January 27, 2010
Common Bankruptcy Questions
Bankruptcy is the kind of topic that few people know very much about unless they file for bankruptcy or are somehow involved in the bankruptcy arena for a living. However, if you ever get to the point where you are considering filing for bankruptcy protection, understanding the most commonly asked bankruptcy questions is crucial.
Q. If I file for bankruptcy will I lose my home?
A. Probably not. But the answer depends on the particular laws in the state where you will be filing for bankruptcy protection. Although Chapter 7 bankruptcy involves the surrender of all assets to a trustee, there are a number of state and federal exemptions that allow bankruptcy debtors to keep their homes. If you don't have any equity in your home, it has no value to a bankruptcy trustee and will not be seized. In Chapter 13 bankruptcy, debtors keep all their property in exchange for a 5-year payment plan distributed to their debtors.
Q. Can I lose my job because I filed for bankruptcy?
A. Absolutely not. Federal laws are on the books that prohibit employees from treating an employee any different from another simply because of a bankruptcy.
Q. Will bankruptcy ruin my credit standing?
A. Probably. Bankruptcy is the worst mark you can have on your credit report and will cause your credit score to take a dive. But most people already had significantly damaged credit before they even filed for bankruptcy. That's because many people are already behind on credit card and mortgage bills when they decide to file bankruptcy. That means their credit rating has already taken a significant hit. The good news is that most people can get a credit almost immediately after bankruptcy and a car loan 6 months to a year later.
Q. Will everyone know I filed for bankruptcy?
A. It depends. Bankruptcy records are available for anyone to view in the local federal courthouse. Some newspapers print the latest bankruptcies in the community on a weekly or month basis. While bankruptcy records are not private, someone must know your name in order to look up your bankruptcy filing. So if you don't mention your bankruptcy to anyone, the chances are very good that no one will know.
Q. Will filing for bankruptcy stop the calls and letters from creditors?
A. Yes. A key section of the bankruptcy law includes an automatic stay that is granted to bankruptcy filers as soon as the bankruptcy petition is filed. Creditors who continue to call after being notified of the bankruptcy should be referred to your lawyer, which will generally stop by all the harassing calls.
Q. Is there a chance my bankruptcy case will not be accepted?
A. Yes, but that is only in the smallest minority of cases. Statistics show that about 70 percent of all individual bankruptcy cases are Chapter 7 filings. While greater scrutiny of Chapter 7 cases has been in place since the 2005 changes to bankruptcy laws, about 90 percent of all Chapter 7 cases are accepted and eventually discharged. Most of the rest are rejected and then refilled as Chapter 13 cases. The only Chapter 13 cases dismissed by the court are those that involve fraud or abuse.
Understanding the answers to these bankruptcy questions can be essential as you decide whether or not to proceed with a bankruptcy case. Only rely on advice from a lawyer trained in the bankruptcy field.
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