Questions Frequently Asked About Bankruptcy
Our team at DelCotto Law Group PLLC is here to answer your questions. Below are some of the most frequently asked questions we encounter. While we have provided general answers, each individual is unique, which makes each bankruptcy unique. You should consult with an experienced bankruptcy attorney to evaluate your individual needs.
In Kentucky, our court system provides detailed information about filing bankruptcy, including write-ups and videos. You may type in “Bankruptcy Basics” or click here to view Bankruptcy Basics on USCourts.gov. In order to keep legal fees reasonable, we ask that you review these resources before your first attorney meeting, so that you are informed and ask the questions most pertinent to your situation.
- What are the differences between filing a Chapter 7 and a Chapter 13 bankruptcy?
- What is a “discharge?”
- What is a “reaffirmation agreement?”
- Will the filing of bankruptcy stop the harassing phone calls?
- What is the automatic stay?
- If I am married, do I have to file bankruptcy with my spouse?
- What is a trustee?
- Will I have to go to Bankruptcy Court?
- How often can I file bankruptcy?
- How long will a bankruptcy stay on my credit report?
- A creditor has gotten a judgment against me. Will the filing of the bankruptcy take care of the judgment?
- I currently have a wage garnishment; will the filing of a bankruptcy stop this?
- Do I have to list all my debts in my bankruptcy?
- Can I keep my credit cards?
- Why do you need so many documents and information to file?
- What are the “order to debtor” documents?
What are the differences between filing a Chapter 7 and a Chapter 13 bankruptcy?
A Chapter 7 is commonly referred to as the liquidation bankruptcy, which means property can be sold to pay creditors. A normal Chapter 7 lasts approximately 120 days from the date the case is filed. A Chapter 7 trustee is appointed to your case to see if there are any assets to be sold in order to pay creditors. In a Chapter 7, most of your debts will discharge, and you will emerge on the other side debt free. The most common types of debts that will not discharge are student loans, taxes, domestic support obligations and secured debts you have chosen to keep through a reaffirmation agreement. Bankruptcy doesn’t prevent you from paying any debts, but it stops most creditors from being able to collect.
A Chapter 13 is commonly referred to as the “repayment bankruptcy.” A Chapter 13 typically lasts five years under a court-approved plan where you pay part of your income to a trustee, who pays creditors. The plan typically pays unsecured creditors only a portion of what they are owed, while secured creditors are often paid in full. There are many reasons why people choose to file a Chapter 13, including:
- Too much income to qualify for a Chapter 7
- Would lose assets in a Chapter 7 case
- Having fallen behind on mortgage payments, wanting to keep your home, and needing time to catch up your payments
- Previous Chapter 7 filing in the last eight years
- Need to pay off tax debt over five years
What is a “discharge?”
A discharge is a permanent release from personal liability on a debt. A debtor is no longer required by law to pay a debt that has been discharged. If a debt is secured by a creditor with a lien on your home, car or boat, for example, bankruptcy can end the obligation to pay the creditor, but the lien survives and the lender may take the property back. In a Chapter 7 bankruptcy, if the lender agrees, you can choose to keep property that is secured by a lien, such as your home or car. The method for keeping this property is known as a “reaffirmation agreement.” In a Chapter 13 bankruptcy, you may be able to keep property by continuing to pay a secured creditor directly, or by paying them the value of the property during the five years of your plan.
What is a “reaffirmation agreement?”
A reaffirmation agreement (also called a “re-aff”) is a written agreement between you and a secured creditor to continue payments so that you may keep property the creditor might otherwise take back. A reaffirmation agreement primarily applies to a Chapter 7 bankruptcy and is voluntary for both parties. For example: You decide to file a bankruptcy but you would like to keep your vehicle. You still owe a lender $7,000 on the vehicle. In order to keep the vehicle, the lender may require that you sign a reaffirmation agreement. Once you and a creditor enter into a reaffirmation agreement, you have re-obligated yourself on that loan in the future, and it is not discharged. One drawback to a reaffirmation agreement is that if you can’t pay the loan in the future, the creditor will have the right to repossess the collateral and sue you for any unpaid balance. Always discuss the advantages and disadvantages of signing a reaffirmation agreement with your attorney. Some reaffirmation agreements must be approved by the court, but many do not.
Will the filing of bankruptcy stop the harassing phone calls?
Yes! The automatic stay prevents bill collectors from taking any action to collect debts. If any continue to call, give them your case number and tell them not to call any more as you have filed for bankruptcy. They will want the court and the case number so that they are able to verify the filing for themselves, so keep that information handy.
What is the automatic stay?
The automatic stay is just what the name suggests: Any action that is pending against you at the time you file bankruptcy is automatically stayed or stopped. For example: If you currently have a foreclosure pending against you, the filing of the bankruptcy will automatically stop that action allowing you time to begin catching up the payments through a Chapter 13 or walking away from the debt through a Chapter 7. Creditors may seek “relief from the stay” to continue on with collection or to enforce their lien.
If I am married, do I have to file bankruptcy with my spouse?
No, but this question should only be answered after a review of your specific circumstances. If most of the debt is in one spouse’s name, it may be better for just that person to file and preserve the other spouse’s credit. However, while your spouse does not have to file with you, you will still need to report their income on the bankruptcy paperwork, and it is a factor in determining which type of bankruptcy better suits your needs.
What is a trustee?
The trustee is not a judge but an individual appointed by the United States Trustee Office to oversee your case. The trustee does not work for a law office and does not work for the court. He or she works independently and reports on your case to the United States Trustee Office and the court. Bankruptcy law requires you to cooperate fully with your trustee. There are several Chapter 7 trustees and one Chapter 13 trustee per bankruptcy court district; Kentucky has an Eastern District and Western District.
Will I have to go to Bankruptcy Court?
Not usually, but there is always one meeting that you must attend. This meeting is known as the Creditors Meeting, and it is 100% mandatory. This meeting is held in a conference room and is run by the trustee in charge of your case. The meeting usually lasts 10–20 minutes, depending upon the complexity of your case. Creditors may appear and ask questions, but they cannot harass you. In most instances, you will never see the judge assigned to your bankruptcy case.
How often can I file bankruptcy?
A person can file a Chapter 7 bankruptcy every eight years and receive a discharge. A debtor can receive a discharge in Chapter 13 every four years. You can file Chapter 13 even if you are not eligible for a discharge.
How long will a bankruptcy stay on my credit report?
A bankruptcy is permitted by law to remain on your credit report for up to seven to 10 years.
A creditor has gotten a judgment against me. Will the filing of the bankruptcy take care of the judgment?
If you have already been sued by a creditor, we must quickly determine the status of the lawsuit because a judgment entitles a creditor to garnish wages, a bank account, or file a lien. Filing a bankruptcy stops most lawsuits, including efforts to collect. However, it is best to act quickly to avoid garnishment or other collection efforts which may go forward after a judgment is entered.
I currently have a wage garnishment; will the filing of a bankruptcy stop this?
The filing of a bankruptcy will stop certain types of wage garnishments as of the date of the filing of the case. Some people think that after they meet with an attorney, the garnishment stops. This is not correct. The garnishment will not stop until you actually file a bankruptcy petition. Some garnishments will not stop, such as garnishments for non-payment of a domestic support obligation.
Do I have to list all my debts in my bankruptcy?
Yes. It is 100% required that ALL debts and ALL assets must be listed in your bankruptcy. Nothing may be left out. Even if debts to relatives or other friends are officially discharged by the bankruptcy, you are not prohibited from voluntarily repaying them after the case is over – that is your choice but not your obligation. However, they all must be listed and get notice that you filed for bankruptcy. Failing to list all your creditors can result in losing your right to discharge all your other debts. It’s not worth it.
Can I keep my credit cards?
No. The credit card companies will immediately cancel your card from any future use. You may want to go ahead and destroy them prior to filing. However, after you file, you may apply for new cards and after some time period, you will most likely begin to receive mail solicitations for new cards. If you urgently needed a credit card for some reason, you may buy prepaid cards with your income that is generated after you file, in a Chapter 7 setting.
Why do you need so many documents and information to file?
Filing for bankruptcy is a privilege permitted by law. The trade-off is full financial disclosure. The level of information demanded is quite rigorous, because your creditors are entitled to know the full extent of your financial picture, sworn to under oath. Your attorney needs to be able to verify various liens and information, so needs to see car titles and mortgages that show that they are properly recorded. Answer truthfully about everything asked, because your signature on the bankruptcy papers are the same as testifying under oath.
If you do not already have all the documents requested, like recorded copies of your deed and mortgage, you will have to get them from the county clerk’s office in the county where the property is located. Copies of vehicle titles may be obtained by requesting a duplicate from the county clerk.
What are the “order to debtor” documents?
In each chapter of bankruptcy, there is a list of certain documents that the court issues as an order. The list is standard and comes out in every single case. The documents are different in Chapter 7 vs. Chapter 13. The order requires that copies of various documents be delivered to the trustee within 14 days after your case is filed. Cases may be dismissed for failing to deliver the documents, so this is mandatory and very crucial. It is important to start early to get these together and not wait until the last minute since the consequences of not complying are harsh.
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We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.