Bankruptcy Questions and Answers

The bankruptcy questions and answers below will give you a general idea of what it can do for you.   

The question and answers below are general questions to help you better understand what bankruptcy covers and what you can expect.  However the best and most current source of information is with your local bankruptcy lawyer because laws change often.  

When considering a lawyer, interview at least three.  If you have little money, find lawyers that offer a free initial consultation. However, don't trade quality service in order to save on costs.   Don't over pay, but make sure that your lawyer will insure that you get through the process successfully.  Ask around for referrals and do your homework.

Common Bankruptcy Questions and Answers

What Does It Cost to File for Bankruptcy? 

Fees change over time, however the currents fess are as follows:  $299 to file for bankruptcy under chapter 7 and $274 to file for bankruptcy under chapter 13, whether for one person or a married couple. This does not include your attorney fees.

What Property Can I Keep? 

In a chapter 7 case, you can keep all property which the law says 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. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement. 

Also, you only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it.

While your exemptions allow you to keep property, your exemptions do not make any difference to the rights of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In most cases you will have to pay the mortgages or liens the same as you would if you didn't file bankruptcy.

What Will Happen to My Home and Car If I File Bankruptcy?

In most cases 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 will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.

However, some of your creditors may have a security interest in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.

Can I Own Anything After Bankruptcy?

Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep all your wages and anything you obtain after the bankruptcy is filed. You can open a new bank account after bankruptcy without fear that a creditor will attach your money for an old debt.

However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money may have to be paid to your creditors.

General Bankruptcy Questions and Answers

Will Bankruptcy Wipe Out All My Debts?

Yes, with some exceptions. Bankruptcy will NOT normally wipe out:

1. money owed for child support or alimony, fines, and some taxes;

2. debts not listed on your bankruptcy petition;

3. loans you got by knowingly giving false information to a creditor;

4. debts resulting from willful and malicious harm;

5. most student loans, except if the court decides that payment would be an undue hardship;

6. mortgages 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).

Will I Have to Go to Court?

No. You only have to go to an informal proceeding called the meeting of creditors to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short, probably 5 minutes or less in most cases.  It's a simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation. Your lawyer will attend the meeting with you.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. For the most part, bankruptcy judges spend their time on big business cases and leave personal bankruptcy cases to the trustee. If you need to go to court, you will receive notice of the court date and time from the court.

Will Bankruptcy Affect My Credit?

There is no clear answer to this question. Unfortunately, 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've filed a bankruptcy can appear on your credit record for ten years. Most credit agencies only report it for seven years. But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you will get new credit based on your income.

What Else Should I Know?

Utility services--Public utilities, such as the electric company, can not refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

Discrimination--An employer or government agency can not discriminate against you because you have filed for bankruptcy.

Driver's license--If you lost your license solely because you couldn't pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.

Co-signers--If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt. If you file a chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan.

DischargeYou will receive your Order of Discharge officially canceling your debts about four months after your meeting of creditors.

SpouseYour spouce's assets are not included in your bankruptcy unless you file together. Likewise, your discharge will not cancel your spouse's debts. A married couple may file a joint petition but are not required to.

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Bankruptcy Questions and Answers and all associated materials and related studies are the complete work of the site's author, Margaret Lukasik, and cannot be copied by any means without her express written permission.