Bankruptcy FAQ: Answers to Your Bankruptcy Questions
A decision to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems. I am debt relief attorney Joel R. Spivack, and I understand that you have questions and concerns about the bankruptcy process. I will be there for you every step of the way to make sure you have the information you need to make smart financial decisions.
What is bankruptcy?
Bankruptcy is a legal proceeding in which a person who cannot pay their bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.
What can bankruptcy do for me?
Bankruptcy can eliminate the legal obligation to pay most or all of your unsecured debts. Bankruptcy can also do the following:
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments.
- Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
- Stop bank account garnishment, wage garnishment, debt collection harassment and similar creditor actions to collect a debt.
- Restore or prevent termination of utility service.
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
What bankruptcy cannot do:
- Bankruptcy cannot eliminate certain rights of “secured” creditors. A “secured” creditor is one who has taken a mortgage or other lien on property as collateral for a loan, such as car loans and home mortgages.
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines and some taxes.
- Bankruptcy is also unable to protect cosigners on your debts or discharge debts that arise after bankruptcy has been filed.
What different types of bankruptcy cases should I consider?
There are four types of bankruptcy cases provided under the law:
- Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property that exceeds certain limits called “exemptions,” so the property can be sold to pay creditors.
- Chapter 11, known as “reorganization,” is used by businesses and a few individual debtors whose debts are very large.
- Chapter 12 is reserved for family farmers and fishermen.
- Chapter 13 is called “debt adjustment.” It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
What must I do before filing for bankruptcy in New Jersey?
You must receive budget and credit counseling from an approved credit counseling agency within 180 days before your bankruptcy case is filed. The agency will review possible options available to you in credit counseling and assist you in reviewing your budget. Different agencies provide the counseling in person, by telephone or online. If you decide to file for bankruptcy, you will need to file a certificate from the agency stating that you received the counseling along with the bankruptcy forms for your case.
In a Chapter 7 case, you can keep all property that the law says is “exempt” from the claims of creditors. You can choose between your exemptions under your state law or under federal law. In many cases, the federal exemptions are better.
Federal exemptions include:
- $21,625 in equity in your home
- $3,450 in equity in your car
- $550 per item in any household goods up to a total of $11,525
- $1,450 in jewelry
- $2,175 in things you need for your job (tools, books, etc.)
- $1,150 in any property, plus part of the unused exemption in your home, up to $10,825
- Your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistance, and pensions — regardless of the amount
(These numbers are as of 2011 and subject to change. Please verify the exemption limits with an attorney).
In a Chapter 13 case, you can keep all of your property if your plan meets the requirements of the U.S. Bankruptcy Code. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.
What will happen to my home and car if I file for bankruptcy?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it if you pay its nonexempt value to creditors in a Chapter 13.
Can I own anything after bankruptcy?
Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
Will bankruptcy wipe out all my debts?
Yes, with some exceptions.
Bankruptcy will not normally wipe out:
- Money owed for child support or alimony, fines, and some taxes
- Debts not listed on your bankruptcy petition
- Loans you got by knowingly giving false information to a creditor who reasonably relied on it in giving you the loan
- Debts resulting from “willful and malicious” harm
- Most student loans, except if the court decides that payment would be an undue hardship
- Mortgages and other liens that are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor)
Will I have to go to court?
In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.
Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.
What else must I do to complete my case?
After your case is filed, you must complete an approved course in personal finances. This course will take approximately two hours to complete. Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the United States Trustee Program office at https://www.usdoj.gov/ust. In a Chapter 7 case, you should sign up for the course soon after your case is filed. If you file a Chapter 13 case, you should ask your attorney when you should take the course.
Will bankruptcy affect my credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse.
The fact that you’ve filed a bankruptcy can appear on your credit record for 10 years. But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
What is my credit rating?
The credit industry has trained consumers to equate the contents of credit reports with their creditworthiness. The two are not the same. A credit report may show that you have faithfully made every payment on time for your entire life and still you are not worthy of more credit because you can’t ever pay off the credit you have.
Contact an Experienced Cherry Hill NJ Bankruptcy Attorney
Every client has different concerns and is faced with different circumstances. Once I have taken a close look at your financial concerns, I can better answer any questions you may have. Conveniently located just off Route 295 at exit 34B, at the intersection of Route 70 and 295, my offices are open weekdays from 8 a.m. to 5 p.m. and offer free parking. Contact me today at 856-488-1200 for a free initial consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.