Q: What is bankruptcy?

A: Bankruptcy is a legal process, overseen by the U.S. Bankruptcy Court, whereby a person can petition the court to get rid of certain debts, or make a plan to repay some or all of their debts.  During a bankruptcy case, the person filing the case can have protection from debt collection activity by his or her creditors – this is called the protection of the Automatic Stay in Bankruptcy.  All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code.

Q: Do I need to hire an attorney to file for bankruptcy?

A: Yes. Even seemingly straightforward bankruptcy cases are tedious and error-prone. You must know the law, complete many forms, meet strict deadlines, and attend legal hearings. Making a mistake can result in your filing for bankruptcy protection being denied. Hiring a legal firm that focuses on bankruptcy law great increases the likelihood that your case will succeed.

Q: Will I lose everything if I go bankrupt?

A: No. In rare cases where an individual attempts to “cheat” the system, they may be subject to substantial penalties. However, for most people who file for bankruptcy, there are exemptions built into the bankruptcy law, which protect your assets from creditors.  Always consult with an experienced bankruptcy attorney to make sure that you properly protect your assets and correctly utilize the bankruptcy exemptions that are available to you.  

Q: Will my friends, family or employer know if I file bankruptcy?

A: Only your creditors and anyone listed as a co-debtor will be notified of the filing. While bankruptcy filings are a public record that anyone technically could access, a person would have to knowingly search for you in the system.

Q: Can I be fired for filing bankruptcy?

A: No. Bankruptcy law strictly prohibits employers from discriminating against you for filing bankruptcy.

Q: Can I file for bankruptcy individually, without my spouse also filing with me?

A: Yes. If your debts are individual – only you are responsible for them – you can file by yourself and your spouse’s credit will remain unaffected. Joint bankruptcy filings, however, may be advisable when large amounts of debt are in both spouses’ names.

Q: What happens to my credit after bankruptcy?

A: First, consider that unpaid credit card debt, back taxes, medical bill collections, etc. likely have already negatively impacted your credit rating. So, the bankruptcy itself, though negative, has a relatively less impactful effect on your credit. In fact, the protection that bankruptcy offers allows you to get a financial fresh start and begin rebuilding your credit. Some people even begin receiving credit card offers in the mail shortly after their debt is discharged. The one thing you should be aware of is that a bankruptcy filing does stay on your credit record for 7-10 years, and for a time it can make it much more difficult or much more expensive to obtain credit.

Q: How long does it take to file for bankruptcy?

A: A straightforward chapter 7 bankruptcy takes around four months from the date of filing. A Chapter 13 bankruptcy typically takes a little more than five years, while some cases can be as short as three years.

Q: Can bankruptcy stop foreclosure?

A: Yes. While a Chapter 7 bankruptcy will only temporarily forestall the foreclosure process, a Chapter 13 bankruptcy can stop a foreclosure and set up a repayment plan that allows you to get caught up on your mortgage arrears (late payments) over five years.  So long as the monthly chapter 13 plan payments are made, the property will be saved from foreclosure.

Q: What if the foreclosure sale is just days away?

A: We can file an emergency or “skeletal” chapter 13 case in as little as a day or two before the scheduled sale.  This will put an instant stop to the foreclosure sale, but it requires that we take some extra steps and complete the skeletal filing within two weeks of the initial filing.  We recommend that you not wait until the last minute to file, but if you have no choice, then an emergency chapter 13 filing can stop a foreclosure sale in very short order.

Q: Are there any other ways to stop foreclosure?

A: If you are in foreclosure, you have options. Our firm specializes in stopping foreclosures and our goal is to protect your property. Sometimes you can seek a loan modification from your lender, during the active review of which the lender is not supposed to foreclose on your home.  Also, if you face imminent foreclosure and are unable to pay future mortgage payments, a quick sale of your real property may allow you to protect the equity you have built up there, so that you don’t lose it to foreclosure.  Not infrequently, clients file for Chapter 13 so that they can get rid of debts and buy themselves more time to sell their home on the open market – thereby avoiding foreclosure and maximizing their profit on sale.

Q: Can I file for bankruptcy on a fixed income?

A: Yes. If your fixed income prevents you from paying your debts, you may qualify for bankruptcy.

Q: Will bankruptcy stop wage garnishment?

A: Yes. Bankruptcy protection stops creditors from collection actions, including wage garnishment.

Q: Can bankruptcy stop a Trustee Sale of my home?

A: Yes.  A chapter 13 bankruptcy, when structured correctly will stop a foreclosure and allow you to catch up on your mortgage.  A chapter 7 bankruptcy generally does not stop a foreclosure for more than a very short period of time.

Q: Will bankruptcy stop an eviction?

A: No. It may temporarily delay it, but your landlord – the property owner – generally is still entitled to the possession of their property. While they may not be able to collect past rent, they can resume the eviction process either upon approval of the bankruptcy court, or when the bankruptcy is finalized.

Q: Can a bankruptcy remove a lien?

A: It depends.  Voluntary liens, such as HOA liens and second mortgage liens can sometimes be removed from your property, depending upon the value of the property and the amount of equity securing the lien. Involuntary/judgment liens also can sometimes be removed by a bankruptcy depending on the situation.  If you are trying to remove liens through bankruptcy, consult with an experienced attorney, as this is a complex area of the law.  

Q: What if I make too much money?

A: Your bankruptcy attorney will help you understand the income requirements for bankruptcy. There is a maximum for chapter 7, and it is calculated by running what is called the bankruptcy “means test”. If you make too much money for a chapter 7, then a chapter 13 case will be an option.  And, a chapter 13 bankruptcy can be preferable to a chapter 7 filing, especially with more complicated cases..

Q: What’s the difference between Chapter 7 and Chapter 13 bankruptcy?

A: Chapter 7 bankruptcy is a way to get rid of unsecured debts, which generally includes credit card debt, medical bills, payday loans, etc.  Chapter 7 is a shorter and more simple process, and typically results in a complete wipe out of one’s unsecured debt after a period of roughly four months.  Chapter 7, however, is not available to all debtors:  if you have too high of an income, or too many assets, then you will not qualify for Chapter 7 bankruptcy, and you would need to file for Chapter 13 bankruptcy instead.

Chapter 13 allows you to set up a multi-year payment plan, through which you can get caught up on secured debt arrears (home loans and car loans), and often get rid of a significant portion of your unsecured debt (credit cards, payday loans, etc.)  Chapter 13 allows individuals with significant assets (e.g. a home or other real property) to file for bankruptcy/restructure their debt, while keep their assets (homes, cars, valuable personal property, etc.), even when you are behind on your payments at the time of filing.  A common misconception regarding Chapter 13 bankruptcy is that you are required to pay back 100% of your unsecured debt.  Very often this is not the case – many Chapter 13 debtors receive a substantial discharge of their unsecured debt (not unlike a Chapter 7 case) while simultaneously keeping major assets like homes and cars.  A Chapter 13 case will require that the debtor have regular income, but this income can be subsidized/enhanced with financial support from family or friends.  A chapter 13 can be very beneficial to struggling home owners or others who have significant assets or income, but need a little breathing room.