Bankruptcy FAQs

The following gives you some general information about what happens in a bankruptcy case. The information here is not complete. In order to make an informed decision as to what is best for you, consultation with an experienced bankruptcy lawyer to discuss the specific facts of your situation is recommended.

Q. Do I need an attorney to file bankruptcy?
A. While it is possible to file a bankruptcy case pro se, that is, without the assistance of an attorney, it is extremely difficult to do so successfully. Hiring a competent attorney is highly recommended.

Q: What kind of bankruptcy is right for me?
A: You can choose the kind of bankruptcy that best meets your needs (provided you meet certain qualifications)

Chapter 7 – A trustee is appointed to take over your property. Any property of value will be sold or turned into money to pay your creditors. You may be able to keep some personal items and possibly real estate depending on the law of the state where you live and applicable federal laws.

Chapter 13 – You can usually keep your property, but you must earn wages or have some other source of regular income and you must agree to pay part of your income to your creditors. The court must approve your repayment plan and your budget. A trustee is appointed and will collect the payments from you, pay your creditors, and monitor your compliance with the terms of your repayment plan.

Chapter 12 – Like Chapter 13, but it is only for family farmers and family fishermen.

Chapter 11 – This is used mostly by businesses (but may be used by individuals who do not qualify for Chapter 13 because they have debt that is over the allowable limits of Chapter 13). In Chapter 11, you may continue to operate your business, but your creditors and the court must approve a plan to repay your debts. There is no trustee unless the judge decides that one is necessary; if a trustee is appointed, the trustee takes control of your business and property.

Q: Can I save my home?
A: Most Chapter 13 petitioners can hold on to their homes. Depending on the circumstances, a Chapter 7 petitioner may be able to retain his or her real estate holdings.

Q: Will my boss find out?
A: Federal bankruptcy law prohibits both public and private sector employers from discriminating or taking any adverse action against a debtor because of a bankruptcy filing.

Q: Does my spouse have to file?
A: No. However, the non-filing spouse will not be relieved from any debts discharged under your filing. For example, your spouse will remain liable for his/her share of any jointly entered debts. However, he/she will not have bankruptcy noted in his/her credit report.

Q: Will a bankruptcy filing stop my wage garnishment?
A: Yes.

Q: What is a bankruptcy discharge and how does it operate?
A: One of the reasons people file bankruptcy is to get a "discharge." A discharge is a court order, which states that you do not have to pay most of your debts. Some debts cannot be discharged. For example, you cannot discharge debts for–

  • Most taxes
  • Child support
  • Alimony
  • Most student loans
  • Court fines and criminal restitution
  • Personal injury caused by driving drunk or under the influence of drugs

The discharge only applies to debts that arose before the date you filed. Also, if the judge finds that you received money or property by fraud, that debt may not be discharged.

It is important to list all your property and debts in your bankruptcy schedules. If you do not list a debt, for example, it is possible the debt will not be discharged. The judge can also deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, lie, or if you disobey a court order.

You can only receive a Chapter 7 discharge once every eight years. Other rules may apply if you previously received a discharge in a Chapter 13 case. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign an agreement or any other kind of document to do this.

Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car). You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.