Frequently Asked Questions
What is bankruptcy, and how does it work?
Bankruptcy is a federal law that stops creditors from trying to collect debts normally. Usually a contract, agreement, or state or federal law determines how a debt must be repaid and what happens if there is a default. Bankruptcy replaces many of those rules. The bankruptcy code creates new rules that change the obligations and rights of the creditors and debtors to give the debtor some relief from their bills and protection from the creditors.
What are the different types of bankruptcy?
For most individuals or married couples, there are two types of bankruptcy to consider: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.
What are the main differences between Chapter 7 and Chapter 13 Bankruptcy?
Chapter 7 is known as the “Fresh Start Bankruptcy” because it completely discharges or wipes out many kinds of debt. Eligible people get these bills totally forgiven so that the creditors cannot collect, file a lawsuit, or even report to the credit bureaus. The debts are gone forever! Chapter 13 is a debt consolidation and repayment plan. It is much more complex than Chapter 7. Most creditors must participate in the case and cannot negotiate how much or when they get repaid. Creditors may be entitled to payment in full, they may be paid nothing at all, or they may receive something in between. An experienced lawyer like Attorney Charles Bonini will be able to quickly and accurately determine how Chapter 13 would work in your unique situation. In most of our chapter 13 cases, unsecured creditors receive just 10% of how much is owed.
Can I keep my house if I file for bankruptcy?
Yes, you can keep your home if you file bankruptcy! Many people file bankruptcy specifically to save their home and stop foreclosure or property tax sales. Chapter 13 will never result in losing your home simply because you filed bankruptcy. Many people are able to file Chapter 7 and keep their home, but sometimes it can get complicated. Attorney Charles Bonini has never filed a case where somebody lost their property who didn’t want to walk away from it.
How do I choose the right bankruptcy chapter?
There are many factors that help people pick the right bankruptcy. Attorney Charles Bonini will work through this process with you during your 30-minute free consultation where you discuss they types of your debts and your goals for your bankruptcy. After going through your monthly budget and your assets, you will learn of how Chapter 7 and Chapter 13 would apply to you and receive a recommendation as to which one is the better fit.
Should I file for bankruptcy?
“I wish I filed years ago” is the most common feedback given by our clients. However, not every consultation results in a recommendation to file chapter 7 or chapter 13. Sometimes people are not eligible or better options exist. All clients deserve honest and unbiased feedback and sometimes that feedback is that bankruptcy is not the best decision.
Is there a certain amount of debt to qualify for bankruptcy?
There is no minimum debt set by the Bankruptcy Code. There is a common-sense minimum of about $7,000.00. That amount varies by individual and situation.
Do I have to be a certain age to file for bankruptcy?
You must be at least 18 years old to file for bankruptcy, in most cases. There is no upper limit. We have clients of all ages and stages of life. Sometimes younger individuals need a fresh start so that their long-term financial health improves. Sometimes older individuals just want to stress-relief of stopping the constant collection calls and harassment.
Do you need a lawyer to file for bankruptcy?
Individuals are allowed to file without an attorney. This is called pro se filing. It is important to remember that if you file without an attorney, you are acting as your own attorney. The Court does not provide any additional assistance or guidance – you are treated as if you know the bankruptcy laws and rules as well as an attorney. Pro se filings have a much lower success rate than those filed by an attorney. Attorneys know the rules, the exceptions to the rules, and save you the time and hassle of figuring it out and attending hearings.
What is the process for filing bankruptcy?
The process starts with a free consultation where you and your lawyer determine a course of action. Then you provide documents such as proof of income, tax returns, identify verification, list of creditors, list of assets, and other information. You must complete a mandatory credit counseling course from an approved agency. Once the paperwork is drafted and signed, it gets electronically filed. This process can be done in as little as one day.
Does bankruptcy eliminate all my debts?
Bankruptcy is best at resolving unsecured debts like credit card bills, medical bills, and parking tickets. It can also be a good solution for car payments, mortgage payments, and tax debt. Bankruptcy is less useful for student loans, child support and alimony, and criminal matters.
Who will know if I file for bankruptcy?
Bankruptcy filings are in the federal court system and so are public records. Your filing will show up on your credit report.
Will bankruptcy stop a foreclosure on my house or property?
Yes. Filing bankruptcy will usually place an immediate stop on all foreclosure proceedings. But don’t delay talking with an attorney because there are hard deadlines when a bankruptcy filing cannot stop a foreclosure.
Will bankruptcy help with car repossession?
Yes. Bankruptcy can be one of the only ways to stop a car repossession. It can also force the company to return your car. Car companies have many rights, and the timing of your filing is critical so don’t wait to file.
Can I wipe out medical bills by filing for bankruptcy?
Yes, medical bills are one of the best reasons to filing bankruptcy. They can be fully wiped out.
Is student loan debt dischargeable in bankruptcy?
Student loan debt is currently dischargeable only in the most extreme situations. I never recommend filing bankruptcy because of student loans.
Will filing for bankruptcy stop collections calls and creditor harassment?
The minute you file your case, the bankruptcy “automatic stay” kicks in. This is a very strong federal protection that forces nearly all creditors to immediately stop all collections, contact, garnishments, repossession, foreclosures, evictions, etc. Creditors knowingly violating this protection can be sanctioned in court.
Can bankruptcy help with IRS and state tax debt?
Yes, bankruptcy can help resolve IRS debt and state tax debt. How much you can save depends on your unique situation, so a full consultation is needed to determine exactly how beneficial bankruptcy will be for you.
Can I get my driver’s license restored if my driver’s license is suspended?
Bankruptcy can help get your driver’s license back. There are many reasons a license can be suspended or revoked, and bankruptcy helps with some of them. If the suspension is due to parking tickets, camera tickets, or an uninsured car accident, usually bankruptcy gets your license reinstated. An attorney can explain all the conditions and talk with the Secretary of State on your behalf to determine exactly what you need.
Does bankruptcy stop a wage garnishment, frozen bank account, or lawsuit?
Yes, bankruptcy usually immediately stops wage garnishments, frozen bank accounts, and lawsuits.
How do I improve my credit score after filing bankruptcy?
Bankruptcy is the first step to improving your credit score. The bankruptcy removes the “bad” things on your credit that drag it down. After filing you need to get new accounts that report to the credit bureaus like a secured credit card. Making all minimum payments on time, month after month, is the key to building a good credit score. It takes time, but not too much. Most people have a significantly improved credit score 1 year after their bankruptcy discharge.