• What is a Chapter 7 Bankruptcy?
  
  
• What is Chapter 13 Bankruptcy?
  
  
• How difficult will it be to file Chapter 7 under the new bankruptcy laws?
  
  
• I know I have to take an approved credit counseling course before I can file bankruptcy. How do I find an approved credit counselor?
  
  
• Will my creditors stop harassing me?
  
  
• Will my spouse be affected?
  
  
• Who will know?
  
  
• What are the most common reasons for a Chapter 7 Bankruptcy?
  
  
• Can I keep my credit cards?
  
  
• When will I be discharged from bankruptcy?

• If I use a credit counselor won't I get a better credit rating than if I go bankrupt?
  
  
• Will I ever get credit again?
  
  
• Can my boss fire me for filing bankruptcy?
  
  
• How much am I allowed to keep?
  
  
• What don't I keep?
  
  
• I was bankrupt before. When can I file again?
  
  
• What are the key or major events in the bankruptcy process and when will the bankruptcy be over?
  
  
• What is Chapter 13 and when can it be used?
  
  
• What debts are erased by a bankruptcy?
  
  
• What does it cost?

This page will provide the person, thinking about filing bankruptcy, the bankruptcy information he or she needs to make an informed decision. After reading the following FAQ information you will have a good understanding of what the law allows when you meet with your Bankruptcy Lawyer or Attorney. If your questions are still not answered after reading the following information we have an "Ask a Bankruptcy Lawyer" feature so you can ask a bankruptcy lawyer or attorney in your area a question.

WHAT IS CHAPTER 7 BANKRUPTCY?

Chapter 7 bankruptcy, sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start".

One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts.

WHAT IS CHAPTER 13 BANKRUPTCY?

Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts. More information on Chapter 13.

HOW DIFFICULT WILL IT BE TO FILE CHAPTER 7 UNDER THE NEW BANKRUPTCY LAWS?

There has been much doom and gloom written about the bankruptcy means test under the new laws and how much more difficult it's going to be to file Chapter 7. It's true that there are more hoops to jump through under the new laws and it's true that the bankruptcy means test will result in some people having to file chapter 13 instead of Chapter 7. However, for the vast majority of filers Chapter 7 is still available with very little extra effort!

For more information please refer to this link.

WILL MY CREDITORS STOP HARASSING ME?

Yes, they will! By law, all actions against a debtor must cease once the documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments.   Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make payments.

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WILL MY SPOUSE BE AFFECTED? 

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt. However, In community property states, either spouse can contract for a debt without the other spouse's signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouse's signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed.

Community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Your lawyer will be able to guide you in this regard.

WHO WILL KNOW? 

Bankruptcy filings are public records.  However, under normal circumstances, no one will know you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years. 

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WHAT ARE THE MOST COMMON REASONS FOR A CHAPTER 7 BANKRUPTCY?

The most common reasons for filing bankruptcy are:

1. Unemployment: Large medical expenses; Seriously overextended credit; Marital problems, and;
2. Other large unexpected expenses.

A Harvard Study reported that half of US bankruptcies were caused by medical Bills (MSNBC). The study was published online in February of 2005 by Health Affairs. The Harvard study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually — counting debtors and their dependents, including about 700,000 children.

WHAT DON'T I KEEP?

In a bankruptcy, assets in excess of your allowed personal exemption, or non exempt assets such as, real estate, automobiles and boats will be liquidated by the trustee. 

I WAS BANKRUPT BEFORE. WHEN CAN I FILE AGAIN?

A person can file Chapter 7 again if it has been more than 8 years since he or she filed the previous Chapter 7 bankruptcy. Also refer to: Chapter 13.

WHAT ARE THE KEY OR MAJOR EVENTS IN THE BANKRUPTCY PROCESS AND WHEN WILL THE BANKRUPTCY BE OVER?

View our PowerPoint presentation on the steps in a Chapter 7 Bankruptcy.

CAN I KEEP ANY CREDIT CARDS?

Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card they will cancel the card  unless you reaffirm the debt. Even if you have a zero balance the credit card company might cancel the card.

 WHEN WILL I BE DISCHARGED FROM BANKRUPTCY?

IF I USE A CREDIT COUNSELOR WON'T I GET A BETTER CREDIT RATING THAN IF I GO BANKRUPT?

No, you will not. It will cost you less money and you will rebuild your credit rating faster if you file Chapter 7 or Chapter 13. Be cautious if your are considering using a credit counselor. Also read about the problems of unscruplous companies in the credit counselling industry and the action the IRS has taken against "non-profit" credit counseling groups following widespread abuse.

WILL I EVER GET CREDIT AGAIN? 

Yes!  A number of banks now offer "secured" credit cards where a debtor  puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment.  Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.  Two years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy.  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.The fact you filed bankruptcy stays on your credit report for 10 years.  It becomes less significant the further in the past the bankruptcy is.  The truth is, that you are probably a better credit risk after bankruptcy than before.
 

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CAN MY BOSS FIRE ME FOR FILING BANKRUPTCY?

No. U.S.C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.

HOW MUCH AM I ALLOWED TO KEEP?

You are allowed to keep certain assets, depending on the state in which you reside.

To check the exemptions allowed in your state click below: