Q: What exactly is bankruptcy?
A: When people or businesses are under attack by their creditors and are at risk of losing their assets, bankruptcy is a solution that is handled through a court proceeding where relief from debts is granted. It is a legal right to request this relief.
Q: Does a bankruptcy mean that I lose everything?
A: Absolutely not. Bankruptcy law is designed so that you won’t lose property that you’ve chosen to exempt. Generally, that would be your home, household furnishings, vehicles that members of your family drive, retirement accounts, or tools of your trade. An exemption puts that property out of the reach of creditors and the Bankruptcy Trustee. You must still make payments on secured debts, like mortgages and vehicle loans in order to retain your home or vehicle.
If you wish to keep property that is collateral for a loan – such as your home or vehicle – but are behind on your payments, a Chapter 13 bankruptcy allows you to propose a three to five year payment plan to repay the debt and keep the property.
Q: What is Chapter 7?
A: Chapter 7 is referred to as “straight bankruptcy.” With certain exceptions, all unsecured debt is discharged under Chapter 7. Chapter 7 bankruptcy stops repossessions, foreclosures, and garnishments, but does not require a repayment plan. Typically, you are able to keep all your property when you file Chapter 7. As long as you reaffirm and continue to pay your creditors with liens on your home or vehicle, you’ll be able to retain that property, as well.
Q: What is Chapter 13?
A: If you are employed and receiving regular income, Chapter 13 protection sets up a repayment plan that will be made through a Bankruptcy Trustee and distributed to some or all of your creditors. Tax debts can be repaid through the repayment plan, usually without paying interest and penalties. This is a great advantage to individuals and businesses with IRS problems.
Q: What if I’m currently in foreclosure?
A: Chapter 13 will stop a foreclosure sale and allows past-due house payments to be put into the plan, to be repaid over three to five years. You may also qualify for home mortgage loan modifications during your Chapter 13.
Q: Will everyone know I’ve filed for bankruptcy protection?
A: Bankruptcy is a matter of public record, but rarely can individuals find out without knowing where to look and paying a fee. Under Chapter 7, your employer is not notified. Under Chapter 13, payroll orders are typically required and will expose the situation. If you’re married, either you or your spouse’s paycheck will be subject to a payroll deduction according to the plan the court approves., and then that employer will be aware of the filing.
Q: Will I ever be able to get credit again?
A: Yes. It won’t be long until you can qualify for credit, such as credit cards, vehicle and mortgage financing. Bankruptcy will stay on your credit report for 10 years, but most of our clients credit scores actually improve within the first two years following bankruptcy. Our office won’t guarantee a better credit score, and you will still need to make responsible choices after your bankruptcy is discharged.
Q: How can I stop creditors from calling at home and work?
A: The Bankruptcy Code requires creditors to stop all collection proceedings once you file. Additionally, the Fair Debt Collection Practices Act requires debt collectors to go through your attorney once you’ve retained one, even before you file.
Q: Can bankruptcy stop creditors from taking money directly from my bank account?
A: Yes. Once you file, creditors are required by law to stop taking money from your account. We will contact your creditors immediately to demand them to stop.
While there is no mandatory requirement that you close your accounts before filing bankruptcy, we will recommend that you do so if you owe money to that bank or credit union.
Q: What if I currently have a judgment against me in civil court?
A: Judgments can be discharged under Chapter 7 and Chapter 13 bankruptcy, and judgment liens can be removed after your bankruptcy is completed through a separate procedure.
Q: What if I want to pay back some of my creditors?
A: While you must list all of your creditors in a Chapter 7 filing, you can still voluntarily pay certain creditors after filing, if you wish. If you file a Chapter 13, you must also list all of your creditors, and they will receive payments according to the terms of your approved plan.
Q: Will I lose my business if I’m self-employed?
A. If you desire to keep your business, we can discuss your best option that will permit you to keep your business. If you desire to close, we can help you do that, as well.
Q: Is the Chapter I file related to my income level?
A.Yes. As experienced bankruptcy attorneys, we’ll make every effort to quality you for Chapter 7, if that is what you wish. There is an income test under current bankruptcy law that will determine what options you qualify for. Call our office to discuss this in more detail.
Q: Is there any special relief offered to military families?
A: Congress has made exceptions to the Bankruptcy Code for active duty military, disabled veterans, reservists, and members of the National Guard. If you have served our country, please be sure to tell us of your service so that we can determine if these special rules in the Bankruptcy Code apply to you.
Q: Can we file a joint bankruptcy if my spouse is about to deploy, or is currently deployed?
A: As long as you have Power of Attorney for your spouse, you can proceed. If you don’t, we can prepare that for you.
Q: Can bankruptcy protect me from a payday loan?
A: Yes. Payday loans can be discharged in bankruptcy. If you’ve given the creditor post-dated checks, we recommend that you close the account or have stop-payment orders issued to prevent them from cashing them.