BANKRUPTCY FAQ

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 Bankruptcy is a "liquidation" process where the debtor signs over all

non-exempt properties to the trustee, who will then liquidate them to pay creditors. The debtor does not make any monthly payments to the trustee, and generally only pays on secured debts they may wish to keep, like a house or auto. Unsecured creditors generally do not receive any payments unless the debtor has sufficient property that can be sold by the trustee. Eligibility for Chapter 7 Bankruptcy is based on income level.

Chapter 13 Bankruptcy is a "reorganization" plan, where the debtor makes monthly payments to the trustee for a period of 36 to 60 months (3-5 years). These monies are then distributed to the creditors according to the terms of the repayment plan approved by the court. The amount of the monthly payments and length of time are dependent on income levels and other factors. Chapter 13 Bankruptcy allows the debtor to keep most or all of the assets by extending the period of time for loan payoffs.

Do I have to include all of my creditors when I file for bankruptcy?

You must include all of your creditors in your bankruptcy petition and schedules filed

with the court. However, nothing prevents you from voluntarily paying any of your creditors after the bankruptcy if you choose to do so. Plus, if you have secured debt that you wish to pay in order to keep the collateral securing such debt, then the creditors are often willing to work with you to allow you to keep your property in exchange for your agreement to continue to make your payments, which is accomplished by use of what is called a "Reaffirmation" agreement.

Are all my debts wiped out when I file for bankruptcy?

No. Certain debts such as unpaid child support or alimony, most back taxes,

student loans, debts incurred by fraud, personal injury claims from an automobile accident that involved alcohol or intoxication, certain credit card debt that was incurred within 90 days of the date bankruptcy was filed, and others, are not discharged in bankruptcy cases.

Will I lose everything I have if I file bankruptcy?

Bankruptcy law allows you to keep certain amounts and types of property. What

property you can keep and how much varies from state to state, and depends on how long you have lived in a certain state. The fact is that most people will be allowed to keep most if not all of their property.

Does my spouse have to file bankruptcy with me?

Not necessarily. It is common for both spouses to file, but not required.

It may be advisable for only one spouse to file under certain circumstances, such as if only one spouse owes all the debt. If your spouse is not responsible for the debt, then their credit would not be affected.

How much does it cost to file for bankruptcy?

There is no charge for your initial consultation. Once you come in and discuss

your case with us, we can determine if you qualify for bankruptcy, and can discuss the fees with you at that time.

Will everyone know that I have filed bankruptcy?

Bankruptcy is a public legal proceeding. However, unless you are a prominent

person or a major corporation that would catch the media's attention, chances are good that no one other than your creditors and those you choose to tell will know you have filed bankruptcy.

Will I ever be able to get credit again after filing for bankruptcy?

Your bankruptcy will be recorded with the Credit Bureaus, and will remain on your

credit record for 10 years. You will usually have the ability to obtain credit after bankruptcy; however, you will likely pay a higher interest rate than someone who has not previously filed bankruptcy.

What can I do to improve my credit after bankruptcy?

Pay all of your bills on time. Consider getting a secured credit card, or one with a very

small credit limit. The card will require a security deposit equal to your credit limit. Your credit limit will be increased as you prove your ability to pay the debt. Obtain a copy of your credit report to make sure your bankruptcy has been properly reported by your creditors. If you find any errors on your credit report, you should write the credit bureaus explaining your circumstances and request that they correct the error. Live within your means, and keep your debt to income ratio for consumer debt at no more than 20% of your expendable income after costs for housing and a vehicle. Open a checking and/or savings account to help show creditors you can responsibly manage your money.

Will everyone know that I have filed bankruptcy?

Bankruptcy is a public legal proceeding. However, unless you are a prominent

person or a major corporation that would catch the media's attention, chances are good that no one other than your creditors and those you choose to tell will know you have filed bankruptcy.

How often can I file for bankruptcy?

Debtors are eligible to file Chapter 7 Bankruptcy every 8 years. A debtor that

filed a previous Chapter 7 Bankruptcy would be eligible to file a Chapter 13 Bankruptcy after 4 years. A debtor that filed a Chapter 13 Bankruptcy may be eligible to file another Chapter 13 Bankruptcy 2 years after discharge of their previous Chapter 13 Bankruptcy.

These Frequently Asked Questions are provided for general information only and are not to be considered as legal advice.

Please contact our office for a free consultation.

We will be happy to discuss your particular circumstances and the options available to you in bankruptcy.