BANKRUPTCY FREQUENTLY ASKED QUESTIONS
How do I know if I am eligible to file bankruptcy?
Almost anyone can file bankruptcy. If you have debt and need to get back on your feet, you are likely eligible to file bankruptcy.
How does bankruptcy affect my credit score?
In most cases, filing a bankruptcy is actually beneficial to your credit score in the long term. While it is true that it will initially negatively impact your credit score, most people who are contemplating bankruptcy are over their heads in debt. Each and every month their credit score is falling lower and lower. Filing bankruptcy will provide a bottom point to work up from.
Will I ever be able to buy a house again?
Yes. Most people who file bankruptcy will find themselves in the position to qualify to buy a house within a few years of completing their bankruptcy.
What types of debts are not discharged by bankruptcy?
While most debts are eliminated in bankruptcy, some are not. Income tax debt that accrued within the previous three years, or tax debt related to tax returns that were filed less than two years before the bankruptcy was filed, are generally not discharged. Neither is domestic support or debt that is the result of a criminal restitution award. There are certain other debts that are also not subject to discharge.
How do I know if I qualify for Chapter 7?
To qualify for Chapter 7, you must pass a “means test.” This test is designed to make sure that people with the ability to repay a portion of their debts do so. The means test is quite tricky, and a skilled attorney can often help people who would otherwise not qualify for Chapter 7 pass the means test.
Is bankruptcy better than debt consolidation?
In most cases, yes. Debt consolidation is often ineffective or, worse yet, a scam. Bankruptcy is product of the laws of the United States and is designed to work.
How does Chapter 13 help me keep my house?
Chapter 13 can stop a foreclosure and provide a structured payment plan to pay the past due amounts in a manageable payment.
Can I get rid of my second mortgage or home equity loan through bankruptcy?
In many cases, yes. If you file a Chapter 13 case and the value of your house is less than the amount you owe on your first mortgage, you can likely eliminate your second mortgage or home equity loan if you successfully complete your Chapter 13 Plan.
Can I get garnished wages back if I file bankruptcy?
In most cases, if the wages were garnished within the 90 days prior to filing the case, those wages must be returned.
Will I lose all my property if I file Chapter 7?
In most cases, no. As long as you do not have more than 10%, plus an additional $21,600.00 in equity in your home, you should be able to keep it. You are also permitted to keep approximately $12,000.00 of personal property, based on its fair market value.
How much does it cost to file?
Every case is different and the cost to file the case depends on how complicated of a case you have. The fee to file the case should be able to be determined after your free 30 minute consultation.
Can I stop a wage garnishment?
Yes. Filing bankruptcy stops a wage garnishment immediately. In most cases, we can even get some or all of the garnished wages returned to you.
Can I stop a foreclosure?
Yes. As long as the case is filed before the sale date, a bankruptcy will stop a foreclosure sale and save your home.
Will I lose my retirement savings?
No. Almost all retirement accounts cannot be taken from you if you file bankruptcy.
What is the “automatic stay?”
The “automatic stay” is the mechanism of law that stops any attempts to collect a debt against you or your property (with very limited exceptions). It goes into effect immediately when you file bankruptcy.
Are all bankruptcy lawyers the same?
NO! Bankruptcy is a very complicated area of law that is rarely taught in law school. You should never turn your case over to a lawyer who does not have the expertise to get the best possible result for you. The only way to make sure you are getting the best possible result is to make sure your lawyer has the knowledge and skill that are necessary to navigate this extremely technical area of law. Many lawyers charge rock bottom fees for bankruptcy services and try to pump as many cases through their offices as they can to make up for their low fees. These “volume filers” do not have the time to pay attention to any individual case in their offices. This results in a poor outcome for their clients. Even worse, many lawyers dabble in bankruptcy because business is down and they need the income. These lawyers usually have no clue how complicated bankruptcy truly is and it is the client that suffers. There is nothing more important than making sure you have a competent lawyer on your side.
Can Taxes be Discharged in a Bankrutpcy?
A common belief is that income taxes are never dischargeable in a bankruptcy. This belief is incorrect. In some cases, income taxes can be discharged in a bankruptcy. Under the bankruptcy code, both Federal and State income taxes may be discharged if they meet certain requirements.
In order to discharge income taxes in a bankruptcy, the taxes must be for a tax year that occurred three or more years prior to filing the bankruptcy case. This is usually calculated by using the April 15 (tax day) date and counting forward.
For example, if a person owes taxes for the tax year of 2005 and files his or her case before April 15, 2009, he or she would not be able to discharge the 2005 income tax liability. However, if one files the case after April 15, 2009, the taxes likely can be discharged. (The date is usually moved from April 15 to October 15 if an extension was filed).
The IRS or State must also have assessed the liability more than 240 days before the case is filed.
The next requirement is that the taxes have to have been filed more than two years prior to filing the bankruptcy. Therefore, if a person did not file his or her taxes on time, the taxes may not be dischargeable, even though they were for a tax year that ended more than two years before the case was filed.
There are other exceptions, including the rules that a person who filed a fraudulent tax return, or was trying to evade tax liability, will not have the tax debt discharged. A good attorney can tell you more about the ability to discharge taxes in a bankruptcy and whether your income tax debt can be wiped out if you file for bankruptcy.
Learn more about Chapter 7 and Chapter 13 of Bankruptcy.