What types of debt may be discharged in bankruptcy?
Debts which bankruptcy will not usually discharge include income taxes that are less than three years old, student loans, child support, alimony, criminal damages resulting from willful or malicious injury or from accidents involving drugs or alcohol, and fraud. These are call “nondischargeable” debts. Bankruptcy will usually discharge all other types of debts, including credit cards, personal loans, bank overdraft fees, amounts due after the sale of a repossessed vehicle or foreclosed-upon home, utility bills, medical bills, rent, etc. Even though there are some types of debt that are nondischargeable, even these nondischargeable debts can usually be dealt with in a Chapter 13 case. Also, some debts which are nondischargeable in a Chapter 7 case are dischargeable in a Chapter 13.Similarly, some types of debts which are normally dischargeable may in some cases be declared by the bankruptcy court to be nondischargeable. For example, credit cards are normally dischargeable. However, if one uses a credit card too recently before filing a bankruptcy, the bankruptcy court might not allow the person to discharge the credit card.
How can bankruptcy hurt me?
Chapter 7 is on one’s credit report for ten years, and Chapter 13 is on ones credit report for seven years, and either one can temporarily reduce ones credit rating by 75-150 points. The appearance of bankruptcy on one’s credit report will have a negative impact on one’s ability to get credit, and will influence the interest rate one has to pay for credit that is received. With bankruptcy, a debtor can immediately start working to rebuild his or her credit score by paying bills on time and structuring the bankruptcy so that they keep a car payment through the bankruptcy (a process known as “reaffirmation”). As a practical matter, it is usually about twelve months before the debtor can qualify for a mortgage loan. However, many mortgage lenders offer no-money-down financing for debtors one day after their bankruptcy discharges. Typically, bankruptcy will affect one’s ability to get a mortgage loan for less than a year.
What fees do I have to pay to file bankruptcy?
There are usually three fees one must pay to file a bankruptcy case: attorney’s fees, the filing fee charged by the court and credit counseling/debtor education fees. Attorneys fees vary depending on the complexity of the particular case and which chapter of bankruptcy one chooses to file. One’s attorney should indicate the amount of the attorneys fees before one hires the attorney to proceed with his or her case. The filing fee goes to the court to administer the case and is a fixed amount set by the court. Currently, the filing fee for a Chapter 7 case is $299.00 and the filing fee for a Chapter 13 case is $274.00. Credit counseling fees are the fees you pay to a third party credit counseling service to get your credit counseling certificate (before you file your bankruptcy case) and to get your debtor education certificate (after you file your case but before your case can be successfully closed). These fees usually total around $50.00 to $80.00.
If I am married, does my spouse have to file too?
No. A married person may either file jointly with his or her spouse or individually. If the spouse does not also file, the spouse’s credit is usually unaffected.
Can I run up my credit cards and then file bankruptcy?
No. The trustee assigned to a case can object to the bankruptcy if he or she feels that the person who filed the bankruptcy made charges on a credit card or bought anything on credit when that person knew he or she would eventually file bankruptcy on the debt. Also, creditors may object if they see a sharp increase in spending prior to filing bankruptcy. If the trustee or a creditor wins on his or her objection, the bankruptcy court can rule that the credit card debt is nondischargeable and/or dismiss the case. In severe cases, criminal proceedings for fraud or abuse can be instituted against a debtor.
Will I get fired for filing bankruptcy?
No. The Bankruptcy Code has a provision in 11 U.S.C. 525 which prohibits employers from discriminating against an employee solely based on the fact that the employee filed for bankruptcy. In most cases, an employer does not even know the employee filed bankruptcy.
Will my creditors stop harassing me if I file bankruptcy?
Yes. 11 U.S.C. 362 requires creditors to immediately stop harassing you upon your filing of a bankruptcy petition. This same code section also generally stops garnishments, writs of attachments, sheriff sales of homes, foreclosure, lawsuits, and repossessions of vehicles. There are some instances where bankruptcy will only temporarily stop collection efforts, or will not stop them at all, if prior bankruptcies were filed too recently (see your attorney for details).
Do I have to use a lawyer to file bankruptcy?
No. However, a bankruptcy filing can be complicated and it is advisable to seek professional help. This is especially true after the new bankruptcy law went into effect in mid-October 2005.
How often can you file bankruptcy?
A Chapter 7 cannot be filed within 8 years of the filing date of any prior case of a Chapter 7. You may file a Chapter 7 if the filing date of your prior Chapter 13 case was at least four years ago. A Chapter 13 may be filed anytime after a prior case, but if it is filed within one year of the pendency of a prior case, the automatic “stay” protects you for only 30 days only, unless you get the Court to extend your protection.
Is the bankruptcy filing printed in the newspaper?
Maybe. Bankruptcy filings are public record, so any newspaper that wants to print the bankruptcy filings may do so. However, no paper is required to do so.
How long do I have to live in a district before I can file bankruptcy there?
91 days. 28 U.S.C. 1408 requires that one live in a district the greater part of the preceding 180 days in order to file a bankruptcy in that district, though there are some technical rules regarding this code section that should be discussed with an attorney.
I’ve heard of a “Chapter 20”—what is that?
There is no Chapter 20 in the Bankruptcy Code. A Chapter 20 is when you file a Chapter 13 right after you file a Chapter 7. One reason some people do this is that you cannot stop a home foreclosure with a Chapter 7, but you cannot file a Chapter 13 if your unsecured debt exceeds a certain dollar amount. So, if one’s home is being foreclosed but their unsecured debt amount exceeds the limit for a Chapter 13, those persons may file a Chapter 7 and wipe out the unsecured debt, then file a Chapter 13 to stop the home foreclosure. Courts generally frown on Chapter 20s.
Do I have to have a certain amount of debt to file bankruptcy?
No. You may file Chapter 7 regardless of how much money you owe, and you may file Chapter 13 so long as your debt does not exceed certain dollar amounts. However, if you don’t owe very much, your situation may not justify filing bankruptcy. Ask your attorney.
Does my filing bankruptcy protect a co-signor?
No. The only way to protect a co-signor is to continue to pay the debt after the bankruptcy is filed (either directly after a Chapter 7 or through the Plan in a Chapter 13), or have the co-signor file bankruptcy also.
