Bankruptcy FAQ

What Is Bankruptcy?

Bankruptcy enables consumers and businesses to get a “fresh start” by restructuring or possibly eliminating some or all of their debts through a court process.

What Is A Bankruptcy Discharge?

One reason some people file for bankruptcy is to get a “discharge.” A discharge is a court order that states that you do not have to pay some or most of your debts.

Are There Some Debts That Cannot Be Discharged In Bankruptcy?

You cannot discharge debts for:

• Most taxes
• Child support
• Alimony
• Most student loans
• Court fines and criminal restitutions
• Personal injury caused by drunk driving or under the influence of drugs
• Debts incurred fraudulently

The discharge only applies to debts that arose before the date you filed. If a judge finds that you received money by fraud, the debt will not be discharged.

Do I Have To Pay A Debt That Has Been Discharged?

No one can make you pay a debt that had been discharged, but you can voluntarily pay any debt you wish to pay.

Why Would I Want To Pay A Debt That Could Be Discharged?

Some creditors hold a secured claim (for example, a car loan). You do not have to pay but the creditor can take the property. If you keep the property, you have to keep the debt associated with that property.

What Is An “Automatic Stay”?

The “automatic stay” associated with a bankruptcy filing generally stops most collection efforts by creditors, including wage garnishments, collection letters, telephone calls and lawsuits initiated by creditors. during the time a case is pending before the bankruptcy court.

How Will Bankruptcy Impact My Credit?

Filing for bankruptcy will often have a negative impact on your credit score and may result in difficulty obtaining credit after the discharge. It may take time to rebuild credit, but through responsible use and payment of available credit options, it is possible to do so. A bankruptcy filing will typically appear on an individual’s credit report for ten (10) years from the date of filing.

How Long Will The Bankruptcy Typically Stay On My Credit Report?

Typically, a bankruptcy filing will appear on an individual’s credit report for ten (10) years.

What Is Chapter 7 Bankruptcy And How To Qualify?

Most people file under Chapter 7. Chapter 7 is often called bankruptcy “in complete liquidation.” You would get to keep “exempt” assets and still have your debts forgiven.

In order to qualify for Chapter 7, you must pass the bankruptcy “means test.” This test looks at your gross income and compares it to the median income level for your state. If you fall above the median income, you may be unable to file for Chapter 7.

How Long Does A Typical Chapter 7 Bankruptcy Filing Take?

A typical Chapter 7 case lasts a few months and an individual generally does not have to appear in bankruptcy court before a judge during the process.

How Often Can I Get A Discharge In A Chapter 7 Bankruptcy?

You can receive a Chapter 7 discharge once every eight (8) years.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy involves a payment plan for a portion of your debt. If you are behind on your mortgage but want to keep your house, a Chapter 13 bankruptcy could be the answer. Generally, a Chapter 13 bankruptcy requires the completion of a consolidated payment plan. Once you have successfully completed the payment plan, the remainder of your debts subject to bankruptcy will be discharged.

How Long Does A Chapter 13 Bankruptcy Plan Last?

A Chapter 13 plan lasts three to five years and requires regular payments to the Chapter 13 Trustee. Upon completion of plan payments, most debts may be forgiven.

How Often Can I Receive A Discharge In A Chapter 13 Bankruptcy?

Special rules may apply if you have previously received a discharge in a Chapter 13 case.

Will A Bankruptcy Filing Stop A Foreclosure Sale?

Typically, a Chapter 13 bankruptcy will stop a foreclosure sale and allow you to keep your home if you file in time. If you do not put together a Chapter 13 bankruptcy payment plan, the foreclosure sale will simply be delayed.