BANKRUPTCY QUESTIONS & ANSWERS

Q.      Should I file Chapter 7?

A.      If your debt is comprised primarily of unsecured debt (credit cards, medical bills, unpaid prior utilities, deficiency balances, etc.) and you do not have a lot of assets or excess monthly income, then a Chapter 7 bankruptcy may be a way for you to get out from under these burdens and start over.  A Chapter 7 bankruptcy is often called a "liquidation", "straight bankruptcy" or "fresh start".  A typical Chapter 7 bankruptcy takes approximately 4 months from start to finish, however, your relief from the creditors is effective immediately upon filing.  At the end of the Chapter 7 process, you will receive a Discharge and you will be relieved of your personal liability for those debts that are discharged.

Q.      If I file a Chapter 7 bankruptcy, will I lose all of my personal possessions or my home?

A.      The bankruptcy law allows for each debtor to keep a certain amount of personal property and/or to protect a pre-determined amount of equity in a principle residence.  The laws that allow you to keep your property are called exemptions.  There are exemptions for things like household good, clothing, automobiles, collectibles, etc.  The attorney that you hire to assist you with your bankruptcy will be able to discuss the exemption amount for each category of assets and determine whether your property is entirely exempt or would be subject to liquidation by the Chapter 7 Trustee.  In most cases, your property will be entirely exempt and you will be able to keep everything that you own.

Q.      Can I pick and choose which debts I want to include in my bankruptcy filing?

A.      No.  The law requires that you list all of your creditors in your bankruptcy paperwork.

Q.      Should I file a Chapter 13?

A.      If you are presently employed and have excess income each month after your regular monthly expenses are paid (excluding your revolving debt) or have assets that would not be protected in a Chapter 7 bankruptcy, you may want to consider filing a Chapter 13 bankruptcy.  A Chapter 13 bankruptcy is a reorganization for individual debtors who have regular income wherein they create a plan to pay off some or all of their debt over a fixed period of time not to exceed 60 months.  Chapter 13 bankruptcy is often referred to as a “reorganization” or “consolidation”.  In a Chapter 13 plan, debtors may pay off non-dischargable taxes, an automobile or delinquent mortgage payments. 

Q.      What will bankruptcy do to my credit?

A.      Filing a bankruptcy will show up on your credit, however, if you are at the point where you are contemplating filing bankruptcy, your credit profile is probably not highly rated.  Bankruptcy will act as a block on your credit report and your good credit activity will show below the bankruptcy reference as you begin to rebuild your credit.  As long as you are willing to be proactive about rebuilding your credit, you will be able to begin the rebuilding process almost immediately.  You may apply for a secured credit card after you receive your discharge.  You may be able to finance a home with a conventional lender a year after receiving your discharge and with a government lender two years after receiving your discharge.  You may be able to purchase a new car after filing as well.  However, be prepared to pay a higher interest or have a larger down payment. 

We are happy to answer any questions that you may have about your specific situation.  Please call us at (714) 505-2121.