Your financial problems are unique. Only you can decide whether bankruptcy is your best option. In making that decision you should consider these warning signs:
Are you facing foreclosure, repossession or a lawsuit;
Have your creditors attached your wages or your bank account;
You cannot catch up with your bills no matter how hard you try; or,
You no longer answer the phone because creditors call you non-stop throughout the day.
You may wish to call us to discuss your situation. Our job, as bankruptcy attorneys, is to consider your entire financial picture, explain all the options to you, and guide you as you make the decision that you think is best.
The two most common types of personal bankruptcy are Chapter 7 and Chapter 13.
In Chapter 7, the goal is to discharge most or all your debts without paying creditors. However, a Chapter 7 does not force a mortgage holder or auto lender to give you additional time to catch up on payments. In addition, some kinds of debts, like alimony, child support, student loans and some taxes, are not discharged in Chapter 7.
Another option is Chapter 13, which gives you an opportunity to pay back some of your debts over time. It is most often used to give you time to bring past-due payments on a mortgage or car loan current, or when you have property that you want to keep or you make too much money to file Chapter 7.
The filing of a bankruptcy has the effect of a court order stopping every one of your creditors from taking any action to collect money from you. Creditors may not file or pursue lawsuits, foreclose on your home, repossess your car, or even call or write to you without the permission of the bankruptcy court.
Once your case is finished, any debts that are discharged by your bankruptcy are no longer collectable. Discharged creditors are prevented from harassing you for payment. Mortgages and car loans remain in place, though, and you must keep making those payments if you wish to keep the property.
You will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt you may still be able to keep your property by filing a chapter 13 bankruptcy instead of a chapter 7 bankruptcy. In a chapter 13 plan you will be required to pay at least the equivalent of the non-exempt equity you have in your home or car and any amount you are behind on your home or car loan over the course of a three to five year plan. You also will be required to continue making the regular monthly payments to those secured lenders.
In a chapter 7 case, you can keep all the property which is exempt from the claims of creditors. In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Generally the trustee is interested in the resale value of your property.
In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you did not file bankruptcy.
Bankruptcy will not eliminate all debts. Some common types of debts that will survive bankruptcy are:
- money owed for child support or alimony, student loans, fines, and some taxes;
- debts not listed on your bankruptcy petition;
- loans you received by knowingly giving false information to a creditor, who reasonably relied on that information in making you the loan;
- debts resulting from "willful and malicious" harm;
- mortgagee liens and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).
In most bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" or "341 meeting" to meet with a bankruptcy trustee and any creditor who chooses to attend. This meeting will take place usually about 30 to 45 days after the bankruptcy filing. The trustee is not a judge but an attorney appointed to oversee your case. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation. Only if a creditor or the trustee files a motion or an adversary (lawsuit) action or if you choose to dispute a debt will you have to appear before a judge at an evidentiary hearing.
If you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you filed bankruptcy, may be less damaging than a history of unpaid accounts. The bankruptcy will appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit. The best way to restore your credit is to obtain new credit and make the payments on the new debt on time.
If someone has co-signed a loan with you and you file for bankruptcy, the co-signer will still have to pay the debt. You should list the co-signer as a creditor in your bankruptcy petition since they may have a contingent claim against you.
Yes, however your spouse will still be liable for any joint debts. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file.
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. Creditors will also stop calling if you inform them that you have filed bankruptcy and supply them with your case number. If a creditor continues to try to collect after it is informed of the bankruptcy it may be liable for court sanctions and attorney fees for this conduct.
In chapter 7 cases, a creditor, the trustee in the case, or the United States Trustee may file an objection to the debtor’s discharge. The objection to discharge must usually be done 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.” A chapter 7 discharge may be denied for very limited reasons such as the transfer or concealment of property with intent to hinder, delay, or defraud creditors; destruction or concealment of books or records; perjury and other fraudulent acts; failure to account for the loss of assets; violation of a court order; or an earlier discharge in a chapter 7 or 11 case commenced within six years before the date the petition was filed.
In chapter 13 cases, the debtor is entitled to a discharge upon completion of all payments under the Court confirmed plan. The Bankruptcy Code does not provide grounds for objecting to the discharge of a chapter 13 debtor. Creditors can object to confirmation of the repayment plan, but cannot object to the discharge if the debtor has successfully completed making planned payments.
A debtor who receives a discharge of debts may voluntarily repay any discharged debt. A debtor may repay fully or partially a discharged debt even though the creditor can no longer legally enforce their claim.
The filing of a Bankruptcy is a negative on your credit report, just as judgments, foreclosures, and repossessions are negatives to your credit score. While judgments, foreclosures and repossessions can stay on your credit report for 7 years, a credit reporting agency can carry a bankruptcy on your credit report for up to 10 years. However, Bankruptcy does not permanently ruin your credit rating, and many people who file bankruptcy can buy houses and cars, and obtain loans and credit cards in a short time after the discharge order is entered.
The bankruptcy is a public record, so if your employer is likely to check for bankruptcy, then yes, they will know. Otherwise your employer will not know unless you owe your employer money and list them as a creditor.
No, you can keep your bank account in a bankruptcy.
No, your landlord is not notified. An exception to this is if you want to discharge back rent you owe. In that case you would list your rent as a debt and discharge any rent that came due before you filed bankruptcy and then you would be subject to eviction.
No, a judgment can be included in bankruptcy to be discharges. One exception is that if the creditor recorded a memorandum of judgment in the county where you own real estate, then the judgment lien will remain a lien on your house and you will have to pay it when you sell your house.