What is a discharge?
Discharge is the final order issued by the court declaring you to no be longer liable for the debts listed in the bankruptcy, unless the debt has been reaffirmed.
What is the Automatic Stay?
The Automatic Stay is an order entered when one files for bankruptcy relief stopping all creditors from taking any further action to collect. If a creditor knowingly violates this stay it can become liable for any damages caused.
How long is the process?
Once filed, a typical chapter 7 is anywhere from 3-5 months. This could be longer depending on whether there are assets to be used to pay to creditors.
A typical chapter 13 is 5 years. Under certain circumstances this can be reduced.
Can I keep a credit card?
All debts must be listed except for ongoing monthly living expense, such as utilities. Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card, the company may cancel the card. Even if you have a zero balance the credit card company might cancel the card. You may choose to voluntarily pay a debt included in your bankruptcy after your case has been closed.
It is important to understand that monies owed to friends or family members are debts. So, those individuals will have to be listed as well. Payment to family or friends within one year of filing for bankruptcy relief is considered a preference. The court then has the authority to take those funds. Talk with an experienced attorney to figure out the best way to handle these situations.
What are Non-Dischargeable debts?
Non-dischargeable debts are those debts that bankruptcy does not eliminate. In chapter 7 this includes: alimony, child support, most recent back taxes, most student loans, luxury goods bought within 90 days of filing, fines or penalties of government agencies (with some exceptions), fraudulent debts, cash advances of $825 within 70 days of filing, recent large purchases of more than $550, injury caused as a result of a DUI, and intentional injuries to another.
Chapter 13 is the same except some debts can be discharged such as alimony.
What are exemptions?
Exemptions are laws allowing you to keep some, if not all, of your assets. Depending on your situation you can choose to use Federal exemptions or State exemptions. Any assets that are not exempt are turned over to the court to be liquidated and paid to creditors.
Can I keep my home?
Federal exemptions allow you to keep your home, including a co-op or mobile home, if your equity does not exceed $22,975.00 or $45,950 for husband and wife filing jointly. Washington exemptions allow up to $125,000 in equity per household. As long as there is enough exemption to cover the equity you should be able to keep your home.
It is important to understand that bankruptcy does not eliminate voluntary liens, like mortgages and deeds of trust, or tax liens on the item secured. If you do not pay, the lender still has the right to take action to obtain possession of the item (ie. foreclosure or repossession).
I am facing foreclosure, can I save my home?
If you are behind in payments then Chapter 13 is a possible way to catch up the payments and keep the home. If this does not work, then you will have to work with the lender.
What if I do not want my home anymore?
If you know you are going to let your home go back to the lender, you might want to consider signing a deed in lieu of foreclosure. Contact your lender to see if it will send you the documents so that it does not have to proceed with the foreclosure proceeding. Signing a deed in lieu of foreclosure is generally less detrimental on your credit report than a foreclosure.
While your name is on title make sure that you continue to pay any homeowner/condo association dues. You remain liable for any dues that accrue while you are in bankruptcy and until the property is sold. If this applies, this is another reason a deed in lieu of foreclosure would be a good option, if available.
Can I keep my car?
The same applies for a car as for a home except the exemption is smaller. As long as you continue to make payments you can keep it if there is no value beyond the exemptions. One benefit of bankruptcy is that if you do not want your car any more, you can surrender the car and eliminate your liability.
What is a Reaffirmation Agreement?
This agreement basically states that the debtor will continue to pay all or part of the debt obligation to the creditor which would otherwise be discharged in the bankruptcy. Understand that when you sign one of these agreements you will become personally liable again.
Do I have to reaffirm debts?
The basic answer is no. However, for a car, or other items secured by the agreement (ie. furniture purchases) if you want to keep the item the creditor may insist on it. If you do not sign the creditor can then declare the loan in default and repossess the item.
For a home as long as you make payments no action will likely happen. However, if you miss one payment the creditor may not be willing to work with you any longer.
Why would I reaffirm a debt?
Why a debt is reaffirmed is for multiple reason. It allows you to keep the item as well as understand what the terms and conditions are (typically it does not change from prior to filing bankruptcy).
Also, if an agreement is not signed the lender will also stop reporting to credit bureaus your payments and stop sending notices or monthly statements. This would allow this to start again.
It is important to understand that it is in the discretion of the creditor whether to send a reaffirmation agreement.
If I have a credit card with the bank I have my checking/savings, can they take my money after I file?
No, except credit unions have special provisions allowing them to do this.
I am facing garnishment, can bankruptcy stop this?
Yes, bankruptcy will stop garnishments under the automatic stay. In some situations, any funds currently being garnished or garnished in the previous 90 days can also be recovered, subject to the exemptions.
Can my boss fire me for filing bankruptcy?
No, your boss cannot fire you. Bankruptcy Code (11 U.S.C. Sec. 525) prohibits employers from discriminating against you because you filed bankruptcy.
What is a meeting of creditors?
Also known as the 341 meeting of creditors, it is a required hearing that the debtor must appear at to testify about assets and liabilities. This is administered by the trustee. Creditors are notified of the hearing but rarely attend. The meeting is typically scheduled for one hour. The debtor will typically only testify for 3 to 15 minutes. It is important to remember to bring your driver’s license or some sort of photo identification along with a valid social security card or other paperwork showing your social security number (no copies are allowed).
Will my friends and family know I filed bankruptcy?
Bankruptcy filings are public record. However, unless they are specifically looking for it, or they are a creditor (creditors listed in the bankruptcy schedules are notified of the filing), they will only know if you tell them.
What about retirement accounts?
Any retirement accounts that are exempt from taxation under the Internal Revenue Code are exempt in bankruptcy. The limitations allowed in the Internal Revenue Code also apply. Types of exempt accounts include 401(k), pensions, and IRA’s. However, one cannot deposit a large amount of money into a retirement account right before filing for bankruptcy and exempt the funds. Normal actions determine whether the funds are exempt or not.
All of this information varies from situation to situation. It is important to contact an experienced attorney to discuss your specific situation to determine how bankruptcy may apply to you. To arrange a free consult please contact our office today at 253-520-5000.