- What are the advantages of bankruptcy?
- How long do I have to wait to rebuild my credit?
- How long does it take before my debts are discharged?
- How long before I can get a regular credit card or mortgage?
- How would I know if Chapter 7 is right for my situation?
- Which bankruptcy chapter is the least expensive?
- Can I pick and choose which assets to put into a personal bankruptcy?
- What exactly can I exempt?
- Can I file a personal Chapter 11?
- Do I have to appear before a bankruptcy judge?
- What is the trustee's job?
- What if I want to keep some non-exempted assets?
- After I file bankruptcy can I still workout the non-exempt assets?
- What does it mean when a trustee abandons property?
- I thought bankruptcy stopped foreclosure? Can they still take my house?
- Can creditors still take my home after I filed bankruptcy?
- If I can't make any payments, should I file Chapter 7 or 13?
- Should I leave some debts out of my bankruptcy?
- Can I change from a Chapter 13 to a Chapter 7 or vice versa later?
- Can I keep my house, cars or pets?
- What if I run out of exemptions but still want to keep some items?
- Does my spouse and I have to file jointly?
- If my spouse files, what am I liable for?
- What happens to my credit?
- Can I file without my family, friends, or spouse knowing about it?
- Is going Bankrupt a bad thing to do?
- Lots of people are filing for Bankruptcy, why shouldn't I?
- Are there different types of bankruptcy?
- What are Chapters 7, 11, 12, and 13?
- What debts cannot be discharged in bankruptcy?
- I committed fraud, can my debts still be discharged in bankruptcy?
- Can statutory penalties and punitive damages for fraud be discharged?
- Can the creditor ask to have me reaffirm the debt?
- Which is the best option; Chapter 7 or 13?
- What are the tax obligations of a person filing a bankruptcy?
- What happens to my Federal Tax Debts?
- My spouse is declaring bankruptcy; should he/she file alone or together?
Top 1. What are the advantages of bankruptcy?
Once discharged through bankruptcy your debts are erased; in other words you are no longer responsible for paying them.
Top 2. How long do I have to wait to rebuild my credit?
You can rebuild your credit immediately with a secured
loan or credit card. In fact you can even obtain these items while
going through the bankruptcy process.
Top 3. How long does it take before my debt are discharged?
Chapter 7 takes between 3 to 8 months;
Chapter 11 can take from just under a year to many years;
Chapter 13 can take several months while trying to get
your repayment plan approved. However, the actual discharge is not
final until you've met the payment plan requirements which takes from
36 to 60 months to complete.
Top 4. How long until my credit gets back to the point where I might hope to get a regular credit card or mortgage?
Rebuilding credit depends on how aggressively you try
to get back on track, it may take a minimum of 1 year. Remember,
you can always get a secured credit card or a mortgage with a low loan
to value (LTV) and high interest rate, sometimes even still in the
middle of a bankruptcy.
Top 5. How would I know if Chapter 7 is right for my situation?
If you have very few assets with no property and your
assets can be exempted then Chapter 7 may be right for you.
Top 6. Which bankruptcy chapter is the least expensive?
Chapter 7 is the least expensive because you may not
have to pay off all of your debts. The next least expensive is Chapter 13
where you repay as little as cents on the dollar, followed by Chapter 11.
Top 7. Can I pick and choose which assets to put into a personal bankruptcy?
No. Every asset you own must be included in the filing. After filing you may choose to exempt some of your assets.
Top 8. What does reaffirm mean?
You become personally liable for the debt again. For
instance, if you have a car and you have a bank loan and you want to keep it, you will have to sign a new contract
(reaffirm) for the vehicle.
Top 9. What exactly can I exempt?
It depends on which state you live in. Most states
allow the Federal exemptions but also have state exemptions that may
be more favorable In New York you can exempt up to $5000 in personal property, $50,000 in equity on your home and $2400 of equity in your car
Top 10. Can I file a personal Chapter 11?
Individuals may file. Individuals must file a Chapter 11 if secured debts are over $1,000,000.
Top 11. Do I have to appear before a bankruptcy judge?
Not initially, First, you will meet with a trustee and your creditors at a meeting called 341.
Top 12. What is the trustee's job?
To administer your petition, conduct the 341 meeting, find assets with equity, liquidate them and then pay
off the creditors.
Top 13. What if I want to keep some non-exempted assets?
In most cases, you can buy them back from the trustee.
Up14. After I file bankruptcy can I still workout the non-exempt assets?
In Chapters 11 and 13 you may negotiate with your
creditors out of court. In a Chapter 7 you may do a workout if the
trustee abandons the property.
Top 15. What does it mean when a trustee abandons property?
When the liquidation value of an asset is too low, the trustee "abandons" it, or simply gives it
back to the debtor.
Top 16. I thought bankruptcy stopped foreclosure? Can they still take my house?
When you file Bankruptcy, you receive an "automatic
stay" on court actions such as foreclosures and sheriff's sales. A
creditor can still go into court and ask the bankruptcy judge for a
"relief from stay", and if granted the creditor can proceed with court
action to foreclose.
Top 17. What are the reasons a judge would allow creditors to take my home after I've filed bankruptcy?
You fail to file a reorganization plan or other required documents on time
You default on your scheduled Chapter 13 or Chapter 11 payments.
Your income is insufficient to execute a reorganization plan within the court's guidelines.
Top 18. What if I can't make any payments, should I file Chapter 13 or Chapter 7?
If you truly cannot make payments on your home or other assets you're probably better off filing Chapter 7 and using the
money you would have spent on Chapter 13 to survive on.
Top 19. Should I leave some debts out of my bankruptcy?
No, you should include all debts.
Top 20. Can I change from a Chapter 13 to a Chapter 7 or vice versa later?
Yes, it's called "motion to convert" and can be done
after you've filed for either chapter, be advised that the trustee can
also request a conversion!
For instance, if your chapter 13 fails, either you or
the creditor, may request a conversion to chapter 7. Likewise if the
trustee thinks money might be available for unsecured creditors they
may make a motion to convert your chapter 7 to a chapter 13.
Top 21. Can I keep my house, cars or pets?
After filing you can exempt certain items such as a
house or pedigree dog. However, in order to keep these items you'll
need to stay current on payments such as a mortgage or car payment.
Top 22. What if I run out of exemptions but still want to keep some items?
After all exemptions have been exhausted, you may still be able to buy back from the trustee certain assets.
Top 23. Does my spouse and I have to file jointly?
No! The decision to file individually or together depends on your situation. For instance . . .
- If only one partner owns all or most of the debt then only that person should file;
- If both partners own the debt, and want to file a Chapter 7 then both should file;
- If you're trying to stop a foreclosure, only one person, on the title to the home, need file a Chapter 13.
Top 24. If only my spouse files, what am I liable for and what happens to my credit?
As long as there was no joint debt, your credit will
not be affected. However, any future join credit purchases will depend
upon the member with the worst credit history. On the other hand, if
there was joint debt and only one member filed, then the member who
did not file will be help responsible for the entire debt.
Top 25. Can I file without my family, friends, or spouse having to know about it?
Yes! You can file without telling family and friends.
Top 26. Is going Bankrupt a bad thing to do?
Annually, approximately 1.5 million
individuals seek the relief from debts and claims of creditors by
filing for bankruptcy. With that huge number of people seeking relief from their debts
and the claims of their creditors, much of the stigma of "going
bankrupt" has gone away. In addition to providing relief from debts
and obligations for individuals, hundreds of such long established blue
chip companies as Dow Corning, Montgomery Ward, Penn Central and
Texaco have used the provisions of the bankruptcy laws.
Top 27. Lots of people are filing for Bankruptcy, why shouldn't I?
Bankruptcy is not something that should be entered into
just for the heck of it. Very often there are intelligent
alternatives to bankruptcy that may produce a far better result than
going into bankruptcy. Bankruptcy also goes on your credit records,
and may make it difficult to obtain new credit. Before
anyone files for bankruptcy he or she should consult with a bankruptcy
lawyer. There are critically important issues as to timing and
disclosure that you had better address before, not after, you file for
bankruptcy.
Top 28. Are there different types of bankruptcy?
Yes, and they are known by the title of the Chapter of
the Federal Bankruptcy Act in which they appear. Each "Chapter"
contains a different set of laws and rules.
Top 29. What are chapters 7, 11, 12, and 13?
Chapter 7
is the most widely used chapter because it enables the debtor to write off 100% of his/her debts. Under Chapter 7, a debtor may retain up to $5000 in personal property, their home if the equity is less than $50,000, and a car if the equity is less than $2400. If the car is leased, debtor may keep the vehicle even if the car is new.
Chapter 11 is typically used for
business bankruptcies and restructuring. It is not commonly used by
individual consumers since it is far more complex and expensive to
pursue. It allows businesses to reorganize themselves, giving them an
opportunity to restructure debt and get out from under certain
burdensome leases and contracts. Typically a business is allowed to
continue to operate while it is in Chapter 11, although it does so under
the supervision of the Bankruptcy Court and its appointees.
Chapter 12 allows farmers with real estate debts to pay off the debts from the profits generated by future crops.
Chapter 13, which has also been known
as a wage earner's plan, is used by about 25% of consumers. In Chapter
13, consumers work out a periodic payment plan with their creditors
to pay off their debts, or at least substantial portions of the debt.
Generally the creditors expect to get more than they would have
received from the debtor's estate if the debtor had sought a complete
liquidation under Chapter 7.
One of the important benefits of Chapter 13 is that
debtors generally continue to live in their home so long as they
comply with the terms of the Chapter 13 arrangement. If the debtor
fails to comply, the Court treats the matter as a Chapter 7
liquidation. The disadvantage of Chapter 13 to the debtor is that the
debts can linger for years, burdening future income.
Top 30. What debts cannot be discharged in bankruptcy?
In general:
- Liens, such as mortgages and security interests in
cars are non-dischargeable as are some other types of obligations
including: Federal, State and local tax claims (subject to specific
time rules)
- Customs duties
- Spousal and Child support
- Student loans
- Secured debts
- Fines and penalties imposed by government agencies
- Debts incurred due to false statements made with the intent to deceive
- Fraud committed in a fiduciary capacity, such as embezzlement or larceny
- Punitive damage claims for "willful and malicious" acts
- Debts not list on the forms filed with the Court
- Drunk driving obligations
A non-dischargeable debt is one that will survive the
bankruptcy proceeding. The debtor still has the obligation to pay
this debt; the creditor has every right to collect.
Top 31. What if I committed fraud, would my debts still be discharged in bankruptcy?
No! The Bankruptcy Code has long prohibited debtors
from discharging liabilities incurred on account of their fraud,
carrying forth a basic policy of affording relief only to an "honest
but unfortunate debtor." Congress did not favor giving perpetrators of
fraud a fresh start (by allowing them to wipe out their debts in
bankruptcy) over the interest in protecting victims of fraud when it
wrote the Bankruptcy Laws.
Accordingly, Section 523(a)(2)(A) of the Bankruptcy
Code excepts from discharge in bankruptcy "any debt . . . for money,
property, services, or an extension, renewal, or refinancing of
credit, to the extent obtained by . . . false pretenses, a false
representation, or actual fraud." 11 U.S.C. § 523(a)(2)(A).
Top 32. I have statutory penalties and punitive damages for fraud, can they be discharged in bankruptcy?
No. It is not only the actual value of the "money,
property, services, or . . . credit" the debtor obtained through fraud
that is non-dischargeable in bankruptcy, but also treble "punitive"
damages and attorneys fees and costs related to the fraud.
This was made clear in a March 25, 1998 decision of the
Supreme Court of the United States in Cohen v. de la Cruz. The case
involved a landlord who had overcharged his tenants. The trial court
found that the landlord had committed "actual fraud" within the
meaning of the Bankruptcy Act and that his conduct amounted to an
"unconscionable commercial practice" under New Jersey’s Consumer Fraud
Act. As a result, the court awarded the tenants treble damages plus
reasonable attorney's fees and costs.
Top 33. Can the creditor ask to have me reaffirm the debt?
Yes, this means that the creditor is asking that the
debtor pay the debt anyway, even after it has been discharged. A
debtor may be willing to do this if there is a co-signer or guarantor
of the debt (such as a family member, friend or employer) that the
debtor does not wish to leave saddled with the debt.
Also, a debtor may want to reaffirm a debt in order to
avoid having a secured creditor take the collateral provided for the
debt. A creditor may also ask a debtor to reaffirm the debt before he
(the creditor) will agree to do business with the debtor again.
Top 34. Which is the best option; Chapter 7 or 13?
The answer really depends on your financial picture. An
individual with serious financial difficulties would most likely find
Chapter 7 "straight" bankruptcy proceeding as the preferred type. A
Chapter 7 proceeding, used by approximately 70% of all consumers
filing bankruptcy petitions, is faster to complete, giving the debtor a
financial "fresh start" without the years of sacrifice.
On the other hand, a Chapter 13 plan offers an
alternative if you have a steady income, a stable job, and want to pay
off most or all of your debts.
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