Am I required to have an attorney deal with creditors or to file for bankruptcy?
The short answer is no, however, dealing with a bankruptcy and/or collections is a very complex legal process. You should be represented by a qualified attorney.
How long will bankruptcy be on my credit report?
A Chapter 13 is deleted from your credit report 7 years after the filing date, a Chapter 7 is deleted from your credit report 10 years after the filing date.
What is exempt?
Various property, personal property, and certain pension and retirement accounts are exempt from bankruptcy proceedings. There are conditions that have to be met but the following are typically exempt:
- Personal property (home furnishings, tools, clothing, etc.)
- Pensions and retirement accounts
- Insurance benefits
- Unpaid wages
What debts are dischargeable vs. non-dischargeable?
The following debts are typically discharged:
- Credit card charges
- Collection agency accounts
- Medical bills
- Personal loans from friends
- Utility bills (past due amounts)
- Dishonored checks
- Auto accident claims (except those involving drunk driving)
- Business debts
- Money owed under lease agreements
- Civil court judgments
The following debts are typically not discharged:
- Certain taxes
- Debts from spousal support or child support
- Debts from government agencies
- Fraud claims
- Court fines and penalties, including criminal restitution
- Attorney fees in child custody and support cases
- Student loans
- Regular income tax debt
What happens to secured debts in bankruptcy?
In a Chapter 7, the debt is typically discharged, but the lien on any collateral—like a mortgage—survives the bankruptcy, unless a Reaffirmation Agreement is signed and entered by the Bankruptcy Court which takes the debt out of the bankruptcy.
In a Chapter 13, the debt is paid, and the lien secures, the note terms as outlined in the Chapter 13 Plan confirmed by the Bankruptcy Court. This allows a debtor to renegotiate the terms of secured debt in a Chapter 13 bankruptcy, or even strip a secured creditor of their security if the value of collateral depreciates and no longer secures the loan.
What happens to credit card and other unsecured debt in bankruptcy?
Upon a discharge in a Chapter 7, credit card debt and other unsecured debt is discharged and is no longer owed by the debtor. It is usually reported on the creditor report as being discharged in a Chapter 7 bankruptcy.
A Chapter 13 requires a debtor to pay all disposable income into the Chapter 13 Plan. Your unsecured creditors are entitled to receive at least the same under a Chapter 13 as the creditors would receive under a Chapter 7, therefore at a minimum you must pay your unsecured creditors your non-exempt property. The amount unsecured creditors receive can vary, but often is minimal unless a debtor has a lot of non-exempt property.
What if I co-signed for a loan for someone that filed for Chapter 13 bankruptcy?
Upon the signor filing for bankruptcy, collection efforts will halt against both the signor and the co-signor of the debt. The non-filing co-signor’s credit will not be affected. If the Chapter 13 plan does not include this debt to be paid in full, the creditor will be able to pursue the non-filing co-signor after a discharge, however, the discharged signor may not be pursued for the debt.
Can I continue to use my credit cards prior to filing for bankruptcy?
Credit card companies closely review and heavily scrutinize credit card purchases prior to bankruptcy. Anything that is out of the ordinary from regular activity like cash advances or large purchases will often be challenged as abusive or bad faith and your case may be dismissed if it appears you intentionally ran up bills prior to filing for bankruptcy. Do not run up credit card purchases prior to filing for bankruptcy.