition. So upon filing a bare-bones, you do get to enjoy the automatics stay of a bankruptcy though. This, for example, would stop a pending foreclosure. So it is important to speak with a bankruptcy attorney to see whether a bare-bones filing in your specific scenario is possible, what that process might look like, and how quickly the attorney needs certain information from you.
If I have no proof of income, how do I file chapter 7 bankruptcy?
All right, next question. I know that I have to show proof of income to file a Chapter 7 bankruptcy. I lost my job back in April. How do I handle this? Yeah, so typically we do need all proofs of income in the past six months to determine your Chapter 7 eligibility. So if you’re a W-2 wage earner, for example, we ideally need copies of your actual pay stubs. And this is because bank deposits usually only will show us your net income, whereas your pay stubs are gonna show us your gross income, as well as any deductions or withholdings. And this is important because in a Chapter 7, to determine eligibility, it’s based upon gross income, not net income. So ideally we really need to know what your gross income is, especially if you’re on the borderline of the Chapter 7 limit for your household size. Now, maybe you didn’t save pay stubs from your previous employer and you say, well, how do I get those pay stubs then? So generally we advise people to reach out to the human resources department at their previous employer’s office and request their pay stubs. Usually we find that most HR departments are happy to do so, but in the off chance, if you really run into an issue with collecting those pay stubs from your HR department at your previous employer, we can try to intervene and step in and send that request on your behalf.
Can payday loans be included in bankruptcy?
All right, next question. Can payday loans be included in a bankruptcy? Yes, payday loons, payday loans, sorry, can and must be included in a bankruptcy. Remember, we don’t get to pick and choose what kind of debt is put into the bankruptcy. It all gets listed, whether it’s a debt that can be discharged or can’t be discharged like student loans or debts you’re paying on, such as even if you’re current on your car payment. But payday loans are listed with your other general unsecured debts. General unsecured debts are going to include things like payday loans, general unsecured personal loans, medical bills, credit card debt, debt you might owe to a friend or family member. Because, again, yes, we have to include debts owed to friends and family members because we cannot pick and choose what debts are listed.
How long does an automatic stay on creditors last?
All right, next question, moving along here. How long does an automatic stay on a creditor last? Does it go into effect as soon as I hire an attorney? Will there ever be a time where I have to file an extension if something holds up my bankruptcy from being processed? So to start, hiring an attorney alone is not going to give you the protection of the automatic stay in bankruptcy. Unless and until you actually file a bankruptcy, you’re gonna remain unprotected by the automatic stay. This means you could still be sued in civil court for collection on a debt if you’ve not filed bankruptcy yet. Your wages will continue to be garnished until you file a bankruptcy. Of course, hiring an attorney, we’re happy to field those calls and give that information, our information, to your creditors so that they contact us instead of you. But just know, legally speaking, they don’t have to stop attempting to collect from you unless and until you actually file the bankruptcy. Now, once you actually file the bankruptcy with the bankruptcy court, you are then under the protection of the automatic stay immediately. This protection against pre-filing debts, so any debts incurred prior to your filing date, that protection is going to last the entire life of your bankruptcy case with the court. Of course, as I mentioned earlier, the nuance of if you’re filing a Chapter 7 case and you’re behind on a secured debt payment, such as a car loan or a mortgage on your house, that creditor in that scenario can request that the court lift the protection of the automatic stay of the bankruptcy to get their property back, because remember, there’s no payment plan in the Chapter 7 bankruptcy. So they have no way to catch up on those missed payments. And the court’s usually gonna grant that permission, when they file, what’s called a motion for relief from stay. In a case where you might have to refile due to one reason or the other, you may need to file a motion to request that the automatic stay be extended, but that’s certainly something that you would speak with your bankruptcy attorney about given your specific scenario.
How can I get medical bills discharged?
All right, and last question. Can you please talk about the process of having medical bills discharged? How hard is that, and will I have to pay some of it back? So medical bills, again, can and must be listed in your debts because we can’t pick and choose. They are just like the payday loans in that they’re general unsecured debts that get treated like credit card debt, for example, as well. Again, the one thing I like to note to clients when it comes to medical bills, whether it’s a dermatologist, a dentist, a primary care physician that you really like to see, you might want to pay that medical bill prior to the bankruptcy filing, if possible, if it’s not too obscenely large. And again, that’s because this medical office could refuse to keep seeing you as a patient if and when you cause them a loss due to your bankruptcy, and a bankruptcy attorney can certainly help you navigate that as well. We can look at the particular debt together and see if it’s possible for you to pay it prior to filing. As far as paying back any of it, again, it just depends on the chapter of bankruptcy that you’re filing. In a Chapter 7, there is no payment plan option. It’s a liquidation process if you have things that are not protected by law to be liquidated. With the Chapter 13 bankruptcy, your medical providers are gonna share in the general unsecured debt payments that are paid via your three-to-five year bankruptcy payment plan.
Alrighty, so that is all the time that we have this week. If you have any other bankruptcy questions that did not get answered today, please be sure to submit them to us for us to answer next week. You’ll be hearing from my colleague, Liz Domenico, next Friday at 11:00 a.m. for our Debt Resolution Fridays. And as a reminder, we do offer free 30-minute bankruptcy case assessments here at Robinson & Henry. So please give us a call at 303-688-0944 or visit robandhen.wpengine.com if you want to see whether bankruptcy is the right option for you or what chapter might be the best option for you. Thanks for your questions. And we look forward to seeing you guys next Friday.