Answers to Bankruptcy FAQ

Q: What is bankruptcy? How does it work?
A. It is a process in which consumers and businesses can eliminate or repay some or all of their debts under the protection of the Federal Bankruptcy Code. There are essentially two types of bankruptcy: Liquidation and Re-organization.

Chapter 7 bankruptcy, commonly known as “liquidation”, 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 any 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 a more lengthy and more expensive process, but is an option for those that do not qualify for Chapter 7.

Q. Is bankruptcy for me? Which type of bankruptcy should I file?

A. We can determine this over the telephone with you in a free confidential evaluation.  Please call us today to to see which type you should file.

Q. What bills can I keep out of my bankruptcy?
A. You are required to list ALL secured and unsecured debt – with the exception of your present monthly utilities.  Bankruptcy is not a pick and choose game; you must list all debts. If you are unsure about what debts are or are not yours, get a copy of your credit report – available from all three reporting agencies once a year for free.  Go to AnnualCreditReport.com or go to creditkarma.com.

Q. I filed bankruptcy before; can I file 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, you may keep your home and/or your car(s).  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. How did bankruptcy law change in 2005?
A. Basically the law changed in two ways: First, it now focuses more on your income than on your debts.  There is a table that is used to determine whether you are eligible for filing a Chapter 7 or whether you could file a Chapter 13. The median annual income for a family of three is $65,280.
Second, you must now submit certificates from a court-approved debt counseling agency for completion of a Pre-Bankruptcy Consult and a Pre-Discharge Debtor Education Course.

Q. Will filing bankruptcy stop a foreclosure or garnishment?
A. Garnishments will cease when your case is filed. If $600.00 or more was taken in the three months prior to filing, it is often possible to recover the funds.
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 the 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. First, charging up credit cards before filing.
Second, 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!
Q. Where can I go for more bankruptcy information?
A. You can go to greenpath.com.  Select Greenpath University.  Next select bankruptcy.

Q. Where can I find information on how to repair my credit report?
A. You can go to greenpath.com or you can go to creditkarma.com.