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| 1. Are there different types of bankruptcy? 2. What is chapter 7, 11, and 13 bankruptcy? 3. Who can file bankruptcy? 4. What are the advantages of bankruptcy? 5. Which kind of bankruptcy should I file? 6. Which bankruptcy chapter is the least expensive? 7. What do I need to begin the bankruptcy process? 8. Will I lose my home if I file for bankruptcy? 9. How long does a bankruptcy stay on my record? 10. What is a discharge in bankruptcy? 11. How long does it take before my debts are discharged? 12. How do I get a discharge? 13. Can all types of debt be discharged? 14. Does the debtor have the right to a discharge or can creditors object to the discharge? 15. Can a debtor receive a second discharge in a later chapter 7 case? 16. What can the debtor do if a creditor attempts to collect a discharged debt after the case is concluded? 17. What is the difference between secured and unsecured debt? 18. Can I change from one chapter of bankruptcy to another? 19. Do you have to have a certain amount of debt to file? 20. What is a joint petition? 21. What happens if one spouse files for bankruptcy and not the other? 22. Does my divorce decree protect me from creditors if my ex files for bankruptcy? 23. What can I keep, if anything, if I file bankruptcy? 24. Do I have to file bankruptcy on all the accounts I owe, or can I keep some? 25. Will I lose my retirement accounts or payments from social security? 26. When can I apply for credit again? 27. Can a creditor continue to contact me after I’ve filed for bankruptcy? 28. Can creditors object to a bankruptcy filing or plan? 29. What is a creditors meeting and do I have to attend one? 30. What if I’ve forgotten to include a debt on my schedule? Can I add it later? 31. When do I have to stop using my credit cards if I’m planning on filing for bankruptcy? 32. What is a reaffirmation agreement? 33. Can a bankruptcy be reopened? 34. If I change my mind after filing, can I get out of or stop the bankruptcy? |
| Question: Are there different types of bankruptcy? |
| Answer: Yes, and they are known by the title of the chapter of the Federal Bankruptcy Act in which they appear. Each “Chapter” contains a different set of laws and rules. |
| Question: What is chapter 7, 11, and 13 bankruptcy? |
| Answer: Chapter 7 is the most frequently used chapter because it involves the complete liquidation of a debtor’s property, with the proceeds used to pay off the debts. However, the debtor can retain certain exempt property under Federal law and/or State law, such as tools of the trade, limited equity in a car and house and some personal effects. If you use chapter 7 you may lose your home (depending on your state), but it does enable you to get out from under the burden of debt more quickly. Chapter 11 is typically used for business bankruptcies and restructuring. It is not commonly used by individual consumers since it is far more complex and expensive to pursue. It allows businesses to reorganize themselves, giving them an opportunity to restructure debt and get out from under certain burdensome leases and contracts. Typically a business is allowed to continue to operate while it is in chapter 11, although it does so under the supervision of the Bankruptcy Court and its appointees. In chapter 13, consumers work out a periodic payment plan with their creditors to pay off their debts, or at least portions of the debt. To a limited extent, chapter 13 also allows for liens to be stripped from your primary residence. Generally, the creditors expect to get more than they would have received from the debtor’s estate if the debtor had sought a complete liquidation under chapter 7, which is not a significant amount in most situations. One of the important benefits of chapter 13 is that debtors generally continue to live in their home so long as they comply with the terms of the chapter 13 arrangement. If the debtor fails to comply, the Court treats the matter as a chapter 7 liquidation. The disadvantage of chapter 13 to the debtor is that the debts can linger for years, burdening future income. |
| Question: Who can file bankruptcy? |
| Answer: With few exceptions, any person or business owing money to a creditor can file for bankruptcy. |
| Question: What are the advantages of bankruptcy? |
| Answer: Once discharged through bankruptcy, your debts are erased. In other words you are no longer responsible for paying them and your creditors cannot bother you about them. |
| Question: Which kind of bankruptcy should I file? |
| Answer: Consumers typically file chapter 13 bankruptcy, where a partial repayment is made to creditors, or chapter 7 where the debts are dismissed. Each chapter of bankruptcy spells out: (1) What bills can be eliminated; (2) How long payments can be stretched out; (3) What possessions you can keep; and (4) Additional information. The type depends on your circumstances and if you have assets available to repay all or part of your debts. Bankruptcy laws can be tricky and involved, so determining if, when and which type of bankruptcy you need should be made with careful thought or the input of a bankruptcy lawyer. |
| Question: Which bankruptcy chapter is the least expensive? |
| Answer: Chapter 7 is the least expensive because you do not have to pay off the debts. The next least expensive is chapter 13 where you repay some part of your debts, followed by chapter 11, which is as expensive as it is complicated, but can produce a great result for troubled businesses. |
| Question: What do I need to begin the bankruptcy process? |
| Answer: Your attorney will generally provide you with a list of necessary information. You need to be prepared to compile a list of past and present debts as well as a schedule, or list, of assets and liabilities. You’ll also need a statement of financial affairs to file with the bankruptcy court in addition to your filing fee. |
| Question: Will I lose my home if I file for bankruptcy? |
| Answer: Maybe. The factors that impact your ability to keep your home are: (1) the state the home is located in and the exemptions allowed; (2) the status of your loan (current or in foreclosure); and (3) the type of bankruptcy you are filing (chapter 13 generally provides more protection than chapter 7 as long as payments are current). |
| Question: How long does a bankruptcy stay on my record? |
| Answer: Bankruptcies usually remain on credit reports anywhere from seven to ten years. |
| Question: What is a discharge in bankruptcy? |
| Answer: Under the federal bankruptcy statute, a discharge releases you (a.k.a “the debtor”) from personal liability for certain specified types of debts. In other words, you are no longer required to pay any debts that are discharged. |
| Question: How long does it take before my debts are discharged? |
| Answer: Chapter 7 takes between six to ten months; chapter 11 can take from just under a year to many years; and chapter 13 can take several months while trying to get your repayment plan approved. However, the actual discharge under chapter 13 is not final until you’ve met the payment plan requirements, which takes from 36 to 60 months to complete. |
| Question: How do I get a discharge? |
| Answer: Unless there is litigation involving objections to the discharge, you'll automatically receive a discharge. The notice of discharge, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable (i.e., not covered by the discharge). The notice generally informs creditors that the debts owed to them have been discharged and that they should not attempt any further collection. |
| Question: Can all types of debt be discharged? |
| Answer: No. The debts that can’t be discharged vary slightly between the different chapters of bankruptcy. Generally, the following debts generally cannot be discharged: (1) debts for taxes owed to local, state or federal agencies; (2) debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently; (3) debts that weren’t in the initial list of debts or that the debtor waived being cancelled; (4) debts owed to a spouse, former spouse, or child, for alimony, maintenance, or support of a spouse or child, with a separation agreement, divorce decree or other order of a court of record; (5) debts owed for injury to another person or property owned by another (as in a court judgment); (6) debts for government-sponsored educational loans i.e., student loans), unless it can be shown that repayment will cause an undue hardship; (7) debts for death or personal injury caused by the debtor’s drunk driving or from driving while under the influence of drugs or other substances (as in a court judgment); and (8) debts incurred after a bankruptcy was filed. A broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case. As a general rule, the chapter 13 debtor is discharged from all debts provided for by the plan except certain long-term obligations (such as a home mortgage), debts for alimony or child support, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. Although, a chapter 13 debtor discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor’s control. |
| Question: Does the debtor have the right to a discharge or can creditors object to the discharge? |
| Answer: In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor’s discharge may be filed by a creditor, by the trustee in the case, or by the United States trustee. Creditors receive a notice shortly after the case is filed that sets forth much of the important information associated with the case, including the deadline for objecting to the discharge. A creditor who desires to object to the debtor’s discharge must do so by filing a complaint in the bankruptcy court before the deadline set out in the notice. Filing of a complaint starts a lawsuit referred to in bankruptcy as an “adversary proceeding.” |
| Question: Can a debtor receive a second discharge in a later chapter 7 case? |
| Answer: Yes, but a discharge may be denied in a later chapter 7 case if the debtor has been granted a previous discharge within a certain amount of time. A chapter 7 can be filed every eight years from a previous chapter 7 filing (§727(a)(8)) or six years from a prior chapter 13 filing (§727(a)(9)). A chapter 13 can be filed four years from a prior chapter 7 filing (§1328(f)(1)) or 2 years from a prior Chapter 13 filing (§1328(f)(2)). |
| Question: What can the debtor do if a creditor attempts to collect a discharged debt after the case is concluded? |
| Answer: If a creditor attempts collection efforts on a discharged debt, the debtor can file a motion with the court reporting the action and asking that the case be reopened to address the matter. The bankruptcy court will often do so to ensure that the discharge is not violated. A creditor can be sanctioned by the court for violating the discharge injunction. |
| Question: What is the difference between secured and unsecured debt? |
| Answer: Secured debt is a claim that’s secured by some type of property, either by an agreement or involuntarily with a court judgment or taxes. Creditors can generally claim the property that secures the debt in the event of bankruptcy. Unsecured debt is not tied to any type of property, and the creditor doesn’t have a claim to their property. A mortgage is a secured debt on your property and credit cards are generally examples of unsecured debt. |
| Question: Can I change from one chapter of bankruptcy to another? |
| Answer: Generally, you can convert a case one time to any other chapter you’re eligible for. The request to convert can be a simple one-sentence document. However, watch out for issues, such as moving from a chapter 13 to a chapter 7, you’ll need to review whether you have acquired items that are now be considered property of the estate under chapter 7 that weren’t part of the previous filing. |
| Question: Do you have to have a certain amount of debt to file? |
| Answer: No. However, some situations may not warrant filing for bankruptcy or may disqualify you for filing certain chapters. If your financial situation is temporary, you may consider making arrangements with individual creditors for a change in payment amounts or a reduction in the total amount due. If you have little property or money, filing bankruptcy may not be necessary, as the creditor may not be able to collect the debt. |
| Question: What is a joint petition? |
| Answer: A joint petition is when an individual and a spouse file a single bankruptcy petition. Unmarried partners must each file a separate case. |
| Question: What happens if one spouse files for bankruptcy and not the other? |
| Answer: If one spouse files and the other does not, the one who doesn’t file could be responsible for the debts. Often times both spouses have signed the contracts associated with debts and the non-filing spouse could be liable for all of the other’s debts. |
| Question: Does my divorce decree protect me from creditors if my ex files for bankruptcy? |
| Answer: No. If you’re a co-signor with your ex-spouse on a debt acquired while married, the creditor can require the entire payment of that debt from you even though the divorce decree assigns the full debt to your ex-spouse. Your divorce decree may address any recourse you may have against your ex-spouse should he or she default on the loan obligations, but you should always let your attorney know everything that could exist so that it can be addressed if you choose to file bankruptcy. |
| Question: What can I keep, if anything, if I file bankruptcy? |
| Answer: Exemptions allow an individual to “exempt”, or keep, certain kinds of property. A complete list of these exemptions can be provided by your attorney. |
| Question: Do I have to file bankruptcy on all the accounts I owe, or can I keep some? |
| Answer: You must include all the debts you owe in your petition and schedules. You may decide to keep some debts by “reaffirming” the specific debt, but the assumption and recommendation is generally that all debts will be discharged and become uncollectable. |
| Question: Will I lose my retirement accounts or payments from social security? |
| Answer: Generally, no. Retirement accounts that are ERISA-qualified aren’t considered property of an estate and aren’t taken into consideration as assets. Social Security benefits are protected from assignment, or garnishment for debts in bankruptcy. Once paid, the benefits continue to be protected only as long as they can be identified as Social Security benefits. For example, money in a bank account where the “only” deposits into the account are direct deposits of Social Security benefits are identifiable and generally protected. |
| Question: When can I apply for credit again? |
| Answer: The decision whether to grant you credit in the future is strictly up to the creditor and varies from creditor to creditor. There’s no law that prevents anyone from extending credit to you immediately after the filing of a bankruptcy, but creditors aren’t required to extend you credit. |
| Question: Can a creditor continue to contact me after I’ve filed for bankruptcy? |
| Answer: During the time the debtor is working out a plan or the trustee is gathering and preparing the assets to sell, the bankruptcy code dictates that creditors must stop all collection efforts against the debtor. As soon as the bankruptcy petition is filed, you’re immediately protected from your creditors. This is called an automatic stay. After that time, if a creditor attempts to collect a debt, immediately notify the creditor in writing that you have filed bankruptcy, and provide them with either the case name number and filing date, or a copy of the petition that shows it was filed. If the creditor still continues to collect, you may be entitled to take legal action against them. |
| Question: Who lets my creditors know I’ve filed for bankruptcy? |
| Answer: The bankruptcy court notifies, by mail, all creditors advising them of the necessary case information. |
| Question: Can creditors object to a bankruptcy filing or plan? |
| Answer: Yes. Bankruptcy filings allow creditors to object to specific debts in the plan or the repayment or cancellation in its entirety. |
| Question: What is a creditors meeting and do I have to attend one? |
| Answer: All debtors must attend a meeting of the creditors prior to obtaining a discharge. This meeting is conducted by the trustee appointed to their case and is generally brief in nature. The debtor may have to answer questions concerning: (1) how the situation evolved; (2) any actions taken with the property; and (3) debts listed in the petition or any other financial information requested by the trustee. Failure to respond truthfully can result in the petition being dismissed or, in extreme cases, a charge of perjury. Creditors may attend and question the debtor about the assets or any other matter relevant to the bankruptcy. |
| Question: What if I’ve forgotten to include a debt on my schedule? Can I add it later? |
| Answer: After filing the petition, if you discover that an entry is inaccurate or missing, you may typically file an amendment to correct it. Remember, you’re submitting the petition under the penalty of perjury, so take care with the initial filing. Also, any debt that isn’t on the list can’t be discharged and you’ll be responsible for it. |
| Question: When do I have to stop using my credit cards if I’m planning on filing for bankruptcy? |
| Answer: As soon as you anticipate filing bankruptcy, stop using your credit cards. Bankruptcy law allows the review of questionable purchases for potential fraud for a period of time after you declare bankruptcy. If purchases are made 40 days prior to filing or cash advances taken within 20 days of filing, the debt may possibly be excluded from the bankruptcy and it can be dismissed. |
| Question: What is a reaffirmation agreement? |
| Answer: When you “reaffirm” to pay off a debt, you’re legally obligated to pay all or a portion of an otherwise dischargeable debt pursuant to the Bankruptcy laws. Reaffirming a debt is voluntary and not required by bankruptcy codes. In fact, it is not recommended to do so and can be complicated because of that. You may voluntarily repay any debt instead of signing a reaffirmation agreement, but there may be valid legal reasons for wanting to reaffirm a specific debt, such as a vehicle loan. |
| Question: Can a bankruptcy be reopened? |
| Answer: Yes. Typically, a bankruptcy case is reopened by the trustee when questions arise concerning what was included or possibly omitted, or any other irregularities that surface. |
| Question: If I change my mind after filing, can I get out of or stop the bankruptcy? |
| Answer: Only the judge will decide if it may be dismissed or not. Even if you get the case dismissed your credit report will still show that you filed. |