Bankruptcy Frequently Asked Questions

Won’t Declaring Bankruptcy Damage My Credit?

Bankruptcy does impact a person’s credit score, but the effects do not last forever. Chapter 7 bankruptcies will normally remain on a persons credit history for 10 years, and a Chapter 13 bankruptcy will remain for 7 years. There is no reason for a person to think they can’t have strong credit after a bankruptcy. It is entirely possible for a person to end up having better credit than they did before filing bankruptcy. It should be noted that their interest rates may be higher, though.

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Will I Be Completely Debt-free After Filing Bankruptcy, No Matter What Types Of Debt I Have?

Unfortunately, no. This misconception is all too common. Only certain types of unsecured debts are allowed to be discharged through bankruptcy, such as medical bills, credit card debts, and unsecured loans. Among the types of debt that cannot be discharged by bankruptcy are alimony, child support, most student loans, and taxes such as trust fund recovery taxes.

Will I Actually Have To Go To Court After Filing For Bankruptcy?

Anyone filing for bankruptcy will likely have to attend a meeting of their creditors about a month after filing the petition papers. This is called a 341 meeting. A court-appointed trustee will interview the debtor to make sure the information submitted in the petitions and schedules was accurate. If the debtor is filing Chapter 7 bankruptcy, the trustee will be determining if asset liquidation will be appropriate. If the debtor is filing Chapter 13 bankruptcy, the trustee will be tasked with making sure the debtors reorganization plan complies with the bankruptcy code.

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Will Creditors Stop Harassing Me Once I File Bankruptcy?

After the requisite paperwork is filed, the bankruptcy court will issue what is called an automatic stay. An automatic stay stops creditors from making any more attempts to make contact or collect debts.

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What Should I Bring With Me To My First Consultation With A Bankruptcy Lawyer?

Upon meeting with a bankruptcy attorney for the first time, it is important to bring along documents so that the attorney can get a clearer picture of the situation.  Everyone’s bankruptcy is different, but these papers will help the attorney determine the best way to handle the case:

A list of creditors, with the amounts owed to each.  This does not have to be an official credit report, but the more thorough the list, the better.
A list of assets including retirement accounts, financial accounts, trusts, real estate, vehicles, and any other asset that may become involved in the bankruptcy proceeding.  The list should be as thorough as possible.  Assets should not be hidden.
The most recent available paystub showing year-to-date earnings, gross income, and net income.  People who are self-employed should bring an estimate of their earnings for the past 6 months, including month-to-month profits and losses.
Copies of any currently pending liens, lawsuits, and judgments.
Copies of spouse’s most recent paystub with gross and net income (if married but filing separately).

What is Bankruptcy?

Bankruptcy is the process through which a party can legally eliminate or at least drastically reduce their amount of debt. There are different types of bankruptcy for different situations, but Chapters 7 and 13 are the most commonly filed.

What If I Don’t Know Who I Owe, Or How Much I Owe?

It is more important to know who is owed money than the exact amounts owed. Without knowing who debts are owed to, there is no way they can be discharged. A good step in the right direction is obtaining a credit report, which can usually be done online at no charge.

What Are The Different Types Of Bankruptcy?

Chapter 7: This is known as “liquidation” or a “straight” bankruptcy.  It is used to eliminate debts such as medical bills and credit card debt (which are unsecured), and certain taxes.  Some personal property may be protected from creditors by filing Chapter 7, and can be filed by either individuals or businesses.
Chapter 11: This type of bankruptcy is known as “reorganization.”  All debts (including loans, taxes, rent, and equipment payments) are discharged by Chapter 11.  It can be filed by individuals or businesses, with the benefit of the business being able to remain operational while the reorganization is in progress.
Chapter 12: Specially tailored for family farmers and fishermen, this type of bankruptcy is a personal or corporate repayment plan.  Chapter 12 allows the business to remain operational while the debt is paid off over time, and attempts to keep the operation from having to liquidate assets.
Chapter 13: Also known as “debt adjustment,” Chapter 13 bankruptcy is a repayment plan for individuals and sole proprietorships with regular income.  It allows for debts to be paid off over time while helping avoid foreclosure or repossession of vehicles or property.  Even debts such as child support, mortgages, and money owed to the IRS are included in this method of repayment.

Despite common belief, there are certain instances when student loans are dischargeable in bankruptcy.  For more information, contact a bankruptcy attorney today.

How Often Can I File For Bankruptcy?

This is a little tricky. There is no waiting period for a person to file bankruptcy after their initial filing, but if the person just received a discharge, they will be unable to immediately receive another. This might sound confusing, but basically a person can file as often as they like under the premise that if the initial filing was not approved, they would not have to wait to try again. Once a person’s debts are discharged, they are ineligible to receive another discharge for a pre-determined amount of time. Put simply, a person can file for bankruptcy as often as they want, but it will only be worth the time and effort until they are granted a discharge. Now that those hairs have been split, here is how often a person may receive a discharge. Once a person receives a Chapter 7 discharge, they cannot receive another Chapter 7 discharge within 8 years of the date of the original bankruptcy’s filing. If a person received a Chapter 13 discharge, they cannot receive another discharge within 2 years of the filing date of the original bankruptcy. Things get complicated again if a person wants to follow up their Chapter 7 bankruptcy with a Chapter 13 bankruptcy, or vice versa. Consulting an experienced bankruptcy attorney can help clear up the finer details.

Do I Need A Lawyer To File Bankruptcy?

No, but it is strongly recommended. A bankruptcy attorney can be an invaluable asset throughout the entire process. Bankruptcy laws have gone through recent changes that may make them even more difficult for individuals to handle on their own. One mistake can mean the difference between a successful bankruptcy and losing assets such as a home or vehicle.

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