Bankruptcy - FAQ

1. What is bankruptcy?
2. What type, or chapter, of bankruptcy should I file?
3. Who can file bankruptcy?
4. What do I need to begin the bankruptcy process?
5. Do you have to have a certain amount of debt to file?
6. What happens if one spouse files for bankruptcy and not the other?
7. Does my divorce decree protect me from creditors if my ex files for bankruptcy?
8. The principal signor on a loan filed bankruptcy. Now the creditor is coming after the co-signor. Can they do that?
9. Can all types of debt be discharged?
10. What can I keep, if anything, if I file bankruptcy?
11. Do I have to file bankruptcy on all the accounts I owe, or can I keep some?
12. Will I lose my retirement accounts or payments from social security?
13. Will I lose my home if I file for bankruptcy?
14. How long does a bankruptcy stay on my record?
15. Can a creditor continue to contact me after I have filed for bankruptcy?

Question:
What is bankruptcy?

Answer:
Bankruptcy allows individuals or businesses ("debtors") who owe others ("creditors") more money than they are able to pay to either work out a plan to repay the money over time or completely eliminate ("discharge") most of the bills.

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Question:
What type, or chapter, of bankruptcy should I file?

Answer:
The selection of which type to file depends on your particular circumstances and whether or not there are assets available to repay all, or part, of the debts owed. Bankruptcy laws can be tricky and involved, so determining if you should bankrupt and what type of bankruptcy you need should be made with the input of an experienced bankruptcy lawyer.

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Question:
Who can file bankruptcy?

Answer:
With few exceptions, any person or business owing money to a creditor can file a bankruptcy petition.

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Question:
What do I need to begin the bankruptcy process?

Answer:
You need to compile a listing of the past and present debts you have. The petition in a bankruptcy filing includes schedules of assets and liabilities as well as a statement of financial affairs. These documents are filed with the bankruptcy court, along with payment of the filing fee.

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Question:
Do you have to have a certain amount of debt to file?

Answer:
No. However, some situations may not warrant filing for bankruptcy. If your financial situation is temporary, you may consider making arrangements with individual creditors for a change in payment amounts or a reduction in the total amount due. If an individual has little in the way of property or money, filing bankruptcy may not be necessary, as the creditor may not be able to collect the debt.

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Question:
What happens if one spouse files for bankruptcy and not the other?

Answer:
If one spouse files and the other does not, the one who does not file could possibly be responsible for the debts. Check this out carefully before filing.

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Question:
Does my divorce decree protect me from creditors if my ex files for bankruptcy?

Answer:
No. If you are a co-signor with your ex-spouse on a debt, the creditor can require the entire payment of that debt from you even though the divorce decree assigns the debt to your ex-spouse. Your divorce decree may address any recourse you may have against your ex-spouse should he or she default on the loan obligations set out.

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Question:
The principal signor on a loan filed bankruptcy. Now the creditor is coming after the co-signor. Can they do that?

Answer:
Yes. The lender can require the co-signor to make payments on a loan once the principal has declared bankruptcy on the credit. This fact makes it extremely important that those considering co-signing for a loan for another be ready, and able, to pay the loan in the event that the principal signor defaults.

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Question:
Can all types of debt be discharged?

Answer:
No. The debts that cannot be discharged vary slightly between the different chapters of bankruptcy. Generally, the following cannot be discharged: (1) debts for taxes owed to local, state or federal agencies, (2) debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently, (3) debts which were neither listed nor scheduled or which the debtor waived discharge, (4) debts which are owed to a spouse, former spouse, or child of the debtor, for alimony, maintenance, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, (5) debts owed for willful and malicious injury by the debtor to another person or property owned by another, (6) debts for government-sponsored educational loans, unless it can be shown that repayment will cause an undue hardship, (7) debts for death or personal injury caused by the debtor's drunk driving or from driving while under the influence of drugs or other substances, (8) debts incurred after a bankruptcy was filed.

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Question:
What can I keep, if anything, if I file bankruptcy?

Answer:
Exemptions allow an individual to "exempt", or keep, certain kinds of property. State law defines what assets are considered "exempt", but typically include: (1) jewelry, (2) vehicles up to a certain amount, (3) equity in a home up to a certain amount, (4) tools and equipment necessary to allow the individual to continue working.

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Question:
Do I have to file bankruptcy on all the accounts I owe, or can I keep some?

Answer:
You must include all the debts you owe in your petition and schedules. You may opt to keep some debts by "reaffirming" the specific debt.

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Question:
Will I lose my retirement accounts or payments from social security?

Answer:
Generally, no. Retirement accounts that are ERISA-qualified are not considered property of an estate and cannot be taken. Social Security benefits are generally protected from assignment, or garnishment for debts in bankruptcy. The Social Security Administration's responsibility for protecting benefits against legal process and assignment usually ends when the beneficiary is paid. Once paid, the benefits continue to be protected only as long as they can be identified as Social Security benefits. For example, money in a bank account where the "only" deposits into the account are direct deposits of Social Security benefits are "identifiable" and generally protected.

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Question:
Will I lose my home if I file for bankruptcy?

Answer:
Possibly. The factors that impact your ability to keep your home are: (1) the state you are in and the exemptions allowed, (2) the status of your loan (current or in foreclosure) (3) the type of bankruptcy you are filing (Chapter 13 provides more protection than Chapter 7 as long as payments are current).

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Question:
How long does a bankruptcy stay on my record?

Answer:
Bankruptcies remain on credit reports anywhere from seven up to 10 years.

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Question:
Can a creditor continue to contact me after I have filed for bankruptcy?

Answer:
During the time the debtor is working out a plan or the trustee is gathering and preparing the assets to sell, the bankruptcy code dictates that creditors must stop all collection efforts against the debtor. As soon as the bankruptcy petition is stamped "Relief Ordered" upon filing, you are immediately protected from your creditors. If a creditor continues to attempt to collect a debt, immediately notify the creditor in writing that you have filed bankruptcy, and provide them with either the case name number and filing date, or a copy of the petition that shows it was filed. If the creditor still continues to collect, the debtor may be entitled to take legal action against the creditor.

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