BANKRUPTCY FREQUENTLY ASKED QUESTIONS
1. How Will Filing Bankruptcy Effect My Credit?
Actually, bankruptcy does not reduce your credit score as much as being 90 days late on a payment does. Realistically, if you are deep in debt and struggling to pay, your income to debt ratio is probably so bad that no-one would extend you credit anyway. And if you already have a house and a car you probably don’t need big credit in the foreseeable future. Your focus should be on getting rid of this debt so that you can move on with your life and begin to build equity and save, rather than continue to pay on exorbitant credit card interest rates and risk losing your home and vehicles. Moreover, after you receive a bankruptcy discharge, your ability to obtain credit will improve because you no longer have all that debt and creditors know you cannot get another bankruptcy discharge for another 8 years. In addition, there are things you can do to rebuild your credit.
2. Will I be Able to Keep My Home and Car?
As a general rule, provided you are current with your house and car payments, you can keep them even if you file bankruptcy, as long as you don’t have unprotected equity in such assets. Once you file for bankruptcy relief, all your assets vest in the bankruptcy estate. What you may keep depends on whether the asset is exempt from the claims of creditors. There are various adjustments and legal considerations that may come into play. Chapter 13 may be a sensible alternative to protect your home. Never assume anything. Consult with a bankruptcy attorney and never conclude on you own that you are not eligible for bankruptcy relief.
3. What if I Want to Keep Certain of My Debts Out of My Bankruptcy?
You cannot pick and choose what to include in your bankruptcy. But don’t be confused. You While you need to fully disclose all your assets, all your creditors, and other information required under the bankruptcy laws, that does not necessarily mean you won’t be able to keep them. In most Chapter 7 cases, there is no excess equity in the filer’s home and car and so keeping the car is usually not a problem. Married couples enjoy an additional very valuable exemption. However there are exceptions . Obviously, the amount of your equity and whether all your equity is protected, needs to be determined on a case-by-case basis. Your bankruptcy lawyer know which questions to ask you and can explain to you how the law applies in your case.
4. What Does “Reaffirmation” Mean and is it Something I Need to do?
A reaffirmation agreement is an agreement you sign confirming that you wish to keep the asset, that you will continue to make the payments. The effect is that the subject debt will not be wiped out in your bankruptcy case. If you do not reaffirm, you will no longer be liable for the debt to the extent such debt is unsecured. Thus, if you need to to In the case of vehicles, a number of creditors are taking the position that of you do not reaffirm, they will repossess your car.5. Can I Keep One or More of My Credit Cards if I File Bankruptcy?
In most cases it makes sense to give up the card and wipe out the debt. There are better ways to rebuild your credit and maintain access to emergency credit. Your lawyer can explain how. If you have a credit card with a small balance, you may be able to keep it and continue to make the monthly payments.6. Does My Spouse Have to File Bankruptcy With Me?
No. However, your spouse’s income and contribution to household expenses are factors the court considers. There can be many factors that have to be weighed to determine whether it is best for spouses to file jointly.7. Can I Wipe Out My Liability to My Spouse & Creditors Under My Divorce Settlement Agreement?
Although the general rule is that unsecured debt can be wiped out in Chapter 7 bankruptcy, there are a number of exceptions, which include obligations arising from a divorce settlement, taxes, and fines.8. Can I Wipe Out Tax Debt in Chapter 7?
Generally no, but there are exceptions. For instance, if you have filed your income tax return, owe taxes and haven’t heard from the IRS regarding your tax debt for more than three years, this debt may be dischargeable.9. My Parents Co-Signed For Me, Will They Have to Pay If I File?
That is the reason for having a co-signor. They guaranteed payment if you default. However, if they continue to make the required payments the loan balance will not be accelerated. You can protect a co-signor by filing under Chapter 13. That way, your unsecured creditors are treated equally in your repayment Plan, and the creditor has to accept the amount offered in the Plan and may not take any action against your co-signor as long as your maintain your Plan payments.10. Can Cash Advances Be Discharged in Bankruptcy?
That depends. Cash advances usually are red flags to creditors when someone files bankruptcy. Modest amounts might go by unchallenged. All debt incurred in the 90 days prior to filing is presumptively non-dischargeable on the grounds of fraud. In such cases, the creditor will provide notice of its assessment and make a settlement proposal. Your lawyer should review the claim carefully. The burden of proof shifts to the creditor for debts older than 90 days before filing. If the issue cannot be resolved, the creditor will likely file a Complaint to Deny the Dischargability of Debt. In most cases, your lawyer should be able to guide you to a sensible resolution and avoid a trial.11. Can I Wipe Out My Mortgage and Still Keep My House?
You’re not serious are you?! Of course not. Your house serves as collateral to secure payment of your mortgage loan. If you don’t pay, the mortgage company can foreclose. If you have more than one mortgage and there is not enough equity in the house to secure full repayment of the first mortgage, then the second mortgage would in fact be wholly unsecured. In that case, the loan is really unsecured. However, the Bankruptcy Code does not allow stripping off of second mortgages secured by one’s primary residence in a Chapter 7 case. But, if you file for bankruptcy relief under Chapter 13, the wholly unsecured second mortgage may be stripped off. There are pro’s and cons to doing this, which can be better evaluated in the course of a professional Rights & Options Consultation.12. Will I Lose My Retirement Savings If I File Bankruptcy?
Generally retirement savings are protected in bankruptcy, provided you made your contributions in the normal way.13. Can I Continue to Repay My 401(K) Loan If I File Bankruptcy?
401(k) loan repayments are not allowed deductions from income in Chapter 7 cases. You are not prohibited from repaying these loans, but the funds used, if from your income, will be deemed available funds for your creditors and might disqualify you from Chapter 7 relief. If you file for relief under Chapter 13, you are allowed to repay your 401(k) loan through your Plan. Although it is absurd to allow such deductions in Chapter 13 for public policy reasons (to encourage people to make every effort to pay their debts before filing bankruptcy and not punishing them for such effort) and not allow the same deduction in Chapter 7, that is how the Bankruptcy Code is written and the courts have no discretion to change the law. Therefore, if you have a large 401(k) loan, it may pay you in the long run to file under Chapter 13. Be sure to discuss this with your lawyer.14. Can I Continue to Contribute to My 401(k) While in Bankruptcy?
No. You cannot claim you don’t have money to pay your creditors and then continue to contribute to your own savings account!15. My Child is in College. Will Bankruptcy Affect My Contributions to Tuition and Expenses?
Yes. Once your child leave the family home he or she is no longer a member of the household. Although supporting one’s child through College is a good thing to do, College is not considered to be a reasonable and necessary household expense and cannot be made at the expense of your creditors.16. Can I Put My House in My Mother’s Name Before Filing For Bankruptcy?
No. You are required to disclose all property interests you had and transfer made in the three years prior to filing. Such a transfer would be deemed fraudulent and the asset would have to be returned to the bankruptcy estate or the value paid to the estate. Such a transfer would also preclude the application of certain exemptions. So don’t do this! If you already have, all is not lost. Discuss the matter with your lawyer and perhaps the situation can be rectified prior to filing.17. I Filed Bankruptcy Before. Can I File Again?
One is only eligible for a Chapter 7 discharge every 8 years from the date of filing. Chapter 13s can be file every 4 years, including 4 years after a Ch. 7 discharge. Even if you are not entitled to another discharge, you may be entitled to bankruptcy relief under Chapter 13, - not to wipe out any debt but to buy breathing room to get caught up on your mortgage, car payments, taxes, student loans and so forth. A Chapter 13 can be filed at any time as long as the case is filed in good faith. For instance, there are rules to prevent abuse through serial filings to avoid foreclosure.18. If I File Bankruptcy, Will They Take My Tax Refund?
You are entitled to keep up to $12,000 worth of stuff, whether it is equity in your home, car, money in the bank, personal property, and so forth. Depending on the amount of your available exemptions, you can exempt all or a portion of your refund from the bankruptcy estate.19. My Wages Are Being Garnished. Can I Stop The Garnishment or Recover This Money?
You cannot stop legal action until your petition is filed. If at least $600 was garnished within the 90 days prior to filing, all the garnished funds may be recovered, - if the issue is handled correctly.20. Are Inheritances Protected in Bankruptcy? What if I Win The Lottery?
An inheritance is not a protected asset. In fact, if you inherit anything in the 180 day period after filing your petition, that fact has to be reported to the bankruptcy trustee and your lawyer and the asset turned over to the bankruptcy estate, - subject to any exemptions you may be able to claim. The same rule applies to lottery or gambling winnings or any other windfall you may receive.21. What is The Worst That Could Happen If I Don’t Disclose My Personal Injury Claim?
First, the court could deny you a discharge or your bankruptcy could be revoked. Second, you could be fined or even receive jail time for committing bankruptcy fraud. Third, under the rules of estoppel, if you don’t disclose your claim in your petition, you will be deemed to have waived it. So, in effect, your claim will be extinguished! Damages for pain and suffering enjoy a special exemption in bankruptcy. As you can see, making assumptions can be extremely costly. Find out what you need to know by investing in a comprehensive Rights & Options Consultation and give yourself the opportunity to make an informed decision!
22. How to Choose an Attorney?
Consulting with an experienced bankruptcy professional is the first step to determining what really needs to be done. Then, you will be able to make an informed decision and enjoy the benefit of being guided by someone who understands your needs and concerns. Ignorance may be bliss in certain instances, but in the case of bankruptcy, you may never know just how much the failure to act actually costs you.
A caring bankruptcy professional will not rush you into making a decision or pressure you to do something you are not comfortable with. Procrastination is your greatest enemy. Act now by scheduling a comprehensive planning meeting. Once you understand what needs to be done, you can proceed with Peace of Mind, knowing that your concerns will be addressed.
CONTACT ROB GOLDMAN LEGAL SOLUTIONS today. Peace of Mind is Just a Phone Call Away!