Bankruptcy Basics

As the real estate market and economy continue to struggle, many more people are facing the possibility of filing for bankruptcy. Bankruptcy law was significantly changed in 2005 with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Here are some frequently asked questions regarding bankruptcy:

What is the difference between a Chapter 7 and Chapter 13 case?

The primary difference is that in a Chapter 7 case the debtor’s nonexempt property (if any exists) is liquidated to pay as much as possible of the debtor’s debts, while in a Chapter 13 case a portion of the debtor’s future income is used to pay as much of the debtor’s debts as is feasible under the debtor’s circumstances.

Is everyone eligible to file a Chapter 7 case?

Not since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Currently, the Bankruptcy Court applies a “means test” to determine a debtor’s eligibility to maintain a Chapter 7 case. If the debtor’s current income exceeds the median annual income for the debtor’s state and family size the case may be dismissed unless it is converted to a Chapter 13 case.

Are all debts discharged in a Chapter 7 case?

No. Some types of debts that may not be discharged are:

• Student loans
• Alimony
• Child support
• Debts incurred through fraud
• Liabilities resulting from drunk driving
• Criminal fees, penalties and restitution

Will I lose all of my assets if I file a Chapter 7 case?

Usually not. Certain property is exempt under state law and may not be taken by creditors unless they have a valid mortgage or lien. If a person keeps property that has a valid lien against it, for example a home or a car, they must keep up the payments.

Do I have to list all of my debts in my bankruptcy filing?

All debts must be listed. Misinformation or neglecting to include certain debts can lead to additional cost and the possible dismissal of the bankruptcy case.

If I have filed a Chapter 7 case before, can I file again?

You can only file for Chapter 7 bankruptcy once every eight years. You have to wait two years to repeat a Chapter 13 filing and four years between a Chapter 7 and a Chapter 13 case.

Can my creditors still call me to try to collect after I file for bankruptcy?

No.

How long does a bankruptcy case take to complete?

A Chapter 7 case usually takes from four to six months to complete. A Chapter 13 case will last from three to five years.

Will everyone know that I filed for bankruptcy?

When a bankruptcy is filed it is public record. However, most filings are not publicized.

What can an attorney do for me if I am filing bankruptcy?

• Analyze the amount and nature of the debts owed by the person filing and determine the best remedy for the person’s financial problems.
• Advise the person filing for the relief available under Chapter 7 and Chapter 13, and the advisability of proceeding under each chapter.
• Assist the person in obtaining the required pre-bankruptcy budget and credit counseling briefing.
• Assemble the information and data necessary to prepare the forms for filing.
• Prepare the petition, schedules, statements, and plan (in a Chapter 13 case) for filing with the bankruptcy court.
• Assist the person filing in arranging his or her asset so as to enable the person to retain as many of the assets as possible after filing a chapter 7 case.
• Filing the petition, schedules, statements, and plan (in a Chapter 13 case) with the bankruptcy court.
• Attending the meeting of creditors with the person and appearing with the person at any other hearings that may be held in the case.
• Assist the person in attending and completing the required instructional course on personal financial management.
• If necessary, preparing and filing amended schedules, statements, and other documents with the bankruptcy court in order to protect the rights of the person.
• In a Chapter 13 case, assisting the debtor in obtaining court approval of the Chapter 13 plan.
• If necessary, assisting the person in overcoming obstacles that may arise to the granting of a discharge.