Frequently Asked Questions

In most cases, you do not lose any of your possessions when you file bankruptcy, including your house or car.  In fact, a Chapter 13 bankruptcy is designed to help save assets such as your house or car if you are facing foreclosure or repossession.

If you are delinquent on your home mortgage and have been notified that the lender is pursuing foreclosure, it is imperative that you take action immediately. When you file either Chapter 7 or Chapter 13 bankruptcy, the court issues an automatic stay. This freezes all foreclosure actions.

Under Chapter 7 bankruptcy, your unsecured debt is discharged, leaving more money for you to work on becoming current on your mortgage obligations. With Chapter 13 bankruptcy, any past due amounts are rolled into a monthly repayment plan that you make over three to five years without interest or penalties.

Most people who lose their house in bankruptcy actually choose voluntarily to surrender the property back to the mortgage company because they can no longer afford the monthly mortgage payment. Bankruptcy law allows you to walk away from the debt even if your real estate is sold for less than the balance owed on the mortgage.

People are often anxious about whether they can keep their car in bankruptcy. It might reassure you to know that most people who file bankruptcy are able to keep their car. In fact, in bankruptcy, oftentimes we are able to reduce a car’s value to fair market value and force the lender to accept the payments through a Chapter 13 bankruptcy repayment plan. As a result, your monthly car payments can be significantly reduced.

The Bankruptcy Code is designed to help debtors, not punish them. As such, bankruptcy law protects certain property classified as exemptions. Generally, a petitioner is allowed to retain a car as an exemption.

If you are delinquent on your car payments, the lender has the right to repossess the vehicle. However, when you file either Chapter 7 or Chapter 13 bankruptcy, the court issues an automatic stay. This stops all repossessions, giving you time to catch up on missed payments. Even if your car was recently repossessed, filing bankruptcy can help you recover it back — and get it back fast.

One of the main concerns that individuals have when filing bankruptcy is what will happen to my retirement accounts if I become bankrupt? We are pleased to tell you that your retirement accounts are protected in the event that you file for bankruptcy. Most likely, your retirement plan will be untouchable by a bankruptcy trustee. In a Chapter 7 bankruptcy, most retirement accounts are exempted under the Bankruptcy Code. That means these accounts cannot be liquidated to pay your creditors. Under Chapter 13 bankruptcy, none of your assets are taken from you. The monthly repayment plan amount is determined by your income.

No! Borrowing from your 401K to pay off your debts is a terrible idea.  Since retirement accounts are protected in bankruptcy, you may be better off filing bankruptcy and preserving your retirement funds.

One of the most common mistakes people do is that they will borrow against their 401K to pay off their credit card debt or medical debt. Within a short period of time, they realize that they cannot afford to make the 401k loan payment. Trying to get by, they skip other important bills like mortgage and car payment. Then, they will eventually file Chapter 13 bankruptcy to save the house and car. These people could have wiped out the credit card debt and the medical debt in a Chapter 13 or a Chapter 7 but now they are stuck with this 401k payment that they cannot afford.

Defaulting on the 401k loan is a bad idea because of the tax penalties. When a person defaults on a 401k loan, they will have to pay the government taxes that they otherwise could have completely avoided if they had never taken out the 401k loan to begin with

Your retirement savings represents years of hard work and sacrifice. Losing this nest egg is a major concern.

The Law forbids Discrimination.  One of the driving forces that keep professionals and employees from considering bankruptcy is fear of how it may impact their career. It is important to understand is that there are clearly established laws designed to prevent employers from discriminating against an employee.

The Bankruptcy Code states that no employer may terminate your employment or discriminate against you if you have filed for bankruptcy relief. That means even if a potential employer performs a background check and sees that you have a poor credit report, that individual or entity is not allowed to discriminate against you.

Bankruptcy was created to provide debtors a second chance and preserve the status quo. It was not designed to punish. That is why the government prohibits the discrimination on the basis of having filed bankruptcy. The idea is to help you get back on the right track, not keep you from getting a good job.

When one spouse has incurred a great deal of debt in his or her name only, he or she can file for bankruptcy without requiring their spouse to do so as well. However, in filing for bankruptcy, salary and other asset information of the non-filing spouse is required, in order to determine if the filing spouse qualifies for Chapter 7 or Chapter 13.  While this option has many advantages, it also has some disadvantages. It pays to carefully consider the pros and cons before making a final decision.

When only One Spouse needs to file for Chapter 7. While only one spouse may be filing for bankruptcy, the court will consider household income, in order to determine if the filing spouse is eligible to file for Chapter 7. In cases where a filing spouse has little disposable income but a non-filing spouse earns substantially more, the income of both will be reported on bankruptcy forms. If the household income is more than the qualifying median income required for filing Chapter 7, the filing spouse may have to file under Chapter 13. In either case, the court will consider what your current monthly income (CMI) is by deducting expenses your spouse pays that are not related to monthly household costs. After determining your CMI, the court will then determine you disposable income.

For example, if your spouse pays $600 on a car loan, that same amount will be deducted from your total costs in order to determine your monthly disposable income.

When One Spouse must file under Chapter 13.  If the household income of a filing spouse disqualifies him or her for Chapter 7, he or she can still file under Chapter 13. Under Chapter 13, a trustee is appointed by the court in order to administer the repayment of debt according to a plan agreed to by the filing spouse’s creditors. While the non-filing spouse will not be involved in the Chapter 13 repayment plan, his or her income will be considered when determining the repayment schedule.

Credit Reports and Non-Filing Spouses.  In theory, any debt carried by one spouse that is his or hers alone, will not appear on the other spouse’s credit report. Additionally, bankruptcy on the part of one spouse should not appear on the credit report of a non-filing spouse unless they have joint debt together.

For most clients seeking protection under Chapter 7 or Chapter 13 bankruptcy, you will only have to appear briefly at a meeting. This meeting is called 341 meeting in the bankruptcy court. This meeting doesn’t include a judge and the purpose is to efficiently move bankruptcy cases along.  In the vast majority of cases it lasts only a few minutes.

The 341 Meeting.  Only three parties are generally present: you, your lawyer and the bankruptcy trustee. Your creditors and debt collection companies may attend the meeting, though they are not required to do so. In fact, oftentimes they do not attend.  During the meeting, the bankruptcy trustee will ask you some routine questions about your finances in order to ensure accuracy of information provided on your bankruptcy petition. All you need to do is answer the questions

Avoid the Consequences of Doing Nothing. Debt and creditors will not simply go away on their own. They will only become more demanding and more aggressive in their collection efforts. Whether you have fallen behind on credit card debt, mortgage, taxes or car loans, you are far better off taking the problem head-on, even if you are unable to pay, than waiting for creditors to react.

Risk of Doing Nothing:

• Creditor lawsuits, including embarrassing phone calls at home and at work
• Home foreclosure
• Car repossession
• Creditor harassment
• Wage garnishments

Creditors have enforceable rights, and once a creditor obtains a judgment against you, they will take action to protect those rights. What’s important to realize is that you have enforceable rights too.

Life is full of chances. Some chances guide and lead you exactly where you had hoped for. Bankruptcy can help people get back on the right track. However, sometimes they can find themselves in financial trouble again down the road. Even people who have had to file for bankruptcy in the past can still experience major financial hardships down the road, and may need to come back again to reorganize, restart and rebuild.  If you are in this situation, it may help to know that you may be able to file for bankruptcy again even if you filed within the past eight years.

The rule is that you can file for Chapter 7 or Chapter 13 bankruptcy every eight years, up to a total of three times in your life. There is no limit to how many times you can file for Chapter 13 bankruptcy. Even if you are currently ineligible to file Chapter 7, you may be able to find relief through Chapter 13 bankruptcy.

For example, you could file Chapter 7 bankruptcy to eliminate most of your unsecured debt. At some point down the road, you could file Chapter 13 bankruptcy, which would allow you to reduce certain payments, eliminate a second mortgage, removal all junior liens and pay off specific debts more quickly than without filing.

Prepare and bring the following information with you to your appointment:

• Pay stubs from the past two months
• Monthly expense information, excluding unsecured debt
• Federal and state tax returns for the past two years
• A copy of your credit report.  If none, our office can run your credit report during your appointment
• Creditor statements, including names, addresses and account numbers
• A list of the property you own
• Credit counseling certificate
• Photo identification
• Social Security card