Answers to Frequently Asked Questions About Filing Bankruptcy in Washington State
At the Law Offices of James H. MaGee, Washington Bankruptcy Attorney, we realize that our clients often have questions about bankruptcy–the process and the alternatives–as well as questions about how other clients have rated Mr. MaGee’s services. Our site contains an extensive collection of free information and resources that we encourage you to review as fully as you need. The site offers a search feature in the right hand column and in the footer of the site, as well as content in our Washington Bankruptcy blog that covers financial planning and all aspects of bankruptcy. The content is classified so that you can find related information simply by clicking on a category or tag just above the title of each blog entry. The categories and tags are there to help you find items of interest to you just like the table of contents or index of a book.
Take your time. Browse around, starting with this page that contains questions and answers we’ve been asked and have answered for our clients gained through experience amassed over our the years of successful bankruptcy law practice and through thousands of individual and business cases. Read more of the resources contained in the learn more menu on the site. We’ll be here when you are ready to take the next step.
That next step is the best opportunity of all. We offer you the opportunity to schedule a free, no obligation appointment with Mr. MaGee so that you can discuss your individual case with him to determine the best option to help you and your family move forward from today’s financial difficulties and get the fresh start that you are entitled to thanks to the wisdom of our nation’s forefathers.
Frequently Asked Questions About Bankruptcy
With the exception of a home mortgage, if you cannot pay your debts off completely within the next three years, you may want to consider filing for bankruptcy. If you file for bankruptcy, you may free up income so that you can begin to pay off your mortgage, save for retirement, or provide an education for your children or grandchildren.
Q – Should you feel bad about filing for bankruptcy?
A – You should not feel guilty or embarrassed for having filed bankruptcy. Popular folklore holds that Henry Ford filed for bankruptcy five times! Psychologists say families, relationships and marriages fail most often because of financial pressures. If financial strain is damaging your health and personal relationships, you should consider bankruptcy. 1,202,503 bankruptcies were filed in the U.S. between March 31, 2008 and March 31, 2009.
Q – Are Creditors losing money because of bankruptcy filings?
A – Are you aware of any large credit card issuing banks that are having financial troubles because of bankruptcy filings? By the time you file for bankruptcy, chances are you have already paid the debt back several times over because of the exorbitant interest rates and late fees that have been charged to your account.
Q – Why should you hire this firm?
A – There are many good reasons why your should hire the James H. MaGee law firm to represent you in your bankruptcy case, including
- Experience. We file many Chapter 7 and Chapter 13 cases every month for people with problems like yours. We have the experience and training required to meet you needs. We have been representing debtors and creditors since 1994.
- Fees are reasonable and competitive. We do keep tabs on what our competent and qualified competitors charge. If a competitor attorney charges substantially less than the rate we estimate for you, we caution you to examine the quality of their service and work product.
- We are polite and friendly. We are respectful, empathetic and polite concerning your schedule and your problems. We will meet with you at a time that is convenient to you. We welcome you to bring your children to appointments if it is not possible or too expensive to arrange for childcare
- We are not dangerous “high volume/low fee” lawyers nor a paralegal business:
Q – What are paralegals? Why do some lawyers charge less? What are “Petition preparers”?
A – These are all important considerations to understand; your choice will have a direct effect on how well you are represented. Let’s examine some of the important points.
- We advise caution with respect to non-lawyer paralegals and “high volume/low fee”bankruptcy businesses that make claims of the following nature: “No Money Down”, “50,000 Cases Filed”, “Low Fixed Fees”, or “Pay Only a Low Fixed Fee”.
- – Paralegals, sometimes called “Petition preparers”, are very dangerous. They ARE NOT lawyers and are not allowed (nor qualified) by law to give you advice on how to fill out bankruptcy documents. If non-lawyer paralegals screw up your case, you have no recourse, because by law, a non-lawyer paralegal cannot obtain malpractice insurance.
- “High Volume/Low Fee” bankruptcy businesses can be almost as dangerousas non-lawyer paralegal businesses. “High volume/low fee” bankruptcy businesses may not closely review your case for traps and problems that could cost you assets or result in your bankruptcy being denied or dismissed!
- The risk to you is that the cheapest lawyers charge so little money that they cannot afford to take the time to properly interview you and analyze your case.
- We generally only charge $400 or $500 more than the dangerously cheap bankruptcy businesses for Chapter 7 cases, but we do a much better job at providing you with full explanations and careful attention to detail.
- In Chapter 13 cases, all lawyers are required to charge the same $3,500 basic fee. Thus, there is no reason to hire less than the best and most experienced attorney. Of the $3,500 fee, we usually only require $350 initially, followed by $1,150 at the time of document completion, along with a $100 payment for the court mandated filing fee, making it very affordable to start your Chapter 13 case. The remaining balance of $2,000 is financed into your case. You pay nothing out of pocket to the attorney other than the $350 initial payment, the $1,150 payment at the time of document completion, and the $100 payment for the court mandated filing fee.
- Also, with “high volume/low fee” bankruptcy businesses, you maybe shuffled off to a very junior or inexperienced attorney–or worse yet, never even be allowed to meet the attorney whose picture appears in the telephone book or on the web site!
- “High volume/low fee” bankruptcy businesses, petition preparers, and non-lawyer paralegalsmay be operating on the fringe of what is lawful and/or proper. Just because they exist in business does not mean they are handling your case correctly!
Q – How do I find the best lawyer for my case?
A – You found an extremely competent and aggressive lawyer and firm when you found this web site. Unfortunately, there is no dependable publication or ratings source that can help you identify the “best” lawyer to represent you in bankruptcy matters. We encourage you to call us and ask us a few questions; by interviewing us you can increase your comfort level that we are the best firm for your representation.
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 a Chapter 13. 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 and your employer does not pursue his claim in bankruptcy, 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 modest portion, 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 – Maybe. You are in a very complex situation, and if you have substantial personal assets, you may be forced to file Chapter 11. However, if you have depleted your personal assets, a Chapter 7 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 many people filed bankruptcy in Washington last year?
A – There were many bankruptcy filings in 2000. Nationally, there were over 1.2 million bankruptcies filed between March 31, 2008 and March 31, 2009. Many families and singles are in economic distress, and the law provides for you an escape from the hopelessness and stress of being in debt.
Q – Isn’t the law going to change to make it harder to file bankruptcy?
A – The bankruptcy bill that became law in 2005 actually makes it easier than ever to file bankruptcy.
More paperwork is required, and more details are necessary to complete the filing, but almost everyone qualifies when represented by a competent lawyer.
Q – How do I get my driver’s license back?
A – I 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 alone can file, 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. Call 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 less than three weeks after your initial appointment with our office. In emergencies, we can usually proceed even more quickly. 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.
How soon will my wage garnishment stop?
Your brighter financial future starts right away, if you are suffering under a garnishment. The bankruptcy filing in any chapter will stop the wage garnishment as to most debts. In fact, if the garnishment has only been going on for less than two months, you may get some or all of your garnished money back returned to you, if the bankruptcy case is actually filed prior to the garnishment having gone on for two months. Getting your garnished money back does not always work in all cases, so it is best to consult with your attorney on this point.
Will the bankruptcy case stop my foreclosure?
If you are in a Chapter 7 case and intending to surrender the home, please note that 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 intending to surrender the home back to the bank, just like in Chapter 13, there will in fact be 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 intending to try to save the house through the Chapter 13 plan because you are delinquent on payments to the mortgage(s), then the Chapter 13 filing will in fact stop the foreclosure. As long as you make the required payments into the Chapter 13 plan, payable to the Chapter 13 Trustee, then your home is likely to be quite safe from the foreclosure. Now, there are a few rare exceptions, so before you trot off trying to file your own Chapter 13 case, I strongly suggest that you consult with an experienced attorney.
Can I continue to live in my house after a bankruptcy filing?
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 the Chapter 13 “house saver” plan, then you can continue living in the house and keep it forever.
What will the bankruptcy case do to my credit score?
Well, if your finances are rough enough to require a bankruptcy filing (or if your finances are soon to turn rough) then the net effect of a bankruptcy score ultimately will be a positive result. If you have a pending foreclosure, past car repossession, or you are delinquent on debts, then your credit score is already far from sterling. With credit scores, your fall from grace is sudden.
Ironically, when you take care of business with a bankruptcy filing, your return to grace (e.g. a higher credit score) can be astonishingly quick. This is my opinion. Your credit score will of course go down a bit, but then let me tell you something about credit scores. These credit scores are in fact designed to go up and improve over time.
From my point of view, the banks and the credit scoring businesses are in cahoots to try to stick you with plenty of new debt after a bankruptcy filing, so if the credit scoring company keeps your credit score in the sewer too long, then it is axiomatic the bank loses out on profitable lending opportunities, and no bank wants to lose out on a profit.
Strangely enough, I believe that the banks pressure the credit scoring companies to write the credit scoring computer programs to ensure that bankrupt people return to better credit scores quite quickly.
Mr. MaGee, what do you mean chase financial solvency instead of chasing credit scores?
I am neither friend nor fan of credit scores. Credit scores are a “product” purchased by a bank or lender. Thus, the credit score computer programs are designed to manipulate you into signing up for more debt so as to please the banks and lenders who buy the credit scores from the credit scoring companies. Simply put, this is because the banks and lenders don’t make money when you don’t borrow money. Lending to you with interest generates profits to the lenders/banks. So of course, they want to lend to you.
I would encourage you to chase financial solvency, instead of being manipulated into chasing a “high credit score”. Here is what I mean by that, and perhaps my point of view is considered by some to be too stodgy. However, if you follow these five steps, I think that you will have less stress in your life and you will achieve more enjoyment from life.
Before you start getting back into debt post-bankruptcy, here is my opinion of where you should be:
- First, you should have at least three months’ worth of net income saved up;
- You should be making maximum IRA and retirement account contributions;
- You should be paying an extra 20% towards your mortgage(s) every month so as to be able to retire without a mortgage; and
- You should be paying for life insurance and disability insurance; and
- You should be putting some money aside in a 529 plan for the college/trade school education of children and/or grandchildren.
If you are not meeting these five goals, then you are probably not earning enough to buy what you are proposing to buy with that new debt. If you can do without that credit funded purchase, then please try to avoid the purchase.
Isn’t a non-bankruptcy “Debt Consolidation/Credit Repair” scheme or “Credit Counseling” repayment plan better than a bankruptcy?
Most people that come in to consult with me have already tried a “debt consolidation/credit repair” scheme or a “credit counseling” plan, and have not enjoyed the hoped for results.
Briefly, “debt consolidation/credit repair” involves you depositing substantial sums with an intermediary who promises to strong-arm the creditor into taking 10% of the balance due on the debt or some other similar low number. There are three problems. First, you may be taxed on the “forgiven” balance. Second, some creditors just won’t cooperate. Third, many of these companies are ineffective scams.
In contrast, “credit counseling” plans ask you to pay money every month towards your debts and the intermediary tries to negotiate interest rate reductions or other small concessions. There are seven problems with credit counseling plans.
First, you may be taxed on the “forgiven” balance.
Second, some creditors just won’t cooperate.
Third, many of these companies are ineffective scams.
Fourth, if you don’t make the payments, then the plan is terminated and all of the debts come back in full force.
Fifth, you have the “herding cats” problem, in that if you have too many creditors perhaps nine out of ten agree, but that one disagreeable creditor destroys your repayment effort because he/she sues and garnishes, thus depriving you of the funds you need to keep your plan alive.
Sixth, the “herding cats” problem may rise again but some years on down the road in the plan, because creditor participation in a “credit counseling” repayment plan is voluntary, so if a creditor has a change of heart, they can leave the repayment plan because of impatience or a change of heart and then sue and garnish, thus ruining your debt repayment plan.
Seventh, the plan administrator may go out of business or shut its doors.