FAQ

Bankruptcy is a legal process which helps individuals and businesses eliminate all or a portion of their debt.  The process is overseen by federal bankruptcy courts.  There are different chapters for individuals/businesses to file: Chapter 7, Chapter 11, Chapter 12 or Chapter 13. All  chapters of bankruptcy can help you eliminate unsecured debt (such as credit cards), halt a foreclosure or repossession, and stop wage garnishments.

Immediately upon the filing of a petition for bankruptcy, an automatic stay goes into effect, meaning your creditors are “stayed” or stopped from being able to collect against you.  Notification is sent to all your creditors of the filing of the bankruptcy petition. 

Chapter 7 bankruptcy is typically referred to as a ‘liquidation’ bankruptcy. This means that an individual’s non-exempt assets are sold for the benefit of his/her creditors.  The Bankruptcy Code allows a person to exempt (or protect) certain assets so they are able to keep the property.  A chapter 7 Trustee is appointed to gather and sell the non-exempt assets and distribute the proceeds to creditors.  A chapter 7 discharge eliminates all unsecured debts, including in certain cases income tax liabilities. 

Chapter 13 bankruptcy is a proceeding in which individuals reorganize their finances, repay a portion of their debts and are typically able to keep their nonexempt assets.  The Chapter 13 plan can be for a period of 3 to 5 years, depending on the circumstances. 

Approximately 7-10 years

The attorney retainer fee for a bankruptcy filing varies, depending on circumstances, as every case is different.  The court filing fees are $338 for chapter 7, $284 for chapter 12, $313 for chapter 13 and $1,738 for chapter 11. 

Typically 2-4 years after the entry of a bankruptcy discharge you may qualify for a mortgage loan, as long as your income and other factors support the mortgage application.  Once again, circumstances will differ for everyone.

Under chapter 13, you make monthly plan payments to a Chapter 13 Trustee who distributes the monies to creditors.  Each chapter 13 plan is based upon different factors and may incorporate the repayment of mortgage arrears, income taxes, and unsecured creditors, depending on the circumstances.  A chapter 13 debtor is required to commit all his/her disposable income to the plan for the duration of the 3-5 years. 

As long as mortgage loan payments continue to be made, you will be able to keep your house.  If there is equity (value) in the house, you are allowed to claim a homestead exemption to protect the equity.  So, as long as the value does not exceed the homestead exemption and you continue to make payments, you can keep the property. 

There is no correct answer, as everyone’s situation differs.  However, you should consider speaking to an attorney if you are behind in your mortgage payments and are in danger of foreclosure, are being harassed by debt collectors, have significant income tax obligations or credit card bills that are overwhelming. 

The best way to rebuild credit after a discharge in bankruptcy is to obtain a secured credit card.  A secured credit card is similar to a credit card but you pay a cash deposit to determine the credit line.  By making regular, on-time payments with a secured credit card, your credit score should build over time. 

Student loans are presumptively not discharged in bankruptcy.  However, in some cases, it is possible to seek the discharge or partial discharge of student loans in a bankruptcy proceeding.  This depends upon the circumstances of the individual and whether the payment on the student loan causes an undue hardship, among other factors. 

There are several advantages of filing bankruptcy, with the most important being a financial fresh start.  Protection from creditors, prevention and protection from foreclosure and repossession, stopping wage garnishment and stress relief are a few other advantages of bankruptcy filing.