Bankruptcy questions
Q: What is bankruptcy?
A: Bankruptcy allows individuals or businesses ("debtors") who owe others ("creditors") more money than they're able to pay to either work out a plan to repay the money over time or completely eliminate ("discharge") most of the bills.
Q: Whats the difference between secured and unsecured debt?
A: Secured debt is a creditors claim thats secured by a lien of some type in your property, either by your agreement or involuntarily such as with a court judgment or taxes. A creditor can generally claim the property that secures the debt in the event of bankruptcy questions. Unsecured debt is not tied to any type of property, leaving the creditor without any claim to property.
Q: What type, or chapter, of bankruptcy should I file?
A: Consumers typically file Chapter 13 bankruptcy questions, where repayment is made to creditors, or under Chapter 7 where the debts are discharged. Each chapter of bankruptcy spells out:
What bills can be eliminated.
How long payments can be stretched out.
What possessions you can keep.
Additional information.
The selection of which type to file depends on your particular circumstances and whether or not there are assets available to repay all, or part, of the debts owed. Bankruptcy questions laws can be tricky and involved, so determining if you should bankrupt and what type of bankruptcy you need should be made with the input of an experienced bankruptcy lawyer.
Q: Can I change from one chapter of bankruptcy to another?
A: Generally, you can convert a case once to any other chapter for which you are eligible. The request to convert can be a simple one-sentence document. There are issues to watch when going from on chapter to another, though. For example, when moving from a Chapter 13 to a Chapter 7, you'll need to review whether you have acquired items that will now be considered property of the estate under Chapter 7 that wasn't part of the previous filing.
Q: Who can file bankruptcy?
A: With few exceptions, any person or business owing money to a creditor can file a bankruptcy petition.
Q: How often can you file for bankruptcy?
A: A Chapter 7 bankruptcy can be filed every 8 years from a previous chapter 7 filing or 6 years from a prior chapter 13 filing. Chapter 13 can be filed 4 years from a prior Chapter 7 filing or 2 years from a prior Chapter 13 filing. Filing bankruptcy can adversely affect your ability to obtain future credit, rent housing and even negatively impact a job application, so any decision to file must be carefully considered.
Q: What do I need to begin the bankruptcy process?
A: You need to compile a listing of the past and present debts you have. The petition in a bankruptcy questions filing includes schedules of assets and liabilities as well as a statement of financial affairs. These documents are filed with the bankruptcy court, along with payment of the filing fee.
Q: Do you have to have a certain amount of debt to file?
A: No. However, some situations may not warrant filing for bankruptcy. If your financial situation is temporary, you may consider making arrangements with individual creditors for a change in payment amounts or a reduction in the total amount due. If an individual has little in the way of property or money, filing bankruptcy may not be necessary, as the creditor may not be able to collect the debt.
Q: What is a joint petition?
A: A joint petition is the filing of a single bankruptcy petition by an individual and the individual's spouse. Only people who are married on the date they file may file a joint petition. Unmarried partners must each file a separate case.
Q: What happens if one spouse files for bankruptcy and not the other?
A: If one spouse files and the other does not, the one who does not file could possibly be responsible for the debts. Check this out carefully before filing.
Q: Does my divorce decree protect me from creditors if my ex files for bankruptcy?
A: No. If you are a co-signor with your ex-spouse on a debt, the creditor can require the entire payment of that debt from you even though the divorce decree assigns the debt to your ex-spouse. Your divorce decree may address any recourse you may have against your ex-spouse should he or she default on the loan obligations set out.
Q: The principal signor on a loan filed bankruptcy. Now the creditor is coming after the co-signor. Can they do that?
A: Yes. The lender can require the co-signor to make payments on a loan once the principal has declared bankruptcy on the credit. This fact makes it extremely important that those considering co-signing for a loan for another be ready, and able, to pay the loan in the event that the principal signor defaults.
Q: Can all types of debt be discharged?
A: No. The debts that cannot be discharged vary slightly between the different chapters of bankruptcy. Generally, the following cannot be discharged:
Debts for taxes owed to local, state or federal agencies
Debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently
Debts which were neither listed nor scheduled or which the debtor waived discharge
Debts which are owed to a spouse, former spouse, or child of the debtor, for alimony, maintenance, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record.
Debts owed for willful and malicious injury by the debtor to another person or property owned by another.
Debts for government-sponsored educational loans, unless it can be shown that repayment will cause an undue hardship.
Debts for death or personal injury caused by the debtor's drunk driving or from driving while under the influence of drugs or other substances.
Debts incurred after a bankruptcy was filed.
Q: What can I keep, if anything, if I file bankruptcy?
A: Exemptions allow an individual to "exempt", or keep, certain kinds of property. State law defines what assets are considered exempt, but typically include:
Jewelry
Vehicles up to a certain amount
Equity in a home up to a certain amount
"Tools of the trade" or tools and equipment necessary to allow the individual to continue working
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