The following bankruptcy FAQ includes common questions we hear from people:
What is bankruptcy?
Bankruptcy is a legal proceeding in through the Federal Bankruptcy Court system that provides a financial “fresh start” to a debtor who cannot pay their bills. Federal law provides you with the right to file bankruptcy. Most, if not all of your debts, can be eliminated, or “discharged” through this proceeding, depending on the type of debt you have, and the type of Bankruptcy you file. Most consumers either file under Chapter 7 (a liquidation of any assets you are not allowed to keep, if any) or Chapter 13 (a repayment plan drafted by you or your attorney, and approved by the trustee) under the US Bankruptcy Code.
How can I stop my creditors from coming after me?
You can stop the insanity once your petition is filed with the US Bankruptcy Court. Once you file for Bankruptcy protection, an immediate freeze on all collection activities, also known as the “automatic stay”, prevents your creditors from collecting money from you. Creditors must cease contact with you, and cannot start or continue any of the following against you: lawsuits, garnishments, bank account “freezes”, or any other actions that try to collect money from you. Filing a bankruptcy also stops creditors from repossessing your vehicle or foreclosing on your home.
Who should consider filing for Bankruptcy?
Each case is specific. See my post called “should I file bankruptcy?” for general examples. There is no ‘typical’ case, as much as there is a ‘typical’ person. However, the following earmarks indicate that you should seek a consultation with a bankruptcy professional: (a) you fear the ringing of the phone and get nervous when getting the mail; (b) most of your credit cards are maxed out; (c) you can only afford to pay minimum payments on your bills; (d) the credit card consolidation payments aren’t working, or you’re too broke to pay them; (e) debt consolidation companies don’t want to work with you; (f) you are using retirement funds to pay your bills; (g) you have increased stress with your family because of financial and debt issues; (h) you look outside your window wondering when the ‘repo man’ or process server is coming; (i) or your paycheck and/or bank accounts are getting garnished. Contact me if any of that seems familiar to you. Call 307.460.8598. You won’t be the first one to consider bankruptcy this year: thousands of companies and individuals are facing the same types of stress you are.
I already filed for Bankruptcy once before. Can I use Bankruptcy protection again?
It depends on three things: (a) what chapter you are filing in the new case; (b) what chapter you filed before; and (c) whether you were discharged in the prior filing. You must wait eight (8) years between Chapter 7 filings. It is possible to file a Chapter 13 within eight (8) years of filing a Chapter 7, but several other considerations must be made before doing so.
Can I still get credit, a car loan or a mortgage to buy a house after I file bankruptcy?
Those considering bankruptcy are usually beyond any hope of rebuilding credit unless their income improves dramatically in a short period of time. Can you still get credit, a car loan or a mortgage to buy a house before you file bankruptcy? Probably not, and in fact, your chances of obtaining new credit are actually improved in many cases after filing bankruptcy. Your creditors know that you can’t refile a Chapter 7 for eight years, and most of your debts after filing are eliminated (or liquidated.) The result is that your debt-to-income ratio actually improves, and in some cases, your ability to obtain credit can rise dramatically. Don’t be surprised if some creditors actively pursue you after filing bankruptcy, but please be wary of any company that demands you pay a ‘deposit fee’ to obtain credit. To obtain a mortgage loan after bankruptcy, it is typically required of you to establish a positive credit history. In a post-bankruptcy world, that means you should pay your bills on time, spend within your means, and avoid high interest debt. You will receive counseling by a third party during the bankruptcy process that provides advice on how best to rebuild your credit.
Can I keep my home, car and other property if I file for Bankruptcy?
In many cases, you can keep it all. In a Chapter 7 Bankruptcy, you can keep all assets secured by a loan (car, home, etc.) if you are current on the loan and continue to pay on the loan after bankruptcy. In a Chapter 7 Bankruptcy, you are allowed to keep a certain value of your assets depending on which type of exemption you elect in the state you live. In a Chapter 13 Bankruptcy, you have the potential to keep all your assets. Our goal is to maximize the amount of assets you can keep, and look at the entirety of your situation before choosing which chapter to file and the results will vary depending on your unique circumstances.
Will I get fired if I file for Bankruptcy?
The Bankruptcy Code, 11 U.S.C. sec. 525(b) states that “No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt.” So, if your employer does fire you because of bankruptcy, they are violating federal law.
Can I transfer some of my assets to a friend or relative before I file for Bankruptcy?
No way. Don’t make this mistake. It is never worth it to be dishonest with the Bankruptcy Court. Remember that law case on our home page? The Supreme Court allows a fresh start for HONEST debtors. Therefore, full disclosure of your situation is required and our office takes your obligation very seriously. “Exemption planning” and timing considerations can provide you a legal way to increase the amount of your post-bankruptcy assets.
Will I need to come to Court?
Yes, but it’s nothing like Law & Order. If you file for a Chapter 7 or 13, you will come to Court, sometimes a meeting hall or conference room, for what is called the Section 341 Meeting. Your creditors have the right to appear at this meeting and ask you questions under oath. In a majority of cases, there are no creditors who appear. The 341 meeting will be conducted by the Trustee, who is a lawyer in private practice assigned by the court to administer your case. The Trustee might ask you questions about the Bankruptcy forms, whether you disclosed all relevant information regarding your financial circumstances, and also on whether you have any “non-exempt” assets. If you file for a Chapter 13, you will also need to appear for a “Confirmation Hearing” before a Bankruptcy Court Judge, to determine if your Chapter 13 Plan will be approved by the Court. The hearings are recorded, and are under penalty of perjury, so it is important to be prepared in advance. I will prepare you in advance for these hearings, so that you will know what to expect and will feel more comfortable. An attorney cannot speak for you at these hearings, but may sit next to you during the hearing and assist with questions or follow-up the trustee may have for you.
Why do I feel guilty about not paying my creditors back?
Everybody has a different reaction to the concept of bankruptcy. Some approach bankruptcy as a moral issue. Others recognize it as a financial tool that can improve their life. When your Bankruptcy case is over, you can voluntarily repay your creditors if you feel bad about discharging the debt. They will be happy to take your money then. By doing this after a bankruptcy discharge, you repay them on your terms, when it is easier for you. A mentor of mine has some interesting insights concerning ‘feeling bad’ about bankruptcy, that you might find helpful. Is your question not listed here? Call our office today for a free consultation at the phone numbers for our office nearest to you.
The information contained in this web site, and within this bankruptcy FAQ, is general information regarding the law. Nothing contained herein constitutes the formal rendering of legal advice, nor can it create an attorney/client relationship by your visiting this web site. The law changes and only a consultation can confirm anything you may have read on other websites, including this one.