Frequently Asked Questions About Bankruptcy
Following are the questions that are most often asked of me by our clients. Get direct answers to the questions that will effect your case by contacting a Borders and Gerace Attorney Today!
How much does it cost to file?
This, by far, is the most often 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 $299; for a Chapter 13 this amount is $274. 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 as 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 your or someone with whom you have been associated has filed bankruptcy.
Can a utility (electrical, telephone, etc.) cut off or refuse service because of bankruptcy?
No, however, the utility can require "adequate assurance" for service (usually 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. Actually, 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 nonexempt 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?
Yes, most probably. 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?
As discussed elsewhere in this site, 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 probably. 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.