Bankruptcy Frequently Asked Questions (FAQS)
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Often times the stress of financial problems can lead to other, even more serious, problems. Many times the stress and anxiety over bill collectors’ harassment can lead to both health and marital problems. We have helped many people stop garnishments, repossessions, foreclosures, court dates, harassing phone calls and piling up of unpaid bills. Bankruptcy laws are there to help the honest debtor get a fresh start, and we proudly represent debtors in all Hampton Roads cities. Read our bankruptcy FAQS for answers to common questions.
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What is a Chapter 7 Bankruptcy?
A Chapter 7 Bankruptcy allows an individual to discharge certain debts, free and clear, and provides the protection of an immediate “automatic stay” which forbids creditors from attempting to collect on such debts. In exchange for the discharge of debts, the debtor agrees to hand over “non-exempt” property to the court, who then liquidates such property and distributes the proceeds to the creditors. In most cases, the Chapter 7 is a “no asset” case which means there is no property of any value, which the court might be interested in for the purpose of selling and distributing proceeds among creditors.
How does a Chapter 7 bankruptcy differ from a Chapter 13?
A Chapter 7 is a “straight discharge” of debts and filed in the event the debtor does not have the ability to pay toward these debts. The term “discharge” means the debtor is released from the obligation to pay on debts owed to creditors. Under Chapter 7, the debtor is immediately granted an automatic stay which prohibits creditors from collecting on the debt. In some cases where there are valuable assets involved, a debtor may have to surrender certain types of non-exempt property in exchange for the discharge. On the other hand, a Chapter 13 bankruptcy is pursued when a debtor has the ability to pay some, if not all of his or her debts through monthly installments, which are managed by a Chapter 13 Standing Trustee. Under Chapter 13, the debtor usually retains his or her non-exempt property while paying off over a three to five year period as much of his or her debts as possible.
Will a Chapter 7 Bankruptcy discharge all of my debts?
Not exactly. Certain types of debts are “non-dischargeable”, which means even though the debtor has filed for bankruptcy protection, these debts are still owed. Some types of non-dischargeable debts include spousal and child support, certain types of taxes, most student loans, and debts incurred due to criminal lawsuits against a debtor. There are other “non-dischargeable” debts not mentioned here. Your bankruptcy attorney will inform you of whether or not you have incurred non-dischargeable debts after examining your records.
What types of taxes are dischargeable?
Generally, if you filed your taxes on time, but didn’t pay them, they are dischargeable if the taxes were filed more than 3 years ago. Other taxes may be dischargeable, but the rules are complicated. It is best to consult with an attorney familiar with bankruptcy law with regard to the determination of which tax debts can or cannot be discharged in bankruptcy.
Can I discharge my student loan obligations in bankruptcy?
In most cases no. An experienced attorney can determine if your situation presents an unusual hardship that might justify requesting a special exception to this rule. Just because you don’t have enough money to pay on these loans is generally not considered a hardship to justify the exception.
Will the bankruptcy stop bill collectors from calling?
In most cases yes. The automatic stay prevents bill collectors from taking any action to collect debts. The automatic stay is effective immediately upon filing of bankruptcy. There are certain cases however, where the automatic stay does not go into effect. This is generally due to prior filings, which have been dismissed for one reason or another. If you have never filed a bankruptcy petition in the past, your automatic stay commences the minute your case is filed. Creditors may still call you for a few days or even weeks after you have filed because they are not aware of your case. Once your petition is filed, the court mails a notice to all the creditors you have listed in your case. Once the creditors receive notice you have filed they are required by law to cease all collection efforts. Keep in mind, just because you have retained an attorney, it does not initiate the automatic stay. The creditors are not required to stop calling you until your petition has actually been filed. If a creditor continues collection efforts against you once they have been notified of your bankruptcy, you may be entitled to file for sanctions against them in the United States Bankruptcy Court.
If I file Bankruptcy won't I lose my house, car, and other personal belongings?
No. If you owe money to a creditor on a secured debt (secured debts are generally debts attached to property that holds value, such as cars, houses, and furniture, etc.), you can continue paying the regular monthly payments to the creditor who has interest in the property. Generally, property of this type would not generate enough money to benefit your creditors if the trustee chooses to liquidate it. If the debtor can afford to pay for the item, the debtor will be given that opportunity. In certain cases where there is a lot of equity in the house or car, an experienced attorney should be consulted to provide you with options for retaining such items. Under the new Bankruptcy Law, you may be required to sign a reaffirmation agreement to keep certain secured items.
Do I have to list all of my property and all of my creditors in my Bankruptcy?
Yes. There are no exceptions. The Office of the United States Trustee maintains the right to investigate any Bankruptcy case at any time. If the U.S. Trustee finds that you have not included a creditor in a bankruptcy, you could be accused of bankruptcy fraud. The penalties for bankruptcy fraud are severe and include fines, prison time or both.
If I list my property, won't it be confiscated by the Court?
The reason you need to list all of your property is so that your attorney can protect it from being confiscated. If you have listed everything you own on your petition and your petition has been filed in good faith, the trustee will generally allow you to keep it. If you fail to list your property, not only does the trustee have the option to confiscate it, but he can also take criminal action against you for bankruptcy fraud. It is against the law for you not to list all of your property, all of your assets, and all of your liabilities. If you intentionally fail to list someone or something on your bankruptcy, this constitutes bankruptcy fraud. As mentioned before, penalties for bankruptcy fraud include fines, jail or both. If you have property that is “at risk” of being confiscated by the trustee, your attorney will let you know well in advance of filing your petition, and will discuss with you strategies to resolve the issue.
If I don't tell the Trustee about my property, how will they know I own it?
The Office of the United States Trustee utilizes the FBI to conduct random investigations of bankruptcy cases.
Who is the Trustee?
The trustee is responsible for the administration of the bankruptcy laws, rules and regulations on a daily, case-by-case basis. The function of the trustee is to examine your bankruptcy petition and schedules, and make inquiries on any aspects of your petition and schedules that may be unclear or questionable. The trustee also presides over the meeting of creditors and provides them with the opportunity to ask any questions they might have with regard to your bankruptcy. It is also the function of the trustee to determine whether there are any assets available in your bankruptcy estate, which could be liquidated and distributed among your creditors. If there are assets deemed to be “non-exempt,” it is the trustee’s duty to sell those assets for a fair price and distribute the proceeds in accordance with the bankruptcy laws. If you don’t have any assets in which to sell, the trustee file a “no asset report” with the court and recommend that your case be deemed as a “no-asset” case and all of your debts be discharged.
Can my employer fire me for filing bankruptcy?
Absolutely not. Government units and private employers are prohibited from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt under 11 U.S.C. § 525. You need to notify your attorney immediately if you get fired or harassed by your employer due to your filing bankruptcy.
Will bankruptcy stop a foreclosure sale of my house?
Yes, but only temporarily. If you file a Chapter 7 and don’t catch up on the payments during the automatic stay period, you could still lose it. If you file a Chapter 13, you can arrange to catch up your payments in a Chapter 13 plan. In a Chapter 13 plan, you will be required to keep your regular payments current, outside of the plan, and pay on the arrearages and any other secured debts within the plan. As long as you follow the instructions of your attorney and maintain your current house payments, you should be allowed to keep the house as long as you desire.
I don't want to include some of my creditors in my bankruptcy. Is that okay?
No. This is called preferential treatment. You cannot favor one creditor over another in bankruptcy. There is a procedure where a debtor can choose to “reaffirm” (continue to pay) one or more creditors with the court’s approval. Reaffirming however, maintains the creditor’s right to collect on the debt, even though you have filed bankruptcy.
How long will it be before I can I get credit again after filing bankruptcy?
Creditors generally make their own decisions when to give new credit. Some creditors may grant you new credit soon after your discharge. Some may tell you to wait six months after your discharge. Others may want to see a steady record of payments on other debts on your credit report. Still others may grant credit soon after the bankruptcy filing because they know the debtor cannot discharge any new debts for 8 years. Soon after your discharge, you may want to check with your financial institution about obtaining a secured line of credit or a secured credit card. Secured accounts require you to deposit funds into a savings account, which are held against your line of credit. The amount of money you deposit with the institution will determine the amount of credit you are allowed. This is an excellent way to re-establish your credit standing.
Can I keep any of my credit cards?
There are many factors that must be considered when deciding whether to keep a credit card account. Under some circumstances you may be able to keep a credit card, however, you need to determine whether keeping the card in your best interest, given the situation you are currently in. Speaking with your bankruptcy attorney can help you determine whether or not there is a real need to preserve your credit line with that particular institution.
How long is my bankruptcy listed on my credit report?
Chapter 7 liquidations generally stay on your credit report for about 10 years. Chapter 13 wage earner plans remain on the credit report for up to 7 years after the completion of all your plan payments. The credit reporting agencies generally determine the rules for how long your bankruptcy will be listed.
Can I file jointly with my spouse?
Yes. Particularly if the majority of your debts are joint debts, this is more than likely the best strategy.
All of our debts are in my name only. Does my spouse have to file?
No. In cases where only one spouse has incurred debts, or one spouse has debts that are not dischargeable, it may be advisable to have only one spouse file.
I am self-employed. Is it legal for me to file Bankruptcy?
Yes, however, you should speak with an experienced attorney about this. If your business is a sole proprietorship, your filing bankruptcy may have a direct impact on the business. If your business is a corporation, you can usually continue to operate independently of the bankruptcy, however, the value of your shares of stock in the business is considered to be one of your assets.
What will happen to co-signers on my debts?
If you file for bankruptcy under Chapter 7, creditors have the right to immediately pursue collection efforts against the co-signers of your debts. In a Chapter 13, you have the ability to protect your co-signers, and arrange to pay off debts with co-signers ahead of certain other creditors. Speak with an experienced attorney if this situation applies to you.
I filed a Chapter 7 Bankruptcy about five years ago, then I lost my job and was unemployed for a few months. Now I'm in trouble again. Can I file another bankruptcy?
More than likely. A new Chapter 7 petition can be filed 8 years after the discharge of a previous one. However, relief may be available under Chapter 13 of the Bankruptcy Code.
If I file Bankruptcy, am I going have to close out my retirement or pension plans?
No. Generally, under the new law, you can keep your 401(k), thrift savings and other ERISA qualified (i.e., federally protected) retirement savings, regardless of how large they are. “Straight IRAs” and other retirement savings plans can be protected up to certain, generally pretty high, limits. Your attorney can advise you of the specifics. In most cases, you will also be allowed to continue contributing toward retirement savings during the course of the Chapter 13 plan.
Will I have to go in front of a judge?
In most cases, no. The only hearing in which you must attend is called the “§ 341 Meeting of Creditors.” This hearing is held at the Office of the U.S. Trustee, and is heard by the Trustee appointed to your case. It is not a court hearing, and is not heard by a Judge. The § 341 meeting is an administrative proceeding where the U.S. Trustee is given the opportunity to ask you questions (under oath) about your bankruptcy petition and schedules. It is also an opportunity for creditors to appear to inquire about matters concerning your debts in which they have a vested interest.
Who notifies the creditors and bill collectors?
Within ten days to two weeks of filing your bankruptcy petition, the court mails a notice of your petition to all the creditors you listed in your schedules. This notice also states the date and the time of the meeting of creditors.
Where will my bankruptcy case be filed?
Generally, the debtor files in the United States Bankruptcy Court closest to where he or she has lived for the past 6 months or the greater portion of the last 6 months. According to the Bankruptcy Code, a bankruptcy can be filed in the court for the district in which the debtor has maintained a domicile, residence, principal place of business in the United States, or in which the principal assets of the debtor exist in the United States have been located, for the 180 days immediately preceding such filing or for a longer portion of such 180 day period than anywhere else.
How long does it take to file a Bankruptcy case?
Once a debtor has retained an attorney and furnished all the required documentation and information needed to complete the bankruptcy petition, it will generally take about two weeks for the attorney’s office to draft the petition and file it with the court. Prior to filing, a signing appointment is scheduled for you to meet once again with your attorney to review your petition and schedules for accuracy. Once you have sworn an oath of accuracy with your attorney and signed your petition and schedules, they can be filed with the Court. If there are extenuating circumstances in which you require an emergency filing, it is possible to prepare an emergency petition in a matter of days or even hours if such an emergency exists. The new Bankruptcy Code requires each debtor to attend and obtain a certificate from an accredited credit counseling organization within 6 months prior to filing. If you think that you may need to file a bankruptcy within the next six months, you may want to investigate or even participate in an accredited credit counseling program.
How long before my creditors stop making those harassing phone calls to me?
Once you have retained an attorney, you can begin to inform your creditors that you have retained an attorney to handle your bankruptcy filing, however, those annoying telephone calls probably won’t stop until you have actually filed, and give them your case number. Your attorney should be willing to accept telephone calls from your creditors to confirm that you are preparing to file for bankruptcy protection. Most unsecured creditors are willing to cease their collection efforts to give you time to file if they know you have retained an attorney. However, your attorney cannot protect you from collection efforts until your petition has been filed with the court and you are protected under the automatic stay of the bankruptcy code.
What is the process in filing for a Bankruptcy?
Your first step is to meet with a qualified attorney and discuss your situation and your options of whether or not you should or shouldn’t file bankruptcy and what type of bankruptcy filing is available to you. If filing bankruptcy is an appropriate option, your attorney will discuss a retainer contract with you, advise you of your legal rights and obligations, advise you of his or her obligations to you, and finally, give you a packet of forms to fill out. You will need to take these forms home with you and fill them out, listing ALL of your debts, ALL of your assets and ALL of your income and expenses. As you fill out the forms, you will be reviewing your credit card statements and other bills in order to fill out the amounts, account numbers, etc. You will need to compile all of these documents and submit them to your attorney. You will also need other documentary evidence, which your attorney will advise you of , such as tax returns, tax assessments of real estate, proof of automobile insurance, etc. In most cases, your attorney will not file your case until you have submitted to him or her all of the requested information and documentation. Your attorney will also refer you to a credit counseling agency. Before you file, you MUST participate in an individual or group briefing, which outlines your options for debt management, both bankruptcy and non-bankruptcy. If you choose to file for bankruptcy protection after your counseling session, and retain our services, we will prepare your petition and schedules. After your petition and schedules are prepared and reviewed by your attorney, you will come back into the office to review and sign them. It is very important that you review each page of your petition and schedules thoroughly to make sure that the information contained in the petition and supporting schedules is accurate and complete. Perfection is not mandatory as far as listing reasonable estimates (such as the amount owed a creditor, or the value of your property), but ALL creditors MUST be listed, and EVERYTHING must be done in good faith. Most attorneys will correct any errors on the spot. Once you have reviewed everything, you will sign the declarations pages on your petition and schedules in several places. You will provide your signature under penalty of perjury. This is a very serious and important matter. The Bankruptcy Court will pick random cases and have the FBI investigate the assets and liabilities in the case. If it is found that you have lied on a bankruptcy petition, or omitted information, you can be prosecuted to the fullest extent of the law, including jail, fines or both. Once you have signed your petition and schedules, your attorney will file them with the United States Bankruptcy Court, in the district serving your jurisdiction. Upon filing, a Notice of the filing will be sent out by the court to all of the creditors you have listed. A trustee is also appointed by the court to oversee your case. As mentioned before, the function of the trustee is to review the bankruptcy paperwork which you have filed (your petition and schedules), to make inquiry on unclear or questionable aspects of any statements you have made, to call a meeting of creditors to provide them an opportunity to ask questions which they may have about the paperwork, and to determine whether there are any assets available in the bankruptcy estate which could be liquidated and distributed to the unsecured creditors. A date is also set for the “§ 341 Meeting of Creditors.” This date is usually scheduled within about 30 to 40 days from the date your petition was filed. Once you have filed, your creditors and the trustee will review your documents and decide whether there is any aspect of the bankruptcy that should be opposed. If you have disclosed everything to your attorney, there shouldn’t be any opposition. In the event you have a threat of opposition, your attorney should be able to identify it and advise you of it at your consultation. A typical filing is a “no-asset” case where the trustee decides not to take and sell any property that you were not able to exempt, and there is no opposition to the filing or the granting of the discharge. In a typical “no-asset” case, the court will issue a “discharge ” documenting that you have been released from your obligation to repay these debts. Once the court orders your discharge, your case is closed.
Where do I begin?
The first thing you should do is call our office and schedule an appointment with an attorney. Your initial consultation with the attorney will last about half an hour. Your attorney will inform you of your options and the essentials of filing bankruptcy. The attorney will listen to you and apply them to your particular situation. There is nothing you need to bring to the interview, except perhaps anything you might need to refer to in explaining your situation, such as a general background of all of your debts and assets. At the end of your consultation, you should have a good idea of your various options. If non-bankruptcy options were suggested, you will be encouraged to pursue those before scheduling another interview in our office. We will give you several forms to complete and list of items to return if you decide that bankruptcy protection is your best option. If you choose to retain our office to represent you in bankruptcy, you will then meet with a paralegal who will go over the contract with you a second time, go over the bankruptcy forms you need to fill out, and provide you with copies of all the information and documents you need to take with you after your consultation. If you decide to retain us and file for bankruptcy protection, you will need to fill out your bankruptcy paperwork and return all of the documentation required so that we may begin to prepare the extensive amount of paperwork that is required for the filing. Once we have completed your petition and schedules, we will schedule an appointment for you to come in to review and sign it. Once they are signed, your bankruptcy petition and schedules are filed with the bankruptcy court. The Court then appoints your trustee, schedules your §341 Meeting of Creditors, and mails out your Notice of filing to the creditors you have listed on your petition and schedules. The creditors are all invited to attend your §341 hearing, however it is a rare occasion when they actually do. Your attorney will attend the §341 meeting with you. At the hearing, you will be sworn in under oath, and your appointed trustee will ask you several questions about the your filing, and your current financial situation. If necessary, the trustee may request additional information or documentation from you. Approximately three months after your § 341 Meeting (assuming there have been no complications such as objections by creditors to declare debts non-dischargeable, no property to surrender, etc.), your case will close, and you will be granted your bankruptcy discharge.
How do I know which attorney can help me with my case?
Choosing the right attorney to represent you is an extremely important decision. You will want to choose an experienced attorney knowledgeable of the current bankruptcy laws. Your attorney has an obligation to sit down with you face to face to discuss your situation and propose an individual solution specific to your needs. You will want to choose an attorney who will fully discuss with you your bankruptcy and non-bankruptcy options. You should not feel pressured to file bankruptcy, and you will want to be able to make the most informed decision possible. John Lee has been helping people file bankruptcy in the Hampton Roads area since 1998. We are knowledgeable, experienced attorneys who are willing to meet with you face to face to learn about your situation and, with your assistance, make available an appropriate solution to your individual needs.
So what do I do next?
If you feel that bankruptcy might be an option for you, please do not hesitate to call our office at 757-896-0868 to schedule an appointment to speak with one of our attorneys. We will be happy to sit down with you and determine what options to consider regarding your needs. There is much more information that you will need to discuss with an attorney before you can make a decision on what avenue you should take with regard to your financial situation. Give us a call and let us assist you today!