Answers to Frequently Asked Questions by the Law Offices of John A. Sterbick
Q – My house payment and car payment are three months behind, I owe thousands on credit cards, and I have to keep the house and the car. What should I do?
A – Chapter 13 might be the best avenue for you. You can make up the missed payments over 60 months, and you can probably discharge all of your credit card debts, too.
Q – How much do I have to owe to file bankruptcy?
A – There is really no minimum amount one has to owe. The real issue is whether at your current income level, you have any hope of repaying the debts you owe in a reasonable amount of time.
Q – If I file Chapter 7, do I have to give up my house, car and furniture?
A – Generally, no. If you continue to make the house and car payments, you can keep them. You can almost always keep your furniture because bankruptcy law protects it from seizure by creditors.
Q –The IRS filed a Federal Tax Lien on my property. I have little equity. However, the interest on the tax debt makes it impossible to repay the taxes. What can I do?
A – You may wish to consider filing a Chapter 13 bankruptcy. You can pay most of the taxes back interest free, and you may even be able to avoid paying some of the penalties. In some cases, you may even be able to discharge some of the tax debt.
Q – I embezzled $50,000.00 from my employer. My employer knows about it and fired me. He is demanding back the money right now. What can I do?
A – If you file Chapter 7 bankruptcy, and your employer does not pursue his claim in your bankruptcy case, then you may be able to discharge the $50,000.00 debt. If he does pursue it, you could file a Chapter 13 and perhaps negotiate to pay a reduced portion of the $50,000, discharging the balance.
Q – I was a general partner in a business that failed. I owe over $1,000,000.00 to suppliers, landlords and former employees. I also owe about $100,000.00 to the IRS for unpaid payroll taxes, and I owe the Washington Department of revenue over $50,000.00. Should I file Chapter 11?
A – Possibly. Yours is a very complex situation. If you have substantial personal assets, you may be forced to file Chapter 11 bankruptcy. However, if you have depleted your personal assets, a Chapter 7 bankruptcy filing may be appropriate.
Q – Will I lose all of the money in my 401k, TSP, or VIP if I file Bankruptcy?
A – Generally, no.
Q – Will I lose my cash value in the whole life insurance policy I have obtained?
A – Probably not. There is a bankruptcy exemption available for much of the cash value.
Q – Will I ever be able to obtain credit again?
A – Generally, yes. Many people are able to purchase homes and cars shortly after, or even during, bankruptcy. Ironically, after completing a Chapter 7, you may receive many credit offers. The reason is that you cannot file Chapter 7 again for a number of years, so if you charge things on the credit cards, the creditors have many years to pursue you for payment.
Q – How do I get my driver’s license back?
A – We can file a Chapter 13 for you and obtain immediate reinstatement of your license, if it was suspended for failing to pay court fines or being responsible for an accident in which you had no insurance.
Q – Can I file bankruptcy alone, or does my spouse need to file also?
A – One spouse can file alone , but usually spouses file together to “clean out” any and all debts.
Q – How often can I file bankruptcy?
A – You must wait some period of time between each bankruptcy filing. Contact us to find out about your eligibility. You may be able to file sooner than you might think.
Q – How long does the filing process take?
A – Your Chapter 7 Bankruptcy or Chapter 13 Bankruptcy can usually be filed with the Court in a short time -- at the most, only a few weeks after your initial appointment with our office. However, the amount of time required is dependent upon the complexity of your case as well as the workload in our office at the time.
Q – How soon will my wage garnishment stop?
A – Your brighter financial future starts right away if you paychecks are under a garnishment. The bankruptcy filing in any chapter will stop the wage garnishment for most debts. In fact, if the garnishment has been going on for less than two months, you may get some or all of your garnished income returned to you. Getting your garnished money back does not happen in all cases, however. It is best to consult with our firm on this point.
Q – Will the bankruptcy case stop my foreclosure?
A – If you are in a Chapter 7 case and you intend to surrender the home, then yes, the Chapter 7 case will place a temporary pause on the foreclosure process. The pause can be as little as two months and perhaps as long as six or more months.
If you are in a Chapter 13 case and you intend to surrender the home back to the bank, as in Chapter 7 cases, there will be a temporary pause on the foreclosure process for the same two to six months.
If you are in a Chapter 13 case and you intend to save your home through the Chapter 13 plan, even though you are delinquent on payments on your mortgage(s), the Chapter 13 filing will in fact stop the foreclosure.
As long as you make the required payments into your Chapter 13 plan, payable to the Chapter 13 Trustee, your home is likely to be safe from foreclosure. However, there are some rare exceptions. Our firm is very qualified to help you understand your individual case.
Q – Can I continue to live in my house after a bankruptcy filing?
A – It is best to break this down into two answers. If you are in a Chapter 7 filing, and the house payments on all mortgages are all current, then the Chapter 7 filing in most cases will not have any net negative effect upon you keeping your house, providing of course that you keep up the payments.
If you are in a Chapter 13 case, then the answer has two parts. If as of the time of the filing Chapter 13 the house payments on all mortgages are all current, then the Chapter 13 filing in most cases will not have any net negative effect upon you keeping your house, providing of course that you keep up the payments.
If you are in a Chapter 13 case that proposes to “save” the house because you are delinquent on mortgage payments, then so long as you make the payments as required into your Chapter 13 plan, then you can continue living in the house and keep it forever.
Q – What will the bankruptcy case do to my credit score?
A – If your financial situation requires a bankruptcy filing, then filing bankruptcy is usually the start of a return to a better credit score over time. If you have a pending foreclosure, past car repossession, or you are delinquent on debts, then your credit score is already low. When you take responsibility to address your financial problems with a bankruptcy filing, your return to a higher credit score can be faster than you might think.
Q – Does my divorce decree protect me from creditors if my ex files for bankruptcy?
A – No. If you’re a co-signor with your ex-spouse on a debt acquired while married, the creditor can require the entire payment of that debt from you even though the divorce decree assigns the full debt to your ex-spouse. Your divorce decree may address any recourse you may have against your ex-spouse should he default on the loan obligations.
Q – What happens if one spouse files for bankruptcy and not the other?
If one spouse files and the other doesn’t, the one who doesn’t file could be responsible for the debts. Review this carefully before filing.
Q – What’s a joint petition?
A – A joint petition is when an individual and a spouse file a single petition. Unmarried partners must each file a separate case.
Q – Do you have to have a certain amount of debt to file?
No. However, some situations may not warrant filing for bankruptcy. If your financial situation is temporary, you may consider making arrangements with individual creditors for a change in payment amounts or a reduction in the total amount due. If you have little property or money, filing bankruptcy may not be necessary, as the creditor may not be able to collect the debt.
Q – What do I need to begin the bankruptcy process?
A – Compile a list of past and present debts as well as a schedule, or list, or assets and liabilities. You’ll also need a statement of financial affairs to file with the bankruptcy court in addition to your filing fee.
Q – How often can you file for bankruptcy?
Filing bankruptcy can adversely affect your ability to obtain future credit, rent housing and even negatively impact a job application. Any decision to file must be carefully considered. Chapter 7 can be filed every 8 years from a previous Chapter 7 filing, or 6 years from a prior Chapter 13 filing. Chapter 13 can be filed 4 years from a prior Chapter 7 filing, or 2 years from a prior Chapter 13 filing.
Q – Who can file bankruptcy?
A – With few exceptions, any person or business owing money to a creditor can file a bankruptcy petition.
Q – Can I change from one chapter of bankruptcy to another?
A – Generally, you can convert a case one time to any other chapter you’re eligible for. The request to convert can be a simple one-sentence document. Watch out for pitfalls, though. For instance, if you move from Chapter 13 to a Chapter 7, some of your possessions may be part of the Chapter 7 estate (and can be taken and sold to pay your debts), even though they were safe from creditors under Chapter 13.
Q – Which Bankruptcy type or chapter should I file?
A – Consumers typically file Chapter 13 bankruptcy, where repayment is made to creditors, or Chapter 7 where the debts are dismissed. The type depends on your circumstances and if you have assets available to repay all or part of the your debts. Bankruptcy laws can be tricky and involved, so determining if, when and which type of bankruptcy you need should be made with careful thought or the input of a bankruptcy lawyer.
Q – What’s the difference between secured and unsecured debt?
Secured debt is a claim that’s secured by some type of property, either by an agreement or involuntarily with a court judgment or taxes. Creditors can generally claim the property (and take it to pay off the debt ) in the event of bankruptcy. Unsecured debt is not tied to any type of property, and the creditor can’t claim it if you file for bankruptcy. A mortgage is a secured debt on you property.
Q – What’s bankruptcy?
A – Bankruptcy allows individuals or businesses (debtors) who owe others (creditors) more money than they’re able to pay to either work out a plan to repay the money over time or completely eliminate (discharge) most of the bills.
IRS Tax Help
Q – Is there a streamlined tax relief process?
A – Various IRS tax relief programs require no financial statement in the application process. The response time from the IRS for tax relief requests is typically 30 days or less. However, be prepared to spend lots of time doing your homework and filling out paperwork in preparation. If you decide to hire the assistance of a tax relief professional, they will provide and facilitate the documents and filing for you.
Q – How can I qualify for tax relief?
A – Tax relief programs were implemented by the IRS to allow taxpayers to resolve tax debt over time with installment payments, or potentially settle the debt at a percentage of what is owed. The IRS does not openly promote such programs, but information on each as available in printed form or via the IRS website. Tax relief is available on multiple levels depending on your tax situation, and various programs have different requirements and qualifications. It is necessary to interface with the IRS and fill out application forms, provide documentation, even write a letter to the IRS stating your situation to be considered.
Q – Are there any guarantees?
A – Tax relief professionals promise satisfaction with their services in assisting taxpayers prepare requests for installation arrangements, offer-in-compromise or other tax resolutions. They cannot guarantee you won’t have to pay taxes, or predict with 100% certainty how the IRS will rule on requests for tax relief, however. If the IRS rejects the initial request for tax relief, many tax relief professionals will review the rejection letter and prepare a response and appeal for no charge.
Q – What can a tax relief specialist do for me?
In cases involving existing businesses or in personal cases where the IRS has taken dramatic steps towards collection including threats of liens, garnishments or levies tax relief professionals can be very helpful. This representation will be knowledgeable on rules and formulas, procedures and paperwork. Tax relief specialists are a recommended aid for contacting, and negotiating with, the IRS. They can help “even the odds” when you must deal with government agents, who can be very intimidating when making demands on the taxpayer. IRS agents tend to be less forceful and more reasonable when dealing with a tax professional.
Q – What is tax relief?
A – The phrase “tax relief”, in general, refers to taxpayers attempts to mitigate their tax problems whether on the local, state or federal level. Generally speaking, individuals seek tax relief because they have been notified by the IRS with a Notice of Intent to either levy accounts, lien on property, real or personal, or garnish wages. Tax relief may be extended to either individuals or a business that can show a specific need for a tax breaks. Tax relief concessions are not usually granted to individuals or businesses with deep pockets.
There are numerous reasons why a taxpayer may seek out specific tax relief. Most often, taxpayers are unable to pay their tax debts in full or have failed to file returns for a number of years and eventually are notified by the IRS of impending action. A number of tax relief programs are available through the IRS. However, to qualify, taxpayers are required to fit within specific guidelines of tax regulations.