Should I file Chapter 7 or Chapter 13 bankruptcy?
You may qualify for Chapter 7 if your monthly expenses exceed your monthly income, your income is less than the median family income in your state, or you do not have a lot of assets that you wish to keep. Your debts may be eliminated under Chapter 7 with a discharge but some types of debts cannot be discharged. You may qualify for Chapter 13 bankruptcy relief if your monthly income exceeds your monthly expenses. Under Chapter 13, you make a “plan” to repay your debts over a maximum of 60 months.
Can a judge turn down a bankruptcy petition?
A judge may decide that you have enough income or assets to repay your debts under Chapter 13 rather than eliminate your debts under Chapter 7. The judge may dismiss your Chapter 7 bankruptcy case in the following cases:
- If you are not eligible for Chapter 7 bankruptcy relief AND do not convert to Chapter 13, or
- If you do not qualify for bankruptcy relief due to a previous case being dismissed. 11 U.S.C. § 707(b)
- You received a discharge under Chapter 7 within 8 years prior to the date of filing your new Chapter 7 case. 11 USC §727 (a)(8)
A trustee is assigned to each bankruptcy case and will determine if you can pay back some (or all) of the debt that you owe.
Who notifies the creditors and bill collectors?
After the bankruptcy petition is filed, the court mails a notice to all the creditors you listed.
Will the bankruptcy stop bill collectors from calling?
Yes. The bankruptcy will temporarily stop virtually all actions that a creditor can take against you, your property, and assets. 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). Read the Law: 11 USC 362(a)
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 about one week or less.
Creditors will also stop calling if you tell them that you filed the bankruptcy petition. Give them the "case 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. Read the Law: 11 USC 362 (h), (k)
Can I use bankruptcy to stop foreclosure on my home or to stop other actions by creditors?
Yes, actions against your assets or property will stop immediately (although it may be temporary). Filing for bankruptcy means that the court grants you an "automatic stay". An automatic stay is an Order that arises from the Court and that Order 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 actions to gain possession of other property on which you owe money.
The stay will prevent your creditors from taking action until the court lifts (removes) the stay. The stay is automatically lifted if the case is closed, dismissed or discharged. Read the Law: 11 USC 362(c)
Can my employer fire me for filing bankruptcy?
No. The Bankruptcy Code prohibits private employers from discriminating against you because you filed a bankruptcy petition. Read the Law: 11 USC 525 (a)-(b)
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.
Will I have to go to court?
Yes. About 30 to 40 days after filing the bankruptcy petition, you will have to attend a First Meeting of Creditors presided over by your bankruptcy trustee. 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 will need to return to court for a confirmation hearing before the bankruptcy judge.
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. Further, if the debts of the other spouse are not dischargeable it may not make sense for that spouse to file.
Both spouses are responsible for the debts acquired together while they are 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. Read the Law: 11 USC §1301
Can I file a bankruptcy for my debts, but not include my assets?
No. If you conceal an asset from the court you can be charged with a felony and can be fined, imprisoned or both. In addition, the court can dismiss your bankruptcy case or revoke your discharge. Read the Law: 11 USC 727 (a)(2)
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.
In a Chapter 7 bankruptcy, you must turn over any property that is not exempt to the Chapter 7 Trustee 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.
Can all of my debts be eliminated by a bankruptcy?
Some types of debts cannot be discharged. 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, debts incurred through fraud, 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 may still owe these debts after the bankruptcy.
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.
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 two years before you file for bankruptcy, the Trustee may undo the transfer, take possession of the asset, and sell the assets to pay your creditors.