FREQUENTLY ASKED QUESTIONS

Read the answers to our Frequently Asked Questions about filing for bankruptcy protection under the current laws. One of the main purposes of bankruptcy is to give those who are burdened with debt a fresh start.

To learn more about your options, call us today at 423.246.1988 for a free consultation.

1. What is a Chapter 7 bankruptcy?
   Chapter 7 Bankruptcy, is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months.

2. What is a Chapter 13 bankruptcy?
   Chapter 13 Bankruptcy is also known as a reorganization bankruptcy and is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
   

3. How difficult will it be to file Chapter 7 under the new laws?

   Although there are some restrictions under the new bankruptcy laws, for the majority of people, Chapter 7 is still available.

4. Will my creditors stop harassing me? The answer is YES. By law, all actions against a debtor must cease once the documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments. In addition, secured creditors such as banks holding a lien on a car will get the stay lifted if you cannot make payments.

5. Will my spouse be affected by my bankruptcy?

   Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt.

6. Will my bankruptcy be made public?
   Bankruptcy filings are public records. However, under normal circumstances, no one will know you went bankrupt.
   

7. How long will my bankruptcy remain on my credit rating?
   The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years. 
   

8. Can I keep my credit cards?
   Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card they will cancel the card  unless you pay off the debt. Even if you have a zero balance, the credit card company might cancel the card.

9. If I use a credit counselor, won't I get a better credit rating than if I file bankruptcy?
   No, you will not. It will cost you less money and you will rebuild your credit rating faster if you file Chapter 7 or Chapter 13. Be cautious if you are considering using a credit counselor.
   

10. Will I ever get credit again?
    Yes! A number of banks now offer "secured" credit cards where a debtor  puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt. Two years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy. The truth is, that you are probably a better credit risk after bankruptcy than before.  

11. Can my boss fire me for claiming bankruptcy?
    No. U.S. C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.
    

12. Will I lose everything if I file for bankruptcy?
    It depends upon the state in which you reside, but in most cases you will be allowed to keep most of your assets.
    

13. I was bankrupt before. Can I file bankruptcy again?
    A person can file Chapter 7 again if it has been more than 8 years since he or she filed the previous Chapter 7 bankruptcy.
    

14. What debts are erased by bankruptcy?
    Most unsecured debt is erased in a bankruptcy except for: Child support and alimony; Debts for personal injury or death caused by drunk driving; Student Loans; and Income tax debt.

15. What does bankruptcy cost?
    It costs about $300 to file a Chapter 7 bankruptcy. A bankruptcy lawyer's fees vary but should be in the range of $1,000 to $2,000. Many bankruptcy lawyers will give you a free initial consultation. You can keep the fees down by being well organized and well prepared.