Frequently Asked Questions about Bankruptcy - General

(Note: the following questions and answers provide generalized comment on  Bankruptcy law and procedure and may not apply in all fact situations.  They are not a substitute for consultation with an experienced attorney.)

1.    What is bankruptcy?

        Bankruptcy is a federal right  that allows those who are unable to pay their bills to obtain a fresh financial start.  The U.S. Bankruptcy Code provides two options for individuals in financial distress:

	Chapter 7 - Liquidation
	Chapter 13 - Plan Of Repayment For Individuals With Regular Income

2.    What does bankruptcy accomplish?

        The filing of a bankruptcy immediately stops the activity of your creditors against you such as:

	Lawsuits
	Garnishments
	Repossessions
	Foreclosures
	Harassing phone calls

        Then, depending on the type of bankruptcy filed, it allows you to make decisions about what property you can afford to keep, what property you want to give up, what secured debts you will continue to service, and how you will structure your ongoing financial life.  It will also generally discharge most of your unsecured debts to bring your budget into better balance.  As a general rule, in order to keep secured property, such as your house, you will still have to be able to make your monthly payments for it.

3.    Does it matter if I am married, divorced, separated, or not  a U.S. citizen?

        No.   Your civil status has no bearing on filing bankruptcy.

4.    Are there residency requirements for filing?        Yes, you generally must file in the district where you have lived for the greater part of the last 180 days.

5.     May I file if I have debts in another city or state?      Yes.

6.    Can I protect and keep any of my property?        Yes.    In ________, there are exemptions that protect your equity in your property, that is the amount not covered by a lien or security interest, such as:   

-    Homestead Exemption - $60,000.00; $90,000 if you are over 60 or disabled.
-    Automobile - $5,000.00 per person filing.
-    Automobile, if you are over 60 or disabled - $10,000, per person filing.
-    Household Goods - Single $3,000; Couple $6,000
-    Jewelry - $2,000.00 per person filing.
-    Tools of trade, inventory - $20,000.00
-    Qualified Retirement accounts - fully protected 

7.    Will I have to appear in court?

        Yes, you will attend, with your attorney,  a meeting with the Trustee appointed to handle your case at which creditors can appear.  In most cases the meeting is simple and short and few, if any, creditors attend.

8.    When is my bankruptcy filing effective?

        When the Petition is filed with the Court.  A "stay" order is then immediately in effect stopping all creditor activity against you and your property.  Of course, you will continue to pay certain important bills with the advice of your attorney.

9.     Who notifies my creditors that I have filed bankruptcy?

        The court will notify your creditors within about ten days of filing.

10.    How does bankruptcy affect my credit report?

        Usually, if you are considering bankruptcy, your credit report is already in trouble.  According to the Fair Credit Reporting Act, the fact that you filed a Chapter 7 or Chapter 13 will go on your credit record, and may remain there for up to 10 years, although some local agencies remove the reports somewhat sooner.

11.    Will the court take any of my property?

        This depends on the type of bankruptcy filed, the nature and value of the property, and the extent to which the property secures a loan by a creditor.  The earlier that we can address these concerns, the better your chances of accommodating your desires.  We generally hope to have your exemptions protect all of your unsecured property and work out what secured property you wish to keep and can afford.

 

12.    What if I return goods such as furniture, appliances or a car that I owe money on?

        Then the debt, if any remains, becomes an "unsecured debt" which is generally dischargeable in your case.  This usually means that you can choose between continuing to pay for goods and keeping them, or returning them and no longer owing the debt.

13.    Will filing bankruptcy affect my job?        Unless you owe money to your employer, it will not receive a notice of your case.  Further, it is illegal for an employer to discriminate against you for exercising your federal right to file bankruptcy.

14.    Do I have to list all my debts on my bankruptcy petition?  Yes, the law requires so.

15.   If I am married, can I file individually?        Yes, and this often occurs, especially when one spouse has substantial debt from before the marriage. However, if the two of you are jointly liable on a debt, the non-filing spouse will continue to be responsible for that debt. 

16.    How about bank and credit union payments that are being automatically deducted from my paycheck or account?         These are required to stop upon the bankruptcy filing, unless you give permission to continue.

17.    What will happen to the garnishment that is currently being taken from my wages?        The creditor will be notified of the filing and the garnishment will be stopped within a short time after your petition has been filed.

 

 

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