Frequently Asked Questions About Bankruptcy
GENERAL BANKRUPTCY QUESTIONS
- Is filing for bankruptcy bad?
- What are the most common reasons people file for bankruptcy?
- Will the bankruptcy stop bill collectors from calling?
- Who notifies the creditors and bill collectors?
- When will the creditors stop calling?
- Who deals with my creditors and bill collectors during bankruptcy?
- Will my employer and landlord find out about my bankruptcy?
- Can my employer fire me for declaring bankruptcy?
- Can I go to jail if I file for bankruptcy?
- Can I keep any credit cards?
- Will I have to go to court?
- Are there alternatives to bankruptcy?
- What can I do to prepare for filing bankruptcy?
- Can I file just to delay a creditor?
- Do I have to disclose all of my assets?
FORECLOSURE, WAGE GARNISHMENT, JUDGMENTS, EVICTION, DIVORCE, STUDENT LOANS, TAXES etc.
- Is it true I can cancel all my debts by filing bankruptcy?
- Will bankruptcy stop wage garnishment?
- Will bankruptcy stop a foreclosure?
- Will bankruptcy stop an eviction, or unlawful detainer action?
- Will bankruptcy stop a judgment?
- Will bankruptcy remove a lien?
- If I am divorced, will bankruptcy eliminate my obligation to pay joint debts?
- Is alimony dischargeable?
- Can I discharge student loans?
- If I am a co-signer for a debt, how does bankruptcy affect the obligation?
- What if I fail to list a creditor in the bankruptcy petition?
ASSETS AND EXEMPTIONS
- What happens to my personal property, real property and other assets?
- What are Exemptions?
- What property is exempt?
- Can I keep my house?
- Is my pension, Retirement, 401(k), IRA etc. Protected?
- Can’t I Just File Myself?
- Can I use a non-attorney bankruptcy petition preparer?
- Ok I understand all that above, can I still file my own petition?
AFTER YOU FILE
- What happens after I file for bankruptcy?
- What is an “automatic stay”?
- Does bankruptcy show up on my credit report?
- After bankruptcy can I obtain new credit?
- How can I re-establish credit after bankruptcy?
CHAPTER 7 BANKRUPTCY QUESTIONS?
- What is Chapter 7 Bankruptcy?
- Who Can File For Chapter 7?
- I Make Too Much Money, but Can I Still File for Chapter 7?
- What Assets Will I Lose?
- Do I Have Too Much Debt?
CHAPTER 13 BANKRUPTCY QUESTIONS
- What is Chapter 13 Bankruptcy?
- Who Can File for Chapter 13?
- Can I Save My Home?
- I Qualify for Chapter 7 and Chapter 13, Why Would I File for Chapter 13?
- What Happens After I File for Chapter 13 Bankruptcy?
- What is the Chapter 13 Repayment Plan?
Is filing for bankruptcy bad?
While most people have attached a very negative stigma to filing for a personal liquidation, Chapter 7 bankruptcy, this should no longer be the case. A Chapter 7, if carried out correctly, should not operate to hurt you, rather it should give you a sense of relief, help retain your property and give a you a fresh start.
Because you can only file bankruptcy once every 8 years or so, credit is not as hard to find as it once was after a successful bankruptcy. Credit card companies have been known to extend to debtors credit even during the bankruptcy process. Companies are willing to extend credit because they know that if a debtor fails to pay after a successful bankruptcy they always have the option of garnishment to be repaid – they can’t lose.
Not only is your credit not ruined forever, but with the proper counseling, good credit can be established quickly – often within 2 years. It can even be better than what it once was.
What are the most common reasons people file for bankruptcy?
Popular reasons why people choose to file are:
• preventing personal liability for a deficiency on a home through foreclosure, short sale or deed in lieu.
• paying only the minimums on their bills
• being contacted by collections agencies
• receiving notices that their mortgage is being foreclosed upon
• recent costly medical bills
• recently lost a job
• divorce, or
• loss of a major client
When will the creditors stop calling?
Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with the “docket number” for your case. In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a law suit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy they may be liable for court sanctions and attorney fees for this conduct.
Will my employer and landlord find out about my bankruptcy? Bankruptcy petitions are public records. However, under normal circumstances, unless your employer or landlord is a creditor, it will not know you filed a bankruptcy petition. If your employer or landlord is a creditor it must be listed as a creditor on the schedules and receive notice of the bankruptcy proceeding. In some states, chapter 13 debtors are required to make payments through wage garnishment and their employer will learn about the bankruptcy.
Can my employer fire me for declaring bankruptcy? No. 11 U.S.C. sec. 525 prohibits government units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.
Can I keep any credit cards? Under some circumstances you may be able to keep some credit cards if the creditor agrees. There are many factors which must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt.
Will I have to go to court? About 30 to 40 days after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but an individual appointed by the United States Trustee to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask you questions, although in the majority of cases creditors do not ask questions at the First Meeting of Creditors.
After the initial meeting you normally do not need to return to court. However, if a creditor or the trustee files a motion or an adversary action you may have to appear in court with your attorney.
Are there alternatives to bankruptcy? Yes. Sometimes payment plans can be negotiated with creditors. Obtaining loan extensions, compromises and workout agreements require negotiation skills and experience. These alternatives may alert your creditors to the existence of nonexempt property that the creditor could reach and can involve considerable expense. You also have the option of doing nothing. In any event you should seek professional advise in dealing with most of these alternatives.
First, you should consult with an attorney. An attorney can help you plan for the bankruptcy, decide when to file a bankruptcy petition, or even avoid filing for bankruptcy. A few specific items are worth mentioning.
1. If you intend to file bankruptcy you should stop using your credit cards. If you borrow money with the specific intent of discharging the debt in bankruptcy instead of paying it back, the debt is not dischargeable. In addition, three specific circumstances are worth mentioning: (a) certain luxury purchases over $1000 within 60 days of the bankruptcy filing are presumed nondischargeable; (b) cash advances aggregating $1000 within 60 days of the bankruptcy filing are presumed nondischargeable; and, (c)debts involving materially false financial statements are nondischargeable under certain circumstances.
2. Don’t transfer your assets to friends, family and business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge.
3. Don’t destroy any business or financial records. You can lose your right to a bankruptcy discharge as a result.
4. Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away. Your attorney should advise you on what debts should and should not be paid while you prepare to file a bankruptcy petition.
Can I file just to delay a creditor?
Rule 9011 of the Rules of Bankruptcy Procedure requires you or your attorney to certify that your petition is not filed “for any improper purpose, such as to harass or to cause unnecessary delay..” Bankruptcy is intended as a tool for dealing with debts that can not otherwise be paid. You should not file a bankruptcy petition for the sole reason of delaying a creditor’s actions.
Do I have to disclose all of my assets?
Yes. If you knowingly and fraudulently conceal an asset from the court you have committed a felony and can be fined up to $5,000, imprisoned for up to five years, or both. In addition, the court can deny you your discharge, or dismiss or convert your bankruptcy proceeding.
Is it true I can cancel all my debts by filing bankruptcy? The underlying policy of bankruptcy law is that the honest debtor who is in debt beyond its ability to repay the debt should receive a fresh start through the discharge of debts.
However, some debts must still be paid. Generally speaking, the following debts will not be discharged: taxes; spousal and child support; debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; nondischargeable debts from a prior bankruptcy; student loans; criminal fines and penalties and forfeitures. 11 U.S.C. sec. 523 describes exactly which debts can not be discharged.
Secured debts may be discharged. In most instances the creditor will take the necessary legal steps to recover the property unless you can reach an agreement for repaying the debt.
Will bankruptcy stop wage garnishment? Yes.
Will bankruptcy stop foreclosure? Yes. The Automatic Stay will prevent the Bank or other lendor from pursuing you unless they obtain an Order Relieving the Automatic Stay.
Will bankruptcy remove a lien? Under some circumstances, once the bankruptcy proceedings have started, a special motion can be filed to remove certain liens. The procedures are complex and require an attorney’s assistance.
If I am divorced, will bankruptcy eliminate my obligation to pay joint debts? In general, you will be discharged from all dischargeable community debts. In some circumstances you may still be liable to your spouse if she or he pays the debt.
Is alimony dischargeable? Alimony, maintenance and child support payments generally are not dischargeable. A few technical exceptions exist. In addition, 11 U.S.C. sec. 523(a)(15) provides that certain other divorce related obligations, such as payments to others, hold harmless provisions and property settlement obligations are not dischargeable if the debtor has the ability to pay them and the detriment to the spouse outweighs the benefit of the discharge to the debtor. In order to take advantage of section 523(a)(15) the spouse must obtain an order from the bankruptcy court declaring the debt non-dischargeable.
1. The student loan may be discharged if it is neither “insured or guaranteed by a governmental unit” nor “made under any program funded in whole or in part by a governmental unit or nonprofit institution.”
2. The student loan may be discharged if paying the loan will “impose an undue hardship on the debtor and the debtor’s dependents.”
Student loans more than 7 years old used to be dischargeable under certain circumstances, but this provision was removed by an appropriations bill passed in October of 1998.
Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. If a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.
If I am a co-signer for a debt, how does bankruptcy affect the obligation? If the debt is a dischargeable debt then you will not have to pay it. Your co-signer will become primarily responsible for the debt. If you file a chapter 13 petition, a special automatic stay provided by 11 U.S.C. sec. 1301 protects certain co-signers during the bankruptcy proceeding.
What happens to my personal property, real property and other assets? Once the bankruptcy is filed, all of your property at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate. This means that the bankruptcy trustee may take control of this property to satisfy your creditors. You are required to file a schedule with the court describing all of your assets.
Certain property is either “excluded” from the bankruptcy estate or “exempt,” and you will be able to keep that property. 11 U.S.C. sec. 541(b) describes what property is “excluded” from the bankruptcy estate and 11 U.S.C. sec. 522(b) describes what property is exempt.
Often, all of your assets can be protected. However, if any question exists regarding protection of assets, you should hire an attorney to ensure that the exemptions are properly chosen and applied to maximize the value of assets retained.
What property is exempt? Exactly what property is protected depends on the exemption scheme chosen. In many states you can either exempt the property listed in 11 U.S.C. sec. 522(d) or exempt any “property that is exempt under [other] Federal law…or State or local law that is applicable…” In other states, you can only choose the “other Federal and State law exemption scheme.” These states have “opted out” of the bankruptcy exemption scheme.
Determining what property is exempt requires a complete understanding of the laws governing residency within states and the exemption laws of the relevant state.
Can I keep my house and car? In many cases you can retain your home and automobile in a chapter 7 bankruptcy proceeding. You will lose your home or automobile in a chapter 7 if (1) you are behind in making payments on a loan secured by the home or automobile and can not reach a payment agreement with the creditor, or (2) the home or automobile has equity (I.E. a liquidation value in excess of the amount owed to creditors with liens against the property) in excess of what you are allowed to exempt.
If either of these two conditions exist, you might consider filing a chapter 13 petition, which allows you to develop a plan for repaying your creditors without necessarily liquidating assets.
Is my pension, Retirement, 401(k), IRA etc. Protected? The United States Supreme Court has held that pension plans, 401(k) plans, and other “ERISA-qualified plans” are generally “excluded” from the bankruptcy estate under 11 U.S.C. sec. 541(c)(2).
Unlike 401(k) plans, IRA accounts are not ERISA-qualified plans. However, in some states an IRA may be excluded from the bankruptcy estate or exempt because of a state statute. Some bankruptcy court judges have held that an IRA may be partially exempt under 11 U.S.C. sec. 522(d)(10)(E).
Can’t I Just File Myself? Individuals may file a bankruptcy petition without an attorney. This is called appearing “pro-se.” However, the bankruptcy code is very complex and filing a bankruptcy petition requires a thorough knowledge of both the bankruptcy code and other Federal and State laws. In addition, bankruptcy practice differs from court to court. Experienced bankruptcy attorneys are familiar with the local rules, both written and unwritten.
Filing your own petition is very risky. Often “do-it-yourselfers,” or even attorneys lacking proper experience, make serious mistakes with drastic results. A mistake can cause the unnecessary loss of assets, loss of a personal home, or even the loss of the right to receive a bankruptcy discharge. You may be able to read the bankruptcy code, but only an experienced bankruptcy attorney can provide a realistic assessment of what can and cannot be accomplished by filing a bankruptcy petition, and make sure that your case proceeds smoothly.
Can I use a non-attorney bankruptcy petition preparer? Bankruptcy petition preparers are barred by law from providing you with any legal advice. In enacting legislation governing bankruptcy petition preparers Congress stated: “These preparers often lack the necessary legal training and ethics regulation to provide [legal advice and legal services] in an adequate and appropriate manner. These services may take unfair advantage of persons who are ignorant of their rights both inside and outside the bankruptcy system.”
The bankruptcy petition preparer’s role is limited by law solely to typing. Unlike an attorney, a bankruptcy petition preparer can not help you understand the law, advise you on how to answer questions, assist you in planning, or assist you in court. They may be useful, but you must be prepared to do all the real work yourself.
Federal law requires that bankruptcy petition preparers sign any documents they prepare, print on the document their name, address, social security number and furnish you a copy of the document. A bankruptcy petition preparer may not sign any document on your behalf, may not use the word “legal” or any similar term in any advertisement, and may not receive any payment from you on account of court fees. The bankruptcy petition preparer is also required to disclose to the court the amount of any fee you pay. Beware of any bankruptcy petition preparer who does not comply with these requirements.
Ok I understand all that above, can I still file my own petition? Again, I strongly advise against filing bankruptcy without using an attorney. If you insist on doing it yourself you can do so by using forms which can be obtained from any legal stationery store. In addition to those forms you may need some local forms which can be obtained from the bankruptcy court where you plan to file.
A few tips will help you file your own bankruptcy petition successfully:
1. Learn the law. Bankruptcy law is complicated and full of traps. Make sure you learn about what you are doing. Just following the instructions on the forms is not enough. You will need to obtain the following materials:
A current copy of the bankruptcy code – Title 11 of the United States Code, or The Bankruptcy Code, is the starting point for learning bankruptcy law. You can find a copy at any law library. Don’t rely on the versions of Bankruptcy form or the code on the Internet, they may not be up-to-date. A Tampa Bankruptcy Attorney will even sell blank forms to those debtors insisting on filing themselves, but any advice on filling them out will be additional.
A copy of the rules of bankruptcy procedure – The Rules of Bankruptcy Procedure govern every aspect of a bankruptcy filing and they must be followed to the letter. Both books referenced above include copies of the rules. As with the bankruptcy code, the on-line versions of the rules are not current as the rules change yearly.
A copy of the local rules governing the court in which you plan to file your petition – Each bankruptcy district has its own rules and procedural orders which must be followed to the letter. Local forms may also be required. You can generally obtain a copy of the local rules and procedural orders from the your local clerk’s office.
2. Ask questions. Some bankruptcy procedure is unwritten. Although court clerks and bankruptcy trustees can not provide you with legal advice, they may assist you with procedural questions. Ask them questions about what you are supposed to do and make sure you understand the answers.
3. Take the process seriously. Make sure you file all documents on time and properly completed. Make sure you appear on time for all meetings and court hearings. Make sure that you follow to the letter any instructions given you by a trustee or judge.
4. Be complete and accurate. Remember, you have an obligation to disclose to the court all assets, creditors, and information regarding your financial affairs and you will sign your schedules under the penalties of perjury. If you intentionally omit something relevant, you have committed perjury. Even forgetting to disclose an asset by accident may have serious repercussions. Assets debtors typically forget to disclose include personal injury actions, property they own which is held by another person, the right to sue another person, and stock or an interest in a defunct company. Remember, if you own stock or an interest in a company which is no longer operating, or which is even in bankruptcy, you still have to disclose that interest to the court.
5. Recognize when you are in over your head. If you no longer understand what is going on, or the process becomes adversarial, either with the bankruptcy trustee or a creditor, it is time to get an attorney.
About 30 to 40 days after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but an individual appointed by the United States Trustee to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters.
Under normal circumstances, in a chapter 7 proceeding the Bankruptcy Court will automatically issue you a discharge 60 to 75 days after the First Meeting of Creditors. In a chapter 13 proceeding, the Court will if appropriate enter an order confirming your chapter 13 plan. In a chapter 13 proceeding you receive your discharge upon completion of the chapter 13 plan.
What is an “automatic stay”? When you file a bankruptcy petition, your creditors are automatically barred from taking any action to collect the debts owed them or seizing your property. The relevant statute, 11 U.S.C. sec. 362, does provide some exceptions. For example, a bankruptcy petition does not stay the commencement or continuation of a criminal action (unless brought to collect a debt), an action to collect alimony, maintenance or support from certain assets or income, or an action to enforce a government’s police or regulatory power.
In some states, an action taken in violation of the automatic stay is void. In other states it is voidable and the debtor must obtain a court order undoing the action.
After bankruptcy can I obtain new credit? Yes. The decision of whether to extend you credit belongs to each particular lender. However, the fact that you filed bankruptcy, if properly explained, is less damaging than a history of unpaid accounts.
How can I re-establish credit after bankruptcy? The best way is to obtain new credit and make the payments religiously. Sometimes an existing creditor may continue to grant you credit based upon a reaffirmation agreement made during the bankruptcy. You may also be able to obtain a secured credit card, where the credit limit is based upon the amount of security given, or obtain credit using a co-signer.
What is Chapter 7 Bankruptcy? Chapter 7 Bankruptcy is a “personal liquidation”. Through our firm it is a very quick and painless process. From your first FREE consultation with your Attorney until the end of your case (this is called the Discharge) will only take about 4 months. Most people get to keep everything they own and do not have to pay additional fees. There is only 1 very short hearing (takes about 5 minutes) called a 341 Meeting of the Creditors hearing – it’s not in a court room and is not with a judge and your attorney will be present with you.
Who Can File For Chapter 7? Anyone may file for Chapter 7, but some people may not be permitted to remain in a Chapter 7. Some people who earn too much money may be forced into a Chapter 13. Other people who are filing for bankruptcy too soon after being discharged from a previous bankruptcy may also not be able to continue their Chapter 7 petition. Your bankruptcy attorney can assist you with this information at your first Free consultation or over simple telephone call.
I Make Too Much Money, but Can I Still File for Chapter 7? Many people who have been told are ineligible to file for chapter 7 by another attorney have been qualified by Florida Bankruptcy Attorneys to file after passing the Means Test. Some people who have a lot of business debts may also qualify to file Chapter 7 even though they make a lot of money. It’s best to ask us.
What Assets Will I Lose? Most people keep all of their property. Your attorney can tell you about the generous Florida exemptions and whether you will have to give anything up or pay additional costs to the court – most of the time this isn’t the case. What distinguishes The Pikramenos Law Group from other firms is that your attorney at PLG helps Bankruptcy filers plan for their bankruptcy by giving legal advice on their current situation and developing a timeline of when to file so as to maximize the Florida Exemptions so debtors will not have to pay or give up any property.
What is Chapter 13 Bankruptcy? This is the chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years. You can pay off your debts earlier and be discharged before 3 years is up.
Who Can File for Chapter 13? Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual’s unsecured debts are less than $360,475 and secured debts are less than $1,081,400. 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor.
Can I Save My Home? Chapter 13 will stop the foreclosure process (if it has already started) and allow you to repay your arrearage (the past due amounts) in equal payments over the life of your plan. You must also pay your current mortgage amount each month. You might also be eligible to strip away (get rid of) your second mortgage or line of credit on your home.
I Qualify for Chapter 7 and Chapter 13, Why Would I File for Chapter 13? Some people will want to do a chapter 13 instead of a chapter 7 if they have property they might lose in a chapter 7 or if they want to save their home from foreclosure. Your attorney can help you make those decisions and paint a clear picture of the future.
What Happens After I File for Chapter 13 Bankruptcy? The chapter 13 process is much like that of the chapter 7 except that you will make monthly payments to your trustee and the trustee will then disburse your payment amongst all of your creditors. At the end of the plan you will be discharged of all eligible debts and you can START FRESH!
What is the Chapter 13 Repayment Plan? A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.