FAQs

Bankruptcy is a way for a consumer or a business to either eliminate their debt or reorganize their debt into more manageable payments. The bankruptcy process is governed by Title 11 of the United States Code and for consumers generally consists of either a Chapter 7 filing or a Chapter 13 filing. A business that is seeking to end operation may also file a Chapter 7 and a business seeking to reorganize will file a Chapter 11.

Filing Chapter 7 bankruptcy typically costs between $1,800 and $2,300 while a Chapter 13 filing can cost between $4,500 and $5,300. Actual costs depend on your specific circumstances.

Filing for bankruptcy can stop wage garnishment, foreclosure or auto repossession, aggressive tax collectors and collection calls/letters, and more.

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. 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.

For most people filing bankruptcy there will be little to no impact on their credit score itself from filing. Most people filing bankruptcy are already at the mid-500s because of significant late payments on their accounts or other things like judgments or foreclosure. Bankruptcy, in general, will not take your score any lower than the mid-500s and, in most cases, your score will improve itself by about 100 points over the 12 month period after your discharge. The score will also increase as you demonstrate good credit use through secured credit cards and/or car loans.

The fact that you have filed may be on your credit report for up to 10 years. The actual impact on your credit report and your credit score will most likely not last that long. As a general guide, the most impact on the report and your score will take place in the 2 years following your discharge. During that two year period you should take all necessary steps to build your credit back up.

If you have received a Chapter 7 discharge you may be ableto get a mortgage loan within 2 years. Perhaps even less if you qualify for certain programs that shorten the wait if had to file for bankruptcy because of a loss of employment or certain other hardships.

Some people buy vehicles within a few weeks or months of aChapter 7 bankruptcy discharge. Financing a vehicle is one way to begin rebuilding your credit, and many places will finance those just emerging from bankruptcy. However, you should be aware of interest rates, as these are usually subprime lenders with high interest.

You can file individually, but your spouse will still be liable for any joint debts. If you file together you will be able to double your exemptions. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable then it might be advisable to have only one spouse file. If the spouses have joint debts, the fact that one spouse discharged the debt may show on the other spouses credit report.

A Chapter 7 bankruptcy is governed by Chapter 7 of Title 11 of the United States Code. This form of bankruptcy protection is often referred to as liquidation bankruptcy or Fresh Start bankruptcy. A Chapter 7 is designed to give your personal finances a restart and allows a consumer to unload, or discharge, their debts.

A Chapter 13 bankruptcy is governed by Chapter 13 of Title 11 of the United States Code. This bankruptcy is often referred to as consumer reorganization or payment plan bankruptcy. Under a Chapter 13 bankruptcy consumers try to reorganize their debts through a Chapter 13 Plan. A Chapter 13 Plan is a repayment plan that usually lasts between 3 and 5 years and is confirmed by the Bankruptcy Court.  

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, who reasonably relied on it in making you the loan;
4. Debts resulting from “willful and malicious” harm;
5. Student loans owed to a school or government body, 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).

In most bankruptcy cases, you only have to go to a 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 and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation. Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

You will need your financial records, legal records, and certain additional documents.

Financial records include:

• Most recent bank statements from all bank accounts
• Most recent bills from every creditor, including credit cards
• Most recent payment coupons for vehicles (leased orpurchased), real estate, and student loans
• Bills or invoices for purchases in the last year
• Receipts

Legal records include:

• Files from previous litigation, especially any judgmentsthat have been entered against you
• Files from previous attorneys
• Any divorce decree or other court order requiring you to paychild support or maintenance

Additional documents include:

• Canceled checks for any expense you can't otherwise document
• All your correspondence with or regarding creditors, especially threat letters
• All insurance policies
• Tax returns for the last three years
• Vehicle titles
• Your lease or mortgage
• Any promissory notes you've signed
• Other documents relating to debts you owe other people
• Any proof that anyone owes you money
• Any lawsuits with which you have been served

Documents needed to file Chapter 7

• You need several documents before filing for a Chapter7 bankruptcy, including:
• Your tax returns
• Pay stubs
• Appraisals of your home, jewelry, and other exempt assets
• Your car titles
• Evidence of child support or alimony obligations
• Bank statements
• Proof that you took credit counseling
  

The Trustee in a bankruptcy case is generally the person appointed to look out for the interests of the unsecured creditor in a Chapter 7 or Chapter 13 bankruptcy case. This person is different than the United States Trustee, although they serve similar functions. In a consumer Chapter 7 and Chapter 13 case the assigned case trustee usually conducts the Section 341 Hearing or Meeting of Creditors. The case trustee is also generally tasked with administering the case. This usually means that he/she will conduct certain hearings, review financial documents provided by you, review your petition and schedules, and in some cases distribute non-exempt assets of your bankruptcy estate. The case Trustee is not your attorney and is not looking out for your best interests. This does not mean that your interaction with the Trustee will be hostile or antagonistic. Generally, the only time you will talk with the case trustee is at your meeting of creditors and you will find that the experience with the Trustee is generally stress-free and runs extremely smoothly. The case Trustee should not be viewed as an enemy or opponent in your case. Rather, the Trustee is as interested as you are in moving your case along to discharge.