COMMON
QUESTIONS WHEN CONSIDERING PERSONAL BANKRUPTCY
1.
Will Bankruptcy ruin my credit?
Probably not. While
a bankruptcy will stay on your credit record for up to ten
years, it is still possible to obtain credit during that
time period. The
changes are that your credit rating has already been
destroyed due to your inability to pay your debt.
That won’t change until the debt is gone.
Bankruptcy offers you the opportunity to eliminate
your debt and begin to rebuild your credit.
2.
Are there any alternatives to bankruptcy?
Yes. There
are alternatives to filing bankruptcy depending on your
individual situation; however, not all of them may be
right for you. Virtually
none of them eliminates the debt, as bankruptcy can, but
instead reduces the debt or extends the time to pay it
off.
3.
Can you file bankruptcy more than once?
Yes. While
there is no limit on the number of bankruptcies you may
file, there is a mandatory waiting period before you may
file again. In
most Chapter 7 cases this waiting period to eight years.
4.
Can I keep my home in bankruptcy?
Yes. It
is possible to keep you home in the
majority of cases; however, this depends upon your
home’s value and how much you owe on it.
Ironically, the less equity you have in your home
the easier it is to keep it.
5.
Will I go to jail if I file bankruptcy?
No. It
is perfectly legal to file for bankruptcy.
In fact, the whole process is created by statute
under Federal Law to protect debts.
6.
Does my spouse have to file bankruptcy with me?
No. There
is no requirement that a spouse join you in bankruptcy.
This is largely a matter of strategy.
If your debt is all or mostly in the name of only
one spouse, it may be beneficial to have the other spouse
avoid filing in order to preserve his or her individual
credit.
7.
Will I be able to keep my personal property in
bankruptcy? Yes.
The Bankruptcy Rules exempt
certain property from being liquidated.
In the vast majority of cases you can keep all of
your personal property and many times even your home.
8.
How can I keep my bankruptcy private?
While bankruptcy is a matter of public record and
cannot be kept confidential, it is highly unusual for them
to be reported in the newspaper or other media unless
except for certain, famous individuals.
In fact, in most cases, the only way your friends
or family will learn of your bankruptcy is if you tell
them or if they are a creditor of yours.
You would be amazed at how many people you know
that have filed for bankruptcy.
9.
Is it difficult to file bankruptcy?
No. Most
Chapter 7 bankruptcies are relatively easy to file, and
from start to finish can be accomplished in less than four
months after filing. Most
cases only have one court hearing and only two to three
meetings with your attorney.
Chapter 13 cases are much more complicated and may
take up to five years to finish.
10.
Do I have to put all of my debt into bankruptcy?
Yes. Under
the Bankruptcy Rules you are required to disclose all of
your assets and all of your debt.
Failure to do so can cause your case to be
dismissed. You
are allowed to keep or reaffirm debt but in most cases
this is not advisable, nor required, and it defeats the
whole purpose of filing bankruptcy.
11.
Will I be able to buy a home after filing
bankruptcy? Yes.
While a bankruptcy will affect your credit
worthiness, it is still possible to buy a home in the
future depending on what the criteria your lender is
looking for. There
is nothing illegal in offering credit to people who have
filed for bankruptcy.
12.
What’s the difference between a Chapter 7 and
a Chapter 13? This
is a very complex question in which thousands of books
have been written. The
simplest answer is that a Chapter 7 is a liquidation case
for individuals or businesses, and a Chapter 13 is a
reorganization case. In
Chapter 7 cases you are allowed to keep all exempt
property and your debt is eliminated.
In Chapter 13 case you are required to come up with
a plan to pay your creditors and work your way out of
bankruptcy.
13.
How can I stop my creditors from harassing me?
Once you file for bankruptcy your creditors are not
allowed to contact you directly.
If they do, they may be sanctioned by the court and
may even have to pay you money!
14.
How long does a bankruptcy take?
This largely depends on the type of bankruptcy you
file, how organized you are, how complex your case is, how
much your debt is, what assets you have, and how
aggressive your creditors are.
In Chapter 7 cases, if you are well organized and
have all of your paperwork together, it is entirely
possible to file within one day, have your hearing
approximately one month later, and receive your discharge
in less than four months.
Aggressive creditors can complicate matters by
filing objections to your discharge or other adversarial
actions which require additional hearings.
Chapter 13 cases decidedly take longer and cost
more. Once you
have filed you are required to propose a “plan” to
work your way out of bankruptcy.
This plan has to be approved by your creditors, the
trustee and the court, and may take up to five years after
its approval to implement.
15.
How much does bankruptcy cost?
This again depends upon the type of case you file
and the complexity of the case.
Many law firms advertise low fees only to charge
extra add on costs. You
should ask your attorney if there are any additional
charges. Some
common, added charges may include:
filing fees, hourly charges, additional charges for
listing real estate, husband and wife filings, credit
counseling certification, financial management
certification, appraisal fees and amendment fees.
While there is nothing improper about such charges,
it is best to know about them upfront in order to make an
informed decision.
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