The bankruptcy process involves a detailed and thorough examination into the financial affairs and history of a debtor and no two cases are alike. However, there are certain reoccurring issues that are helpful to know for individuals who are contemplating bankruptcy.
Will bankruptcy stop harassment from creditors?
Yes. One of the benefits of bankruptcy is that once a petition is filed an "automatic stay" goes into effect preventing most debt collection activities, including creditors' persistent telephone calls. The automatic stay is one of the most powerful protections available in the American judicial system and creditors that do not comply with the stay are subject to sanctions. In addition, the automatic stay can stop foreclosures and repossessions and halt litigation that is pending in another forum.
What debts are not discharged in bankruptcy?
Student loans, unless repayment would cause the debtor an "undue hardship"
Domestic support obligations
Debts incurred through fraudulent activity
Fines and other criminal restitution
Certain tax debt
If I file Chapter 7, can I keep my home and car?
If you are current on your house and car payments, it may be possible to protect the equity in your home and vehicles in a chapter 7 case. If the equity in your home and vehicle are protected by exemptions and you remain current on you payments, you will not have to have to liquidate those assets in chapter 7. However each case is fact specific and will depend on your individual circumstances. In addition, if you have too much equity in your home or vehicle, you may be able to pay the trustee the value of your non-exempt equity, thus preventing liquidation of the asset.
How can Chapter 13 save my house?
Filing under Chapter 13 halts a foreclosure and can give you the opportunity to catch up on your delinquent mortgage payments over a three, to five-year period. During your chapter 13 case you will continue to make your regular monthly payments but will also pay-off a portion of your mortgage arrears each month through your chapter 13 plan. As long as you remain current on your plan payments, the creditor cannot foreclose.
When do I know if it is time for me to file bankruptcy?
You have high balances on your credit cards and cannot afford to make more than the minimum payment
There is little to no likelihood that you will be able to repay your debts in the foreseeable future
You are facing a foreclosure or repossession
A creditor is seeking to initiate a lawsuit or collect on a judgment
You are withdrawing early from your retirement in order to pay debts
You are selling your household possession just to pay your creditors.
I am married; do I have to file with my spouse?
No, married debtors can file either individually or as a couple. Whether it is in your best interest to file jointly may depend on the amount of your property, whether the property is owned together or separately and whether your debts are joint or separate.
What are some of the other benefits of bankruptcy?
In addition to tremendous debt relief options and the imposition of the automatic stay (which stops most debt collection activities), bankruptcy provides a single forum to resolve certain disputes with creditors. If you dispute whether you owe a certain creditor money or perhaps claim that a creditor owes you money, the bankruptcy court may have jurisdiction to resolve the dispute, providing a convenient, single forum to resolve your claim, all within the context of your bankruptcy case.
I have previously filed bankruptcy; can I file again?
Yes, but depending on when your last case was filed and whether or not you received a discharge may have an impact on whether you can receive a discharge, among other considerations. However, even if you received a discharge in a prior chapter 7 case and are ineligible for a discharge in another chapter 7 (for 8 years), or a discharge in a chapter 13 (for 4 years), chapter 13 may offer certain benefits that were not available in chapter 7. These benefits include stripping off an unsecured second or third mortgage, catching up on mortgage arrears, restructuring certain tax debt, and lowering the interest rate on a vehicle. All of those options may be available in chapter 13 even though you are ineligible for a chapter 13 discharge.
What do I need to begin the bankruptcy process?
Initially, you will need to collect information regarding your outstanding debt. Obtaining your free, yearly credit report is a good tool for finding which debts are outstanding and which debts have been paid. You will also need to provide a list of your assets, along with a statement regarding your monthly income and monthly expenses. Prior to filing bankruptcy, all individual debtors are also required to obtain pre-bankruptcy credit counseling from an approved provider.
Can I leave any of my assets off of my bankruptcy petition?
Intentionally leaving assets off of a bankruptcy petition is never a good idea and can result in severe consequences including a revocation of discharge and criminal charges. In return for the extraordinary relief afforded by the bankruptcy system, debtors are required to disclose all of their assets. If you are concerned about losing certain non-exempt assets through bankruptcy it is better to plan ahead and consider all alternatives, than to intentionally fail to disclose an asset.
Is it possible to transfer my assets before I file Bankruptcy?
Transferring assets while you are contemplating bankruptcy is risky business. Transfers made to friends and family within a certain time period before the bankruptcy petition looks suspicious and if the purpose of the transfer was to hinder, delay or defraud creditors, the transfer could be seen as fraudulent and result in a denial of discharge. Even if a transfer is undone before bankruptcy it could still have adverse consequences if it appeared the debtor was trying to place property out of reach of creditors. If you are concerned about what may happen to your property if you file bankruptcy, it is better to seek legal advice before transferring any assets of value.