Bankruptcy FAQs

There is no automatic requirement to give up any particular property in bankruptcy. In fact, depending on the chapter (such as Chapter 13), you may be entitled to keep all of your property. Only in Chapter 7 is an analysis done as to whether you have to part with any of your property at all. It is called a liquidation analysis. Each state has a certain amount of property that it keeps safe from your creditors. This property is called “exempt” property. And only property that exceeds the exemption levels offered to you by your state would be subject to any form of liquidation. In the majority of cases, people get to keep houses and cars. It is a very complex analysis depending on your property mix, whether you will have to part with any of your property. A good bankruptcy attorney usually can negotiate a compromise with the Trustee to allow you to keep all of your property. You should speak to a lawyer about your particular situation and what property, if any, may be subject to turnover if you were to file a Chapter 7 case.

It all depends on how diligent you are. There are two parts to the process. There is a pre-petition period, in which you prepare your documentation and your attorney works for you, and there is the post-petition part, where the Trustee assigned to your case by the bankruptcy court does most of their work. After you file, it generally takes about 90 days for your discharge to be entered. That time period can be affected by different factors, such as whether a trustee has to administer your estate assets or whether a creditor filed some form of objection to your discharge. You should speak to a lawyer about the special conditions that can affect the timing of a discharge in your case. Even with a discharge, the case may not be over if your bankruptcy estate assets are being administered.

Yes, you can convert from one chapter of bankruptcy to another if the circumstances warrant it. Sometimes a person will file under one chapter and for reasons discovered later, they decide that another chapter is better suited for them. It is possible to convert from one chapter to another. You should speak with the lawyer about if you need to change from one chapter to another if you have already filed under one chapter.

Generally, SBA Loans are like any other debt. Just because they are received through the Small Business Administration does not change the fact that, in most cases, it is a private bank that is loaning the funds. The catch is, however, that in many cases, SBA Loans are secured by some form of collateral. If your loan is secured by some collateral, then that portion of the loan would not be dischargeable, and the Creditor would be entitled to recover the collateral to sell to help pay back the debt. However, if the loan is a wholly unsecured loan, then the answer is yes; the loan would be wholly dischargeable in bankruptcy.

The answer really depends on the age of your outstanding IRS tax bill. Penalties and interest are generally dischargeable. No matter the age of your unpaid debt. However, the underlying unpaid taxes are exempted from discharge and are not dischargeable unless they are very old. It depends on whether and when the tax was actually due, including all extensions, that determines when the clock starts running on the IRS debt to determine when it gets old enough to be discharged. It is very complicated, and you should absolutely seek legal advice in terms of determining whether your particular tax liability is dischargeable.

The answer is that income does, in fact, factor into whether you will be eligible for Chapter 7. There is a “means test” that is a part of the law. This test is designed to determine whether a person can pay back some of their debts or whether they’re entitled to complete debt relief under Chapter 7. The means test is very number-specific, and it would be very difficult to know whether you can pass it without knowing your precise income during a six-month period, as well as contemporary data on the median income in your particular area. So, it is a moving target, which you should consult an attorney to determine your likelihood of successfully passing the means test. It is not necessarily any particular income level that matters. They are people that are far above the median income, which still may qualify for Chapter 7 based upon them being insolvent. It is a complex concept, and you should talk to your attorney about whether you qualify.

The answer really depends on how much personal property that you have. In Chapter 7 what your creditors receive is based upon the assets that you have. If you have assets that exceed the amount that your state allows to be kept exempt from creditors, then that excess property would be what creditors are entitled to receive. If you have excess income and are left each month with a significant amount of disposable income, you may have to commit that disposable income to your creditors over a period of five years if you cannot pass the means test. In some cases, even if you do pass the means test, the United States Trustee may still force you to pay some of your debts in Chapter 13 if your disposable income after deducting your necessary living expenses is too great. These are very precise calculations, and you should speak with an attorney about determining how much you may have to pay back your creditors based upon your financial situation.

When you file a Chapter 7, there may be property that is secured by a loan that you wish to keep. The most common examples of these are your house and your car. You get the option to keep those secured debts if you continue to pay the Creditor the amount that is owed for that collateral. However, the Creditor may want, or you the debtor may want the security of knowing you have a formal agreement, which will allow the Creditor to continue to report timely payments to the credit bureaus and will also make the Creditor feel comfortable that they do not have to repossess the property. This agreement is called a reaffirmation agreement because it “reaffirms” to the court the debt. It forms a new agreement which is now affirmed by the bankruptcy court and is allowed to survive the bankruptcy discharge. In most cases, you would make the same payments normally made for the collateral that you are paying under the current agreement. If you want the benefit of having such an agreement, you should definitely make sure you inform your attorney so that you can keep your property and also get the credit-reporting benefits of making your payment.

Unfortunately, that depends on whether you also want to get rid of your house. If you are content with abandoning your house and want to be rid of the debt underlying it, then it is absolutely possible in bankruptcy. If you surrender your property, then the mortgage debt will get wiped out, and you will not have to ever repay it. However, with a secured debt such as a mortgage, if you want to keep the collateral, then you must pay the mortgage on time. Even if the mortgage is discharged against you personally by the bankruptcy, the mortgage still will not be extinguished against the property. This means that even if you are personally released from the mortgage obligation, the lender may still be able to foreclose on the home to get their money back.

The answer really depends. It depends on how aggressive you are at rebuilding your credit. There are many different ways to attack trying to restore and rebuild your credit score. Some people are very aggressive in doing it. Others are very passive. There is a required debtor education course that all bankruptcy filers have to take, which gives guidance on how to rebuild your credit.

You do not have to have an attorney to be able to file bankruptcy. Bankruptcy can be filed without the assistance of an attorney or a petition preparer. However, the process is very complex. Based upon the complexities and the vagaries of each case, it has been our experience that having counseled advice from persons who know the process, including the ups and downs, can be very helpful in navigating the maze of the bankruptcy code.

In bankruptcy, all debts can get wiped away with the exception of debts that are either secured by property or debts that are called “priority” debts. There is a category of priority debts (which means they will survive the bankruptcy discharge). These priority debts include IRS taxes, student loans, alimony, and child support, as well as unpaid wages and orders of restitution from a court for bad acts or for causing intentional injuries. These debts will not be discharged by the bankruptcy discharge. The creditors may get stayed by the automatic stay; however, when the bankruptcy is over, those debts will still be there to be paid.

The means test is a mathematical formula that is designed to determine if a person is abusing the bankruptcy system. In other words, if they can pay back some debts, then the system wants them to pay back what they can afford. The means test is set to calculate a person's disposable income if they don’t have to pay their unsecured revolving creditors' bills each month. If a person makes over the median income, in order to still qualify for Chapter 7, a person must be insolvent, meaning they must have more debts going out than they have coming in. If there is no income left over at the end of the month when all necessary living expenses have been paid, then a person will overcome the presumption of abuse and be able to file for Chapter 7.

Each state decides which tax credit may or may not be exempt from the bankruptcy estate. The state decides which tax credits they will protect from creditors. Some states like Florida, for example, protect and exempt the earned income credit. While other states protect the child tax credit. You should speak with an attorney to find out which exemptions your state provides for the tax credits given by the federal government.

The answer is it depends. When a bankruptcy is filed, it will be reported on the person’s credit. It may remain on a credit report for up to ten years. However, most other negative remarks will disappear from a person’s credit after seven years. Many people find that their credit score is higher even one year after filing for bankruptcy for two distinct reasons. Their debt balances get removed from their credit report, and all negative reporting comes to a stop once the bankruptcy is filed.

The waiting period between filing for the same chapter depends on which chapter you filed previously and which chapter you are filing now. For example, if you filed Chapter 7 before and want to file Chapter 7 now, you would have to wait eight years from the time of your previous discharge. If you filed Chapter 13 before and wanted to file Chapter 13 now, you would have to wait four years from your previous discharge. If you filed Chapter 7 before and need to file Chapter 13 now, there is no waiting period other than the possible six-month moratorium that some districts impose for various reasons. You should speak with a lawyer to analyze whether or not you are eligible to file, if you have filed before.