Bankruptcy Questions
What happens when I file bankruptcy?
When you file bankruptcy your debts will be wiped out with certain
exceptions such as school loans, child support, alimony and taxes, giving
you a chance to rebuild your credit and pay your normal living expenses.
Can my employer fire me if I file bankruptcy?
Your employer cannot fire you if you file bankruptcy.
Can I go to jail if
I file bankruptcy?
The U.S. does not have debtors prisons so you will not go to jail if you
file bankruptcy, or even if you don't pay your bills.
How do I prepare to file bankruptcy?
To prepare to file bankruptcy you should have a complete list of your debts,
as well as your assets. (Read more on how to prepare
for bankruptcy here)
Will
creditors stop calling if I file bankruptcy?
When you file bankruptcy, the bankruptcy court will issue an automatic stay
which will stop all of your creditors from calling you immediately.
If my spouse files bankruptcy, do I have to?
No, but if the debts are joint, the bankruptcy may show up on the other
spouses credit.
Can I keep my house
and car if I file bankruptcy?
In most cases you can, unless you are behind on payments for a debt that
used one or the other as collateral (such as a personal loan), or you have
enough equity to cover all of your debts, in which case you may consider
Chapter 13.
Do I need an attorney to
file bankruptcy?
You do not need an attorney to file bankruptcy, you can file "pro-se", but
the bankruptcy laws are complex and different in every state, so
professional help is advised and well worth the money so that you don't
mistakenly lose assets such as your home.
What if I am unmarried but living with someone? Can we
file a bankruptcy together?
No. If you are living together with a “significant other”
but are legally unmarried, you cannot file a bankruptcy together, even if
the bills are in both your names. In this case, each one of you would have
to file separate bankruptcy petition. A competent attorney or paralegal can
separate the expenses and budget so that each of you pay 50% of the
day-to-day living expenses (if both of you share the expenses) and submit
the information properly to the court. In addition, if you are separated
from your legal spouse, your bankruptcy petition can be prepared showing two
separate living expenses for each person.
Will bankruptcy stop a wage garnishment?
Yes, some of the money garnished from your paycheck may
even be returned to you. It all depends on how much was garnished and when
it was garnished. If your wages are currently being garnisheed, a
Notification of Stay pleading needs to be filed in court as well as a letter
mailed to the creditor and your employer to stop the garnishment after your
bankruptcy petition is filed.
Stopping a wage garnishment is possible because whomever you owe that is garnishing your check is now being paid (or is being discharged) through the bankruptcy petition you filed. As soon as the clerk file stamps your bankruptcy petition, you have immediate protection under the United States Bankruptcy Court and every creditor you owe must proceed through the court to collect anything from you.
How can I immediately stop creditor harassment?
The filing of a bankruptcy under Chapter 7 or Chapter 13
will IMMEDIATELY bring the harassment caused by creditors to a HALT. Once
your bankruptcy has been filed, creditors are forbidden from taking action
against you or against your property to collect money you owe them. If they
try to do so, they can be held in contempt of court. This is the advantage
of the law, administered by the United States Bankruptcy Court, and provided
as a way to help citizens get “another chance.” Even if there is a wage
garnishment or other legal proceeding under way, filing bankruptcy
will bring it to a screeching halt, giving you the opportunity to take care
of your financial affairs in an orderly and permanent way.
What if I owe the IRS back taxes? How will bankruptcy help
me?
Most tax debts cannot be discharged in a bankruptcy. Trust funds
and withholding taxes you owe, such as sales taxes or employee withholding
obligations can never be discharged. However, income and self-employment
taxes may be discharged or reduced by the Trustee if they are at least three
(3) years old and the tax returns have been on file for at least two (2)
years.
In situations like this, a bankruptcy can be a great help in many ways. The biggest benefit is that you may be able to reduce the amount of the tax you owe. In a Debt Adjustment Plan, you can also stop interest and penalties on all taxes you owe — even the ones that are non-dischargeable. This will place you in a situation where it will be easier to pay your taxes off.
When does a bankruptcy take effect?
When the Clerk of Court receives your bankruptcy petition and
date/time stamps it, your bankruptcy is immediately in effect. The Court
sends notice of your filing to all of your creditors and bill collectors
generally within 5 days after filing. That is why it is so vitally important
to include complete addresses and zip codes of all the people you owe on
your bankruptcy petition. The court will send a copy of your petition to all
these creditors so they will stop harassing you and allow them the
opportunity to file a Proof of Claim. If those addresses are not correct,
the creditor won’t know you filed bankruptcy and will continue to harass
you. It is also important to list all the collection agency addresses so
they can be notified as well. Upon receipt of the notice of your filing,
creditors and bills collectors are prohibited from having contact with you.
If you should receive any harassing or annoying creditor calls after filing your bankruptcy petition, a letter can be mailed to the creditor which spells out Section 362 of the Bankruptcy Code (Automatic Stay.) This letter prohibits the creditor from contacting you again or risk being held in contempt of court.
I feel so guilty not being able to pay my bills. Am I a
“bad” person because I need to file bankruptcy?
You are NOT a “bad” person because you decide to file for
bankruptcy. Back in the old days (pre 1900), if a person went bankrupt,
creditors stepped in, sold everything the person owned, split the money
between them, put the bankrupt person out in the street and made a public
mockery of them. Therefore, this is why people who have not kept up with the
times still feel that bankruptcy is a “bad” thing to do. But that was over
150 years ago! The economy has changed, employers have changed, life is more
complicated, interest rates are higher than they have ever been in history
and the money you make doesn’t reach as far as it used to just five years
ago.
Any one of these factors could cause a “good” person who was responsible and financially secure, to suddenly consider filing bankruptcy. Not one of us is immune from the world’s problems. So if there comes a point in your life where you find it necessary to take advantage of the bankruptcy law, don’t look back. Meet the problem head on, clear it up and get over it. In fact, you should be glad the United States has set up a governing body to protect people like you and me so we can continue to survive in times of great financial burden.
Is it legal for me to file my own bankruptcy petition?
It is perfectly legal in all 50 states to file your own
bankruptcy petition. Don’t allow anyone to tell you otherwise. To prove it,
on the 2nd page of the Voluntary Petition that you file in court, there is a
signature area for a non-attorney bankruptcy petition preparer to sign.
There is also a statement that appears below your signature line that reads:
"Debtor not represented by an attorney." If it were not legal to
file your own bankruptcy petition, then why would the Federal Government put
this directly on their forms? In other words, it is just as legal for you to
file your own voluntary bankruptcy petition as it is for you to get your
driver’s license renewed.
What about filing bankruptcy on bad checks I wrote at
check-cashing agencies? Can I include them?
First of all, you should include ALL the debts you owe,
regardless of who or what they are for on your bankruptcy petition. However,
you need to understand something about check-cashing agencies. Believe it or
not -- when you walk into the corner check-cashing store, write them a
post-dated check and they give you cash, a bounced check is not
considered to be the same thing as writing a “bad check.” How could this
be? Because the person at the check-cashing store is fully aware of the
fact that the check you are giving them is “post-dated.” That means, that at
the time you are writing the check, the check-cashing agency is aware the
check is bad. You make a promise that the check will be “good” on a certain
date. If you break that promise you still owe the debt but it is treated as
“unsecure” rather than a criminal act of check fraud.
However, if you go to several check-cashing agencies and get cash advances against the same payroll check; you are committing fraud if you obtain one or more cash advances that amount to “more” than your check will cover.
Will I lose any of my personal belongings or household
goods when I file bankruptcy?
If you are filing a Chapter 13 bankruptcy and paying back
your creditors 100% of the debt you owe them, the Trustee at the Bankruptcy
Court will not take any of your personal belongings or household
goods and sell them to pay your debts.
If you are filing a Chapter 7 bankruptcy, the only way you could lose any personal belongings or household goods is if any of the following is true:
You do not totally own the personal belongings or household goods because you are still making payments on them. (Example: furniture and appliances you purchased at a rent-to-own store.) In this case, if you want to keep the item, you can "reaffirm" the debt if you have enough money per month to keep paying the bill and are current on your payments. Otherwise, you may want to surrender the item, which does not necessarily mean it will be repossessed. It depends on the market value of the item and how the individual company handles repossessions on bankruptcy claims.
If the personal belonging or household good is not covered by an exemption, that item could be sold by the Trustee and distributed to your creditors. But, don't be alarmed by this statement. Most average consumers filing a Chapter 7 normally do not have more than one motor vehicle, television set, computer, stove, refrigerator and some miscellaneous costume jewelry; and these items can most likely all be exempted in your bankruptcy petition.
How is my leased vehicle treated in bankruptcy?
A leased vehicle is treated as an executory contract and the monthly payment
is included in Schedule J along with the normal monthly expenses. Because
you do not actually own the vehicle, it is treated as a rental and actually
carries no asset value.
Some of the personal belongings and furniture I have belong
to an ex-roommate. Should I list these in my bankruptcy?
Yes, the value of these items will be recorded on the
Statement of Affairs in your bankruptcy petition as ONE amount. They do not
need to be listed separately.
The main issue here is if you are holding these items pending a potential lawsuit because the ex-roommate owes you money. If this is the case, you must provide information as to how much this person owes you and if you have filed a lawsuit against them. If not, do you plan to do so within the next six months or do you plan to collect the money yourself within that period of time?
If you are simply holding the furniture and personal belongings of an ex-roommate, who doesn't owe you any money and they plan to return and get these items, their value only needs listed on the Statement of Affairs and no exemption is necessary. In other words, these items cannot be taken from you by the bankruptcy court because they do not belong to you and you have no financial interest in them.