Frequently Asked Questions

1. What is Chapter 13 bankruptcy?
2. Who determines the amount of my Chapter 13 payments?
3. Will I be able to keep all of my property?
4. Who can file a Chapter 13 bankruptcy?
5. How long will a Chapter 13 Plan last?
6. What are the most common reasons for a Chapter 7 bankruptcy?
7. Can I stop the bill collectors from calling?
8. How long after I file will my creditors stop calling?
9. I am married; does my spouse also have to file bankruptcy?
10. Will I lose my job?
11. Can I go to jail if I file bankruptcy?
12. Will my employer find out about my bankruptcy?
13. What happens to my real property and other assets?
14. Can I keep my home and personal property?
15. Can I keep my car after bankruptcy?
16. Can I keep my credit cards after bankruptcy?
17. Will bankruptcy stop a wage garnishment?
18. Will bankruptcy stop a foreclosure?
19. Will bankruptcy stop an eviction action?
20. Will bankruptcy stop a judgment?
21. Will bankruptcy remove a lien?
22. I am divorced. Will bankruptcy wipe out my obligation to pay joint debts?
23. I am a cosigner for a debt. How does bankruptcy affect my obligation?
24. Who notifies my creditors and bill collectors that I have filed bankruptcy?
25. Do I have to fill out forms?
26. Do I have to go to Court or a hearing?
27. What happens after I file bankruptcy?
28. Who deals with the creditors and bill collectors during the bankruptcy?
29. What if I forget to list a creditor on my bankruptcy papers?
30. What happens to my credit rating after bankruptcy?
31. After bankruptcy, can I get credit?
32. How do I reestablish my credit after Bankruptcy?
33. Is there anything I should not do if I am contemplating bankruptcy?
34. If I need to file bankruptcy again, how long do I have to wait?
35. Am I required to hire an attorney?

1. What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is a debt repayment proceeding. The debtor turns over a specified portion of future earnings to a Chapter 13 trustee, who then distributes the money according to a confirmed plan to creditors who have filed bona fide claims. The method of determining the dividend distribution is determined by the Chapter 13 Plan which is filed with and confirmed or not confirmed by the Bankruptcy Court. If the debtor complete the plan, the debtor receives a discharge of all dischargeable debts.

2. Who determines how much my Chapter 13 payments will be?

The amount of your Chapter 13 payments are based upon your income, your reasonable and necessary monthly living expenses, and the amount of your debts. The Court will allow you to keep and spend so much of your income as is necessary to maintain a reasonable standard of living. Only your disposable income over and above normal and reasonable living expenses will be used to make a plan payment.

3. Will I be able to keep all of my property?

YES, generally, if you want to. By filing a Chapter 13 Plan, you arrange for the repayment of your debts and for the repayment of liens on your property. Sometimes, a debtor may want to surrender a particular asset in order to get rid of a debt, or, sometimes, get rid of a car, TV or appliance which does not work anyway by giving it back to a creditor in full or partial satisfaction of a debt. You may not be able to keep property considered luxury items.

4. Who can file a Chapter 13 bankruptcy?

Only individuals may file under Chapter 13. You must reside or have a domicile, a place of business, or property in the United States or a municipality. You must not have had a bankruptcy filing dismissed for cause within the last 180 days. You must have a regular income. Your debts cannot exceed $871,550 in secured debt or $290,525 in unsecured debt.

5. How long will a Chapter 13 Plan last?

Chapter 13 Plans are not less than 36 months long nor more than 60 month. After the debtor completes the plan, the debtor is discharged [forgiven] for his debts.

6. What are the most common causes of Chapter 13 bankruptcy?

The most common reasons for consumer bankruptcy are (a) loss of a job or long-term layoffs; (b) loss of overtime hours; (c) lengthy illnesses and large medical expenses; (d) death or disability of a spouse; (e) separation, divorce and marital problems; (f) seriously over extended credit; and (g) large unexpected expenses.

7. Can I stop the bill collectors from calling?

One of the major benefits of filing for protection under bankruptcy is that creditor actions are stayed (stopped). This means that debt collection effort and foreclosure are halted immediately. Chapter 13 also protects codebtors or cosigners from collection activity while you are making your Chapter 13 payments.

8. How long after I file will the creditors stop calling?

Once a creditor or bill collector becomes aware that you have filed for bankruptcy protection, the creditor must stop all efforts to collect the debt. There are exception to the automatic stay for certain types of debts and proceedings under §362. After you file bankruptcy, the court will mail a notice to all of the creditors listed in your schedules. This usually takes a week to ten days. You will receive a copy of the same notice which goes out to creditors. If this is not soon enough to stop a garnishment or repossession, then you should have your attorney inform the creditor immediately.

If a creditor continues to use collection tactics once informed of the bankruptcy, they may be liable for court sanctions and attorney fees for this conduct.

9. I am married. Does my spouse also have to file bankruptcy?

No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file.

10. Will I lose my job?

No. Bankruptcy laws prohibits discrimination based upon a debtor filing for protection under the bankruptcy laws.

11. Can I go to jail if I file bankruptcy?

ABSOLUTELY NOT. There are no debtors' prisons in the United States. As a matter of fact, the right of bankruptcy is governed by the U.S. Constitution in Article I, Sec. 8, cl.4.

12. Will my employer find out about my bankruptcy?

Under normal circumstances, unless your employer is a creditor, your employer will not know that you have filed bankruptcy. However, there is a growing trend in Bankruptcy Courts to require wage withholding to fund the Chapter 13 Plan. This means that your employer may receive an order from the Bankruptcy Court to deduct your Chapter 13 payment from your check and send it directly to the Chapter 13 trustee. Consult your attorney about local procedure.

13. What happens to my real property and other assets?

Once the Chapter 13 bankruptcy is filed, all the property of the debtor at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate. This means that the bankruptcy trustee will take control of all non?exempt property for purposes of satisfying the creditors. However, once the Chapter 13 Plan is confirmed [approved by the court], control over all of your property, except for future wages, may be returned to you, depending on the local court rules.

14. Can I keep my home and personal property?

YES. One of the main reasons people file a Chapter 13 bankruptcy is to keep their home. Usually, if you are behind on your house payments, your Chapter 13 Plan will provide that you begin making your current monthly payments and not get any further behind. Any payments you are behind on will be included in your plan payment and paid to the mortgage company through the Chapter 13 trustee.

15. Can I keep my car after bankruptcy?

Yes. If your car is mortgaged to a creditor as security for a loan, you will be expected to pay an amount to the creditor at least equal to the value of the automobile at the time you file your Chapter 13 Plan. Any amount due to the creditor over the value of the car will be paid as an unsecured debt. You will have to maintain property insurance on the vehicle if you owe money on it.

16. Can I keep my credit cards after bankruptcy?

Generally, no. Under some circumstances you may be able to keep your credit cards. There are many factors which must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt. Under Chapter 13, the Bankruptcy Court must usually approve any new debt you make, which includes future credit card charges.

17. Will bankruptcy stop a wage garnishment?

Yes.

18. Will bankruptcy stop a foreclosure?

Yes. A home is an asset usually secured by a mortgage. While a Chapter 13 will stop a foreclosure, unless you begin making current payments, a creditor will be successful in obtaining permission from the Court to start or continue a foreclosure proceeding. Assuming you can make your monthly mortgage payments after you file a Chapter 13 plan, you can catch up your arrearages under Chapter 13 and avoid foreclosure of your home.

19. Will bankruptcy stop an eviction action?

Yes, however, unless you can begin making your future rent payments on time, Chapter 13 will only stop an eviction for a while. Like a home mortgage payment, unless you can stay current from the date of filing a Chapter 13 forward, the owner will be entitled to possession of his property and at best you will be able to remain in the property until the owner can obtain an order from the Bankruptcy Court granting relief from the automatic stay and begin eviction proceedings in state court. If you can stay current, then you can catch up your back rent through the Chapter 13 Plan.

20. Will bankruptcy stop a judgment?

Yes. Most civil judgments are stopped by bankruptcy.

21. Will bankruptcy remove a lien?

Under some circumstances once the bankruptcy proceedings have started, a special motion can be filed to remove certain liens. It will take a bankruptcy court order to remove them. This is a complicated area of the bankruptcy law and you should consult with an attorney.

22. I am divorced. Will bankruptcy wipe out my obligation to pay joint debts?

In some cases, yes. In October of 1994, Congress amended the Bankruptcy Code to provide, generally, that obligations arising out of a divorce or property settlement agreement are nondischargeable. If your Chapter 13 Plan provides for payment in full of these obligations, then they will be discharged. However, if your plan does not provide for payment in full, these obligations will not be discharged at the end of your Chapter 13 plan and you will still have to pay them outside of Bankruptcy Court. While you are in Chapter 13, creditors will not be permitted to collect the joint debts either from you or from your former spouse directly.

23. I am a cosigner for a debt. How does bankruptcy affect my obligation?

If the debt is primarily your debt, then you must provide for payment under your Chapter 13 plan. If the debt is primarily the debt of the person with whom you cosigned, then you may provide for payment of the debt under your Chapter 13 plan. If your plan does not provide for full payment of the cosigned debt, the creditor could get Bankruptcy Court permission to collect the debt from the codebtor. While you are in Chapter 13 and if your plan provides for full payment of the debt, the codebtor is protected against collection efforts outside the Bankruptcy Court.

24. Who notifies the creditor and bill collectors?

After your bankruptcy is filed, the Bankruptcy Court mails a notice to all the creditors listed in your schedules. This usually takes a week to ten days. If this is not soon enough, then you should have your attorney inform the creditors immediately. However, you must list all your creditors and correct addresses in order for the court to give the proper notice.

25. Do I have to fill out forms?

YES. You will be required to list ALL of your property and ALL of your debts. At the initial court appearance, you will be asked under oath whether you have listed all of your property and all of your debts and you must be able to truthfully answer that you have.

Your attorney will ask you to complete a questionnaire and then will take that questionnaire and complete the bankruptcy petition and schedules based on the information which you have provided. There could be between 30 and 60 pages in your petition, schedule and other papers filed at the time of your bankruptcy. You must follow the local and federal bankruptcy court rules in completing the forms. Preparing these forms requires an understanding of both bankruptcy law and local state law in order to enter the information correctly and accurately. The forms have to be typed and a certain number of copies must be included with the filing.
After your attorney has prepared the bankruptcy petition, you or you and your spouse if filing jointly) will review them and, if they are correct, sign them. Your attorney will forward them to the Court along with the necessary filing fees.

You may have to complete a detailed questionnaire from the trustee's office. It is important that you complete all of the questions, even though many of them may not apply to you or to your situation.

26. Do I have to go to court or a hearing?

Yes. Within about 30 to 45 days after you file the bankruptcy, you will have to attend a hearing presided over by the Trustee or by the Bankruptcy Administrator. This hearing, not actually a court hearing, is called the First Meeting of Creditors or Section 341 Meeting. At this meeting, the Trustee or the Bankruptcy Administrator and the trustee will ask questions of you under oath regarding the content of your bankruptcy papers, assets, debts and other matters. After the trustee is done, your creditors will have an opportunity to ask questions of you regarding the location and condition of your property, hazard insurance coverage and matters related to your financial affairs.

Don't worry, your attorney will be there to represent you and your attorney will help you prepare for the hearing. Sometimes, after your hearing is over, your creditors will approach you through your attorney to discuss the status of secured property or your desire to retain a credit card. Your attorney will negotiate with them, with your knowledge and approval. After this hearing you will normally not need to return to court unless a creditor files a motion or an adversary action. This is the exception and only your attorney can determine if this is likely to happen. Generally, debtors will only need to appear in the Bankruptcy Court only once.

27. What happens after I file bankruptcy?

Once you file for Chapter 13 protection, the Bankruptcy Court will issue an order requiring that you make the payments to the Chapter 13 Trustee which you proposed in your Plan. The Court will also set a date for you Section 341 meeting of creditors and for hearing on confirmation [approval] of your Plan. Sometimes the 341 meeting and confirmation hearing are combined into one hearing. Once your Plan is confirmed, you will be required to make the payments which you proposed to the Chapter 13 Trustee and, if appropriate, keep you home mortgage or your rent from getting further behind. Once you have completed all of your payments, the Court will issue a discharge to you which will relieve you from any further obligation on the debts which were covered by your Plan.

28. Who deals with the creditors and bill collectors during the bankruptcy?

Your attorney and the Chapter 13 trustee deal with your creditors for you. You should refer all creditors and bill collectors either to your attorney.

29. What if I forget to list a creditor on my bankruptcy papers?

You can file an amendment to your schedules up to a certain time before discharge. If the amendment is timely filed then the omitted creditor is added to the bankruptcy. It is perjury to intentionally omit a creditor. However, if you do not know that a creditor exists and there are no assets for your creditors, the debt will be discharged.

30. What happens to my credit rating after Bankruptcy?

The bankruptcy may be listed in credit reports for a period of up to ten years. However, by the time most debtors have filed bankruptcy, their credit rating is already damaged by late payments, repossessions, lawsuits, foreclosures and other debt problems which may be reported for a period of up to seven years.

31. After Bankruptcy, can I get credit?

Surprisingly to most folks, YES. This is up to each particular credit grantor. It is possible to get credit if the credit grantor believes and understands your reasons for filing the bankruptcy. Also, creditors realize that after you receive a discharge in bankruptcy, you are virtually debt free with the same income as before you filed bankruptcy.

32. How do I reestablish my credit after Bankruptcy?

There are at least two ways to get credit after a bankruptcy. First, one of your existing creditors may continue to grant you credit based upon your past dealings with them. Second, today there are several banks offering secured credit cards. This means that the credit limit is based upon the amount of security [usually cash] given to the card issuer. There are people who "specialize" in the business of credit repair. BEWARE. Some of the schemes they offer to you are not only worthless, they may be illegal. Consult your attorney first. You will almost certainly receive at least one solicitation from one of these "professionals."

33. Is there any thing I should not do if I am contemplating bankruptcy?

There are several areas related to this question. You should consult your attorney. In particular there are three items worth mentioning. a) Under bankruptcy law, certain luxury purchases over $1,000 within days of the bankruptcy filing are presumed nondischargeable. b) Under bankruptcy law, cash advances aggregating $1,000 within 60 days of the bankruptcy filing are presumed nondischargeable. c) Debts involving materially false financial statements are nondischargeable under certain circumstances, depending on which type of bankruptcy you file.

34. If I need to file Bankruptcy again, how long do I have to wait?

You may file a Chapter 7 case every six years. If you filed a Chapter 13 case and paid at least 70% of your unsecured debts, there is no waiting period to file a Chapter 7 case. There is no restriction on an individual for filing Chapter 13 cases other than if the Court dismissed a prior case for a willful failure to obey a court order or you voluntarily dismissed the prior case after a creditor filed a motion for stay relief.

35. Am I required to hire an attorney?

No, but it is strongly recommended. Most cases without representation by an attorney fail. The bankruptcy trustee does not represent you and will not give you legal advice.