Bankruptcy
Resource Center
Frequently Asked Questions
Who will know that I have filed?
- Your creditors will know, but that is what you want, so they will stop taking action against you.
- Your employer will not know, unless your wages are being garnished (then they have to know).
- Your friends, family, people in your community will likely not know, unless you tell them.
- Your bankruptcy will go on your credit report; however no one can check this without your permission.
<Will I ever be able to get a credit card again?
Yes, you will. Although you might not get as favorable terms as you might like, you can certainly obtain credit cards post bankruptcy. In fact, due to the fact that you cannot declare bankruptcy for another several years, many companies will be glad to offer you credit cards.
<Are there other alternatives?
Yes. You can try:
- Negotiating with your creditors: You may be able to work out a plan with your creditors. Most creditors would like to get paid slower or less, if the alternative is their getting nothing at all.
- Seeking professional help: It may be useful for you to consult a credit counseling service. Some of these services have enough credibility to negotiate a workable settlement on your behalf.
<Do I need an attorney to file bankruptcy?
An attorney is not required in order to file bankruptcy. Filing Bankruptcy is a complicated process, and many people would benefit from the help of an attorney. You can, however, accomplish the entire process without an attorney. Attorney fees can be expensive, and the more your do before you hire and attorney, the more you can save on legal costs. Consider filling out your petition, and organizing all of you paperwork before your first meeting.
<What are the different kinds of bankruptcy?
The vast majority of bankruptcies are Chapter 7 or Chapter 13.
- Chapter 7 This eliminates most of your debt, and in return you surrender you non-exempt property to a trustee. The trustee uses this non-exempt property to pay some of your debts. Chapter 7 does not include a repayment plan. After you debts are discharged you are forever free from any obligation to pay them. When most people think of bankruptcy, they are usually thinking of Chapter 7, as this is the bankruptcy most commonly filed by individuals.
- Chapter 13 You propose a repayment plan to the court, and as long as you
stick to the plan your creditor must leave you alone. You pay over a 3 to
5 year period. Every Chapter 13 must pass 2 tests:
- Best efforts test - It is required that you pay all your disposable income (pay minus "reasonable" living expenses) to a trustee for at least 36 months.
- Best interest test - for your plan to be accepted by the court your unsecured creditors must get paid at least as much as they would had you filed chapter 7.
There are also chapters 11 and 12. These are used for businesses that need to file bankruptcy and have no benefit for consumers.
<If I file will it affect the credit of my spouse? What are the implications for my spouse if I file?
Many married people assume that they are responsible for each others debts. This is misconception. You are responsible only for the debts you incur, and the debts that you co-sign for with your spouse, unless you live in a community property state. There are 9 community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin).
<Haven't the laws changed recently regarding bankruptcy?
Yes. On October 17, 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect. Here are some of the highlights:
- Before you can file chapter 7, regardless of your income, there is now a means test to determine who can file chapter 7. If your income exceeds your expenses, you may not be able to file chapter 7. Because of this, many people will be forced into repayment plans who before could have had their debts wiped clean.
- Before, you could simply call your creditors and tell them you have filed, and they had to leave you alone. Now there is a written format you must follow. If you don't follow the format your creditors can continue their efforts to collect.
- Before you file, you are now required to attend a meeting with a court approved credit counseling agency. After you file, you must attend a financial management class.
- The rules regarding multiple filings have also changed. Before, you had to wait six years between chapter 7 filing. You could file any number of chapter 13 cases, even the day after you filed a chapter 7 case. After October 17, 2005, you have to wait eight years between chapter 7 cases; you must wait two years between Chapter 13 cases. If you have filed a Chapter 7 cases, and you received a discharge, you must wait four years before you can file a Chapter 13.
- Before, you could (in some states) use your “homestead exemption” no matter what the cost of your home. Now the law limits the state homestead exemption to $125,000 for property acquired during the 1,215 days before filing.
- The new law also calls for closer regulation of attorney and non-attorney bankruptcy petition preparers. Both are required to give consumers more details about fees and services.
- The types of educational loans that may not be discharged have also been broadened.
