Bankruptcy FAQs

Bankruptcy may make it possible for you to: 

• Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start. 
• Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. 
• Prevent repossession of a car.
• Prevent termination of utility service.
• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt. 

There are four types of  bankruptcy cases provided under the law: 

• Chapter 7  is known as “liquidation.” It requires an individual to give up property which is not “exempt” under the law, so the property can be sold to pay creditors. Generally, those who file chapter 7 keep all of their property except property which is very valuable or which is subject to a lien which they can not avoid or afford to pay.               
• Chapter 11, known as “reorganization,” is used by businesses and a few individuals whose debts are very large. 
• Chapter 12 is reserved for family farmers and fishermen. 
• Chapter 13 is a type of “reorganization” used by individuals to pay all or a portion of their debts over a period of years using their current income. 

Most people filing bankruptcy will want to file under either chapter 7 or chapter  13. Either type of case may be filed individually or by a married couple filing jointly. 

It depends as some types of debts cannot be discharged. Some debts, such as student loans, child support, alimony, recent income taxes, certain criminal penalties and debts incurred through fraud, cannot be eliminated or "discharged" by the bankruptcy court. 

In a Chapter 13 bankruptcy, some debts will be repaid completely, some will be partly repaid and other debts will be eliminated entirely.

Lastly, if you forget to list any debts on the documents you file with the Court, you may still owe these debts after the bankruptcy.

Yes, you are required to attend one meeting at the federal courthouse, but it's not held in a courtroom and a judge will not be present (in fact, the judge is prohibited from attending). That meeting usually takes place between 21-40 days after your bankruptcy filing date. 

At the meeting, the trustee will ask you questions, under oath, about the documents you filed with the court, your assets, debts and other matters. In addition, creditors may also show up and would be permitted to ask you questions. However, if you have filed for Chapter 7 bankruptcy, creditors will usually not attend these meetings .

No. In some instances where one spouse has the majority of debts, it may make sense for only one spouse to file. However, if you and your spouse are responsible for the majority of debts, you may both want to file for bankruptcy jointly.

If you do decide to file without your spouse, please be aware that the non-filing spouse is still required to provide their proof of income for the case, unless you are separated and living under different households.

Yes, actions against your property or assets must stop immediately, although it may be temporary. In most cases, filing for bankruptcy means an "automatic stay" is put in place. An automatic stay is an Order that arises from the Court and it stops your creditors from whatever actions they have been taking to collect from you. Creditors must immediately stop actions such as:

• foreclosing on your home,
• garnishing your wages,
• repossessing your car,
• taking money from your bank account,
• cutting off your utilities, 
• stopping collection calls, or
• taking actions to gain possession of other property on which you owe money.

The automatic stay will prevent your creditors from taking action until the court lifts (removes) the stay; however, the stay is automatically lifted if the case is dismissed, discharged or closed.

You won’t necessarily have to pay back your medical bills and personal loans just because you are filing for Chapter 13 bankruptcy. The majority of the time, the unsecured creditors (medical bills, credit cards, personal loans, etc.) get little to nothing throughout the life of the Chapter 13 Plan.

There are several factors that go into analyzing how much a debtor is required to pay back to the unsecured debts. Every case is unique, but it can be based on how much money you have left over each month or how much non-exempt equity you have in your personal assets.

A bankruptcy filing will negatively affect your credit for a certain amount of time depending on which Chapter you file:

• A Chapter 7 bankruptcy stays on your credit report for 10 years after final discharge.

• A Chapter 13 bankruptcy stays on your credit report for 7 years after final discharge.