Frequently Asked Questions About Bankruptcy
The following questions are most often asked of us by our clients. Get
direct answers to the questions that will affect your case by speaking with a
Cleveland bankruptcy attorney at Borders and Gerace Attorney today!
How much does it cost to file?
This, by far, is the most commonly asked question. This is understandable,
because if someone is at the point of considering filing a bankruptcy
petition, the cost of doing so is usually an important factor. Before
getting into specifics on fees and costs, we will tell you that our fees are
extremely competitive. If you "shop around", you will find that our fees are in line
with most attorneys who handle bankruptcy matters regularly. (You should retain
only an attorney who practices bankruptcy law day in and day out). Court costs
for a Chapter 7 are $306; for a Chapter 13 this amount is $281. This normally
must be paid at the time of filing. See the affordable fees page for more details.
Does my spouse have to file with me?
No, there is no requirement that both spouses file, either under Chapter
7 or Chapter 13. In some situations, it might not be necessary. For example,
in Louisiana, which is a community property state, a debt incurred during
the existence of a marriage is
presumed to be a community debt, and therefore owed by both spouses. This presumption
can be overcome if the debt was not incurred for the benefit of both spouses
or the one who had not incurred the debt. Even if only one spouse files
a bankruptcy petition, the bankruptcy discharge is effective to the other
spouse with regard to the community debts.
Assuming that all debts are community in nature, one might then ask why
it would ever be necessary for both spouses to file. Two reasons come
to mind. First, the presumption that a debt is community is just that-only
a presumption. It can possibly be overcome, and a creditor may attempt
to do so. Second, creditors, especially those located out of the state
of Louisiana, may be ignorant of this rule, and assume that the discharge
does not cover the non-filing spouse. In either event, needless harassment
or even litigation may ensue. Since one of the goals of filing bankruptcy
is to obtain protection from creditors, it often is advisable for both
spouses to file. If only one spouse has debt and it is clear that this
debt is separate, not community (for example, if the debt was incurred
prior to the marriage), then it is not necessary for both spouses to file.
Can I be fired or denied employment because of a bankruptcy?
No, the Bankruptcy Code prohibits a private employer from discriminating
against an employee or prospective employee solely because of a bankruptcy.
Can I be denied a student loan on account of bankruptcy?
No. Again, the Bankruptcy Code strictly prohibits denial of a loan because
you or someone with whom you have been associated has filed bankruptcy.
Can a utility (electrical, telephone, etc.) cut off or refuse service because
No, however, the utility can require "adequate assurance" for
service, such as a deposit. Please note that this deposit must be paid
within 20 days of filing.
Will a bankruptcy discharge get rid of a lien on my home?
No. The discharge relieves you of the legal obligation of paying the debt
underlying the lien. But, the lien generally survives. For example, if
a creditor has obtained a judgment against you and has recorded the judgment,
a judicial lien is created against your real estate. This lien will remain
after the bankruptcy discharge. It may be possible to have this lien removed,
but it is not automatically removed. You should discuss this with your attorney.
Will the trustee come to my house?
No one will come to your home to examine your personal belongings, unless
there is a suspicion that you have hidden assets or undervalued what you
own. That is extremely rare and should not worry you at all. The trustee
and the judge assume that you have truthfully scheduled your assets. In
some cases, the trustee may have a real estate agent take a look at your
house if there is uncertainty about its value. Similarly, you might be
asked to have your car appraised. This usually happens only if there is
significant difference between the value listed in the "schedules"
and the value in the "Blue Book" or other vehicle value guide.
This is nothing to worry about. Anxiety about the bankruptcy process and
the fear of exposure or humiliation is created in the mind of the debtor
to a far greater degree than by the reality of the judicial process.
Will I have to give up all my property?
No. The Bankruptcy Code provides that a debtor filing for bankruptcy can
keep certain assets for a "fresh start" by exempting property
from the estate. The vast majority of bankruptcy cases are "no asset"
cases, meaning that there are no non-exempt assets which the trustee is
going to administer in order to pay creditors. Of course, by the time
you file your bankruptcy petition, you and your attorney will have thoroughly
reviewed your situation in order to determine if there are any assets at risk.
Will bankruptcy stop wage garnishments?
Yes. As soon as your case is filed, creditors must stop whatever collection
efforts are underway, including garnishment. The only exception may be
for ongoing child or family support ordered by a court. The discharge
of a debt will forever eliminate a creditor's right to garnish your
wages on account of that debt.
Can I keep my car?
In most cases, yes. There are two questions which must be addressed.
Will the trustee take the car?
The first consideration is to determine whether the trustee will administer
the vehicle (take it and sell it to pay creditors). If there is little
or no equity in the car, after subtracting any car loan from the car's
present value, the bankruptcy trustee will not take the car. If there
is equity in the car over and above the value of the exemptions available,
a debtor can usually buy any unprotected equity from the Chapter 7 trustee,
if necessary. Under Ohio law you can protect a certain amount of equity
in your car and other property. Usually this protection is enough to avoid
losing any property. Please contact a Borders and Gerace Attorney today
to see if your car and other property can be protected.
Will the creditor take the car?
If you still owe money on the car, you can choose to reaffirm the debt
to the secured lender, keep the car, and continue paying under the existing
terms; or you can buy the car from the secured creditor for its present value (
redemption), usually in a single payment. Your creditor will be quite willing for
you to reaffirm the debt. In a Chapter 7, the creditor usually requires
you to be current with your payments at the time the reaffirmation agreement
is signed. Of course, if you choose, you can surrender the car and be
free of any obligation to pay for it.
Will I be allowed to file bankruptcy if my income is high?
In order to determine whether or not you are eligible to file under Chapter
7, a "means test" is utilized. If your income is above the state
median level for a household size the same as yours in the county in which
you reside, analysis of your expenses is necessary. Some of these expenses
are not your actual expenses, but rather national and regional standards,
and some are your actual expenses. If, after deduction of these expenses,
your "disposable income" is less than a certain amount, then
you are permitted to file a Chapter 7 without involving a presumption
of abuse. If your income is over that amount, then you will be forced
into a Chapter 13 proceeding.
Can I put my property in someone else's name before filing?
Such transfers are not effective to put your assets beyond the reach of
creditors and bankruptcy trustees. Worse, such action may lead to the
denial of your discharge. A bankruptcy trustee can recover assets transferred
within one year of the bankruptcy filing where the debtor did not get
reasonably equivalent value for the asset, or where the transfer was made
with intent to hinder creditors. This "look back" period may
be even longer in some situations. If you have more assets than you can
protect with the available exemptions, consider filing Chapter 13 where
the debtor generally keeps all of his or her property and, in essence,
"buys back" the non-exempt value from the creditors through
payments to the Chapter 13 trustee out of future income.
Can I get credit after bankruptcy?
Most likely, yes, you will get credit after bankruptcy. Filing bankruptcy
does not prevent you from getting new credit; an entire class of lenders
target the recently bankrupt as customers! Immediately after a bankruptcy
filing, you can expect credit to be more difficult to get, more expensive,
and limited in amount. Two years after a bankruptcy discharge, however,
debtors are eligible for mortgage loans on terms just as good as those
with the same financial characteristics who have not filed bankruptcy.
That is, in getting a home loan, the size of your down payment and the
stability of your income will be much more important than the fact you
filed bankruptcy in the past. There is no "right" to credit,
and landlords and credit card companies are well within their rights to
consider your financial history in their credit decision. However, debtors
are protected from discrimination based solely on the fact that they have
filed bankruptcy by provisions of the Bankruptcy Code. While the fact
that you filed bankruptcy stays on your credit report for up to 10 years,
it becomes less significant the further in the past the bankruptcy is.
In fact, you are probably a better credit risk after bankruptcy than before.
What if I can't make the payments on my Chapter 13 plan?
Chapter 13 plans are voluntary and you can dismiss them freely. Also,
if you have a temporary interruption in income or an unexpected increase
in your expenses, you can ask the court to modify your plan to reduce
the payments, or to obtain a suspension of the payments for a couple of
months. If you miss the payments and don't take action to modify your
plan or to get a suspension, the court will dismiss your case. Even if
this happens, however, you can refile, usually right away. (In some situations,
you may have to wait 180 days before refiling). You also have the right
to convert your Chapter 13 case to Chapter 7 if you meet certain qualifications.
Does a previous bankruptcy prevent me from filing again?
It depends on what chapter you want to file now, what chapter you filed
before and whether you received a discharge in the earlier case. You can
only get a Chapter 7 discharge if a previous Chapter 7 case was filed
more than 8 years ago. If you got a Chapter 13 discharge within 8 years,
the Chapter 13 plan has to have met certain repayment requirements to
permit a Chapter 7 case within 8 years. If your previous case was dismissed
before discharge, this does not count in these considerations. You can
file a Chapter 13 case after a Chapter 7 without any statutory time restrictions.
The court, however, can question the debtor's good faith, a necessary
element to confirm a Chapter 13 plan, if he or she has recently filed
Chapter 7 and received a discharge. You can freely convert a pending case
from one chapter to another. Generally, you can only convert a Chapter
7 to Chapter 13 before the discharge is entered.
If you have any further questions regarding bankruptcy, contact us today