FAQ

FREQUENTLY ASKED QUESTIONS

WHAT IS BANKRUPTCY?

WHAT IS A CHAPTER 7 BANKRUPTCY?

WHAT IS A CHAPTER 13 BANKRUPTCY?

WILL ALL OF MY DEBTS BE DISCHARGED IN A CHAPTER 7?

WILL I LOSE MY HOME IF I FILE BANKRUPTCY?

WILL I LOSE MY CARS, FURNITURE OR OTHER PERSONAL ITEMS IF I FILE BANKRUPTCY?

WILL FILING BANKRUPTCY AFFECT MY CREDIT RATING?

HOW LONG WILL BANKRUPTCY STAY ON MY CREDIT REPORT?

HOW MUCH DOES IT COST TO FILE BANKRUPTCY?

WILL MY SPOUSE AND I HAVE TO PAY TWO FILING FEES?

MY SPOUSE AND I ARE GETTING A DIVORCE; CAN WE FILE A JOINT PETITION?

WILL I NEED TO GO TO COURT?

CAN MY BANKRUPTCY BE DENIED?

WHAT IS THE DIFFERENCE BETWEEN A DISCHARGE AND DISMISSAL?

DO I HAVE TO CASH IN MY IRA, 401K, PENSION OR OTHER RETIREMENT ACCOUNT?

WHAT IS BANKRUPTCY?

Bankruptcy is a legal method of getting a financial fresh start for individuals and businesses that find they are unable to pay their bills. Individuals have two options, Chapter 7, liquidation, and Chapter 13, debt repayment, also known as reorganization. Farmers and fishermen can file a Chapter 12. There are other types of bankruptcies for businesses, municipalities’ etcetera but this web site only addresses Chapter 7 and Chapter 13 bankruptcies. Return to top of page.

WHAT IS A CHAPTER 7 BANKRUPTCY?

This is a fresh start where most or all of your debts can be discharged. While there are some debts that cannot be bankrupted, such as back child support payments, most people find that a Chapter 7 eliminates all, or substantially reduces, their debts. Under current law, not everyone qualifies to file for Chapter 7 bankruptcy protection. First, you have to pass a Means Test. If you do not qualify to for a Chapter 7, the next option would be to consider filing a petition for Chapter 13 debt reorganization bankruptcy. An example of a typical bankruptcy filer would be a person who lost their job and was off work for number of months. They have a new job that does not pay as much as their old job. For this reason, they cannot pay all of their bills. Another example would be someone who was just making ends meet and then was hospitalized with a major illness or injury and now has a huge list of medical bills that they cannot pay. These people, want to pay their debts but simply do not make enough money. Return to top of page.

WHAT IS A CHAPTER 13 BANKRUPTCY?

Chapter 13, debt reorganization, is a court supervised program which allows you to create a repayment plan for your debts. Under a Chapter 13, your debts are consolidated and you make payments to a trustee who creates a fund from which he makes payments to your creditors on your behalf. The total percentage of your debt that you pay back, depends on a number of factors, which include, your income, your monthly living expenses and how much property you own. Return to top of page.

WILL ALL OF MY DEBTS BE DISCHARGED IN A CHAPTER 7?

In some cases, all of the consumers debts will be discharged. In other Chapter 7 bankruptcy case most debts can be eliminated, The reason for this is that the Bankruptcy Code contains a list of debts that cannot be discharged (nondischargeable). If you have these debts, they will not be discharged in the bankruptcy. The types of debts that can be discharged include, credit cards, medical bills, personal loans, repossession debt and most judgments. Some of the common categories of nondischargeable debts include student loans, child support, domestic support orders, certain credit card debts for luxury goods and cash advances, certain taxes and certain debts arising from personal injury to others and restitution in criminal cases.

Cash advances on credit cards or a line of credit totaling $750.00 or more within 70 days of filing for bankruptcy are presumed to be nondischargeable. Purchases for luxury goods totaling $500.00 within 90 days of filing for bankruptcy are also presumed to be non-dischargeable. Keep in mind that 10 cash advances of $ 75.00 over a 10 week period meets the $750.00 requirement and will be presumed to be nondischargeable. This does not mean that you can wait 70 days and have no problem. After 70 days a creditor can still claim that you obtained the money or property with no intention of repaying them. If this occurs, you will have to defend the charge.

Chapter 13 rules are different. In a Chapter 13 you are repaying a part or all of your debts. Some debts can still be discharged. You will want to consult an attorney about the specifics. Return to top of page.

WILL I LOSE MY HOME IF I FILE BANKRUPTCY?

While this is a possibility, most people are able to keep their home. For example, If you file for a Chapter 7 Bankruptcy, you could lose your home if you have more equity in your home than the allowable exemption. You could also lose your home if you are unable to make your mortgage payments. Return to top of page.

WILL I LOSE MY CARS, FURNITURE OR OTHER PERSONAL ITEMS IF I FILE BANKRUPTCY?

Not necessarily. Most people who file bankruptcy do not lose those items, but it depends on their value and the exemptions you have available. Also, if you still owe money on items that are considered secured debt then you need to continue making payments in order to keep these items. Return to top of page.

WILL FILING BANKRUPTCY AFFECT MY CREDIT RATING?

Yes. However, if you are currently thinking about filing for bankruptcy, then it is likely that your current credit rating has already been affected. A discharge of your current debt may provide the opportunity to rebuild your credit with steady, regular payments on a new account. Keep in mind that a bankruptcy can be on your credit rating for up to 10 years. Return to top of page.

HOW LONG WILL BANKRUPTCY STAY ON MY CREDIT REPORT? Under current law, (The Fair Credit Report Act, 6 U.S.C. Section 605), credit reporting agencies must remove the report of a bankruptcy case from your credit report after ten (10) years from the date you filed for bankruptcy protection Other bad credit information is removed after seven years. Since it is better for your creditors if you file for chapter 13 instead of Chapter 7, some remove Chapter 13 cases from credit reports after seven years in an effort to encourage debtors to file a Chapter 13 instead of a Chapter 7 bankruptcy. Return to top of page.

HOW MUCH DOES IT COST TO FILE BANKRUPTCY?

The Court filing fee for a Chapter 7 Bankruptcy case is $299.00. For a Chapter 13 Bankruptcy case, the fee is $274.00 and these fees must be paid up front to the Court. to start your case. These fees are not set by your attorney. Other expenses that you will incur include the cost of mandatory credit counseling, and mandatory financial management training. These fees vary, but usually cost around $50.00 each. In addition to these expenses you will also have to pay attorney fees. This amount varies with the type of bankruptcy and the lawyer you hire, as each lawyer determines their own fees. Return to top of page.

WILL MY SPOUSE AND I HAVE TO PAY TWO FILING FEES? If you and your spouse file a Joint Petition, there is only one filing fee. If you file separate petitions then you will each have to pay separate filing fees. Return to top of page.

MY SPOUSE AND I ARE GETTING A DIVORCE; CAN WE FILE A JOINT PETITION? You can file a joint petition, if, at the time of the filing, you are still married. If a divorce decree has been entered, you each will have to file a separate petition. Return to top of page.

WILL I NEED TO GO TO COURT?

Yes. If you file a Chapter 7 Bankruptcy, you will be required to attend the Meeting of Creditors, which your attorney also will attend. Failure to attend the Meeting of Creditors may result in the dismissal of your case. At this meeting, you will be asked questions by a trustee and any of your creditors who attend. You may also have to attend a reaffirmation hearing. Return to top of page.

CAN MY BANKRUPTCY BE DENIED?

Yes. Any case can be dismissed if certain conditions are not met. Some examples include: failing to follow the rules, not going to court for hearings, not giving accurate information in the documents you file with the Bankruptcy Court or at a hearing, committing fraud, or failing to produce documents to the Trustee by the proper deadline. Return to top of page.

WHAT IS THE DIFFERENCE BETWEEN A DISCHARGE AND DISMISSAL?

A dismissal means that the automatic stay is lifted and your creditors can start calling you again and take other measures to collect your debts such as foreclosure, repossession and general lawsuits. A discharge means that your debts are forgiven and you have been given a financial fresh start. In addition, the creditors whose debts were discharged cannot start calling you again or take other measures to collect your discharged debts. Keep in mind that only debts that you list can be discharged. Any debt you fail to list is not discharged and you still owe the creditor. Return to top of page.

DO I HAVE TO CASH IN MY IRA, 401K, PENSION OR OTHER RETIREMENT ACCOUNT?

Most people are allowed to keep all of their retirement money. In fact, one of the most common mistakes people make is to use the money they have saved for retirement to pay bills before going to see a bankruptcy attorney. Return to top of page.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.