Bankruptcy FAQs

What is bankruptcy?

Bankruptcy is a legal process through which individuals or entities unable to repay debts seek relief from some or all of their debts. It involves a court proceeding where assets and liabilities are examined, and a decision is made whether to discharge debts.

What are the different types of bankruptcy?

Chapter 7: Liquidation of assets to pay off creditors, with debts being discharged.

Chapter 13: Reorganization for individuals with regular income to repay debts over time.

Chapter 11: Reorganization for businesses to continue operations while restructuring debts.

How do I know if I should file for bankruptcy?

Consider filing if you have debts you cannot pay, are behind on payments, or face foreclosure or creditor actions.

What are the eligibility requirements for filing bankruptcy?

Chapter 7: Income must pass a means test or be below the median income along with prior credit counseling.

Chapter 13: Must have regular income and meet debt limits, tax filings, credit counseling taken. 

How does filing for bankruptcy affect my credit score?

Filing for bankruptcy negatively impacts your credit score initially, but it is not permanent. You can rebuild credit over time.

Can bankruptcy help stop foreclosure on my home?

Yes, bankruptcy can halt foreclosure through an automatic stay, providing time to propose a address debts.

Will I lose my house if I file for bankruptcy?

You can keep your home by reaffirming the mortgage debt or catching up on payments through Chapter 13. Chapter 7 may require surrendering the home or negotiating with the lender.

Can I keep my car if I file for bankruptcy?

You can keep a car in Chapter 7 if it is exempt or reaffirm the debt. Chapter 13 allows for repayment. You also can also use “redemption” to keep your vehicle. Redemption requires you to pay the fair market value of the vehicle in full.

How long does the bankruptcy process take?

It typically takes 36-60 months to complete the case and receive a discharge. 

What is the means test in bankruptcy?

The means test compares your income to the median income in your state to determine eligibility for Chapter 7 bankruptcy.

What debts can be discharged in bankruptcy?

Most unsecured debts like credit cards and medical bills can be discharged.

What debts cannot be discharged in bankruptcy?

Certain debts such as child support, alimony, most taxes, and student loans (without proving undue hardship) are not dischargeable.

How does bankruptcy affect my tax obligations?

You remain liable for taxes and must continue filing returns during bankruptcy.

Can bankruptcy stop wage garnishment?

Yes, bankruptcy stops wage garnishment through the automatic stay.

Will bankruptcy stop creditors from calling me?

Yes, creditors are prohibited from contacting you once you file for bankruptcy.

Can I file for bankruptcy more than once?

There is no limit to how many times you can file, but there are waiting periods between filings.

What is the difference between secured and unsecured debt?

Secured debt is backed by collateral, while unsecured debt is not.

How does bankruptcy affect co-signers on my loans?

Bankruptcy eliminates your liability for debts, but co-signers remain liable unless they also file for bankruptcy.

What are the fees associated with filing for bankruptcy?

Filing fees are approximately $338 for Chapter 7 and $313 for Chapter 13, plus attorney fees.

Do I need an attorney to file for bankruptcy?

Individuals can file on their own, but it is advisable to use an attorney for guidance and compliance.

What documents do I need to file for bankruptcy?

Documents include income records, tax returns, creditor statements, asset details, and credit counseling certificates.

What is the role of a bankruptcy trustee?

They oversee the bankruptcy process, including asset liquidation in a Chapter 7 or repayment plan management in a Chapter 13.

What is a creditors' 341 meeting?

A meeting where the trustee reviews your bankruptcy petition and financial affairs.

How will bankruptcy affect my spouse?

Bankruptcy does not affect a spouse's credit unless they are a co-debtor. Joint debts or accounts may be impacted.

Can I exclude certain debts from bankruptcy?

Chapter 13 allows reaffirmation of certain debts like mortgages and vehicle loans to maintain payments.

What is the automatic stay in bankruptcy?

It halts creditors' collection actions upon filing for bankruptcy.

Can I use my credit cards before filing for bankruptcy?

You can use credit cards for necessities such as food, clothing etc. 

How do I rebuild my credit after bankruptcy?

Rebuild credit by making timely payments and managing finances responsibly.

What are the long-term effects of filing for bankruptcy?

It negatively impacts credit, making borrowing more challenging with potentially higher interest rates.

Can bankruptcy help with medical bills?

Yes, medical bills can be discharged through bankruptcy.

What happens to my retirement accounts in bankruptcy?

Qualified retirement accounts are generally protected from creditors in bankruptcy.

Can I keep my personal belongings if I file for bankruptcy?

Yes, exempt property such as clothing and household goods can usually be kept.

How does bankruptcy affect my ability to rent an apartment?

It may affect your ability to rent due to credit impacts, potentially requiring larger security deposits.

Can student loans be discharged in bankruptcy?

Student loans are typically not dischargeable unless undue hardship is proven through an adversary proceeding.  However, new guidelines from the Departmetn of Justice have made a clear process that may discharge student loans.  Call us to find out more!

How does bankruptcy affect child support and alimony obligations?

These obligations are non-dischargeable and must still be paid after bankruptcy.

What is the difference between bankruptcy and debt settlement?

Bankruptcy is a court process that can eliminate or reorganize debts, while debt settlement negotiates a payment amount with creditors.

Can I discharge utility bills in bankruptcy?

Utility bills owed prior to filing can be discharged in bankruptcy.

What is a bankruptcy discharge?

The debtor’s legal obligation to pay debts have been eliminated and discharged.

How long does bankruptcy stay on my credit report?

Chapter 7 stays for 10 years, and Chapter 13 stays for 7 years on your credit report.

Can filing for bankruptcy stop a lawsuit against me?

Yes, bankruptcy typically stops lawsuits and other collection actions through the automatic stay.

What happens if I receive an inheritance during bankruptcy?

An inheritance received within 180 days after filing becomes part of the bankruptcy estate.

How does bankruptcy affect my ability to obtain credit in the future?

It may classify you as a higher-risk borrower, making it harder to obtain credit with potentially higher interest rates.

What is a reaffirmation agreement in bankruptcy?

A voluntary agreement to continue paying a debt that would otherwise be discharged in bankruptcy, allowing you to keep certain personal property such as a vehicle payment or mortgage payment. 

Can a bankruptcy discharge my mortgage?

Bankruptcy can discharge your personal liability for a mortgage debt, but the lien on your property remains.