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Bankruptcy FAQs

This page is intended to provide general information. It is important to note that every situation is different and these questions and answers are not intended as a substitute for a consultation with competent counsel. If you would like to schedule an appointment, you can request a consultation by clicking the button below,

1. I am considering filing for bankruptcy. What are my options?

There are three general forms of bankruptcy filing available to individual debtors. These are Chapter 7, 13 and in some cases 11. However, before filing for bankruptcy, it is important that you evaluate your present financial situation to determine whether filing is necessary. In some cases you may be able to work out alternate payment arrangements with your creditors, such as extending payment periods, deferring payments, or offering a lump sum amount to satisfy an outstanding debt. It is a good idea to seek counsel from a bankruptcy attorney to determine how and what steps you should take prior to filing for bankruptcy.

2. What Property You Can Keep

One of the most frequently asked questions before filing for bankruptcy is “What property can I keep?” The answer is that the typical consumer debtor will keep ALL of his or her property, provided such property is exempt from creditors, and depending on the type of bankruptcy filed and how much property you own. Under Chapter 7, debtors have property exemptions which allow them to keep a lot of their property as they need for a fresh start. The Trustee may, however, look carefully at property which a debtor may not really need. Every case is a bit different, and our attorneys can explain everything to you. If you file a Chapter 13 bankruptcy, there is usually less of a chance of losing property since you’re simply rescheduling your debts, not wiping them out.

3. The Automatic Stay

Immediately upon filing your petition, an “automatic stay” (freeze) goes into effect. This means that all creditors must halt all collection activity against you. They cannot write or call you (except to send monthly statements). Any pending lawsuits are put on hold until further notice. If a creditor wants to be removed from the Stay Order, it must make a formal motion (request) to the bankruptcy judge.

4. You Can Change Your Mind

After filing your petition, if you change your mind, you may ask the court to voluntarily dismiss your case, and the court will likely do so, provided it won’t harm any creditors, or cause undue expense to the trustee or the Court. In some cases, you may be asked to reimburse the U.S. Trustee’s Office for any costs incurred in processing your petition.

5. What are the different types of creditors?

In general there are three different types of creditors. First, are secured creditors to whom you owe a debt such as a loan and the loan is attached to an asset of the individual. For example, the person holding the mortgage on your house is a secured creditor. Another secured creditor is the creditor who holds a debtor’s car loan.

The second type of creditor is an unsecured creditor. These are creditors such as credit card companies. These debts are not secured by an asset.

The third type of creditor is a priority creditor. Examples of priority creditors include the individual to whom you owe a child support obligation, the bankruptcy attorney, the trustee, and the IRS.

6. What fees will I be required to pay and how will I pay them?

There are several fees that must be paid. First is the filing fee. This fee is paid directly to the bankruptcy court.

In addition to the filing fee, you will have to pay fees to your attorney and to the trustee. The trustee is a priority creditor and his fee will be accounted for in your bankruptcy.

7. My house is about to go into foreclosure. Will filing for bankruptcy protect me from losing my house?

Filing for bankruptcy will temporarily stop foreclosure proceedings. It will also provide you with more time in which to explore your options of (1) selling (assuming you have equity in the house), (2) renegotiating the loan in some cases, (3) giving you time to bring any late payments current.

8. How will filing for bankruptcy affect my credit?

Filing for bankruptcy will have a negative effect on your credit score. However, this effect is not permanent. In general, a filing will remain on your credit report for ten years. You will have the opportunity to rebuild your credit immediately upon receiving a discharge. It has been possible to qualify for a mortgage loan in as little as three years after bankruptcy.

9. What is a 341(a) meeting?

A 341(a) meeting is presided over by the trustee assigned to the bankruptcy case and is considered a meeting of creditors. This meeting is held approximately 40 days after the new petition is filed. A debtor is required to appear and testify under oath and to be questioned by the trustee or creditors about his/her assets/liabilities. Failure to appear may result in dismissal of the case. If a continuance or change in the hearing date, time, or location is sought, the trustee assigned to the case must be contacted. Such requests are not filed with the court.

10. What is a bankruptcy discharge?

Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In cases involving a discharge, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor (such as telephone calls, letters, and personal contacts). Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

11. What is a Reaffirmation Agreement?

A reaffirmation agreement is an agreement by a debtor to continue paying a dischargeable debt (such as an auto loan) after bankruptcy, usually for the purpose of keeping collateral (i.e., the car) that would otherwise be subject to repossession.

12. What is the difference between bankruptcy chapters 7, 11, and 13?

Chapter 7
Chapter 7 is used by individuals, partnerships, or corporations who cannot repair their financial situation. In Chapter 7, the debtor’s estate is liquidated under the rules of the Bankruptcy Code. Liquidation is the process through which the debtor’s non-exempt property is sold by a trustee and the funds from the liquidation are distributed to creditors.

Chapter 11
Often called the “reorganization chapter,” Chapter 11 allows corporations, partnerships, and individuals to reorganize without having to liquidate all assets. In filing a Chapter 11, the debtor presents a plan to creditors which, if accepted by the creditors and approved by the court, will allow the debtor to reorganize personal, financial, or business affairs and again become a financially productive individual or business.

Chapter 13
An individual with a regular income who is overcome by debts, may file under Chapter 13 of the Bankruptcy Code to repay the debts within a reasonable period of time, . Chapter 13 permits the debtor to file a plan in which the debtor agrees to pay a certain percentage of future income to the Bankruptcy Court for payment to creditors. If the court approves the plan, the debtor will be under the court’s protection while repaying such debts.

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