What do I have to do to file for bankruptcy, and how does it help and protect me? Can creditors try to collect money from me/us after I file bankruptcy?
We, of course, recommend that you consult with a bankruptcy lawyer/specialist concerning your qualification to file a Chapter 7 or 13 case. 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.
What is the difference between Chapter 7, Chapter 11 and Chapter 13?
In a successful Chapter 7 case an individual’s honest debts are forgiven/discharged. The individual will have no further obligation to pay back amounts owed to any of his/her general unsecured creditors. If however, the person’s personal belongings, including real estate and other assets, exceed the exemptions allowed by The Code, these assets can be lost in a Chapter 7 case (this is extremely rare). However, if debtors can afford to make the necessary monthly payments, debtors can file a Chapter 13 case whereby the unprotected equity the debtor has in any asset can be paid to creditors through a Chapter 13 Plan; this allows debtors to keep asset(s) which might otherwise be lost in a Chapter 7 case; monthly payments are made through a three to five year Plan. Usually, however, Chapter 13 is used by debtors to enable them to catch up on past due mortgage(s) arrears or other amounts owed to secured creditors (see paragraph below). A Chapter 11 bankruptcy is usually for business reorganization and is most frequently filed by companies/individuals engaged in business.
What kinds of debts are discharged (wiped out) in a bankruptcy? Are all my debts forgiven?
Almost all unsecured debts are discharged in a bankruptcy, including credit card bills, medical bills, business and personal loans, etc.... The general rule is that all general unsecured debts are discharged, and all secured debts are not discharged. Certain priority debts, such as most Government fines and many taxes are not dischargeable; student loan debts that would cause an undue hardship on the debtor(s) or the debtors’ family to pay back in the foreseeable future can also be dischargeable
What about my assets; can I keep my house, car and/or other assets?
Yes, in the overwhelming number of bankruptcy cases, debtors are able to keep all of their assets. All of the assets owned by debtors in the vast majority of good faith Chapter 7 cases continue to fall within the Exemptions allowed by The U.S. Bankruptcy Code and related New Jersey state law; in this scenario neither creditors nor the chapter 7 Bankruptcy Trustee can require debtors to sell any of their assets. A different article in our firm's website, entitled "Bankruptcy Exemptions" provides information concerning the specific exemptions allowed under the Bankruptcy Code, and how these exemptions are applied in Chapter 7 and 13 cases.
Can I keep my home if I file bankruptcy?
Most people who file Chapter 7 are able to keep their homes, while having their general unsecured debts completely forgiven by The Bankruptcy Court's Discharge Order. Based upon the fair market value of your home and your outstanding mortgage debt, your attorney will help you determine whether you will be able to keep your home in a Chapter 7 bankruptcy. In instances where debtors need to catch up on mortgage arrears in order to keep their home, and insufficient equity exists in the debtor's home to secure a secondary mortgage, a Chapter 13 bankruptcy will usually allow debtors to keep their home, provided debtors can make the required Chapter 13 Plan payment along with their regular post-petition monthly mortgage payments.
Can I keep my car?
In most 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. Again, the ability to keep your car in your individual situation should be determined by your attorney.
Will I be able to get a guaranteed student loan after I file bankruptcy?
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.
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?
Unless you owe your employer money, your employer generally 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 for 7-10 years (see paragraph below). A private employer cannot legally terminate employment or discriminate against any individual solely on the basis of that individual’s bankruptcy filing; however, the law is unsettled as to whether a prospective employer can deny employment because of a bankruptcy filing. Note, that even though your bankruptcy file is a matter of public record, it is not printed in any general publications.
How is my credit affected?
Credit reporting agencies list your Chapter 7 bankruptcy case for 10 years. However, in most cases, the credit rating of individuals who need to file for bankruptcy relief is already poor. Since, most debtors will no longer owe any unsecured debt at the end of their Bankruptcy case; debtors can begin to rebuild their credit rating/score immediately after filing. Some creditors will seek you out; you should be able to get secured credit cards before your case is even over. Our office supplies clients with a list of potential sources for procuring secured and unsecured credit after bankruptcy. The owners of several mortgage/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 cards etc.) on a timely basis every month. Our clients have confirmed this on numerous occasions. See the testimonials in our website and separate article, "How to Rebuild Your Credit". www.marcgalster.com
Could a judge deny my bankruptcy?
In Chapter 7 or 13 cases, a Bankruptcy Judge may deny your discharge if the Court determines that you have the ability to repay your debts based upon your current income and assets. Also, should you conceal property with intent to hinder, delay or defraud creditors, destroy or conceal records, are guilty of perjury or other fraudulent acts, a Judge can also deny your discharge if bad faith is found to exist.