Frequently Asked Questions
- When should I file bankruptcy?
Basically, when you have run out of other choices. Most people know when their budget does not allow for payment of debts after necessary living expenses are met. There may also not be enough assets to sell and satisfy creditors either. Many clients come to us after they have sold or liquidated many assets and tried unsuccessfully to pay off all their debt. Filing bankruptcy can often save you from having to sell or liquidating those assets, including retirement accounts, and still get rid of the debt. When to file can also be time-sensitive issue. There are multiple reasons why you may want to file at a certain time. We can explore those possible situations during our free consultation to see if timing is an issue for you.
- Will my credit be ruined for the rest of my life?
Not at all! While filing a Petition for Bankruptcy will remain on your credit rating for ten years and your credit rating will or may initially drop (how much varies from person to person) our experience after representing thousands of clients tells us that many clients are able not only to obtain secured and unsecured credit cards in as short as a few months, but many are also able to finance a new motor vehicle or purchase a home right after discharge. Filing for bankruptcy can actually lead to a better credit rating since banks know that you are no longer in debt and you have vastly improved your income–to-debt ratio.
- Can my wages be garnished?
A creditor can garnish your wages, in addition to seizing bank accounts, state tax refunds and taking other assets that you own. However, they can only do so after 21 days have elapsed from the time they obtained a judgment against you from a court. Filing for bankruptcy will stop them from being able to take any of these measures. In fact, if a creditor takes more than $600 from you within 90 days of your bankruptcy filing date, we may be able to recover the entire amount.
- What hearings are required in court?
Generally both Chapter 7 and Chapter 13 cases require what is referred to as a "First Meeting of Creditors," or a "341 hearing." The purpose of this meeting is to allow your creditors (which rarely show up) and the trustee assigned to your case to ask you questions about your finances and assets. They usually only take about 5 minutes to complete. In Chapter 13 cases, the court will also schedule a "Confirmation Hearing." This is when the court considers approval of your plan of reorganization. However, you may not have to attend that hearing if all issues in your case are resolved with the trustee and the creditors.
- Will some of my debts survive the bankruptcy?
There are some debts that will certainly survive the discharge of your other debt. These include moneys owed for child support, alimony, and most taxes. Student loans are almost always non-dischargeable as well as certain debts arising out of drunk driving offenses or certain other court or government fines. Sometimes people use credit cards or take cash advances within a few months of filing their bankruptcy. These actions may cause such charges to be non-dischargeable depending on what they were used for. Therefore, it would be advisable to no longer use or incur credit card debt if you are considering bankruptcy.
- Are student loans dischargeable?
Student loans are not dischargeable unless they cause you an undue hardship. However this situation is not as simple as it appears. "The Undue Hardship" standard is almost impossible to meet and is therefore rarely attempted.
- Can I discharge income taxes in bankruptcy?
Not generally. However, under certain circumstances, they may be discharged. The tax year that may be discharged needs to be at least 3 years from when it was first due. The return also needs to have been filed more than two years before you file your bankruptcy and the IRS needs to have made its last assessment at least 240 days prior to the bankruptcy filing date.
- What property can I keep when I file bankruptcy?
Generally speaking, most people who file bankruptcy walk away with everything they owned before they filed. They lose nothing except most or all of their debt. This is due to the exemptions allowed under the bankruptcy laws. However, most of these exemptions are not unlimited and certain limits apply to different types of property. Rather than list them all here, we can review your particular assets during the free consultation. It is important to note that some people sell, give away or otherwise transfer their interest in property to avoid losing it in bankruptcy. This will almost always cause a bigger problem than any benefit, including denial of your discharge and the loss of your asset or assets.
- What constitutes an asset?
EVERYTHING! While a very large percentage of bankruptcy filers need not worry about losing any property when they file a bankruptcy petition, the requirement to list or disclose everything you have, no matter where it is, when you will receive it or what is it worth, is an absolute requirement. For example, the right to sue someone is an asset, even if you haven't even spoken to an attorney about starting a lawsuit. Your bank and retirement accounts are assets. Money someone owes you is an asset. An inheritance from someone who has passed before you file, or up to 6 months after you file your case, is an asset. If your assets are valued above your allowed exemptions under the law, then the trustee may liquidate those assets for the benefit of your creditors.
- What should I expect after the bankruptcy?
Expect solicitations from secured and even unsecured credit card companies. Expect auto dealers to send you invitations to come down to their lot and pick out a vehicle. Expect not to get sued or garnished by any of your previous creditors. Expect the ability, in many cases, to be approved for conventional mortgages at normal rates in about two years after your discharge. Indeed, the fact that you have filed bankruptcy may help you get credit you otherwise would have been denied due to your previous income-to-debt ratio. Your life should change profoundly.
