Bankruptcy Questions and Answers

Q: What is bankruptcy?
A. Bankruptcy is a process in which consumers and businesses can eliminate or repay some of their debts under the protection of the Federal Bankruptcy Code.

Chapter 7 bankruptcy, commonly known as “liquidation”.  It works so that your unsecured debts are deemed discharged by the court, and you cannot be forced to pay them.  Certain debts are not eligible (e.g. taxes, child support, criminal fines, student loans, and educational benefits).

Chapter 13 bankruptcy, commonly known as “reorganization”.  This is a plan where you pay back an approved sum through a payroll deduction over the course of 3 to 5 years.  It is an option for those that do not qualify for Chapter 7.


Q. What bills can I keep out of my bankruptcy?
A. You are required to list ALL debts, with the exception of your present monthly utilities.  Bankruptcy is not a pick and choose game.

Q. Can I file bankruptcy again?
A. You must wait 8 yrs before filing again.  If you change chapters, this time frame is 2 yrs.

Q. Can I keep my home and car?
A. In most cases, yes.  If you choose to keep the property, you also keep the debt associated with it.  You must be and remain current on your monthly payments at all times. This is called “reaffirming.”

Q. What happens to the co-signer(s) on my debts?
A. Debts are only discharged for the person(s) filing bankruptcy.  If you file bankruptcy, a co-signer is responsible for any remaining debt.

Q. Will filing bankruptcy stop a foreclosure?
A. Foreclosures can be stopped by filing a Chapter 13 case, but only if it is filed before the Sheriff’s Sale date.

Q. How long does bankruptcy remain on my credit report?
A. Ten years for a Chapter 7.  Seven years for a Chapter 13.

Q. What are the two most common mistakes?
A. Charging up credit cards before filing.  Also transferring, selling, giving away, or signing a title over to a family member, or quit claiming real estate to a family member.  Do not do either of these things!