Common Bankruptcy Questions

Here are 10 of the most commonly asked bankruptcy questions and answers:

1. What is bankruptcy? 
Bankruptcy is a right that US citizens are given to relieve themselves of overwhelming amounts of debt through a legal process. There are 2 main types of personal bankruptcy avaliable: Chapter 7 and Chapter 13.

2. Will bill collectors stop calling me after I file bankruptcy?
Yes! The day that your bankruptcy case is filed with the court is legally the last day that anyone can attempt to collect a debt from you. This is called an “automatic stay” and it protects you from collection attempts until your case is over.

3. Will I have to go to court?
Yes, everyone who goes bankrupt is required to attend a hearing known as the “meeting of creditors”. Although all of your creditors will be notified of the date and time of the hearing it is rare that any will show up.

4. Do I have to list all my creditors when I file bankruptcy?
Yes, since the bankruptcy laws changed in 2005 any and all debt in your name must be listed in your bankruptcy paperwork. This does not necessarily mean that all of your debts and/or property will be erased when your bankruptcy is complete.

5. Will I be able to rent after I file personal bankruptcy?
In most rental situations the landlord will do a credit check and notice that “bankruptcy” is on your credit report. This does not stop them from renting to you, but they may want proof that you are making timely payments elsewhere.

6. How do I know if I should file personal bankruptcy?
You are the only person that can decide if personal bankruptcy is right for you, but if you are facing an overwhelming amount of debt that you cannot see yourself coming out of in the next 1-2 years then personal bankruptcy may be a good option for you. Ask friends or family that have filed bankruptcy how it helped them.

7. Who notifies the creditors that I filed bankruptcy?
Your creditors are notified of your bankruptcy by the bankruptcy court via electronic mail or paper mail via the USPS. You will not be required to communicate with creditors once your case has begun.

8. How do I choose a bankruptcy attorney?
Choosing a bankruptcy attorney may be difficult, but it is well worth the research. Again, you can ask friends or family who have filed, speak with your local bar association, or just call local attorneys and request a free consultation.

9. Can I get rid of student loans or tax debts?
In most cases filing bankruptcy cannot get rid of student loans or tax debts. These debts fall into the category of “non dischargeable” debts that are typically not erased by the bankruptcy court.

10. Can I get credit after filing personal bankruptcy?
Yes! One of the common misconceptions about declaring bankruptcy is that your credit will never recover. The day your bankruptcy is discharged you will be ready to start making positive financial decisions that will quickly begin rebuilding your damaged credit.

Chapter 13 Bankruptcy & Foreclosure

During my time as a bankruptcy paralegal I heard hundreds of reasons why individuals and married couples decided to file for personal bankruptcy. The main reason I heard people choosing to file Chapter 13 bankruptcy was to stop the foreclosure process on their home. With the housing crisis that America faced several years ago and the still waning real estate market it is no surprise that foreclosures are rampant, but giving up your home is never an easy decision to make. In some cases filing Chapter 13 bankruptcy to halt a foreclosure is the best decision a family can make. So how does it work?

First of all let me explain what a Chapter 13 bankruptcy is. Chapter 13 bankruptcy is a form of personal bankruptcy that involves a 3-5 year court ordered payment plan where the debtor is allowed to pay back a percentage of their overall unsecured debt and any other secured debt that they choose. Put simply, the debtor sends a check to his/her bankruptcy trustee every month for 3-5 years and the trustee makes sure that all of the creditors are paid. By the end of a typical Chapter 13 bankruptcy the debtor is free of all unsecured debts (credit cards and/or medical bills) and caught up on all secured payments (mortgage and/or vehicle). And that is where foreclosure comes in.

If the foreclosure process has already started when you file Chapter 13 bankruptcy then the bankruptcy court will notify the bank to stop all proceedings until further notice. At that point your bankruptcy lawyer and the bankruptcy trustee who will oversee your case will create your repayment plan. The repayment plan will include all of the mortgage payments that you are behind on and any unsecured debt you may have. The current payments on your mortgage will need to be paid by you outside of the plan in order to stay up to date. As long as you are making your monthly bankruptcy payments then the bank who holds your mortgage has no right to take legal action against you. In fact, in order to take legal action against you the bank would need to file a motion with the bankruptcy trustee.

By the end of your Chapter 13 repayment plan you will be caught up on your past and present mortgage payments and at no risk of losing your home. This also works in the case of vehicle repossession. If you are being threatened with foreclosure or are in the midst of the process and think that filing Chapter 13 bankruptcy could benefit you then don’t hesitate to contact a local bankruptcy attorney. In most cases bankruptcy attorneys offer free initial consultations that allow you to share your situation with them to see if they can help. Filing Chapter 13 bankruptcy could be the final push you need to help save your home.

Money Saving Tips for the Holiday Season

The end of the year is always eventful from Halloween to New Years, but with the bustle of the season comes lots and lots of spending. The last thing anyone wants to start a new year with is thousands of dollars in credit card debt and consulting with a personal bankruptcy attorney. Here are 5 tips on how to get through the holiday season without tons of credit card debt and a looming bankruptcy:

1. Keep it Simple – Remember that being around friends and family during the holidays is more important than thousands of dollars worth of “stuff” so don’t go overboard when shopping for gifts or planning a menu. Try to give yourself a price limit when shopping for specific people in your life and stick to your plan.

2. Plan Ahead – If you are hosting a holiday at your home don’t wait until the last minute to create a menu and buy the groceries. Make your menu early so that you can delegate to your guests what they can bring. Asking guests to bring an item isn’t rude, it’s smart and allows everyone to feel like they pitched in for the event.

3. Look for Sales – Black Friday and Cyber Monday aren’t the only holiday sales worth looking forward to. Most retail shops have sporadic sales from October until December to keep customers in the doors. Check for online deals with free shipping or ads in the Sunday paper to keep up with the best value for the price.

4. Homemade gifts – Handmade gifts not only have a personal touch, but they can be great if you are trying to find a way to give lots of different people a gift. Bake cookies, make ornaments, make candies, or stock up on bulk candles for a nice gift that won’t break the bank.

5. Buy throughout the year – The good thing about the holiday season is that it’s consistent; it comes at the same time every year without fail. Because of this make sure and keep your eyes peeled for sales throughout the year on bulk items or even special items that you want to get for certain people in your life. Spreading out your spending will keep the holiday season from feeling like nothing but a spending spree.

The best way to not fall into a debt trap during the holidays is to simply not spend what you don’t have. Start an account and the beginning of the year for holiday gifts and groceries so that you don’t automatically rush to use credit cards when October comes around. By using this tips you can avoid thinking about filing for bankruptcy after having a wonderful holiday season. Remember you can only file Chapter 7 bankruptcy once every 8 years so an overboard Christmas spending spree is not what you want to cause one.

Bankruptcy and Your Belongings

Are you ready to file bankruptcy but too worried about what will happen to your belongings? Don’t be! The bankruptcy code is very clear on what will happen to your belongings when you file for Chapter 7 or Chapter 13 bankruptcy. Most of the rules for keeping your belongings when you file bankruptcy deal with the specific state that you live in and their rule on the matter. Here are some important things to know about the most commonly mentioned items that debtors are worried about losing:

1. Home If you are filing a Chapter 7 bankruptcy to get rid of large amounts of unsecured debt such as credit cards or medical bills and you don’t want to lose your home then remember one phrase: to keep it, stay current. If you stay current on your mortgage payments during your bankruptcy process then it will show the court that you will be able to do that once your personal bankruptcy is completed as well. If your home is paid in full then the situation is a bit different and relies solely on how much equity your state bankruptcy exemptions protect.

2. Vehicle Again, the key phrase if you want to keep your vehicle is: to keep it, stay current. If you have multiple vehicles then the bankruptcy court may want you to prove that each one is a necessity and if that can’t be proven then the court may choose to take one unnecessary vehicle and use it to pay back some of your creditors. If you have one or more paid in full vehicles then the issue again goes to your state bankruptcy exemption for vehicles and how much it allows to be protected.

3. Clothes, jewelry, and/or other household items Each state has the right to create their own bankruptcy exemptions and the majority of the states have a miscellaneous or “catch all” exemption for items like clothing, jewelry, and household items. The protection for these items can range from $1500-$10,000 depending on what state you live in. If you are unsure about your state’s bankruptcy exemptions you should consult the bankruptcy court (online or over the phone) in your district or a local bankruptcy attorney.

As you can probably tell, state bankruptcy exemptions are incredibly important to the filing of any case. Using them correctly can ensure that your belongings are safe and your debts are erased. Using them incorrectly can result in not only losing your debt, but losing property that you intended to keep. Typically, personal bankruptcy attorneys that have been practicing in the same state for several years are knowledgeable in the specific state exemptions that will be most beneficial to your situation. The bottom line is that filing bankruptcy is not going to strip you of everything you have in your name. The bankruptcy court understands that sometimes all people need is to wipe away their debt and start fresh with what they have.

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