The decision to file a bankruptcy is a difficult one, but we can help you demystify the bankruptcy process. Reading this overview prior to meeting with an attorney at The Law Office of Johnny J. Bardine, P.A., will help us concentrate on the specifics of your case.
BAPCA – The Bankruptcy Abuse Prevention and Consumer Protection Act
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA) was signed into law by President Bush on April 20, 2005. BAPCA is the law for bankruptcies filed on or after October 17, 2005.
The general purpose of BAPCA was to toughen the rules for individuals seeking bankruptcy relief, while also establishing additional requirements like pre-filing credit counseling and a debtor education course. The greatest complaint from debtors and their lawyers is that the additional requirements required by BAPCA have driven up the cost of filing bankruptcy by several hundred dollars. Even under the new law, bankruptcy still provides the exact same “fresh start” relief afforded to consumers struggling with their debt.
Types of Bankruptcy
Chapter 7 Bankruptcy is also known as “liquidation” or “straight” bankruptcy. Chapter 7 is typically preferred for debtors who are current with their secured payments (e.g. mortgage and car note) but overwhelmed by unsecured debts (e.g. credit cards and medical bills).
The Chapter 13 Plan is a written explanation of how the debtor intends to straighten out his financial mess. The plan describes how the debtor will pay priority and secured creditors in full or in accordance with the original contract terms. As long as the debtor makes all payments in accordance with the confirmed plan, he can remain under the protection of the bankruptcy court. The monthly plan payment is made directly to the Chapter 13 trustee, who disburses the money to creditors in accordance with the confirmed plan.
- Debtor – The debtor is the person, or married couple, filing bankruptcy. Additionally, a corporation can be a Chapter 7 debtor, although filing a corporate Chapter 7 bankruptcy is infrequently the best option. It is quite common for a person’s insolvency to be primarily the result of their failed corporation.
- Creditor – The creditor is the entity to whom the debtor owes money. There are different “classes” of creditors, such as priority, secured and unsecured. We order a tri-merged credit report for every bankruptcy client to help ensure that all creditors are accurately reported in the bankruptcy schedules, but not all creditors necessarily appear on the credit report. Ultimately, the debtor must analyze his schedules to verify that every creditor has been listed.
- U.S. Trustee – The U.S. Trustee’s Office, a branch of the U.S. Department of Justice, plays a significant role in the process of reviewing debtor’s bankruptcy schedules. The U.S.Trustee oversees many of the requirements under BAPCA, such as approving the companies that offer mandatory credit counseling and debtor education. The U.S.Trustee also reviews the “means test” that every Chapter 7 debtor must file.
- Local Trustee – The local Trustees are individuals supervised by the U.S. Trustee’s office. However the motivation and focus of a Chapter 7 Trustee is different than the Chapter 13 Trustee.
- Chapter 7 Trustee – The purpose of the Chapter 7 Trustee is to get money for the debtor’s general unsecured creditors. Because the trustee earns a commission on whatever he can collect for these creditors, his focus is primarily on the debtor’s non-exempt assets. In reality, the trustee is motivated to protecting creditors and is not focused on preserving a debtor’s disposable income.
- Chapter 13 Trustee – The Chapter 13 trustee is also concerned with protecting the rights of creditors. In a Chapter 13 bankruptcy, where creditors are paid pursuant to a Plan over the course of 36 to 60 months, it is his or her goal to maximize the monthly plan payments made by the debtor. The Chapter 13 Trustee’s office receives 5% of every monthly plan payment as an administrative expense.
- Judge – Generally, Chapter 7 debtors do not have to see the bankruptcy judge assigned to their case unless things are not going well for them. Typically, Chapter 13 debtors must go before the judge at their confirmation hearing.
- Petition, Schedules and Statement of Financial Affairs – These initial pleadings provide the trustee and creditors with a financial snapshot of the debtor as of the date of filing. These papers describe the debtor’s assets, liabilities, monthly income and monthly expenses.
- Must File Last Four Tax Returns – A new requirement under BAPCA is that the debtor must be current with his federal income tax filings for at least the last four years. A copy of the last four years of tax returns must be submitted directly to the trustee. Don't worry if you cannot find your returns for the last four years. We can order tax transcripts directly from the IRS.
- Credit Counseling: The Ticket Into Bankruptcy – A new provision under BAPCA requires that a debtor receive credit counseling within the six month period prior to filing a bankruptcy petition. The credit counseling agency must be approved by the U.S. Trustee’s Office. The certificate of credit counseling is filed simultaneously with the bankruptcy petition. The cost for credit counseling is approximately $50 per person, or $100 per couple.
- Debtor Education: The Ticket Out of Bankruptcy – Prior to receiving a discharge in bankruptcy, but after the case is filed, debtors must complete a debtor education program. The debtor education provider must be approved by the U.S. Trustee’s Office. The certificate of completion is filed with the bankruptcy court. The cost for the approved program is approximately $50 per person ($100 per couple).
The Automatic Stay
The automatic stay is a federal court order which is imposed the moment a bankruptcy case is filed. It immediately freezes any effort by any creditor to collect any debt from the debtor. It stops foreclosures, garnishments, lawsuits, etc. If a finance company repossesses a debtor’s car before the debtor files for bankruptcy protection, the debtor cannot get the car back, but if the debtor files the bankruptcy before the finance company can repossess his car, then the automatic stay prevents repossession.
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Consumers have rights. If you feel like you have been the victim of deceptive creditor practices or an unfair collection, schedule a free consultation with an attorney at The Law Office of Johnny J. Bardine, P.A. who will fight for you. The attorneys at The Law Office of Johnny J. Bardine, P.A., handle all manner of consumer law cases related to:
- Student loan law
- Automobile Fraud
- Fair Debt Collections Practices Act
- Credit Discrimination
- Fair Credit Reporting
- Unfair and Deceptive Acts and Practices
- Consumer Warranty Law
There are laws to protect you. The Law Office of Johnny J. Bardine, P.A. can help. Contact The Law Office of Johnny J. Bardine, P.A. today for a free consultation with an attorney.
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