Bankruptcy – Some Common Questions Answered

Will I lose everything? No. Some of your assets are exempt. Both the federal government and the individual states have exemption laws. Some states allow debtors to choose between the two, while the other states require debtors to follow the state exemption laws. In states where you have a choice, your decision should turn on which set of rules allows you to keep the most, or most important, assets. Exemptions generally include amounts for your homestead (i.e., home equity), motor vehicles, life insurance, jewelry, tools of trade, and household goods, as well as certain retirement and education savings.

Can I get rid of all of my debts? Probably not. Certain debts cannot be discharged in bankruptcy. A discharge releases you from legal liability for the debt. Liens, however, remain; secured creditors are still able to get property back. Non-dischargeable debts remain after the bankruptcy case ends, and include (under Chapter 7) most tax debts, most student loans, domestic support obligations, and debts incurred in connection with fraud, larceny, and driving while intoxicated.

Do I need to use a lawyer? No. You can file yourself (this is known as filing “pro se”), or with the help of a petition preparer. However, bankruptcy can be a complex process, and filings must be precise. An experienced attorney can guide you through the process, and advise you about the potential consequences of your actions. Regardless of the fee, an attorney can help you save time, money, and stress.

Will I have to go to court? Yes. You are required to attend at least one meeting at the court shortly after you file (between 20 and 40 days). This is known as a Section 341 creditors meeting or first creditors meeting, and typically lasts less than 30 minutes. The purpose of the meeting is to give your creditors and the trustee an opportunity to question you about your financial affairs. However, creditors are not required to attend and often do not. You are required to answer any questions under oath.

Will my utilities be cut off? No. Public utilities are not allowed to cut off your service because you filed bankruptcy. They can, however, require you to pay a deposit for future service, and they can terminate service if you fail to make current payments after filing.

Will my creditors stop harassing me? Yes. Once a petition is filed, an automatic stay goes into effect. While the stay is in effect, creditors must not engage in collection activities without permission from the bankruptcy court. Lawsuits, foreclosures, repossession efforts, wage garnishments, dunning letters, and bill collector calls all should stop.

Will my credit be affected? Yes. The bankruptcy will appear on your credit report for 10 years. However, you will likely receive unsolicited credit card offers, and you should still be able to get credit, though it may be at a higher rate of interest or require a cosigner.

Can I keep my credit cards? Yes, if the credit card companies agree. However, if overextended credit card debt got you into bankruptcy, you should think twice about using them. You’ll be unable to file bankruptcy again for several years.

Will everyone know that I filed for bankruptcy? Maybe. Your bankruptcy case is a matter of public record; it can be reviewed by anyone making an inquiry at the clerk’s office in the bankruptcy court where you filed.

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