Frequently Asked Questions
Will I qualify to file a Bankruptcy?
If you are asking me this question you probably qualify to file a Bankruptcy case. The standard for whether you can file a Bankruptcy case is whether either your debts exceed the value of your property, or whether you are not able to pay your bills as they come due. Some higher income people may have to file a Chapter 13 Bankruptcy (if they earn more than the "median income" for their family size and cannot pass the "means test") but if you have a real debt problem you will qualify to file a Bankruptcy case.
Can I save my house in Bankruptcy?
Bankruptcy offers one of the best chances to save your house when you are in financial trouble. If you are current with your house payments, Bankruptcy can get rid of other debts so that you can better afford your housing. If you are behind in your payments, but could afford the payments going forward, Bankruptcy can be used as a tool to bring your loan current over time. If you have a second mortgage and your house is worth less than the first mortgage balance Bankruptcy may allow you to "strip off" the second mortgage. If you are behind on your mortgage it is important to analyze your financial situation carefully and get good advice on your options, because this is a decision that you will be living with for many years to come.
Will I lose my car if I file for Bankruptcy?
If you can afford your car (after your other debts go away) and it makes sense to keep the car you can almost always keep your car when you file a Bankruptcy case. However, if you made a bad deal on your car loan there may be ways to get out of the deal and have a car with lower car payments. Bankruptcy gives you an opportunity to look at these deals, keep the ones that make sense and get rid of the ones that are dragging you down.
Will I lose all of my property in Bankruptcy?
No. In Bankruptcy there are laws called "exemptions" that let you keep a reasonable amount of property. Your household goods, your clothing, retirement plans and a reasonable amount of money in the bank to live off of are all usually protected. In most Chapter 7 Bankruptcy cases the debtors do not give up any property. Of course, you will want to work with someone (like me) who is experienced in Bankruptcy law to get the most benefit out of your exemptions.
Will I have to face my creditors if I file for Bankruptcy?
Not usually. As a matter of fact, creditors are actually prohibited from contacting you directly after you file a Bankruptcy case. After you file the Bankruptcy case you are required to attend a "creditors meeting", but in practice you almost never see creditors at the creditors meeting. Instead, you spend a few minutes with the Bankruptcy Trustee, who will ask you some questions about your Bankruptcy filing. If a creditor contacts you outside of this meeting it is probably a violation of Bankruptcy law and they can be brought before a Bankruptcy Judge to answer for their actions.
Will Bankruptcy destroy my credit?
How bad is your credit score now? If your credit is already damaged, bankruptcy may actually improve it. A bankruptcy will improve your "income to debt ratio". That is, your income will be the same after bankruptcy but you will have much less debt. You can then take steps to improve your credit score by making timely payments on credit obligations. Many people who file bankruptcy get reasonable interest auto loans within 1 or 2 years of discharge and many get unsecured credit cards as well. Although bankruptcy can remain on your credit reports for up to 10 years many people who make reasonable efforts to re-establish their credit may have adequate credit within 2 to 3 years of bankruptcy.
Do all of my debts go away in a Bankruptcy?
Most debts go away (get "discharged") in Bankruptcy, but there are some debts that do not get discharged. Some types of debts that don't get discharged include:
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 incurred by fraud or embezzlement
5) debts resulting from "willful and malicious" harm; and
6) most student loans
However, the vast majority of debts - including credit cards, medical bills, personal loans, lines of credit, etc. - go away in a Bankruptcy case.
Do I still have to pay my bills if I file for Bankruptcy?
There are some bills that you still have to pay after you file for Bankruptcy. Most of these bills are normal living expenses. Some types of bills that you must continue to pay are:
- All child and spousal support and most income taxes and student loans
- Secured debts like vehicle loans and home loans (if you want to keep the items)
- Vehicle leases (if you want to keep the vehicle)
- Your normal monthly utility bills, rent or mortgage, insurance, property taxes, etc.
Do I still have to pay court judgments if I file for Bankruptcy?
In most instances a court judgment will be discharged just like any other debt and you will not have to pay it. Some types of court judgments, like a judgment ordering you to pay child support, alimony or student loans, are not discharged. In some instances a creditor may ask the Bankruptcy Court to order that their debt is not discharged; for example, if you had defrauded someone or embezzled money. However, most court judgments get discharged.
Is filing for Bankruptcy expensive?
Most people will find that filing for Bankruptcy is a lot less expensive than struggling to make payments that they can't afford month after month and getting nowhere doing it. Different attorneys charge different fees (you will find my fees to be among the most reasonable) and often the fees and costs need to be saved up over a period of time. I can tell you without hesitation that I have handled a number of cases where I have charged my clients less than they had already paid to bogus online "credit counselors".
