Last page edit 02/12/08

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Frequently Asked Questions About Personal Bankruptcy

This website will be updated to reflect the new law by January 31, 2006.
Here is a brief summary of two major changes in the law.
Please note that the sections below may not yet have been updated.

Who notifies the creditors and bill collectors?
Will the bankruptcy stop bill collectors from calling?
How long after filing will the creditors stop calling?
Can I use bankruptcy to stop foreclosure on my home or to stop other actions by creditors?

Can my employer fire me for filing bankruptcy?
Can I go to jail if I file bankruptcy or don't pay my debts?
Will I have to go to court?
Does the spouse of a married person also have to file bankruptcy?
Can a judge ever turn down a bankruptcy petition?

Can I file a bankruptcy for my debts, but not include my assets?
Do I have to disclose all of my assets?
Will I lose property in a bankruptcy?
Can all of my debts be eliminated by a bankruptcy?
Can I keep any credit cards?
Can I load up on debt just before the bankruptcy?

 

A bankruptcy is legal process designed to help people who are deep in debt to make a fresh start. There are two different kinds of personal bankruptcies. If you are a farmer or have a business and most of your debts are business debts, this section is not for you. 

 

Bankruptcy under Chapter 13 allows you time to catch up on your bills and debts. Chapter 7 bankruptcies allow you to have fresh start without a legal obligation to pay the debts that were “discharged”.

Who notifies the creditors and bill collectors?
After the bankruptcy petition is filed, the court mails a notice to all the creditors listed in the schedules. This usually takes a couple of weeks. back to top]

Will the bankruptcy stop bill collectors from calling?
Yes. The court will immediately issue an order ( called an "automatic stay") which prevents bill collectors from taking any action to collect debts. 

 

Bankruptcy will temporarily stop virtually all actions that a creditor can take against you. Once you file, your creditors must work through the bankruptcy court process. This means that debt collection lawsuits, utility shutoffs, foreclosures and repossessions will be stopped (sometimes only temporarily). Source: 11 USC 362. 

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How long after filing will the creditors stop calling?
As soon as a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks.

 

Creditors will also stop calling if you tell them that you filed the bankruptcy petition. Give them the "docket number" for your case. This is the number given to you by the court. It will be at the top of your petition.

 

In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a law suit is pending. If a creditor continues to try to collect, the court can take action against them. Source: 11 USC 362 (h). Also see Pettit v. Baker 876 F2d 456 (5th cir, 1989). [back to top]

Can I use bankruptcy to stop foreclosure on my home or to stop other actions by creditors?
Yes, it will stop immediately (although it may be temporary). Filing for bankruptcy means that the court gives you an "automatic stay". An automatic stay means that the court stops your creditors from whatever actions they have been taking to collect from you. Creditors must immediately stop actions such as :

  • repossessing your car,

  • garnishing your wages,

  • taking money from your bank account,

  • cutting off your utilities, or

  • taking back other property on which you owe money.

The stay will prevent your creditors from taking action until the court lifts (removes) the stay.

Some people use the time given under a Chapter 13 bankruptcy "stay" to try to sell a house in order to avoid foreclosure.

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Can my employer fire me for filing bankruptcy?
No. The Bankruptcy Code prohibits government units and private employers from discriminating against you because you filed a bankruptcy petition. Source: 11 USC 525 (a).

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Can I go to jail if I file bankruptcy or don't pay my debts?
No. There are no debtor's prisons in the United States. 

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Will I have to go to court?
You usually will not need to go to court. About 30 to 40 days after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but a person appointed by the United States Trustee to oversee bankruptcy cases.

 

At the First Meeting of Creditors, the trustee will ask you questions (under oath) about your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask you questions. However, usually creditors do not attend these meetings if you have filed for Chapter 7 bankruptcy.

 

If you file for a Chapter 7 Bankruptcy, you normally do not need to return to court. If you filed for a Chapter 13 Bankruptcy, you may need to return to court for a confirmation hearing before the bankruptcy judge. 

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Does the spouse of a married person also have to file bankruptcy?
No. In some cases where only one spouse has debts. It may make sense for only one spouse to file, if one spouse has debts that are not dischargeable.

 

Both spouses are responsible for the debts that you acquired together while you were married. If you file for a bankruptcy on these joint debts, your creditors can pursue your spouse for payment. If you are living together, it may be wise for you to jointly file for bankruptcy.

If the debt belongs to you alone, the creditor cannot pursue your spouse for the debt after you file for bankruptcy. Before you make a decision on whether the debt is a joint debt or yours alone, you may want to ask an attorney.

 

If you co-signed for a debt with an unmarried partner or someone else, you cannot file jointly for bankruptcy. However, you can file separately.

 

You can protect a friend or relative who co-signed with you by filing for Chapter 13 bankruptcy. When you file under Chapter 13, creditors are not allowed to pursue your co-signers as long as you are keeping up the payments under the plan. As long as you pay the creditor as proposed by the plan, the creditors will not pursue the friend or relative who co-signed with you.

Source: 11 USC 363 (h).

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Can a Judge ever turn down a bankruptcy petition?
Yes - A judge may decide that you have enough income or assets to reorganize (Chapter 13) rather than eliminate your debts (Chapter 7). S/he may dismiss your Chapter 7 bankruptcy case. (11 U.S.C. § 707(b)) This situation usually comes up when the person appointed to oversee your case (the trustee) believes that you could pay back some (or all) of the debt that you owe. If your monthly income is enough greater than your monthly expenses, you may be able to file for a Chapter 13 bankruptcy instead.

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Can I file a bankruptcy for my debts, but not include my assets?
No. 

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Do I have to reveal all of my assets?
Yes. If you conceal an asset from the court you can be charged with a felony and can be fined up to $5,000, imprisoned for up to five years, or both. In addition, the court can dismiss your bankruptcy case. 

Source: 11 USC 727 (a)(2).

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Will I lose property in a bankruptcy?
Maybe. Most of your property is likely to be protected from sale because of special exemptions. Review the exemptions. If you have valuable property that you want to keep that is not covered by the exemptions, you will probably not be able to keep it unless you file a Chapter 13 bankruptcy and pay for it under the plan.

 

In a Chapter 7 bankruptcy, you must turn over any property that is not exempt to a court-appointed person who will arrange to sell the property and give the money to your creditors. Some debts may be "secured" - usually a house or car or mobile home. A secured debt is a debt where you have promised property as collateral. Usually you will need to give the property back to the creditor. See more details on secured debts (like a house or car) under the question “Which type of bankruptcy should I file?

 

In a Chapter 13 bankruptcy, you will not lose any property if you are able to complete your reorganization plan. (More than half of the people, who file for a Chapter 13 Bankruptcy, are not able to complete the plan.)

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Can all of my debts be eliminated by a bankruptcy?
Probably not. Some types of debts are protected. The law does not treat all debts in the same way. Some debts, such as alimony, child support, recent income taxes, student loans and certain criminal penalties, cannot be eliminated or "discharged" by the bankruptcy court. Details on these special debts.

If you have a Chapter 13 bankruptcy, some debts will be repaid completely, some will be partly repaid and other debts will be eliminated entirely.

Finally, if you forget to list any debts on your bankruptcy papers, you will still owe these debts after the bankruptcy.

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Can I keep any credit cards?
Under some circumstances if the creditor agrees, you may be able to keep some credit cards. There are many factors which must be considered. Some of the factors include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt. 

Source: 11 USC 541 (c).

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Can I load up on debt just before the bankruptcy?
If you wait to file for a bankruptcy and use your credit to take a last minute vacation or make some major purchases, the court may decide that these later debts are not dischargeable.

If you transfer valuable assets that would not be covered by the exemptions in the year before you file for bankruptcy, the court may dismiss your case.

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Source: This material was originally created by Richard Granat, a Maryland private attorney.  It has been expanded substantially and updated by legal services provider and legal interns working with the Maryland Legal Assistance Network staff

Last date of legal review 02/12/08 (PLL/M.A.J.)
Is this legal advice? This site offers legal information, not legal advice.  We make every effort to ensure the accuracy of the information and to clearly explain your options.  However we do not provide legal advice - the application of the law to your individual circumstances. For legal advice, you should consult an attorney.  See our section on Finding Legal Help.

About this website. The Maryland State Law Library, a court-related agency of the Maryland Judiciary, sponsors this site. The website was developed (1999-2007) as part of an access to justice initiative by the Maryland Legal Assistance Network (MLAN) in collaboration with a number of legal services providers serving low and moderate income Marylanders.  In the absence of file-specific attribution or copyright, the Maryland State Law Library may hold the copyright to parts of this website. You are free to copy the information for your own use or for other non-commercial purposes with the following language “Source: Maryland's People’s Law Library – www.peoples-law.org. © Maryland State Law Library, 2007.”

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