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Bankruptcy

When should I file for bankruptcy?

How will the new bankruptcy laws affect me?

Will all of my debts be forgiven if I file bankruptcy?

What should I know about the bankruptcy hearing?

How much money can I have in my bank account when I file bankruptcy?

What is the difference between Chapter 7 and Chapter 13?

Will my employer be notified of the bankruptcy?

What will the effect be on my credit rating?

Will my bankruptcy be reported in the paper?

Can I keep my car in a bankruptcy?

Can I keep any of my credit cards?

What if I want to pay back my debts, I just need some time to catch up and the creditors are unreasonable, demanding payments I cannot make, and refusing to work with me?

I think a Chapter 13 is for me. Do I have to pay back 100% of all of my debts?

Will a Chapter 13 be better for my credit rating than a Chapter 7?





Q: When should I file for bankruptcy?

The decision to file for bankruptcy is often one of the hardest choices that a person has to make in his or her  lifetime. Poor planning can often make the process even harder. It goes without saying that filing for bankruptcy should be a last resort, and should only be done when all other methods of satisfying one's financial obligations have been exhausted. However, if your situation has become so severe that you are in danger of foreclosure, garnished wages or repossessions or are facing debts that you are in no position to pay, putting off the inevitable can have devastating consequences. Procrastination can cost you your car, your wages, and even your home. Filing your case in a timely fashion can spare you these losses.


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Q: How will the new bankruptcy laws affect me?

The Bankruptcy Abuse Protection and Consumer Protection Act, passed in 2005 puts much stricter guidelines on personal bankruptcy filings. Some of these guidelines include mandatory debt counseling, income limitations on who can and cannot file, and requiring some debtors in higher income brackets to pay off a portion of their debt before allowing them to file. Depending on the amount of money you have, your current income and your personal circumstances, you may not be allowed to file for Chapter 7, which absolves most of your debts. Instead, you may be forced to file for Chapter 13, which requires you to enter into a payment plan. Before filing, it is important that you speak with someone experienced with the bankruptcy laws so that you will have a better idea of what to expect when you file.


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Q: Will all of my debts be forgiven if I file bankruptcy?

Many people mistakenly believe that filing bankruptcy will “wipe the slate clean" and absolve them of all their financial obligations, but that is not necessarily true all of the time. Even if you file for bankruptcy, you will still need to pay you child support, back taxes, federal student loans or debts incurred as a result of fraud or theft (writing bad checks, for example). If you are not clear on which debts will and will not be discharged, speak with an attorney or reputable credit counselor before filing.


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Q: What should I know about the bankruptcy hearing?

Not being prepared for the hearing. Failing to show up or properly prepare for your hearing will not buy you more time. If you are not present at the time of your hearing, your case could be dismissed, and you will have to re-file at a future date. In addition, you will also be forced to pay court costs. Not having all of the required forms and documents may result in not getting all of your debts included in the bankruptcy, which means that you will still be responsible for them even after you file. It is very important to arrive for the hearing on time and that you bring all of your supporting documentation, including a detailed list of all of your creditors. You will also need to bring a valid photo ID to the hearing.


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Q: How much money can I have in my bank account when I file bankruptcy?

Having too much money in the bank. This is a time when it is not good to save. When you file for bankruptcy, anything over $200 in most cases will be seized and used to pay your creditors. If you have a significant amount of money in savings, you may want to consider entering into a payment plan or settlement with your creditors before you file for bankruptcy. This may allow you to save some of your money.


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Q: What is the difference between Chapter 7 and Chapter 13?

A. A Chapter 7, also known as a straight bankruptcy, is a person’s most powerful weapon. It makes most debts disappear without paying them back at all. Straight bankruptcy is a good idea if someone realistically cannot expect to pay a significant portion of his or her debts with in a reasonable period of time.

A Chapter 13 bankruptcy involves payment of all or a portion of your debt over a period of time, from three to five years. Each week or month, a payment is made to a Chapter 13 trustee, who then pays the creditors. Chapter 13 can be an extremely flexible and useful way to deal with debt problems.

Some refer to this as a “US Government Managed Repayment Plan.” Actually, it is the individual who makes up the plan, and, if the plan is accepted by the court, the only “government management” you will ever see is the fact that the money is paid into the court, and the court pays it out. You control the terms, And the percentage of payment to the individual creditors. The Chapter 13 bankruptcy can be filed even if you have filed a bankruptcy in the past, and is commonly used to stop foreclosures.


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Q: Will my employer be notified of the bankruptcy?

A. In a straight bankruptcy the employer is not notified, because there is no repayment plan to be wage deducted. In Chapter 13, the preferred method of plan payment is by wage deduction, although it is possible to have the payments taken directly out of your bank account, without involving your employer.


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Q: What will the effect be on my credit rating?

A. If you are a candidate for bankruptcy, your credit rating is probably already damaged, although this is not always the case. I have seen many cases where no payments have been missed, although the people are borrowing on one credit card to pay on the other cards.
Credit reporting companies are able to keep a notation of the bankruptcy for up to ten years, but today, unlike even a few years ago, filing a bankruptcy is NOT the end of your ability to get credit. I tell all of my clients several easy ways to rebuild their credit quickly. These steps are so successful that my clients call to tell me that they have rebuilt their credit, and two or three years after bankruptcy, they are buying a house.


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Q: Will my bankruptcy be reported in the paper?

A. When have you ever seen anyone’s bankruptcy in the paper? It is a public record but you have to read the legal newspapers to see it and the only people I know that read these papers are lawyers. Anyone who wants to can go to the federal court in Eugene and see who has filed bankruptcy.

I have actually filed bankruptcy for relatives, at the same time, and neither knew that the other was filing. Unless you tell them, your friends, relatives, and neighbors or anyone else, are not likely to know that you have filed.


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Q: Can I keep my car in a bankruptcy?

A. Yes, you can keep your car, your house, your stereo and other property, subject to certain limitations if they are owned outright. If you owe on any of it, you can choose to keep the debt and the result is just as if you had not filed on that particular debt. This is what people mean when they say that they did not file on their house or car or other debt.


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Q: Can I keep any of my credit cards?

A. Yes. Some credit card companies have special programs for people who want to keep their credit card. Sometimes the limits are lowered, sometimes not. There is a way I have used to help my clients keep credit cards without the credit card company being told that they filed. This way, there is no effect on the card at all and the entire credit line is protected.


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Q: What if I want to pay back my debts, I just need some time to catch up and the creditors are unreasonable, demanding payments I cannot make, and refusing to work with me?

A. In this case, a Chapter 13 will probably be your best bet. You can stretch out your payments for three to five years, and the creditors cannot do anything to stop you.


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Q: I think a Chapter 13 is for me. Do I have to pay back 100% of all of my debts?

A. No. Some Chapter 13 plans pay less than 100% on some or all of your debts. This will depend on your living expenses, how much you earn, and what types of debts you owe. Then, if you successfully make all of the plan payments, your debts will disappear at the end of the plan, even if you have not paid them back in full.


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Q: Will a Chapter 13 be better for my credit rating than a Chapter 7?

A. Not really. Although you might think a person would be rewarded with a kinder view of their credit rating when they pay back at least some of their debt, it does not appear to work that way. In fact, creditors know that when a person files a Chapter 7, they don’t owe any other debt, so their income is free to spend on new debt. Also, creditors know that you can file a Chapter 7 once every 6 years, so they are sure that you will not be able to discharge their debt in another Chapter 7 bankruptcy. For this reason, Chapter 7 actually cleans up your credit rating in some respects, and faster, than a Chapter 13.

When you are in a Chapter 13, you are not allowed to go out and borrow money without permission from the Trustee. So, you are not establishing a repayment track record, while the trustee is paying all or some of your bills. This is another reason why Chapter 7 is often a quicker way to resolve and restore your credit.


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Oakes Law Offices, P.C. are located in the City of Medford, Jackson County, and serving the cities of Medford and Klamath Falls.



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1730 E. McAndrews Rd., Suite B, Medford, OR 97504
| Phone: 541-210-5038
6502 S. 6th Street, Klamath Falls, OR 97603
| Phone: 541-273-1650

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