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Will bankruptcy hurt my credit?

Your bankruptcy may stay on your credit report for up to 7-10 years. However, in many cases, bankruptcy will improve your credit as soon as you receive your discharge because your past due creditors will be discharged and no longer report to the bureaus. You may immediately apply for a secured credit card and car loan and you may apply for a new mortgage after two years after bankruptcy. There are new FHA programs for home financing one year after filing bankruptcy.

Are all of my unsecured debts wiped out in bankruptcy?

Chapter 7 bankruptcy can eliminate most unsecured debts such as collection judgments, medical bills, credit card bills, deficiency judgments on repossessions or foreclosures, auto accident insurance claims, personal loans, signature loans, unpaid rents or broken leases, certain taxes, gambling debts, old utility bills, etc. Not all debts will be discharged through bankruptcy. Non-dischargeable debts include alimony and child support, fines payable to any governmental unit, student loans, restitution imposed on you as part of a criminal sentence, debts incurred through fraud or by willful or malicious actions and certain taxes.

Can my employer fire me if I file for bankruptcy?

No, the bankruptcy code prohibits an employer from firing you solely because you filed for bankruptcy.

Is bankruptcy a judicial process?

In most cases bankruptcy is more of an administrative process than a judicial process. Unlike other court cases, filing bankruptcy does not create a lawsuit and there is no plaintiff and no defendant. The role of the court is to supervise the process and to issue orders where necessary. The executive part of the government is represented in the bankruptcy process by the Department of Justice which appoints bankruptcy trustees to provide the administration. The trustees are given broad powers to administer bankruptcy cases and they serve the role of custodian. Typically in chapter 7 cases, the debtor never sees the judge or appears in a court room and his only contact with the court is usually the one short meeting with the trustee.

Do I need to hire an attorney?

No you are not required by law to hire an attorney. An attorney will not speak for you at the Meeting of Creditors or speak on your behalf. They may sit near you when you answer questions for yourself at this meeting that typically only lasts just a couple of minutes. However, if you believe you need legal advice, feel free to meet with an attorney for a consultation. Most attorney’s will offer this service for free. Keep in mind that in most cases the court will not waive the filing fee if you hire an attorney.

Do I need to notify my creditors?

No, the bankruptcy court will notify your creditors using the creditor matrix that we provide to you along with your documents.

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When will creditors stop calling?

As soon as your case is filed with the court, your automatic stay is in effect and your creditors may no longer contact, sue, garnish or perform any other collection activity against you.

Will I lose my personal property?

Chapter 7 bankruptcy is in some ways a bargain. The bankruptcy court agrees to wipe out your unsecured debt and in exchange, your creditors are entitled to proceeds from the sale of some of your assets. However, in most chapter 7 bankruptcy cases, there is no sale of any property of any kind!

Thanks to exemptions, most or all of your property may be fully protected from sale including your home and cars. Exemptions vary from state to state.

What happens to my car in bankruptcy? In most bankruptcy cases, you can protect your car using allowable bankruptcy exemptions. It is important to clarify whether you have a clear title to your car or if you have secured your car as security for a debt. If you have pledged your car as security for a debt or if you are currently financing a vehicle, you will probably have a few choices for your secured loan such as reaffirming the debt, redeeming the debt, or surrendering the debt.

Reaffirm – A reaffirmation agreement constitutes a contract between you and your car creditor. You will agree to pay the balance owed on your car note, despite your bankruptcy filing. Under this plan, you will continue to make your payments and the creditor agrees not to repossess your car. If you do not make your payments, the car lender is able to repossess the car and sue you for the deficiency balance. Reaffirmation agreements are voluntary, but as you can see, it is a decision with serious repercussions.

Redeem – In chapter 7 bankruptcy, you are entitled to purchase or redeem your car from your creditor by making a one-time payment equal to the car’s fair market value. The U.S. Bankruptcy Code provides that you are required to pay your creditor the replacement retail cost of the car, and the balance of the debt will be discharged. For example, if a car is worth $5000 and the owner owes the finance company $10,000, you may be able to redeem the vehicle by paying the creditor $5,000. The remaining amount will be discharged by your bankruptcy.

Surrender – If you cannot afford the monthly payments on your car loan or if you determine that you owe more than the car is worth, you may surrender the car and discharge the debt. If you are leasing a car, you may opt to either continue making monthly payments or surrender the car back. If you surrender the vehicle, any obligation under the lease will be eliminated by the bankruptcy.

Will I qualify for Chapter 7 bankruptcy?

The 2005 bankruptcy lawchanges require bankruptcy filers to pass the Chapter 7 Means Test. A major component of the means test is to compare your income to the state’s median income level. If your income is less than the state’s median income level then you probably qualify for chapter 7. If your income is more than the state’s median income level you may still qualify for the chapter 7 after taking other certain types of debts into consideration. If your income is still too high, then you may need to file under chapter 13.

If I rent an apartment, can I be evicted if I file bankruptcy?

Not immediately. In most cases the automatic stay will prevent your landlord from evicting you. You will be required to assume your lease if you want to stay in the apartment. This means that you must make up any missed payments and make a future payments on time. There are two exceptions to the rule that your landlord cannot evict you upon filing for bankruptcy. If the landlord has already sued you for eviction and the court has given your landlord the right to take possession of your apartment, your landlord will be able to evict you 30 days after you file for bankruptcy. Also, if your landlord has already started the eviction proceedings because you endangered the property or used illegal drugs on the property, then he will be able to continue those eviction proceedings fifteen days after you file bankruptcy.
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