Bankruptcy - FAQ's


Q. If I file bankruptcy, will I lose my house, car or other possessions?


A. If you file the correct type of bankruptcy for your situation the proceeding not only reduces or eliminates debt but preserves and protects your property and possessions. If you are behind in payments on a mortgage or auto loan you may need to utilize Chapter 13 to protect your property.  The type of possession and its value are important factors. You are entitled to claim certain exemptions which protect many types of property from being reached by creditors or by the bankruptcy trustee. Consult a qualified bankruptcy attorney to determine the best course of action for you.

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


A.  In a Chapter 7 case your dischargeable debts are completely eliminated and you only continue to pay for any home mortgage, auto loan or other secured loan on property you wish to keep.  You do not pay unsecured creditors such as credit card companies, old medical and utility bills or unsecured loans - those debts are erased. In contrast, a Chapter 13 proceeding provides that you make at least some payment, to all your creditors, in accordance with a plan designed by you and your lawyer. The amount you pay depends on the type of debt you owe, your income, expenses, the value of your property and the exemptions available to you. Chapter 13 can be used to stop foresclosure or repossession and also to reorganize debt to make it more affordable.  Contact a qualified bankruptcy lawyer to learn more.

Q.  How long does a bankrutcy proceeding last?


A.  A Chapter 7 proceeding is usually completed in about 3 1/2 months.  A Chapter 13 proceeding, where there is a plan to make payments, lasts between 36 and 60 months depending upon the individual case.

Q.  Can I include some debt in a bankruptcy and not other debt?

A.  Generally, yes.  Although full disclosure of all assets and liabilities is required, voluntarily continuing to pay certain debts such as mortgages, auto loans or debts co-signed by others is common. Which debts you should continue to pay is best discussed with a qualified bankruptcy attorney.

Q.  If I file bankruptcy, is my spouse required to file?


A. No.  You can file your own proceeding and your spouse is not required to file.

Q.  If a creditor has already gone to Court and and gotten a judgment can that bill be erased?

A.  Generally, yes. Even if you are paying a court ordered judgment that debt can usually be discharged.  If the creditor filed a lien on your house or vehicle your attorney may be able to remove the lien as well. Consult a qualified bankruptcy attorney about your particular case.

Q.  Can a bankrupty proceeding help with tax debt?

A.   Often, yes, but it depends on several factors including the type of tax, how old the debt is and whether any required returns have been filed.  Some tax debt can be erased, some needs to be paid in part and other tax debt may need to be paid in full.  This is a complex area that you should discuss in detail with a qualified and experienced bankruptcy attorney.

Q.  How will bankrutcy affect my credit?

A.  The answer depends on many factors.  If your credit is already damaged, bankruptcy may actually improve it.   A bankruptcy will improve your "income to debt ratio". That is, your income will be the same after bankruptcy but you will have much less debt. Income to debt ratio is an important factor in determining credit worthiness.  Two years after bankruptcy you can obatin an FHA mortgage, at regular interest rates, as long as you otherwise qualify.  Many people who file bankruptcy get reasonable interest auto loans within 1 or 2 years of discharge and many get unsecured credit cards as well. Although bankruptcy can remain on your credit reports for up to 10 years many people who make reasonable efforts to re-establish their credit may have adequate credit within 2 to 3 years of bankruptcy. Consult an experienced bankrutcy attorney for more ideas on how to re-establish your credit after bankruptcy.


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