Q: Should we file bankruptcy?
We have recently finished short selling my two houses. My credit card companies raised the interest rates after we were late on payments more than once. My wife and I have five credit cards, our payments used to be $350 per month, which we can afford. Right now, the total monthly payment is $1,000, which we cannot afford.
Two weeks ago, I injured my back at work and I am tolerating excruciating back pain until my doctor will authorize back surgery. My doctor estimated the recovery period to be three months or more. I have a wife and two children, house payments and more. My credit is already ruined from short selling two houses.
A: You are right that your credit is already ruined by going delinquent on your two home loans and then short selling. After you short sell your home, bankruptcy can offer additional protection in that you can provide the deficiency information on your home loan to your attorney.
This is becoming an all-too-common story in Reno/Sparks for the past five years. Many homeowners have turned to bankruptcy as a solution to their distressed financial hardship. Whether to stop a foreclosure on a house, a repossession of a car or a wage garnishment, bankruptcy can provide a fresh start and allow you to rebuild your credit and get back on healthy financial footing.
Q: Do I need a lawyer to file for bankruptcy?
A: Yes. Although it might be a fairly easy process to start, you might encounter complications along the way that should be handled by a legal professional during the entire bankruptcy petition.
You should first consult with an attorney who specializes in local bankruptcy law. Bankruptcy law has significantly changed since 2005, making it more difficult to file for protection. Although you are not legally required to have an attorney file for bankruptcy, consulting with an experienced bankruptcy attorney will help you fully understand your options and avoid potential pitfalls. For example, failure to obtain credit counseling before filing or not providing certain documents to the court and the trustee on a timely basis could cause your case to be dismissed.
There are several types of bankruptcy filing.
This is the liquidation chapter, also known as a “straight bankruptcy.” A Chapter 7 case typically remains open for six months (from filing to final decree), with a discharge being entered within 90 days of the filing of the petition. This is the most common filing and the simplest.
This is commonly referred to as business re-organization. Although individuals can file Chapter 11, most filings are for businesses. Under Chapter 11 protection, the business or individual debtor remains in possession of the assets and formulates a plan to pay creditors over a period of time.
This is another type of re-organization, commonly referred to as a “wage earners” plan. This chapter is primarily filed by someone whose house is in foreclosure and has substantial non-exempt assets or income that is above the median range.
Q: When I file for bankruptcy, will I lose everything I own?
A: No. Nevada law allows individual and married couples a certain amount of exemptions for property, retirement and pension accounts, tools of the trade and personal injury awards. All personal assets must be listed on the schedules filed with the court, including furniture, clothing, bank accounts, cars, jewelry and computers. You must also disclose all real estate that is titled in your name. An experienced bankruptcy attorney can explain how to list your assets properly and maximize your exemptions.
Q: How does filing bankruptcy affect my credit?
A: When you file for bankruptcy, the information shows up on your credit report and can remain on the report for up to 10 years.
Q: How much does it cost to file for bankruptcy?
A: Filing fees vary depending on how much work your attorney needs to perform from filing to discharge. Generally your filing is calculated by how much debt you have. It is advisable to contact several attorneys who specialize in bankruptcy to for consultation to determine who will offer you the most value for their services.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.