22 Bankruptcy FAQ

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By: ruthgibson
on 18th Oct,2016

1. Know more... The trustee, then, sells the property and distributes the sold proceedings amongst the creditors.
22 Bankruptcy FAQ

1. What is bankruptcy?

Bankruptcy is an option through which you can wipe out debts by selling off your assets or making payments as approved by the court. Know more...

2. What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is a liquidation proceeding. There is a bankruptcy trustee who will handle all your non-exempted properties. The trustee, then, sells the property and distributes the sold proceedings amongst the creditors. After this, you will be discharged off all debts usually within the timeframe of 4-6 months.

3. What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is best for people who have a predictable income. If you've sufficient income to pay off your reasonable expenses with some left over amount, then you may go with this type of bankruptcy. Here, you need to pay off all your debt over a period of 3-5 years. This type of bankruptcy is helpful for people who want to keep their non-exempted property safe.

4. Will the creditors stop calling me after I've filed bankruptcy?

According to law, creditors can’t call you after you've filed for bankruptcy. They should stop all lawsuits, wage garnishments and even telephone calls demanding payments.

5. How much does filing for bankruptcy and the procedure costs?

Mostly, you will get a free initial consultation from the bankruptcy lawyers. To file Chapter 7 bankruptcy, it’s going to cost you around $300. A bankruptcy lawyer’s fees may vary from $1000 to $2000. You can also save money by not appointing a lawyer to attend the meeting of the creditors. Although, this may vary from lawyer to lawyer. Consult your lawyer before taking any step further.

6. Is it possible to convert from one chapter of bankruptcy to another?

It is possible to change a case anytime to any chapter if you're eligible to. The request for converting to another chapter can be made through a very simple single sentence document. However, you need to keep in mind that if you change from Chapter 13 to Chapter 7, some of your assets might be taken or sold out, while they were safe under Chapter 13.

7. Is the information about my bankruptcy under public records?

Bankruptcy filings are public records. The credit bureaus will record your bankruptcy and it will remain on your credit record for ten years. However, no one will know you went bankrupt under normal circumstances.

8. Why should I avoid filing bankruptcy?

You will lose some of your assets if you file bankruptcy Chapter 7. Your credit score will also go down by several points. Bankruptcy will remain on your credit report for 10 years. So, it's better to avoid bankruptcy.

9. What will happen to my credit cards?

The credit card company is to decide if you can keep the credit cards. If you've discharged the credit card, they might cancel the card until you reaffirm the debt. The credit card company can also cancel the credit card even if you've zero balance.

10. When will I be discharged from bankruptcy?

You can be discharged from debts within 3-5 months after a bankruptcy is filed. Most of the debts are written off. However, exceptions are always there and it is best to consult your bankruptcy lawyer for the same.

11. What debts are eliminated by bankruptcy?

Most of the unsecured debts are erased in bankruptcy except child support and alimony, accidents occurred because of you, student loans and income tax debts.

12. How will my creditors know that I've filed for bankruptcy?

The bankruptcy court notifies all creditors, about the filing of bankruptcy, through mail. They also inform the creditors about the case number, the stay, the name of the trustees associated with the case, the date set for meeting the creditors, etc.

13. How will my creditors get affected?

The creditors under the unsecured debt will stop calling you after you are bankrupt. They’ll stop asking for repayment of the debt.

However, there are certain debts that you have to pay despite being bankrupt like:

  • a Unliquidated damages you are liable to pay due to accidents, except under certain circumstances
  • b All kinds of penalties or fines imposed by the court
  • c Any debt you incur after your bankruptcy commences
  • d Loans for students assistance or supplements

On the other hand, creditors under the secured debt, who hold security over property, can seize your property and sell it if you are late in repayment. They may also contact you to discuss this.

14. How do I choose a personal bankruptcy lawyer?

There are a few things you must keep in mind while finalizing your attorney. Firstly, it is important to select a lawyer who specializes in this field. Also, it will be a good idea to contact a local bankruptcy lawyer since the laws vary from state to state. The lawyer should be upfront, honest and experienced about the procedures of bankruptcy.

15. Do I need to go to court if I file bankruptcy?

Irrespective of whichever Chapter of bankruptcy you are filing, you need to attend a meeting of the creditors. It might last for an hour or even the whole day in a Chapter 13 case.

16. Will I be fired from my job after filing bankruptcy?

There is no such rule which will get you fired from your job after filing bankruptcy. In fact U.S.C. Sec. 525, prohibits an employer from discriminating against you because you've filed bankruptcy.

17. When can I file for bankruptcy next time?

You can file bankruptcy again only after 8 years, under Chapter 7 bankruptcy, and if the earlier one was also under Chapter 7.

You can file Chapter 13 bankruptcy if you received a discharge under any kind of bankruptcy for more than 4 years ago and under Chapter 13 for more than two years ago.

18. Is debt consolidation better than bankruptcy?

Yes, debt consolidation is better than bankruptcy. The former has a positive impact on your credit score whereas the latter brings down your score by around 250 points.

19. How will my credit report get affected?

Your credit report includes information about your credit history. If you are considering bankruptcy, probably your credit report is already affected. Credit reporting agencies mostly keep a record of your bankruptcy for 7 to 10 years. Any creditor who wishes to obtain a copy of your credit report can obtain it from the credit reporting agency.

20. How does the new bankruptcy law affect me?

The new bankruptcy law prevents some people to file for the bankruptcy. The new law needs you to fulfill certain requirements to have a successful bankruptcy. You need to consult a bankruptcy lawyer to find out if you are affected by the new law.

21. How does bankruptcy affect my spouse?

Your spouse will not be affected by your bankruptcy if he/ she isn't responsible or didn’t sign any contract for any of your debt. However, there are few exceptions, such as if you've bought a property which has the signature of both, then the spouse might be affected. It is advisable to consult your lawyer before filing.

22. How will be an inheritance treated in a bankruptcy case?

It completely depends on the time you become entitled to receive it, and also what kind of bankruptcy relief you're seeking.

In case of Chapter 7 bankruptcy: If the inheritance is received within 6 months of filing bankruptcy, it can be regarded as a part of your bankruptcy estate and can be used to pay your debt.

In case of Chapter 13 bankruptcy: Here, there isn’t any 6 months limit. Your inheritance can be used in deciding about the amount available to repay the creditors.

In any circumstance, it is important to inform the bankruptcy trustee about the inheritance.

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