JACK J. NICHOLS
- BANKRUPTCY ATTORNEY -
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Frequently Asked Questions
Bankruptcy can seem like an extremely complicated process. There are many procedures involved and the documentation may seem daunting. I understand that you probably have several questions about bankruptcy that I would be more than willing to answer during a face-to-face consultation. However, take a moment to review the frequently asked questions below for answers to many of the common questions that I receive regarding bankruptcy.
What is the difference between Chapter 7 and Chapter 13 bankruptcy?
A Chapter 7 is called a “straight” or “liquidation” bankruptcy and it is a legal proceeding in which your property is held in trust by the United States Trustee, and the property that is not exempted by state or federal law will be sold or liquidated in order to pay your creditors. In exchange, you will be relieved from future payments to most your creditors. Sometimes you will be relieved of all your debts, as is common with filings in South Dakota. This is fairly common in most filings, but each person’s set of facts are unique.
Chapter 13 filing is typically for a situation where you have a good income but have simply fallen behind on your debts. The purpose behind a Chapter 13 Bankruptcy is to set up a repayment plan to give you time to catch up on your debts. The plan will either be three or five years, depending on a number of facts of your case and your ability to repay legally required amounts of your debt. In Chapter 13, you will typically be required to pay secured creditors all the amounts they are owed. Common secured creditors are mortgage lenders and lenders with a lien on an automobile you own. Sometimes, but not often, the amounts owed to secured creditors can be reduced. Your debts to unsecured creditors, typically credit card companies, will likely be reduced, depending primarily on what they would have been able to receive in a Chapter 7 liquidation case.
Should I hire a lawyer for bankruptcy?
We would always advise a person to hire an attorney for bankruptcy. Bankruptcy is a complex legal proceeding in federal court, governed by thousands of pages of both federal and state statutes and the corresponding case law. A lawyer will be able to navigate these laws and know how each one will apply to your unique set of facts. In a bankruptcy proceeding, important assets such as your house or car can be at stake, and there are ways a person without legal training may inadvertently cause herself to lose these assets which might have otherwise been saved had the case been handled professionally. Additionally, if a person does not have an intricate knowledge of the laws, they might be forced to pay debts a lawyer could have gotten discharged.
Furthermore, bankruptcy proceedings involve lawyers at all ends. Your creditors will most likely be represented by experienced lawyers, the United States Trustee is a lawyer, and the judge will be a lawyer. Hiring a lawyer puts you on a level playing field. Creditors recognizing that you are filing without counsel may try to take advantage of you and they may not deal with you with the same level of collegiality as they would another member of the bar.
How much do we charge in legal fees to handle your bankruptcy?
For a typical Chapter 7 case, our legal fees are $1800 plus sales tax and the $335 filing fee. If a contract (such as an automobile lease) needs to be negotiated and "reaffirmed" with a creditor, that could cost and additional $190 dollars. The fees for Chapter 13 cases vary based on the complexity of the case, but expect to pay at least $2,500 in fees (note: additional fees may be assessed for additional work outside the scope of our normal representation or contested cases.). While filing for bankruptcy is not cheap, it is remarkably less expensive than paying off mounting debts or fighting wage garnishments.
Note: We charge very competitive rates. Be cautious of offers to handle a bankruptcy case for substantially lower as they may include hidden costs and they may not cover your filing fees. They may also be substantially limited in the services provided.
I am already in debt. How can I pay an attorney to handle my bankruptcy case?
There are several ways people pay for bankruptcy. We accept cash, certified check, money order, or personal check if it is processed. We accept payments from third parties (such as your friends and relatives). We also accept credit card payments from your friends and family. In a Chapter 13 case, you are able to pay an amount up front and continue making payments throughout the repayment plan. In some cases and under some circumstances, we may be able to extend a small amount of financing. Call us to discuss this option.
I am behind on my bills. Should I file for bankruptcy?
Bankruptcy may provide you with relief and a “fresh start” if you are being overwhelmed by your debts. When you file a bankruptcy proceeding the collection efforts of your creditors will be stopped and you will have time to regroup. You may be permanently relieved from some or all of your bills.
I am being sued. Can bankruptcy help?
Yes, there are certain exceptions to this which you should discuss with our attorneys, but in general the filing of Bankruptcy will stop a lawsuit that is pending against you, at least temporarily, and maybe permanently. If the debt for which you are being sued is dischargeable, the lawsuit may go away altogether. If, for example, the lawsuit is for damages caused while driving intoxicated, the lawsuit will not likely be dischargeable, so it will only temporarily be stopped. Filing a bankruptcy is only one option if you are being sued - you might also consider hiring a lawyer to fight or settle your case (a service we also provide). But filing for bankruptcy is an option that should be considered when you are being sued.
Can I save my house by filing a Chapter 13 bankruptcv in South Dakota?
Chapter 13 Bankruptcy, in some cases can, save your house from foreclosure in South Dakota. When you file a Chapter 13 Bankruptcy, the lender cannot seek foreclosure during the Bankruptcy proceedings. You may be granted an opportunity to pay the amounts you are behind on your mortgage over a three-to-five year span of time as set out by a repayment plan (established during the bankruptcy proceedings). However, if you fail to to make timely payments under the plan, the lenders can ask the court to allow it to start foreclosure proceedings, and the court will most likely grant their requests.
Can I save my house by filing a Chapter 7 bankruptcy in South Dakota?
Chapter 7 Bankruptcy in some cases can save your house from foreclosure in South Dakota. While there are some limitations and exceptions, a person’s house is generally protected from foreclosure by South Dakota law as long as it is a “homestead" and so long as the equity in your home is less than $60,000.”
What is considered a "homestead" in South Dakota?
The concept of a “homestead” as it relates to exemptions from foreclosure in bankruptcy is explained by reference to more than one statute in South Dakota (see SDCL Chapter 43-31 generally). Most likely, if you use your house as a residence, it will be considered a "homestead". Also, certain types of mobile homes that have been registered in South Dakota for at least six months can be exempt as a “homestead.”
Can filing bankruptcy stop my wages from being garnished in South Dakota?
When you file for bankruptcy, wage garnishments are stopped for as long as you are in bankruptcy. However, this does not apply to wages for child support or alimony. If your wages are being garnished for debts that are dischargeable in a bankruptcy proceeding, the garnishments may be discontinued permanently.
Which debts can be discharged in a Chapter 7 bankruptcy?
Most unsecured debt can be discharged in a Chapter 7 Bankruptcy, assuming there has been no fraud or bad faith by the person filing (a “secured debt” is a debt such as a lien or a mortgage where a specific piece of property is used as collateral for a loan). Common debts that are discharged in a Chapter 7 Bankruptcy include credit card debt, medical bills, collection agency debts, civil court judgments, legal fees (unrelated to the bankruptcy attorney fees), and business debts. If the debt is credit card debt, it will most likely not be discharged if large amounts are ran up prior to bankruptcy or spent on luxury items. Occasionally student loans will be discharged, but this is incredibly difficult to achieve.
How can student loans be discharged in bankruptcy?
Student loans will only be discharged in Bankruptcy if there is an “undue hardship.” The case law explaining undue hardship requires an inability to pay, usually related to a severe disability, as well as proof that good faith efforts have been made to repay the loans. If student loans are only part of the problem, bankruptcy may still be an option to relieve you from other debts, and freeing up income to tackle your student loans. If student loans are a major contributing cause to your mounting debt, please consult an attorney about whether bankruptcy would assist you in getting back on track.
JACK J. NICHOLS
Sioux Falls, South Dakota 57104
Nichols & Rabuck, P.C. is a debt relief agency as defined by federal law.
We help people file for bankruptcy relief under the Bankruptcy Code.
I am told I have to give my tax return to the U.S. Trustee. Why?
Legally, all amounts you are entitled to, at the time the case is filed, are subject to the “bankruptcy estate.” This means it is property the Trustee can consider giving to creditors or using to pay costs of administration. This is true with all property. Our strategy is to stretch South Dakota exemption laws as far as they can go to protect your tax return. Many of our clients get some, if not all of their tax returns back from the Trustee.
Is it possible to still owe money after a Chapter 7?
Yes, and it is quite common. South Dakota has extremely limited “exemption laws.” This means if you own a lot of property and assets, you may exceed your “exemptions” and the Trustee will claim there is property available to be distributed to creditors. What happens in practicality, is that the Trustee usually comes up with a dollar amount for how much your property exceeds the maximum claimed exemptions, and I review that figure for accuracy. I try to work with the Trustee to arrange a repayment plan for that amount that works for your budget. But the take-away is that, because of South Dakota’s pro-creditor exemption scheme, some clients will have to pay some in after they have received their debt discharge.
How long does the Bankruptcy Process take in South Dakota?
Once the bankruptcy petition is filed, the discharge is typicallygranted by the Court in about three months. However, creditors may make motions after the discharge.
If money is owed after the case, expect to receive “Motion for Turnover” from the Trustee, which we receive and review. If there are no objections to the Trustee’s calculations, the Court enters a “Turnover Order” which usually happens four to six months after the date of filing.At that time, I work with the Trustee to work out a repayment plan, if you cannot pay the whole sum at once. Additionally, if creditors are left out of the bankruptcy, they can make post-discharge motions if they believe their debt should not have been discharged. This is very rare, but it is extremely important you know about all your creditors and provide them to us before we file the case.
It is important to remember this time frame is based on the time the petition is filed. Generally, it may take some time to get the case filed as we work to put together your petition and collect information from you that is relevant to your case and/or required by law. We generally file cases on a first-come-first-serve basis, and like accountants and tax preparers, some times of year are busier than others for bankruptcy lawyers. Our clients can help move their cases along much more quickly when they read instructions carefully, provide complete, thorough and accurate information, take the required courses promptly, and provide necessary information when asked as soon as possible.
What is the “341 Hearing,” or “Meeting of the Creditors”?
Although the term “hearing” is used, it is not a courtroom proceeding. There is no judge. This is a meeting required by federal bankruptcy law. We attend this meeting with you while you answer questions under oath from the U.S. Trustee. The questions pertain to your petition, financial status, assets, marital status, dependents, and the like. I usually go over the commonly asked questions beforehand with my clients so they go into the meeting knowledgeable, informed, and confident about truthfully answering the questions.
The U.S. Trustee asks questions first, then if any of your creditors show up, they are able to ask questions as well (it is rare any creditors show up, unless they suspect fraud or foul play). The 341 Hearing is NOT an opportunity for the Trustee to judge you about your status, and you will not be put under the spotlight and embarrassed. The U.S. Trustee is a professional attorney who works for the United States Department of Justice and whose job it is, in part, to make sure the rights of creditors are protected as throughout the process.
For clients of ours who file in the Southern Division of South Dakota (counties around Sioux Falls), the 341 Hearing is held at 314 S. Main Ave, which is located downtown,direcly across the street from the Washington Pavilion.
What courses do I have to take for my bankruptcy?
Before we can file your case, you are required to take a pre-filing credit counseling course. This course is good for 180 days, so it is wise to take it right away, even before contact us about your case. This course takes about 60-90 minutes. After the case is filed, and after the 341 Hearing [link to the other FAQ], you are required to take a second course, called a post-filing debtor education course. This course is required to be at least 2 hours long. This course must be completed within 60 days after the date set for the 341 Hearing. We ask our clients to take this course immediately after the 341 Hearing, to get it done and over with.
Where and how can I take the required bankruptcy courses?
There are any number of licensed providers of these services. Many people utilize Lutheran Social Services and DebtorCC [link to debtorcc.org], both of which allow the courses to be taken online. However, you are free to choose any licensed provider you believe is right for you. These courses are worth the expense, and a great way to learn about personal finance and budgeting, which is something everyone could learn more about (not just people in immediate financial trouble). Most clients tell me they are happy they took the courses.