Frequently Asked Questions About Bankruptcy
Who Can File Bankruptcy?
Anyone can, provided you meet the following criteria:
- You must reside, have a place of business, or own property in a municipality in the USA and have lived there for at least 180 days prior to filing.
- You must not have been granted a Chapter 7 discharge or completed a Chapter 13 plan within the last 8 years.
- You must not have had a bankruptcy dismissed within the last 180 days.
- There cannot be a presumption of abuse under a Chapter 7. This generally means that the debtor does not have enough money to pay remaining monthly debts after basic living necessities have been paid. Granting a Chapter 7 discharge under these circumstances would not be a presumption of abuse.
What Is Bankruptcy?
Bankruptcy is a legal proceeding in which an individual, known as the debtor, who is not capable of paying off their debts, files a petition with the Federal Bankruptcy Court. The petition will be a summary of the debtor’s past, current and future financial position listing all assets and liabilities. Bankruptcy will typically stop creditors from pursuing debt collection almost immediately after filing. Bankruptcy may also do away with a debtor’s responsibility to pay most, if not all, debts incurred prior to filing.
Can Bankruptcy Wipe Out Most Of My Bills?
Yes. The fundamental principle of bankruptcy law is to provide a mechanism for an honest debtor, who is in debt beyond their ability to repay, to be given a fresh start through the legal discharge of debts.
Unsecured debts such as credit cards, utility and medical bills will almost always be discharged. However, secured debts such as a mortgage on a house or car payments might face a challenge from the creditor to take back the property. In most cases, however, the debtor’s equity interest in the property will be exempt and the debtor will retain the property.
What Are Some Of The Reasons People File Bankruptcy?
There are many including large medical expenses, unemployment, seriously over-extended credit, marital problems and other large unexpected expenses.
Can Bankruptcy Stop Creditors And Collection Agencies From Calling?
Yes. One of the advantages of filing a Chapter 7 bankruptcy is that most creditor actions are automatically stayed or stopped. This means that all debt collection efforts and foreclosure actions are halted.
How Soon After Filing Bankruptcy Will Creditors Stop Calling?
The court will mail an official notice of the bankruptcy filing to all the creditors listed in your petition. This process usually takes a few weeks before the creditors are notified. Once this occurs, they must immediately stop all debt collection efforts. For quicker action, we can inform the creditor. There are serious consequences if a creditor continues collection efforts once informed of the bankruptcy that could include court sanctions and attorney fees.
Does My Spouse Also Have To File Along With Me?
Not necessarily. Where only one spouse has debts or the debts are not likely dischargeable, it might be prudent for only one spouse to file. Both spouses should file if real property is jointly owned and there are cosigned loans.
Can I Be Fired From My Job For Filing Bankruptcy?
No. Laws ban employment termination for filing bankruptcy.
Will I Be Imprisoned?
No. Debtor’s prisons no longer exist in the US.
Will My Current Employer Know About My Bankruptcy Filing?
They shouldn’t unless you listed your employer as a creditor in your petition.
Can I Lose My House, Assets Or Personal Possessions As A Result Of Filing?
Probably not. Once the bankruptcy is filed, the bankruptcy trustee essentially has control of your property for the purposes of paying off creditors. Certain property including your primary residence and most personal possessions are either excluded or exempt because they have little resale value and the debtor gets to keep them. Property or asset exemptions are based on many factors including your financial position, income and your state laws. Second or vacation homes, luxury items such as jewelry, artwork and expensive clothing are the types of property that the trustee would be interested in liquidating.
Will I Be Able To Retain Possession Of My Car?
The courts understand that you need a car for work and to get back on your feet. If you own vintage or luxury cars which are free and clear and worth thousands of dollars, you are probably not going to be able to keep them. If, on the other hand, you have a car worth $10,000 and you owe $8000 on it, you will most likely keep it. Most leased vehicles have no equity and therefore are entirely exempt. If you owe money on your car or it is leased, you must still make the payments.
Can I Have Credit Cards After Filing?
Under some circumstances, with many factors under consideration including the credit card balance, what the credit card company is willing to do and your ability to pay the present and future credit card debt.
Can Bankruptcy Prevent Wage Garnishment?
Yes.
Will Bankruptcy Stop A Judgment Ordered By A Court?
Yes. As long as they are civil judgments, like a creditor lawsuit. Financial obligations imposed as part of a criminal conviction are not stopped.
How Does Bankruptcy Affect The Obligation Of A Co-Signer On One Of My Debts?
The co-signer will become solely accountable, if you are relieved from paying the debt from the bankruptcy filing. The co-signer now becomes a creditor though as they might have a conditional claim against you. Make certain that the co-signer is listed on your petition.
Who Give Notices To The Creditors That A Bankruptcy Has Been Filed?
The court does. A notice is mailed to the creditors listed in your petition after the bankruptcy is filed.
Are There Certain Obligations That Cannot Be Eliminated By A Bankruptcy Filing?
Yes there are. The following debts cannot be discharged in bankruptcy:
- Income taxes
- Alimony and child support obligations
- Monetary judgments from willful misconduct or malicious behavior
- Legal responsibility for injury or death from a DUI (driving while intoxicated) conviction
- Debts not discharged from a previous bankruptcy
- Student loans
- Fines, penalties or forfeitures from criminal activity
Will I Need To Appear In Court?
Yes, but generally just once. After the bankruptcy filing, a hearing called the 341 or First Meeting of Creditors is scheduled. This meeting usually takes place about 30 to 40 days after your filing. The hearing is presided over by the bankruptcy trustee assigned to your case and not a judge. You MUST attend this meeting or risk having the bankruptcy dismissed.
While you are under, oath certain questions will be asked by the trustee concerning your petition, assets, debts and other financial matters. Your creditors are allowed to attend the meeting and ask questions of you and the trustee. However, most creditors do not attend the meeting, so no need to worry. In addition, we will be there as your representative and to assist you in prepping for the meeting.
In most cases, you will not have to appear in court after the 341 hearing. Only in the rare case of a creditor filing a motion for an adverse action, would you ever need to return to court.
After The 341 Meeting, Then What Happens?
In the majority of cases, a discharge by the bankruptcy court will be issued anywhere from 60 to 75 days after the 341 Meeting.
During The Bankruptcy Process, Who Deals With My Creditors?
We will deal with your creditors.
If I Change My Mind, Can A Bankruptcy Be Canceled?
It depends. A Chapter 7 or a Chapter 13 converted from a Chapter 7 cannot be canceled unless deemed by the court to be of benefit to the creditors. A Chapter 13 that was never converted from a Chapter 7 can be dismissed without court authorization, provided there is no fraudulent conduct on your part.
Is Bankruptcy A Lengthy Proceeding?
Not in a Chapter 7 filing, which make up the majority of the consumer cases. Most are discharged in about four months from the petition filing date. Chapter 13 cases take longer, as the repayment period can range from three to five years. However, once the court consents to your repayment plan, the legal matters are over with in about the same time frame as a Chapter 7.
How Much Does It Cost?
The filing fee to the court for a Chapter 7 case is $299 and $274 for a Chapter 13. In addition, there is the $40 to $50 charge for the required credit counseling courses along with attorney fees.
Can I Deal With A Creditor Separately And Not List Them In My Filing?
Absolutely not. It is perjury to purposely exclude a creditor from your petition. If you forgot to list some, you can add creditors by filing an amendment up to a certain time prior to the discharge. In a situation where you did not know that a creditor exists, this debt will also be discharged provided there are no assets available for this creditor.
There is no advantage in omitting a creditor from your petition, so be sure you are thorough and list everything.
Will Bankruptcy Hurt My Credit Scores?
Yes, it will. In Chapter 7 cases, the bankruptcy will show as a judgment on your credit reports and will so for a period of up to 10 years after discharge. With Chapter 13 cases, the bankruptcy is usually removed after 7 years, as long as the court ordered repayment plan is successfully completed.
Will I Be Able To Get Credit Afterwards?
Most likely. In the short term though, expect to pay higher interest rates and processing fees. The good news is that eventually your credit scores will improve over time as the judgments and debts that were discharged in the bankruptcy will no longer appear on the credit report.
Are There Things I Should Not Do When I Am Considering Bankruptcy?
Yes, do not:
- Borrow any more money or make large cash advances.
- Make any payments on debts to friends, business partners or relatives.
- Provide information about income or expenses to any credit counseling or debt consolidation outfit.
- Call or write any creditor who does not already know how to contact you.
- Get married or get divorced.
- Sell or purchase any valuable assets.
- Give any gifts, other than regular charitable contributions.
- Transfer property in an attempt to keep those assets away from creditors.
- Ignore lawsuits.
- Give any creditor a postdated check.
- Reveal to a creditor who holds title to your car that you’re considering bankruptcy.
- Agree to pay joint debts if you’re in the middle of a divorce matter.
- File any past-due income tax returns.
- Make any unusual or large contributions to a pension/retirement fund.
- Make any withdrawals from your pension/retirement fund.
- Move out of your house or enter into a contract to sell it.
- Allow a foreclosure auction sale to occur or give a creditor a deed in lieu of foreclosure.
- Leave any money on deposit in an institution where you owe money.
- Allow health insurance to lapse.
- Voluntarily leave your job.
How Long After A Bankruptcy Before I Can File Again?
Eight years. If your bankruptcy was dismissed, it is 180 days (six months) before you can re-file.
Can I File A Chapter 7 Bankruptcy If I Own My Home?
Yes, as long as you are current with your mortgage and do not have a lot of equity in your home, the Bankruptcy Court will let you keep your home.
What If I Am Behind Several Months On My Mortgage Payments? Can I Keep My Home Then?
Yes, Chapter 13 Bankruptcy will allow you to repay the mortgage arrears over time, which will allow you to stay in your home and avoid foreclosure.
I Fell Behind On My Car Payments. Can I Keep My Car?
Yes, Chapter 13 Bankruptcy will repay the missed car payments over time, which will allow you to keep your car.
Will The Trustee Ever Come To My Home To See What Personal Belongings I Have?
No, the trustee is very busy and does not have time to make personal visits to homes. You will sign the Bankruptcy Petition under the penalties of perjury and the Trustee relies on your sworn representations.
Will The Trustee Ever Look At My Facebook Page?
Yes, take anything you would not want the Trustee to see off your Facebook page during your bankruptcy.
Will I Be Able To Rent An Apartment After I File Bankruptcy?
Yes, the landlord may require two months security deposit.
Will I Be Able To Purchase A Car After I File Bankruptcy?
Yes, many individuals purchase a car shortly after they have filed Bankruptcy. There are companies that will work with you. Ask us for their names and contact information at our meeting.