Bankruptcy FAQs

What is bankruptcy?

Bankruptcy is a federal court process where individuals and businesses can discharge all of their debts or enter into repayment plans to pay back some or all of their debts. It is a financial reset button allowing individuals and businesses to obtain a fresh financial start.

Learn what to expect at your initial Bankruptcy consultation. 

How will bankruptcy affect my credit score?

When you file bankruptcy your credit score will take a hit. It is hard to tell exactly how low your credit score will drop to, but if you are considering filing bankruptcy your credit score may be low already. However, your credit score will be able to rebound after your discharge is granted depending on what actions you take moving forward.

Can just one spouse file for bankruptcy?

You can file for bankruptcy individually even if you are married. We will take into account the household income and household expenses so some of your spouse’s information will be included. But your spouse will not be affected by your individual bankruptcy filing.

What is the best way to start rebuilding your credit after a bankruptcy?

After receiving a bankruptcy discharge I recommend looking into a secured credit card since this creditor will report to the credit bureaus while keeping you on a limit. It is also beneficial if you have a car loan or mortgage you keep and continue to pay on since those creditors will continue to report your payment history with the credit bureaus.

Will bankruptcy stop the IRS from collecting tax debts?

Bankruptcy will prevent the IRS from collecting tax debts while your bankruptcy case is open. If the tax debt is not affected by the bankruptcy case, the IRS will pick up their collections actions once your case is discharged and closed.

Will all of my debts be canceled in bankruptcy?

Typically, all of your unsecured debt will be wiped away. However, there are certain categories of debts that are not affected (i.e. student loans, domestic support obligations, taxes, among others). Whether all of your debts are discharged depends on the types of debts you have.

How long does the bankruptcy process take?

chapter 7 case takes approximately 5-6 months from the date the case is filed until the case is closed.  A chapter 13 case takes between 3-5 years to complete your payment plan.

Is this the right time to file for bankruptcy?

If you are reading this question it is probably the right time to schedule a free consultation to learn more about the process. Filing for bankruptcy can help you cut ties with your old debt and give you a fresh financial start that you deserve.

What bankruptcy type or chapter should I file?

The type of bankruptcy you should file depends on specific facts that are unique to your situation. Factors that influence which chapter to file under include your household income, family size, and what assets you are trying to protect or save.

Can we refinance a mortgage in Chapter 13 bankruptcy?

It is possible to refinance a mortgage while in a chapter 13 case. However, if you are approved by the lender to refinance your mortgage you will also need to obtain permission from the bankruptcy court before finalizing your refinance agreement.

If I don't pay the balloon payments on 2 home equity lines of credit, which were included but not reaffirmed in a Chapter 7 bankruptcy, will the lenders foreclose?

If you do not reaffirm a secured debt, you do not have to pay back that loan but that loan remains as a lien against the real estate. The creditor can foreclose if payments are not made.

Should I file for bankruptcy or attempt to force my ex-husband, who filed for bankruptcy after our divorce, to pay a large debt in both our names?

If your ex-spouse filed bankruptcy after a divorce and did not reaffirm the large debt that was in both names he or she is no longer legally responsible for that debt. You should consider filing bankruptcy if this large debt is creating a financial hardship for you.

Will I ever recover my 750 credit score if I file for bankruptcy?

You definitely can recover a 750 credit score after filing bankruptcy. It will depend on your financial discipline after you receive your discharge, what you do with credit in the future, and the types of credit you obtain after receiving a discharge. It is possible!

Will business bankruptcy hurt my credit score?

If the business is setup properly as a separate legal entity, it can file bankruptcy without affecting you personally. Keep in mind that some business lenders will require personal guarantees on loans and credit, so you may remain personally obligated for business debt if you also personally guaranteed it.

If I declare Chapter 7 bankruptcy, will my HELOC be dismissed?

Secured debt, like a HELOC, can be discharged in a chapter 7. However, the recorded lien will remain against your real estate.

Can I file for bankruptcy if I am unemployed?

You can file bankruptcy if you are unemployed. There are no income requirements in order to be able to file for bankruptcy protection.

Which business debts are discharged in Chapter 7 bankruptcy?

If you file a personal bankruptcy and personally guaranteed business debts, your personal responsibility for those debts will be discharged. However, the business will still be responsible for its debts.

Can my lender repossess my car during Chapter 7 bankruptcy?

Car lenders cannot immediately repossess your motor vehicle after your bankruptcy case is filed. The automatic stay prevents any collection actions against your bankruptcy estate. Even if you decide to give the vehicle back to the lender, the lender still cannot take the vehicle against your will until after you receive your order of discharge.

Will bankruptcy affect my job or future employment?

Current or future employers cannot discriminate against you because you filed for bankruptcy. However, in some governmental arenas you might lose or be denied a security clearance by having a bankruptcy on your record.

When can I get a mortgage after bankruptcy?

You can typically be eligible for a mortgage about 2 years after your bankruptcy case is discharged. However, it will also depend on the type of mortgage you are applying for and the requirements of the lender you are working with to secure your mortgage.

Will bankruptcy get rid of lawsuit judgments?

Filing for bankruptcy will stop pending lawsuits in their tracks. Once the case is filed the automatic stay that goes into effect stops any collections actions against you and your property.

When can you file for bankruptcy again?

If you have filed bankruptcy in the past that doesn’t mean you can’t file another case in the future. However, there are time limits as to when another case can be filed. Everything relates back to the last case filing date.

I'm facing foreclosure and want to keep my home. Is bankruptcy my best option?

I would check with your mortgage lender to see what options or programs are available with their company. If you have no options as to working with your lender chapter 13 bankruptcy would be your next best option to save your home.

I'm in over my head with debt, and I just lost my job, meaning more debt to come. Should I file for Chapter 7 bankruptcy?

chapter 7 case would be the better option if you lost your job and have no income.

Debt collectors won't leave me alone! Will bankruptcy stop the harassment?

As soon as a bankruptcy case is filed the phone calls will stop. If you get any phone calls after your case is filed you can provide the creditor with your case number and the creditors will leave you alone.

I've heard it's harder to qualify for Chapter 7 bankruptcy now. Is this true?

It is not harder to qualify for a chapter 7 case. We look at your monthly budget to see what money, if any, you have available at the end of the month. We also perform a calculation based on the household’s average gross income for the 6 months before the month of filing your case.

How long will my repayment plan last if I decide to file for bankruptcy under Chapter 13?

The repayment plan in a chapter 13 case is a minimum of 3 years but no more than 5 years long. The length of the plan depends on multiple factors and can be affected by what debts you have and what property you might be trying to protect or save.

We're facing foreclosure. If we file for Chapter 13 bankruptcy, can we keep our home?

If you are facing a foreclosure chapter 13 bankruptcy can help you save your home. During the chapter 13 process you will be paying your mortgage along with curing the money owed. When you are done with the chapter 13 case your mortgage will be current.

My only income is from retirement benefits. Can I use those to fund a Chapter 13 repayment plan?

As long as you have monthly income you can fund a chapter 13 case. Keep in mind you have to have funds available at the end of the month to make a payments in your chapter 13 case.

Along with other debt, I owe back taxes to the IRS. Can Chapter 13 bankruptcy help?

Bankruptcy in general can help with back taxes. Depending on how old your taxes are they might be completely discharged in chapter 7. Including back taxes in a chapter 13 plan will have the taxes paid in full before completing your case.

How long are certificates valid?

Credit counseling certificates are valid for 6 months from the date you complete the course. If you don’t file your bankruptcy case within this period of time you will have to complete another credit counseling course before you can file a case.

How soon should I schedule a bankruptcy counseling appointment?

If you have made the decision that you are going to file bankruptcy I would complete the credit counseling as soon as possible. The credit counseling certificate is valid for 6 months and it must be included with the initial bankruptcy paperwork that is filed with the court.

How long will the counseling session take?

Your first credit counseling session can take about 1 hour of your time. The second credit counseling course can take up to 2 hours.

What is a reaffirmation agreement?

Reaffirmation agreements are signed when you have secured debt (mortgage, car loan) and want to keep the asset (home, car). The agreement makes you legally obligated for the debt after your bankruptcy case is discharged and closed.

Will I have to go to court if I file bankruptcy?

Typically there is only 1 court appearance that is required when you file bankruptcy. The hearing is called the 341 hearing or Meeting of Creditors. You appear in front your case Trustee and verify information that you have filed in your bankruptcy paperwork.

What is a debt discharge?

A debt discharge is an order from the Bankruptcy Court wiping away your debt. Depending on the types of debt you have all or part of your debts will be discharged once this order is filed by the court.

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