Answers to Your Questions About Bankruptcy
Prefiling Concerns
What is the difference between Chapter 7 and Chapter 13
Are student loans dischargeable?
I own a business, how will that affect a bankruptcy filing?
I own three cars and only two are exempt, why can't I just sign the title over to my brother?
How long does the process take?
When will bankruptcy provide me relief and protection from my creditors?
As soon as the bankruptcy petition is filed. When that happens, a case number is assigned to you, and we will provide you with that number. If a creditor calls, you should inform them of this case number and request that they stop contacting you. They will stop. If they do not, they are in violation of the automatic stay and are subject to sanctions by the Court.
What is the automatic stay?
The moment a bankruptcy petition is filed, an automatic stay goes into effect and all of your creditors are subject to it. The automatic stay is like a time out. It stops the action. It orders your creditors to stop their debt collection efforts and to refrain from any new collection attempts. They must stop as soon as they receive notice of your bankruptcy petition filing. That could be verbal notice on the phone from you. Additionally, your creditors will receive written notice from the bankruptcy court. That's one reason it is very important to inform us of every single creditor you have.
Can a creditor get around the automatic stay?
It is possible, if the debt is secured by collateral like your car. If you don't make the payment for your car, the bank can move to lift the stay and repossess your car.
Will I lose my home and car?
You may keep them as long as you make your home and car payments on time, provided that the equity in your home and car are not greater than the exemption. However, if you fall behind in making the payments after your discharge, you may lose the property to the creditor.
What does "reaffirm a debt" mean?
Reaffirming a debt means that you agree to be liable for a debt that could be discharged in your bankruptcy case. You may sign a reaffirmation agreement and the agreement will be filed with the bankruptcy clerk. If you break the agreement in the future you will still be responsible for the outstanding debt.
Will I lose my 401(K) or other retirement accounts?
More often than not, people are able to keep these accounts. The bankruptcy laws include exemptions and/or exclusions that protect ERISA qualified retirement accounts.
Can I include my utility bills in my bankruptcy case?
Yes, but you may have to pay a security deposit for any future payments. All utility bills prior to filing bankruptcy will be eliminated. However, you will have to pay all utility bills from the date of filing forward. Cable television is an exception, because it is not considered a utility.
Will bankruptcy eliminate the unpaid child support or spousal maintenance?
No, this priority debt is not dischargeable.
Will filing bankruptcy allow for the reinstatement of my driver's license?
The answer is often yes. It could depend on why your license was suspended. If you were in an auto accident or were suspended for driving without insurance, then the bankruptcy may permit the reinstatement of your driver's license provided that any other requirement of the DMV is also satisfied.
Will a creditor try to collect the debt from the co-debtor if I file for bankruptcy?
It is possible and completely up to the creditor. The creditor has a legal right to do so, but may choose not to if they determine that collecting the debt is not possible.
Will my employer find out about the bankruptcy?
If your wages are being garnished and you want that to stop, your employer must be notified. Otherwise, it is not necessary to inform your employer.
Do I have to appear in Court?
Normally, no. However, you do need to appear at a 341 meeting of creditors. At this meeting, you will answer questions under oath from the bankruptcy trustee. Creditors have the opportunity to appear at this meeting but rarely do.
Will I be able to get credit in the future?
Yes. Creditors will see you as a fairly minor credit risk, because they know you cannot file again for another eight years. After three years, you may be able to get a mortgage for a fairly low rate. Most auto lenders like to wait until you have received your discharge before they will give you a car loan.
How do I know filing bankruptcy is right for me?
Here are 11 indicators that bankruptcy is a good option.
- If you are considering taking money out of your retirement account to pay bills that are dischargeable then filing a bankruptcy petition may be a good option. Remember you can file a bankruptcy petition and keep all of your retirement money while discharging all of your unsecured debt like credit card debt, medical bills, repossession debt, old tax debt, payday loans, lines of credit and others.
- If you are considering borrowing more money to pay off existing debt then you are probably in a vicious circle which can be stopped and eliminated by filing a bankruptcy petition
- If you are only making minimum payments on large credit card bills, check the interest rates on those debts. Do you know how long it is going to take to pay off these debts? It is not uncommon for the results of this calculation to be from ten to thirty years.
- If you have been served with a lawsuit which will soon become a judgment and then a wage garnishment then bankruptcy may be a very good option for you. Wage garnishments take up to 25% of your paycheck, after mandatory taxes are withheld. Will you be able to pay your necessary expenses if your wages are garnished?
- If you can strip a second mortgage from your home. If the fair market value of your home is less than the amount owed to the first mortgage holder than the second mortgage can be stripped in a chapter 13 bankruptcy filing.
- Are creditors harassing you? Are they calling you at work? Are they calling your family? Do they call you all day long? Filing a bankruptcy petition puts a stop to all of this.
- Do you want to save your house from foreclosure? Chapter 13 bankruptcy will stop the sale of your home and provide a repayment plan to allow you to save your home.
- Is your car in danger of being repossessed? Chapter 13 bankruptcy will prevent the repossession and provide a repayment plan to allow you to keep your car.
- Are you close to retirement age but don’t see any way you could possibly stop working because of your debt? Filing bankruptcy petition could solve this problem.
- Do you want to take the first big step toward a good credit score? Filing a bankruptcy petition will give you a clean slate and a fresh start. With the proven credit repair techniques now available you can achieve an above average credit score in three years after filing a bankruptcy petition.
- Do you have old tax debts? Most people think that a bankruptcy petition cannot help them with tax debt, this is not entirely accurate. Some tax debts are 100% dischargeable. If your tax debt meets the following requirements then you may not have to pay it. First, the tax debt is more than three years old. Second, you filed the tax return more than two years ago. Third, any assessment by the government happened more than 240 days before the filing of your bankruptcy petition.
How will filing bankruptcy affect my credit score?
If your credit is not already destroyed then filing a bankruptcy petition will take care of that for you. If your credit is already in the dump then filing a bankruptcy petition is the first step to repairing your credit. There are many proven credit repair technicians available that will assist you in achieving a good credit score in three years.
What day should I file?
This is sometimes a sensitive issue which may require the expert knowledge of a seasoned bankruptcy attorney. This is not a task for amateurs or dabbling attorneys. There are often several different factors at play when deciding when, exactly, to file. Some of those factors include the balance in your bank accounts, tax refunds, debt acquired within the last 90 days, pending lawsuits, forthcoming garnishments, rolled over retirement funds, the demise of a family member which may result in an inheritance, terms and conditions in a decree of dissolution, any unliquidated claim, changes in income and many others. I am an experienced bankruptcy attorney and I will point out these factors in your case and council you on the best day to file.
What do I keep when I file bankruptcy?
This depends upon the exemptions that apply to your situation. If you have lived in Arizona for a continuous two year period prior to the filing of your bankruptcy petition then Arizona exemptions will apply. In a nut shell, the following is a list of property that you will keep.
- Your residence so long as there is less than $150,000 of equity in it. Equity is measured by subtracting the debt owed on the property from the fair market value.
- One vehicle with less than $5000 equity, $10,000 if you are disabled. Two vehicles if you are married and file a joint petition.
- 100% of your retirement benefits.
- All of your household items so long as they are everyday average items. A good way to look at this is to ask yourself if there is any one item that could be sold for $1500 or more. If not, then there is a significant chance that you will keep all your household property
- Cash value of annuities and whole life insurance policies up to a certain value and with some restrictions.
- Wedding jewelry worth up to $1000 per spouse
- One firearm worth up to $500, two if you are filing a joint bankruptcy
- $150 per spouse in one bank account
- For a complete list of Arizona Exemptions click here. If you have non exempt property than I can help you manage that situation. I will make suggestions on possible ways to deal with property. Sometimes it makes sense to sell the property before filing a bankruptcy petition and sometimes it does not.
What is the credit counseling class?
It is a prerequisite to filing a bankruptcy petition. It will give you an idea of what to expect while your case is pending and help determine which chapters of bankruptcy you qualify to file. My flat fee includes the cost of this class so don’t spend extra money taking the class on your own. I will make it easy for you by providing a user name and password along with a link so that you can complete the class in the comfort of your own home, on the internet or on the phone.
Will a bankruptcy petition stop a garnishment?
Yes, dead in its tracks, and the underlying judgment then becomes void too.
Can I pay my family and friends the money I owe them before I file a bankruptcy petition?
Not usually. Any payment made to a friend or family member within a year of filing a bankruptcy petition could cause a problem if it involves a “meaningful amount” of money. What is a “meaningful amount” of money? That depends on your trustee. The best thing to do is avoid this situation if possible.
Can I pay off one of my credit cards before declaring bankruptcy so I can keep the card?
No. More likely than not, even if the balance is zero on the day of filing the credit card company is going to close the account anyway. So the money will not be well spent. You will probably be able to get a new credit card after you declare bankruptcy. Go to creditcards.com to see how.
Must I include all my debts in the bankruptcy filing?
Yes, gone are the days of choosing which debts you do and do not want to include in a bankruptcy petition.
How do I figure out how much and to whom I owe money?
I will obtain your credit report. We have access to the best credit report in the business. It combines all three of your credit reports from Equifax, Transuinion, and Experian into one easy to read report. I will give you a copy to review and ask that you inform me of any debt that does not appear on the report.
Will declaring bankruptcy stop a foreclosure, vehicle repossession and all the harassing phone calls?
Yes to all three.
I have heard that filing a bankruptcy petition gives me the option of getting my car back after it has been repossessed, is this true?
Yes, if the timing is right. Usually the bankruptcy petition must be filed within ten days of the repossession.
Post Filing Concerns
What is a discharge?
A discharge is a court order granting you a fresh start. It relieves you from the obligation of paying all the unsecured debts listed in your Chapter 7 petition and schedules. Additionally, all unsecured debts remaining on your Chapter 13 petition and schedules are discharged at the completion of the plan. Remember, if it is not listed in your schedules, then it is not discharged, so please be thorough and complete when reporting your debts to us.
When does the bankruptcy get removed from my credit report?
Bankruptcy stays on your credit report for up to 10 years.
Contact Us for Answers to More Questions
Do you have questions that are not answered by these bankruptcy FAQs? Every case is different, so it is important to discuss your situation with a Tucson lawyer before making a decision. Contact us to discuss your options with attorney Stephen Trezza.
