Frequently Asked Questions

What is bankruptcy?

Bankruptcy is a procedure where a person gets debt relief through the bankruptcy courts. The person who owes money is called the “debtor.” The people who believe they are owed money are “creditors.” The debts that creditors argue the debtor owes them are known as “claims.”

In bankruptcy, the debtor files a petition and a list of assets and a list of liabilities with the bankruptcy court. The court then decides what should be done about each of the creditors’ claims.

The goal is to resolve claims of the creditors, get an order discharging the debtor’s obligations, and allow the debtor to start over.

What does it take to “file bankruptcy?”

“File bankruptcy” and “taking bankruptcy” are two of the ways people describe the process. When a debtor “files bankruptcy” he or she is asking for relief from debts by filing a petition with the court and persuading the court that they are entitled to relief. Bankruptcy involves the following broad steps:

organizing and collecting all your financial information
preparing legal documents and filing them with the court
presenting your case to the bankruptcy trustee and creditors, and
asking the court to give you a discharge order (this order approves your request for bankruptcy relief)

What information will I need to start?

To begin you will need information about your current financial status

Your income for the last 6 months (all income)
Your current expenses (your regular bills)
All of your assets, and
All of your debts

You will then need to gather documents that record the financial information you give us.

How do I get started?

Getting started is easy. You will follow these

You let us know you are interested in our help

Our staff will ask you a series of questions about your situation
Answers are reviewed to confirm bankruptcy is a suitable option for you
You will be contacted about the review

You decide to move forward

We send you a legal services agreement and instructions for hiring us to represent you in bankruptcy.
You sign and return the legal services agreement and make arrangements to make your first payment if we agree to represent you.
One of our attorneys will consult with you about the bankruptcy filing and make a determination about representing you.

We agree to represent you

The firm will prepare a petition for filing
You will do a pre-bankruptcy counseling session (all debtors are required to do this counseling)(It can be done by phone or online)
You will provide papers necessary to document the schedules (lists of things you must tell the court as part of your case) that are filed with your petition.

After filing, you will be required to attend a “meeting of creditors” in which the bankruptcy trustee will ask about the petition and schedules. Ironically, creditors often choose not to attend; however, they can attend and ask questions if they wish. One our attorneys will attend the meeting with you.

What's BK all about?

Bankruptcy is a federal court process designed to give consumers and/or businesses a “fresh start” by either eliminating many of their debts or repaying their debts through an order of the court.

When a bankruptcy is filed, creditors have to stop any attempt to collect a debt. Most creditors cannot call, correspond, or sue you after you have filed for bankruptcy. Bankruptcy laws have numerous rules regarding the kind of debts that can be wiped out, who is able to file, and what property you can and cannot keep.

I heard the law changed and you can't file, is that true?

No, but filing is more challenging now. Now the court looks to see if you have any money remaining in your budget after you pay necessary living expenses. If there is money left then you must file a reorganization type bankruptcy to slowly pay back creditors. On the other hand, if there is no money left over each month then you may receive a discharge without paying back creditors.

Not all living expenses are considered necessary. Bankruptcy law provides a method for calculating your necessary living expenses. It is called the “Means Test.”

What's the difference between a chapter 7 and a chapter 13?

Chapter 7 or liquidation bankruptcy is a fresh start. Chapter 7 is usually completed in three or four months. After the Debtor’s estate is liquidated, the court grants a Discharge Order at the successful conclusion of Chapter 7. The Discharge Order frees the debtor from all of the old debts that were included in the bankruptcy case.

Chapter 13 is a reorganization plan. It is often used by debtors to re-organize past due car payments and house payments in a three to five year plan of monthly payments. In addition, the plan will usually include repayment of some or all taxes, credit card debts, and medical bills. Payments are also made to a Chapter 13 trustee who will track the debtor’s progress and alert the court if the debtor falls behind on the plan. If all monthly payments are made and the plan completed, the debtor receives a discharge.

Are all debts dischargeable?

No. Some debts are NOT discharged under the law. Generally speaking, taxes owed to the IRS and student loans are not dischargeable. Child support and spousal support are usually not dischargeable. Most fines, penalties, forfeitures, and criminal restitution obligations are not dischargeable. The same is true for debts not listed in your bankruptcy schedules and debts for death or personal injury caused by operating a motor vehicle while intoxicated.

How much does it cost?

This depends on several factors. Two of the most prominent are (1) the complexity of your case and (2) the cost of legal services in your area.

Do I have to pay all at once?

No. The representation agreement we send you will explain how much is needed for the initial retainer. In Chapter 7 cases the balance will be required before we file your bankruptcy. In Chapter 13 cases it may be possible to include a portion of our fee in the plan.

Once a bankruptcy is filed, if you owe your attorney money, the amount owed becomes a debt just like any other debt, and your attorney becomes a creditor in your bankruptcy case.

Will I lose my house, car, etc?

Every case is different. Most necessary household goods will be retained. In a Chapter 7 case, you must stay current on car and house payments to keep them. In a Chapter 13, you can get time to catch up for past due payments, but you will have to make all current car and house payments. In either case, if you have a home or vehicle you cannot afford, you will need to consider letting them go. Bankruptcy does not erase the lien (or security interest) the bank took on the property when it made your loan. Your attorney will cover which assets are “exempt” under your state’s bankruptcy code.

Will my employer find out?

There is no general notice requirement to your employer although, technically speaking, a bankruptcy filing is a public record. As a general rule, employers will not learn of your Chapter 7 filing unless they are a creditor. In a Chapter 13, most Trustees require your employer to make direct payment of your Chapter 13 installments; therefore, your employer will know.

The bankruptcy codes states that you cannot be fired or discriminated against for filing bankruptcy.

How long will it be on my credit report?

By federal law bankruptcy may be recorded on your credit report for approximately 10 years. However, many clients are able to begin rebuilding their credit in less than 10 years.

Does my spouse have to file?

No. There is no general requirement that both spouses file. If all of the debt is in only one spouse’s name, it may be better to file individually. Our office will want to examine the debts of both spouses to determine who is liable for the debt. Many loan documents include both spouses - sometimes without the borrowers being aware of it. After review of your situation, your attorney will help you make the decision to file a joint or individual case.

I owe my brother money. Do I have to list him on the bankruptcy?

Yes. ALL creditors must be disclosed, and everyone will be treated the same. The bankruptcy laws were intended to promote fairness and full disclosure. You are not permitted to favor family and friends. There is nothing, however, that prevents you from electing to repay your brother after the bankruptcy is completed.

Can I keep one of my credit cards to use during and after the bankruptcy?

Technically, you do not have to disclose credit cards which have a zero balance. If you do not owe money, they are not a creditor. As a practical matter most credit card companies do routine inquiries on your credit, which will reveal the bankruptcy and may cause them to cancel the card. Your best bet may be to get a secured card... a card that allows you to borrow against money you deposit with the card issuer. This will help you rebuild your credit over time and eventually you should be eligible to withdraw your deposit and get a regular credit card. You can also open a new bank account with a debit card which may be used in place of a credit card.

How often can I file bankruptcy?

You can file bankruptcy as many times as you want in your life; however, you may not file another chapter 7 bankruptcy case until eight years have passed since your last chapter 7 bankruptcy case. And under the new laws, it is extremely difficult to get a Chapter 13 reorganization plan confirmed if you had a prior Chapter 13 case dismissed within 1 year of the prior dismissal.

What are the credit counseling and debtor education requirements?

The 2005 bankruptcy laws require people get financial education to help with life before and after bankruptcy. This includes a pre-bankruptcy credit counseling course and a post-bankruptcy debtor education course.

Before someone can file bankruptcy, he or she must obtain a credit counseling certificate from an agency approved by the U.S. Trustee’s Office. Things covered in the credit counseling briefing include an evaluation of your personal finances, alternatives to bankruptcy and personal budgeting. We can help you find a convenient course and online or phone courses are available.

After filing bankruptcy a debtor must complete a trustee-approved debtor education course, which covers essentials of personal finance, such as budgeting, money management and credit use. The debtor must submit the certificate of completion in order to receive a discharge from debt.

How long do bankruptcy cases last?

Chapter 7 bankruptcy cases are relatively quick, with a discharge often attainable in as little as three or four months after filing. Chapter 13 bankruptcy cases are longer; repayment plans typically range from 3-5 years.

What is a bankruptcy preference and what does a bankruptcy preference mean to me?

Part of the job of the bankruptcy court is to treat all creditors fairly. Imagine that right before your bankruptcy filing you paid one credit card $10,000 and paid none of your other creditors anything. When your case is filed, the court will see the payment and say you showed a preference to one creditor over the others. The court will usually take action to reverse the preference. The court will look back 90 days for most creditors, but look back one year for family and friends.

Will bankruptcy stop a foreclosure or repossession?

The short answer is yes; however, it may not be for long. After your bankruptcy is filed, an “automatic stay” prevents creditors from going forward with foreclosures or repossessions. However, if the creditor has a legitimate lien on your property, they can ask the court to lift the stay in order to repossess the property. Bankruptcy can delay foreclosure and repossession, but it will not always prevent it. If you are attempting to negotiate with the creditor to keep the property, bankruptcy might be a way to help with those discussions, but there are no guarantees. You will want the guidance of your attorney to sort out your options.