What can bankruptcy do for me?
Bankruptcy may make it possible for you to eliminate the legal obligation to pay most or all of your debts. This is called a discharge” of debts. It is designed to give you a fresh financial start. It can stop foreclosure on your house and allow you an opportunity to catch up on missed payments. Bankruptcy also prevents repossession of your vehicle, stops wage garnishments, debt collection harassment, and restores or prevents termination of utility service.
What is a Chapter 7 Bankruptcy?
The basic idea in a Chapter 7 bankruptcy is to wipe out (discharge) your debts, such as credit cards, medical bills, and past-due utility bills. If you want to keep property like a home or vehicle you will need to continue to pay for them. If you are behind on mortgage or vehicle payments, a Chapter 7 probably will not be the right choice for you. Chapter 7 bankruptcy does not eliminate the right of the mortgage holders or car loan creditors to take your property to cover your debt if you do not pay.
What is a Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy is a reorganization of your debt. The most important thing about a Chapter 13 is that it will allow you to keep valuable property, such as your home and car, which might otherwise be lost if you were behind on your payments. In a Chapter 13, you will file a “plan” showing how you will pay off some of your past-due and current debts over three to five years. It will allow you to catch up on past-due amounts on your secured property (home and vehicles). It also will allow you to pay back your unsecured creditors (credit cards and medical debt) at an amount you can afford. This amount is sometimes only pennies on the dollar. You should consider filing a Chapter 13 if you: Own your home and are in danger of losing it because of foreclosure; Are behind on debt payments but can catch up if given some time; Have valuable property which is not exempt, but you can afford to pay creditors from your income over time. You will need to have enough income in Chapter 13 to pay for your necessities and to keep up with the required payments as they come due.
Can I own anything after bankruptcy?
YES! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
Will bankruptcy wipe out all my debts?
Yes, with some exemptions. Bankruptcy will not normally wipe out: Money owed for child support or alimony, fines, and some taxes; Debts not listed on your bankruptcy petition, so be sure that everyone is listed; Loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan; Debts resulting from “willful and malicious” harm; Student loans owed to a school or government body; Mortgage and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).
Will I have to go to court?
Yes. In most cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.
Will bankruptcy affect my credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you’ve filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
What else should I know?
Utility Services: Public utilities, such as the electric company, cannot refuse or cut off your services because you have filed for bankruptcy. However, they can require a deposit for future service and you do have to pay bills which arise after the bankruptcy is filed. Discrimination: An employer or government agency cannot discriminate against you because you have filed for bankruptcy. Driver’s license: If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back. Co-signers: If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt. If you file a Chapter 13, you may be able to protect co-signers, depending upon the terms of your Chapter 13 plan.