Bankruptcy Frequently Asked Questions

What is Bankruptcy?
Bankruptcy is a legal proceeding that cancels some or all of your debt. When you file bankruptcy, creditors are not allowed to collect money from you.

What are the Different Types of Bankruptcy?
A Chapter 7 is referred to as a liquidation bankruptcy. It requires you to give up property that is worth more than certain limits called “exemptions,” so that the property can be sold to pay creditors. A Chapter 11 is known as a reorganization and is used mostly by businesses. A Chapter 12 is for family farmers and fishermen. A Chapter 13 is a payment plan through the bankruptcy court. It requires you to make payments to a trustee who will divide the payments up among your creditors.

How Does Filing Bankruptcy Protect Me from Creditors?
When you file bankruptcy, there is an automatic stay. That means that creditors cannot do anything to collect money from you. They must stop sending monthly statements and collection letters. Also, they may not call you on the phone, sue you, collect on a judgment, foreclose on your home, shut off your utilities or repossess your vehicle.

What is a Discharge?
The ultimate goal of most bankruptcies is to get a discharge. A discharge is the cancellation of debt. Once debt is discharged, the creditor can never ask you to repay the debt.

Will Bankruptcy Cancel All of My Debt?
Bankruptcy can cancel most debt. However, it will not cancel child support, alimony, most taxes, student loans, most liens, debt obtained by fraud, criminal fines and debts resulting from willful and malicious harm.

How Much does it Cost to File Bankruptcy?
For a Chapter 7, the court filing fee is $335. For a Chapter 13, the court filing fee is $310. A Chapter 11 court filing fee is $1,717. If you hire an attorney to represent you in a bankruptcy, you will also need to pay an attorney fee.

What Must I do in Order to File Bankruptcy?
Individuals who file bankruptcy must complete a credit counseling session with a court approved credit counseling agency before filing a bankruptcy petition.

Can I Keep My Home and Car if I File Bankruptcy?
Most people are able to keep their homes and cars after filing bankruptcy. In a Chapter 7, you can usually keep a home as long as you don’t have too much equity in it. You will still need to continue making your mortgage payments. In a Chapter 11 and 13, you may usually keep your home and car despite the value.

How will Bankruptcy Affect My Credit?
Bankruptcy stays on your credit report for up to ten years. However, you can improve your credit a few years after filing bankruptcy by making timely payments on new credit accounts.