Frequently Asked Questions and Answers

Following are some commonly asked questions by people considering filing for bankruptcy:

Q. What do I have to do to file for bankruptcy, and how does it help and protect me? Can somebody try to collect money from me/us after I file bankruptcy?
Q. What is the difference between Chapter 7, Chapter 11 and Chapter 13?
Q. What about my assets; can I keep my house, car and/or other assets?
Q. Can I keep my home if I file bankruptcy?
Q. Can I keep my car?
Q. What kinds of debts are discharged (wiped out) in a bankruptcy? Are all my debts forgiven in bankruptcy?
Q. Will I be able to get a guaranteed student loan after I file bankruptcy?
Q. How is my salary affected? Will my employer be notified of my bankruptcy petition, can I be fired from my job for filing for bankruptcy protection?
Q. How is my credit affected?
Q. Could a judge deny my bankruptcy?

Q. What do I have to do to file for bankruptcy, and how does it help and protect me? Can somebody try to collect money from me/us after I file bankruptcy?

A. We, of course, recommend that you consult with a bankruptcy lawyer concerning your qualifications to file a Chapter 7 or a Chapter 13 petition. After your lawyer files your petition with the Bankruptcy Court, an automatic stay immediately goes into effect; this prohibits almost all creditors from taking any action against you outside of the Bankruptcy Court to enforce their claims. Your creditors, their lawyers and collections agencies must immediately (1) stop all lawsuits, (2) stop making written and/or telephone demands for payment, (3) cancel all wage garnishments, etc., and (4) All creditors and their agents are prohibited from contacting you, assuming you have retained a lawyer to file your petition and/or otherwise represent you. Upon filing a Chapter 7 or 13 petition, a trustee is appointed by the Bankruptcy Court. The trustee will review your petition, meet with you, and make recommendations to the Bankruptcy Judge. The meeting with the Trustee is not intimidating and usually lasts less than 10 minutes. Of course, your attorney will be by your side.

Q. What is the difference between Chapter 7, Chapter 11 and Chapter 13?

A. In a successful Chapter 7 bankruptcy case a debtor(s) unsecured debts are forgiven/discharged. The debtor(s) will have no further obligation to pay any of their creditors. If however, personal belongings, including real estate and other assets, exceed the exemptions allowed by law; those assets may be lost in a Chapter 7 case (this is extremely rare). On the other hand, in a Chapter 13 bankruptcy case, a monthly payment plan is created through a Chapter 13 Plan, which allows a person to keep assets that he or she otherwise might lose; monthly payments are made through a three or a five year plan. The Chapter 13 Plan allows debtor(s) to get caught up on past due amount owed on their mortgage(s) or other amounts owed to secured creditors. A Chapter 11 bankruptcy is usually for business reorganization and is most frequently filed by companies or individuals engaged in an ongoing business.

Q. What about my assets; can I keep my house, car and/or other assets?

A. Yes, in the overwhelming number of Chapter 7 bankruptcy cases the debtor(s) are able to keep all of their assets. All of the assets owned by the vast majority of individuals and/or spouses filing a Chapter 7 petition almost always fall within the exemptions allowed under The Bankruptcy Code and related state law; neither creditors or the Chapter 7 Bankruptcy Trustee can require debtor(s) to sell a debtor(s) assets. A different article in this website entitled "Bankruptcy Exemptions" provides specific information concerning the specific exemptions allowed under the U.S. Bankruptcy Code, and how they are applied in Chapter 7 case in New Jersey.

Q. Can I keep my home if I file bankruptcy?

A. Most people who file Chapter 7 are able to keep their homes, while having their unsecured debts completely forgiven by the bankruptcy discharge, provided they continue to make their normal monthly mortgage payments. Based upon the fair market value of your home and the outstanding mortgage, your attorney can help you determine whether you will be able to keep your home in a Chapter 7 bankruptcy. In instances in which your house would be in jeopardy, you can still consider a Chapter 13 bankruptcy which would allow you to keep your home, provided you make the required payments under the plan, along with your normal mortgage payments.

Q. Can I keep my car?

A. In almost all cases, people are able to keep their cars in bankruptcy (should they choose), provided they continue to make the monthly payments due on their lease or financing agreements. The issue comes down to how much equity, if any, a debtor(s) has in his/her car and can that equity be protected. The answer is almost always positive, but, again, the ability to keep your car in your individual situation should be determined by your attorney.

Q. What kinds of debts are discharged (wiped out) in a bankruptcy? Are all my debts forgiven in bankruptcy?

A. Almost all general unsecured debts are discharged in a bankruptcy, including credit card bills, medical bills, business and personal loans, etc… The general rule is that unsecured debts are dischargeable and all secured debts are not dischargeable. Student loans are not generally dischargeable, but if there is "no reasonable likelihood" of being able to make payments on a debtor(s) student loans in the foreseeable future student loans can also be dischargeable.

Q. Will I be able to get a guaranteed student loan after I file bankruptcy?

A. The filing of a bankruptcy cannot legally affect your ability to obtain a state or federally guaranteed student loan. Federal law prevents the government or any institution dealing in guaranteed student loans from denying a student loan or grant because of a bankruptcy filing.

Q. How is my salary affected? Will my employer be notified of my bankruptcy petition, can I be fired from my job for filing for bankruptcy protection?

A. Unless you owe your employer money, generally your employer will not find out about your bankruptcy. However, if you are applying for a job, an employer may review your credit record, which would indicate your bankruptcy filing. In any case, a private employer cannot legally terminate the employment, or discriminate with respect to the employment of any individual solely on the basis of that individual's bankruptcy filing. (Please note, however, that the law is unsettled as to whether a prospective employer may deny you employment because of a bankruptcy filing.) Also, on a similar note, though your bankruptcy file is a matter of public record, it is not printed in any general publications.

Q. How is my credit affected?

A. Credit reporting agencies will list your Chapter 7 bankruptcy filing for 10 years. A Chapter 13 filing is reported for 7 years. However, the credit rating of most individuals who are considering or need to file for bankruptcy relief is already very poor. After filing for bankruptcy protection, debtor(s) will likely no longer owe any unsecured debt. Debtor(s) are able to begin rebuilding their credit rating/score immediately after filing for bankruptcy protection; some creditors will seek you out. Immediately after discharge, debtors will be able to get secured visas or a MasterCard. Our office supplies clients with a list of potential sources for procuring secured and unsecured credit after bankruptcy. The owners of several credit companies have informed us that a discharged debtor can become creditworthy as soon as one year after discharge by paying all outstanding loans (i.e. home, car, secured and unsecured credit card obligations) on a timely basis every month.

Q. Could a judge deny my bankruptcy?

A. A Bankruptcy Judge may deny your discharge if he or she determines that you have the ability to repay some of your debts based upon your current income and non-exempt assets. Also, should you conceal property with an intent to hinder, delay or defraud creditors, destroy or conceal records, are guilty of perjury or other fraudulent acts, the judge could also deny you bankruptcy protection.

Call or contact our firm today to schedule an appointment to meet with an experienced bankruptcy attorney to get answers to your specific questions concerning bankruptcy.