IS FILING BANKRUPTCY RIGHT FOR ME?
Commonly Asked Questions About Bankruptcy Law

There are four types of bankruptcy cases provided under the law:

• Chapter 7  "Straight bankruptcy" or "liquidation." It requires a debtor to give up property that exceeds certain limits called "exemptions", so the property can be sold to pay creditors.
• Chapter 11, "Reorganization",  used by businesses and a few individual debtors whose debts are very large.
• Chapter 12  "Farmer relief" is reserved for family farmers.
• Chapter 13  "Debt adjustment" Requires a debtor to file a plan to pay debts (or parts of debts) from current income.

Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.

Chapter 7

In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The general principal is "discharge" of  your debts in exchange for your giving up property, except for "exempt" property, which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt (such as second homes, expensive artwork, etc.) is sold, with the money distributed to creditors.

If you want to keep property like a home or a car and are behind on the payments on a mortgage or a car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

Chapter 13 (Reorganization)

In a chapter 13 case you file a "plan" showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property, especially your home and car, which might otherwise be lost, by repossession or forced sale. 

You should consider filing chapter 13 plan if you:

1. Own your home and are in danger of losing it because of money problems;
2. Are behind on debt payments, but can catch up if given some time;
3. Have valuable property which is not exempt, but you can afford to pay creditors from your income over time

• You will need to be able to show that you have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due.
  
  What Does It Cost to File for Bankruptcy?
  
  It now costs $200 to file for bankruptcy under chapter 7 and $185 to file for bankruptcy under chapter 13, whether for one person or a married couple. The court may allow you to pay this filing fee in installments if you cannot pay all at once. If you hire an attorney you will also have to pay the attorney's fees. Some attorneys will accept payment plans and will let you pay their fees "over time'
  
  What Will Happen To My Home and Car If I File Bankruptcy?
  
  In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. Only a bankruptcy lawyer will accurately be able to tell you how much of your property is "exempt."
  
  However, some of your creditors may have a "security interest" in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.
  
  There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth.
  
  Can I Own Anything After Bankruptcy?
  
  You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
  
  Will Bankruptcy Wipe Out All My Debts?
  
  Yes, with some exceptions.
  
  Bankruptcy will NOT normally wipe out:
  

• money owed for child support or alimony fines, and some taxes;
  

• debts not listed on your bankruptcy petition;
  

• loans you got by knowingly giving false information to a creditor,
  who reasonably relied on it in making you the loan;
  

• debts resulting from "willful and malicious " harm;
  

• student loans owed to a school or government body,
  except if: the loan first became due more than 7 years before the bankruptcy was filed
  or the court decides that payment would be an undue hardship;
  

• mortgages and other liens which are not paid in the bankruptcy case
  (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

Will I Have to Go to Court?

In most bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" to meet with the bankruptcy trustee and any creditor who chooses to come.

Generally, it is only if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

Will Bankruptcy Affect My Credit?

Unfortunately, if you are behind on your bills, your credit is probably already bad. Bankruptcies will probably not make things any worse. And it may make things better, as you will be able to "start fresh" and get caught up, rather than having the same debts go on for years and years.

A bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.  Many people who file Bankruptcy are able to repair their credit eventually.

What Else Should I Know?

Utility Services - Public Utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills that arise after bankruptcy is filed.

Discrimination - An employer or government agency cannot discriminate against you because you have filed for bankruptcy.

Driver's License - If you lost your license solely because you couldn't pay court ordered damages caused in an accident, bankruptcy will allow you to get your license back.

Co-signers - If someone has co-signed a loan with you and you file for bankruptcy, the co-signer will probably have to pay your debt.

Only a qualified bankruptcy attorney can help you decide if filing bankruptcy is the best solution for your debt situation. Hundreds of thousands of individuals have gotten creditors "off their backs," stopped the harrassing phone calls, and gotten a "fresh start"  by properly using the Bankruptcy Laws.  Click here to find an experienced  bankruptcy lawyer who will give you a free consultation.