Frequently Asked Questions About Bankruptcy

If you are considering bankruptcy, you likely have several questions. For more information on any of these questions, please click the Underlined Links inside the answer that will direct you to in depth articles I’ve drafted in the Bankruptcy Resource Center. Be sure to check out Myths About Bankruptcy too. 

What is Bankruptcy?  Shouldn’t I try a “Debt Consolidation” Program First?

Bankruptcy is a Constitutional Right that protects individuals or businesses from overwhelming debts by either eliminating or restructuring them. In general, Debt Consolidation Programs Do Not Work because creditors usually sue you before the plan can be completed. Unlike the Automatic Stay imposed by a Bankruptcy case, the random debt consolidation companies you hear about will not protect you and will leave you “high and dry” when you are sued. Also, if you file bankruptcy, not only may you pay less back to creditors, but you will not have to pay Debt Cancellation Income.

What are the different types of Bankruptcy for individuals?

The two most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 involves the liquidation of non-exempt assets to repay creditors, while Chapter 13 involves the development of a Repayment Plan over a specified period of time.  Chapter 11 is only appropriate for individuals under very limited circumstances.

Will Bankruptcy eliminate all my debts?

  Probably. Most debts are discharged by Bankruptcy. Bankruptcy eliminates most types of unsecured debts such as credit cards, Medical Bills, Gambling Debt and Personal Guarantees. However, certain debts such as Student Loans, Child Support, Luxury Purchases, Cash Advances and most Taxes may not be dischargeable.

Can I keep my House?  

Yes.  If you continue to pay the mortgage you can keep your house. However, if you have substantial home equity exceeding the allowed exemption, Chapter 13 may be appropriate. 

Can I keep my Car?  

Yes. If you continue making payments.  For car loans, you can either Reaffirm, Redeem, or Surrender the Car if you no longer want it or if keeping it would impose an undue financial hardship.  In Chapter 13, you may be able to do a Cramdown in order to discharge the vehicle’s negative equity, which might make the car loan more affordable. 

When Should I contact a Bankruptcy Attorney?

Anytime you feel like you are losing your ability to pay your debts on time. When you are sued by credit card companies, receive a mortgage foreclosure complaint. It’s better to contact me sooner rather than later, because time improves my ability to develop a successful debt reduction strategy for you. More on this Topic Discussed Here.

Won’t Bankruptcy destroy my credit?

Probably Not. While it’s no secret that bankruptcy has a Negatively Effect on Your Credit Score, it will probably not make your credit score worse than it already is. Plus, is your credit score really more important than discharging your debts? Whatever short term effect bankruptcy has on a credit report, it hasn’t stopped hundreds of my clients successfully rebuild their credit after bankruptcy to become successful business owners, investors, or just enjoy their debt free lives.

Who is going to find out about my Bankruptcy?   

Probably just your creditors unless you tell other people. Bankruptcy is a matter of public record, however, most people have better things to do than check who has filed for bankruptcy recently. Unless you tell other people about your bankruptcy case, no one is not going to know (unless they are a creditor, then yes).

Can I keep my assets if I file for bankruptcy?

Yes .Unless you drive a Lambo or have some very valuable things.  Rest assured you will not be left destitute. With proper Pre-Bankruptcy Exemption Planning, my clients retain the assets that matter the most to them, such as their home and cars.  Ultimately, whether you can keep all your assets will depend on the type of bankruptcy filed and the available exemptions available. Certain assets, such as Household Items, Cars, Jewelry and Retirement Accounts, are generally protected for values of ordinary people.  There are also exemptions for Educational Accounts (i.e. 529 Plans), Home Equity, Tools of the Trade, and other valuable assets.  My job as your attorney is to ensure that you maximize your exemptions, legally, to keep the assets you want to keep.

Will Bankruptcy stop Mortgage Foreclosure, Sheriff Sale or Eviction?

Absolutely. Bankruptcy triggers an Automatic Stay, which halts Mortgage Foreclosure, Tax Sales, and in some situations, Eviction Proceedings. Chapter 13 provides you with an opportunity to explore options to catch up on missed payments and Save Your Home.

Do I need an Attorney to file for Bankruptcy? 

Probably. While you can file without an attorney (pro se), it is not recommended. Bankruptcy law is intricate, and a Good Attorney will guide you through the process, ensure compliance with legal requirements, and maximize the benefits available to you. There are also Substantial Disclosure Requirements. Mistakes could result in significant consequences, such as loss of money, property or the dismissal of your case.  

Are all Bankruptcy Attorneys the Same? Should I just hire the least expensive attorney? 

Definitely not. Like everything in life, do your research and choose carefully.  Bankruptcy is an important life event and you want someone who know what they are doing. Skill, experience and client service vary substantially. Some bankruptcy attorneys will cut corners to offer the lowest fee. Some attorneys dabble or won’t return your phone calls or respond to your emails or show up in court if they quote the lowest fee. Ultimately, if you Hire the Wrong Attorney (or let price be your sole consideration) then you may pay for their mistakes and inexperience through loss of assets or the dismissal of your case. Instead, give consideration to finding a Good Bankruptcy Attorney who is Board Certified and has good number of favorable Client Testimonials.

What does it cost to declare Bankruptcy?   

The costs of the bankruptcy vary depending on the type of case and complexity of issues. While no case is exactly the same, there are common issues present in most cases.  During your Consultation, I will provide you with a written fee agreement that clearly describes how attorney’s fees and costs are calculated.  I am not the cheapest bankruptcy attorney because I refuse to compromise quality. My rates are in line with current market conditions and are routinely reviewed and approved by the Chapter 13 Trustee and Court as part of the Fee Application Process.

Does filing Bankruptcy make me a loser?

Absolutely not. You actually might be surprised who has filed bankruptcy. People of all kinds file for bankruptcy - and each has their own reasons why. Most people have to file bankruptcy because of situations beyond their control, such as job loss, medical problems or divorce. So whatever your situation might be, I promise that I’m not going to judge you for the present circumstances. Everyone gets treated with respect, humility and compassion.

How Do I Afford Paying Attorney Fees if I declare Bankruptcy?  

Most people reallocate their income away from paying debts that will be discharged towards the costs of doing the bankruptcy. I will work with you to develop a strategy to deal with your creditors while you gather the funds necessary to file your case.

Do I qualify for Bankruptcy?

Everyone qualifies for some form of Bankruptcy.  In general, people with Average Income will qualify for Chapter 7. People with higher incomes might be required to enter Chapter 13 to repay a portion of their income to creditors. If Chapter 13 is required, it’s likely you will still pay back significantly less than you would if you tried a Random Non-Attorney Debt Settlement Company.

Can I get rid of my mortgage? 

Not really - if you want to keep the house.  If you continue making payments, then you can keep your home if you can afford it. But you still need to continue to pay the mortgage. Your personal liability on the mortgage may be discharged when you case is done, but the mortgage company retains the ability to foreclose if you do not pay in the future. In some Chapter 13 cases, you can Strip Off A Second/Junior Mortgage.

Can I include tax debts in Bankruptcy?

This is an area where some attorneys who Dabble in Bankruptcy usually just give a blanket answer that it’s not possible to discharge taxes - but actually, it’s a much more nuanced analysis. Some tax debts can be included in bankruptcy and it depends on factors such as the type of tax, the age of the debt, and compliance with tax filing requirements. If you have significant tax problems, hire an attorney who knows what they are doing in this area. 

Can I get rid of Judgments?  

Yes. Your personal liability is generally discharged from a judgment, however, a judicial lien may remain against property. I discuss the possibility of Stripping Judicial Liens with my clients before we file any bankruptcy case. If you hire the wrong attorney, they probably won’t take this extra step to protect you.

My Bank Account is Frozen!  Will bankruptcy help? 

100 percent. Filing for Bankruptcy triggers an Automatic Stay, which immediately stops wage garnishments and bank account freezes.

Can I keep my credit cards if I file for bankruptcy?

No. In most cases, credit cards are included in the bankruptcy and will be discharged.  However, you can re-apply for another card after your case is over, which will help you reestablish your credit.

Can I file again if I have filed Bankruptcy before?

It is possible to file for bankruptcy multiple times. However, there are Time Limits between filings which depend on the type of bankruptcy. If you aren’t eligible yet to refile, then I can help you develop a strategy to deal with your creditors in the meantime until you are eligible to file again.

What is the difference between secured and unsecured debts?

Secured debts are tied to collateral (e.g., a mortgage or car loan), while unsecured debts (e.g., credit card debt or medical bills) are not backed by collateral.  Here is a more in-depth discussion.  This is important to understand because bankruptcy may not automatically discharge lien rights against collateral.

Should I repay family loans or transfer my assets before filing Bankruptcy?

No. Not unless you want your friend/family member getting sued by the Chapter 7 Trustee to recover that Preferential Payment or Fraudulent Transfer.  You’d also be placing your ability to get a discharge in jeopardy. However, I advise clients on permissible strategies to minimize risks in this area where there are delicate family issues involved. 

Will Bankruptcy affect my ability to rent a home or apartment?

  Probably not. I have not seen this be a huge problem for my clients. If you are currently renting, then you’re going to need to continue paying rent. However, in the future, Bankruptcy can impact your future ability to rent, as landlords may consider your credit history. However, each landlord has different criteria. Some may be more understanding of applicants who have gone through bankruptcy and prefer renting to a tenant that has a fresh start and not at risk of default because of mountain of credit card debt.

Can Student Loans be discharged in Bankruptcy?

In most cases, student loans are not discharged in bankruptcy, except in rare circumstances if you can demonstrate undue hardship through an adversarial proceeding. Notwithstanding, I have a good understanding of Administrative remedies available for Federal Student Loans and can advise you on federal programs such as Income Based Repayment plans and certain administrative student loan forgiveness programs.

How long does Bankruptcy typically last?

The duration depends on the complexity of the case, the type of bankruptcy and other factors. Chapter 7 typically takes around three to six months, while Chapter 13 Bankruptcy involves a three-to five-year repayment plan. While you are in Bankruptcy, you are protected by the Automatic Stay and can’t be sued or contacted by creditors.

Does my Spouse need to file Bankruptcy with me?

No. There is no legal requirement that a spouse file bankruptcy with the other spouse. However, in some situations, it might be advantageous to file a joint petition because of Joint Debt. In Chapter 13, there is a co-debtor stay for joint consumer debt which protects the non-filing spouse for the duration of the bankruptcy case.

What effect will Bankruptcy have on my divorce case?

  Bankruptcy won’t stop the divorce process or the entry of a divorce decree. However, the Automatic Stay imposed by a bankruptcy will impact the timing for equitable distribution of property. In some cases, Bankruptcy simplifies divorce because the soon-to-be former spouses don’t need to argue about who is responsible for paying marital debts.  I have represented many clients in the middle of divorce and facilitated cooperation to file a joint bankruptcy case together. I also regularly and collaboratively work with my clients’ divorce attorneys to develop and implement strategies to resolve debt issues for both spouses within divorce cases.

Who is the Trustee? Who is the Bankruptcy Judge?

In general, the Chapter 7 Trustee represents unsecured creditors and liquidates non-exempt property.  The Chapter 13 Trustee also represents creditors, but also acts as a pay agent and is a sort of “gatekeeper” for confirmation of your Chapter 13 Plan.  The Bankruptcy Judge decides disputes between you and the Trustee. In all cases, I advocate for my clients to these parties and regularly appear in Bankruptcy Court, confident and knowledgeable with bankruptcy rules and courtroom procedures..

Can I be fired from my job if I file Bankruptcy? 

No.  Employers are generally Prohibited from Discriminating. Bankruptcy also cannot be used as a basis for denying employment or professional licenses. However, some employers or licensing boards may consider credit history as part of their evaluation.

Should I conceal my assets? Could I refuse to disclose my income or assets?

Not unless your favorite color is orange and you’d like a vacation to “Club Fed.” (Federal Prison). Jokes aside, this is a serious issue. While not paying your debts is NOT a crime, concealing your assets / income is a Bankruptcy Crime. You must also disclose you interest in all assets, including Cryptocurrency (i.e. Bitcoin, etc).  That being said, there really no need for you to NOT disclose your assets because the exemptions are generous and most people keep their assets. My role as an attorney is to ensure that your assets are properly disclosed and properly exempted. In general, my clients do not have to give up their assets.

What happens if I win the lottery or receive an inheritance?

It depends on when you receive it.  The rules here are discussed further here. If you expect to receive an inheritance and are contemplating bankruptcy, I advise clients and their families on permissible strategies.

Where do I file Bankruptcy?  

In general, you file bankruptcy in the state where you currently live, however, there are Rules about Venue that you may need to be aware if you move around a lot.

 What is a “Debt Relief Agency” and do you mention this on your website?

Federal Law requires Bankruptcy Attorneys to disclose that they are “debt relief agencies” under the Bankruptcy Code. You can read more about this Here.

Still have Questions? Schedule a Personal Consultation and Let’s Get Started !