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Find Answers to Common Bankruptcy Questions
What is Bankruptcy?
In its simplest terms, Bankruptcy is a legal right that allows individuals who owe others (creditors) more money than they’re able to pay to either work out a plan to repay the money over time or completely eliminate most of the bills.
What’s the difference between secured and unsecured debt?
Secured debt is a claim that’s secured by some type of property, either by an agreement or involuntarily with a court judgment or taxes. Creditors can generally claim the property and use it to pay off the debt in the event of a Bankruptcy. For example, the mortgage on your house is a secured debt on your property. Unsecured debt is not tied to any type of property, and the creditor can’t claim it if you file for bankruptcy.
Which Bankruptcy type or chapter should I file?
Consumers typically file Chapter 13 bankruptcy, where repayment is made to creditors or Chapter 7 where the debts are dismissed. Each chapter of bankruptcy spells out:
- What bills can be eliminated
- How long payments can be stretched out
- What possessions you can keep
- Additional information
The type depends on your circumstances and if you have assets available to repay all or part of your debts. Bankruptcy laws can be tricky and involved, so determining if, when and which type of bankruptcy you need should be made with careful thought or the input of a bankruptcy lawyer.
Can I change from one chapter of bankruptcy to another?
Generally, you can convert a case one time to any other chapter you’re eligible for. The request to convert can be a simple one-sentence document. Watch out for pitfalls, though. For instance, if you move from Chapter 13 to a Chapter 7, some of your possessions may be part of the Chapter 7 estate (and can be taken and sold to pay your debts), even though they were safe from creditors under Chapter 13.
Who can file bankruptcy?
Technically, any person in debt, owing money to a creditor can file a bankruptcy petition.
How often can you file for bankruptcy?
Filing bankruptcy can adversely affect your ability to obtain future credit, rent housing and even negatively impact a job application. Any decision to file must be carefully considered.
Chapter 7 – can be filed every 8 years from a previous Chapter 7 filing, or 6 years from a prior Chapter 13 filing.
Chapter 13 – can be filed 4 years from a prior Chapter 7 filing, or 2 years from a prior Chapter 13 filing.
Do you have to have a certain amount of debt to file?
No. However, some situations may not warrant filing for bankruptcy. If your financial situation is temporary, you may consider making arrangements with individual creditors for a change in payment amounts or a reduction in the total amount due. If you have little property or money, filing bankruptcy may not be necessary, as the creditor may not be able to collect the debt.
What’s a joint petition?
A joint petition is when an individual and a spouse file a single petition. Unmarried partners must each file a separate case.
What happens if one spouse files for bankruptcy and not the other?
If one spouse files and the other doesn’t, the one who doesn’t file could be responsible for the debts. Review this carefully before filing.
Does my divorce decree protect me from creditors if my ex files for bankruptcy?
No. If you’re a cosigner with your ex-spouse on a debt acquired while married, the creditor can require the entire payment of that debt from you even though the divorce decree assigns the full debt to your ex-spouse. Your divorce decree may address any recourse you may have against your ex-spouse should he default on the loan obligations.
Can a loan cosigner be responsible for a debt if the other person declares bankruptcy?
Yes. The lender can require the co-signor to make payments on a loan once the principal has declared bankruptcy on the credit. This makes it extremely important when considering co-signing a loan: Be ready, and able, to pay the loan in the event that the principal signer defaults.
Can all types of debt be discharged?
No. The following list represents those types of debt which generally cannot be discharged:
- Debts for taxes owed to local, state or federal agencies
- Debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently
- Debts that weren’t in the initial list of debts or that the debtor waived being canceled
- Debts owed to a spouse, former spouse, or child, for alimony, maintenance, or support of a spouse or child, with a separation agreement, divorce decree or other order of a court of record
- Debts owed for injury to another person or property owned by another (as in a court judgment)
- Debts for government-sponsored educational loans, unless it can be shown that repayment will cause an undue hardship
- Debts for death or personal injury caused by the debtor’s drunk driving or from driving while under the influence of drugs or other substances (as in a court judgment)
- Debts incurred after a bankruptcy was filed
- Any type of legal judgment
What can I keep, if anything, if I file for bankruptcy?
Exemptions allow an individual to “exempt”, or keep, certain kinds of property. State law defines what assets are considered “exempt,” but typically include:
- Vehicles up to a certain amount
- Equity in a home up to a certain amount
- “Tools of the trade” or tools and equipment necessary to allow the individual to continue working
Do I have to file bankruptcy on all the accounts I owe, or can I keep some?
You must include all the debts you owe in your petition and schedules. You may opt to keep some debts by “reaffirming” the specific debt.
Will I lose my retirement accounts or payments from social security?
Generally, no. Retirement accounts that are ERISA-qualified aren’t considered the property of an estate and aren’t taken into consideration as assets. Social Security benefits are protected from an assignment, or garnishment for debts in bankruptcy. Once paid, the benefits continue to be protected only as long as they can be identified as Social Security benefits. For example, money in a bank account where the “only” deposits into the account are direct deposits of Social Security benefits are identifiable and generally protected.
Will I lose my home if I file for bankruptcy?
There are many factors that impact the ability to keep your home, including:
- The state you’re in and the exemptions allowed
- The status of your loan (current or in foreclosure)
- The type of bankruptcy you’re filing (Chapter 13 provides more protection than Chapter 7 as long as payments are current)
For what duration does a bankruptcy stay on my financial records?
This varies, however, in general Bankruptcies remain on credit reports anywhere from 7 up to 10 years.
Can I do anything to remove a bankruptcy from my credit report?
No. Although at your option, you can file an explanation with the credit reporting agencies briefly describing the events resulting in your bankruptcy. If an account is reported inaccurately, you can request the record be updated to reflect the actual situation.
When can I apply for credit again?
The decision whether to grant you credit in the future is strictly up to the creditor and varies from creditor to creditor. There’s no law that prevents anyone from extending credit to you immediately after the filing of a bankruptcy, but creditors aren’t required to extend you credit.
Can a creditor continue to contact me after I’ve filed for bankruptcy?
During the time the debtor is working out a plan or the trustee is gathering and preparing the assets to sell, creditors are required by law to stop all collection efforts against you. As soon as the bankruptcy petition is stamped “Relief Ordered” upon filing, you’re immediately protected from your creditors. This is called an automatic stay. After that time, if a creditor attempts to collect a debt, immediately notify the creditor in writing that you have filed bankruptcy, and provide them with either the case name number and filing date or a copy of the petition that shows it was filed. If the creditor still continues to collect, you may be entitled to take legal action against it.
If you have further questions about Bankruptcy or Foreclosure, please call 866-460-1990 for answers to all your frequently asked questions. And to schedule a free consultation at one of our four Bankruptcy Law Firm offices in Port St. Lucie, Vero Beach, Fort Pierce or Okeechobee, please call or visit our contact page.
We are a debt relief agency and attorneys. We help people file for Bankruptcy relief under the Bankruptcy Code. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free information about our qualifications and experience.
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