More Bankruptcy FAQs
Common Bankruptcy Law Questions
What is bankruptcy?
Consumer bankruptcy allows people to either eliminate or ‘wipe out’ most of their debt; or, in some circumstances, to repay their creditors under a court supervised repayment plan. The eventual goal of any type of bankruptcy filing is almost always to obtain a “discharge” from the court, which means that all the consumers’ debts (with some exceptions) which existed before the filing of the bankruptcy petition with the court are eliminated.
What type, or chapter, of bankruptcy can I file?
Consumers typically file Chapter 13 bankruptcy, where repayment is made to creditors, or a Chapter 7, where most debts are eliminated. For the majority of consumers, a Chapter 7 would be filed; usually a Chapter 13 is filed by those who face losing their home in a foreclosure.
Do I need a lawyer to file bankruptcy?
Some people do have a very simple case that they could possibly do on their own, but it’s a good idea to have an attorney guide you through the process and make sure you do things correctly. A lawyer can guide you through the intricacies of the process and help you avoid the pitfalls. Although you may think your case is easy, if you file incorrectly, it can significantly delay your discharge and in some cases, your case could be dismissed. Moreover, if you file for the wrong bankruptcy chapter, you could put yourself in jeopardy of losing assets, including your home. My fees are very reasonable and it is worth paying a lawyer to make sure your case is successful.
What is the difference between a secured claim and an unsecured claim?
Secured debt is a creditor’s claim that’s secured by a lien of some type in your property, either by your agreement or involuntarily such as with a court judgment or taxes. For example, a mortgage is a secured claim or a finance agreement for an automobile. If you do not continue making payments, the creditor could take back the property. A creditor can generally claim the property that secures the debt in the event of bankruptcy. Unsecured debt is not tied to any specific kind of property.
Can I change from one chapter of bankruptcy to another?
Usually, yes. Generally, you can convert a case once to any other chapter for which you are eligible. There are issues to watch for when going from one Chapter to another which I can guide you through.
Who can file bankruptcy?
With few exceptions, any person or business owing money to a creditor can file a bankruptcy petition.
Is filing bankruptcy immoral or bad?
No, the bankruptcy law is in place because our system of law recognizes that your life and future should not be ruined because of some financial mistakes you’ve made or events that might possibly have happened outside of your control. You should never feel ashamed or feel like a failure if you decide to file for bankruptcy. The truth is, millions of people have filed, especially during this weak economic period. Even major billion dollar corporations file for bankruptcy. Hold your head up high and remember that bankruptcy can give you a fresh start.
Can I get credit cards after I file bankruptcy?
Yes. You might even start receiving offers in the mail right after you file your case. However, these credit cards usually carry with them high interest rates and fees. They put money in your bank’s pocket, not in yours. If you want the convenience of a credit card, have one with a small limit, or better yet, a debit card that doesn’t allow you spend more than you have on deposit.
How often can you file for bankruptcy?
A Chapter 7 bankruptcy can be filed every 8 years from a previous chapter 7 filing or 6 years from a prior chapter 13 filing. Chapter 13 can be filed 4 years from a prior Chapter 7 filing or 2 years from a prior Chapter 13 filing. Filing bankruptcy can adversely affect your ability to obtain future credit, rent housing and even negatively impact a job application, so it’s important to take these things in to consideration as you make your decision whether to file.
What do I need to begin the bankruptcy process?
You will need information on your assets (property), income and expenses, the bills you have outstanding, your recent pay stubs and tax returns, and money to pay your legal fees and your court filing fee. This is a minimum, there are other things you will need depending on where you live and what type of bankruptcy you will be filing. Again, I will guide you step-by-step through out the whole process.
Do you have to have a certain amount of debt to file?
Strictly speaking, no, but of course if you only have only a very small amount of debt, filing a bankruptcy case may not make much sense. Some people probably should not file because they have very little debt, others should not file because they have nothing the creditors can take, etc.
What is a joint petition?
A joint petition is the filing of a single bankruptcy petition by an individual and the individual’s spouse. Only people who are married on the date they file may file a joint petition. Unmarried partners must each file a separate case.
What happens if one spouse files for bankruptcy and not the other?
If one spouse files and the other does not, the one who does not file could possibly be responsible for the debts if they are a co-debtor. But of course the benefit is that one of the spouses will not have the negative credit mark of a bankruptcy on their credit report.
The principal signor on a loan filed bankruptcy. Now the creditor is coming after the co-signor. Can they do that?
Yes. The lender can require the co-signor to make payments on a loan once the principal has declared bankruptcy on the credit. This fact makes it extremely important that those considering co-signing for a loan for another be ready, and able, to pay the loan in the event that the principal signor defaults.
Can all types of debt be discharged?
No. The debts that cannot be discharged vary slightly between the different chapters of bankruptcy. Generally, student loans, recent income taxes, child support and other marital obligations, and items having to do with fraud are not dischargeable. There are rules and twists to this, which is why you should be represented by a bankruptcy attorney if you choose to file.
What can I keep, if anything, if I file bankruptcy?
Exemptions allow an individual to “exempt”, or keep, certain kinds of property. Most people that wish to file bankruptcy are unlikely to have a great deal of money or property stashed away, otherwise, they probably would have paid their bills. It is likely that unless you own a valuable car that’s paid off, a house with a lot of equity, a valuable inheritance or lawsuit, or some other kind of unusually valuable property, you will be able to keep everything you own as “exempt”.
Do I have to file bankruptcy on all the accounts I owe, or can I keep some?
You must include all the debts you owe in your petition and schedules. There is no such thing as ‘leaving a creditor off.’ If you want to keep a credit card after you file, that might be possible (it’s up to the creditor) but you still must list that creditor on your bankruptcy schedules.
Will I lose my retirement accounts or payments from social security?
It is unlikely that would happen. Social Security and most pensions are protected “exempt” from the bankruptcy trustee as are 401k’s and IRA’s.
Will I lose my home if I file for bankruptcy?
It depends on different factors: where you live, how much equity you have in the property, how far you are behind in the mortgage payments, etc. If you have a home or own any kind of real estate, it’s more important than ever that you hire a bankruptcy attorney. Filing the wrong bankruptcy could jeopardize your home.
How long does a bankruptcy stay on my record?
Bankruptcies remain on credit reports anywhere from seven up to 10 years but you can improve your credit along the way.
Can I do anything to remove a bankruptcy from my credit report?
No. Although at your option, you can file an explanation with the credit reporting agencies briefly describing the events resulting in your bankruptcy. If an account is reported inaccurately, you can request the record be updated to reflect the actual situation.
When can I apply for credit again?
The decision whether to grant you credit in the future is strictly up to the creditor and varies from creditor to creditor. There is 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.
Can a “credit repair” company really save me from bankruptcy?
In my experience, most people can negotiate with a creditor just as well as a credit repair company can.
Can a creditor continue to contact me after I’ve filed for bankruptcy?
No, they are not supposed to. In theory, any collection attempt from a creditor after you file a case– calls, letters, etc.- are illegal. Therefore, if this does happen, you and or your attorney should notify the creditor that you have filed bankruptcy. If they keep trying to collect, you have the option of suing them in court for violating a court order.
Who lets my creditors know I’ve filed for bankruptcy?
The bankruptcy court notifies, by mail, all creditors advising them of:
- The filing of the bankruptcy
- The case number
- The automatic stay
- The name of the trustee assigned to the case (if filed under chapters 7 or 13)
- The date set for the meeting of creditors
- The deadline, if any, set for filing objections to the discharge of the debtor and/or the discharge of specific debts
- Whether and where to file claims
The exact information in the notice may be slightly different depending on the chapter under which the case is filed.
What does a trustee do?
The trustee’s job is to:
- Administer the bankruptcy
- Make sure creditors get as much money as possible
- Run the first meeting of creditors (also called the “section 341 meeting”).
- Collect and sell non-exempt property (in a chapter 7 case) or collect and pay out money on a repayment plan (in a chapter 13 case)
- Obtain information from you and documents related to your bankruptcy
Trustees are appointed by the United States Trustee, but aren’t necessarily lawyers. The courts don’t pay the trustee. Their fees come from the bankruptcy filing fee or are a set percentage of the money distributed in the bankruptcy.
Can creditors object to a bankruptcy filing or plan?
Yes Each type of bankruptcy allows creditors to object to specific debts included in the plan or the manner in which the plan addresses the repayment or discharge, though it is not likely that a creditor in a Chapter 7 case will actually object.
In Chapter 7 Bankruptcy, creditors generally have 60 days after the first creditors meeting to object to the discharge of a specific debt. If no objections are filed, the court will issue the discharge order and the trustee will proceed to collect and sell the assets, then distribute the proceeds to the creditors under a predetermined system. If there are objections, the bankruptcy itself, less the objected debts, continues through to discharge. It may be necessary to have a trial before a judge to resolve the items that creditors objected to.
In a Chapter 13 case, creditors are given an opportunity to object to the plan for repayment. If there are no objections filed by creditors or the trustee, the plan may be confirmed as filed. After the plan is confirmed, the trustee will distribute the payments from the debtor to creditors until the plan is completed. Upon completion of the Chapter 13 plan, the court will issue a discharge order, the trustee will prepare a final report, and the case will be closed.
What happens at a creditors meeting?
The debtor must attend the creditors’ meeting scheduled for their bankruptcy petition. The trustee conducts the meeting. The debtor must answer questions concerning:
- How the situation evolved
- Any actions taken with the property
- Debts listed in the petition or any other financial information requested by the trustee
Failure to respond or not respond truthfully can result in the petition being dismissed or, in extreme cases, a charge of perjury. Creditors have been notified that they may attend and question the debtor about the assets of the debtor or any other matter relevant to the bankruptcy. A creditor doesn’t waive any rights by not attending the creditors meeting.
What if I’ve forgotten to include a debt on my schedule? Can I add it later?
After filing the petition, if you discover that an entry is inaccurate or missing, the documents typically may be corrected by filing of an amendment. Remember, you’re submitting the petition under the penalty of perjury, so be as thorough as possible with the initial filing.
When do I have to stop using my credit cards if I’m planning on filing for bankruptcy?
As soon as you anticipate filing bankruptcy, you must stop using your credit cards. Bankruptcy law allows the review of questionable purchases for potential fraud. If a purchase is made 40 days prior to filing or cash advances taken within 20 days of filing, the debt may possibly be excluded from the bankruptcy.
What is a reaffirmation agreement?
A reaffirmation agreement legally obligates the debtor to pay all or a portion of an otherwise dischargeable debt. These are voluntary agreements not required by bankruptcy codes. 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.
Can a bankruptcy be reopened?
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.
Unanswered Questions? Contact Attorney Ginter
I am happy to discuss the options available to those considering bankruptcy or in a tough financial spot wondering what they can do. Contact me online or by phone at 908-418-4084.