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Bankruptcy - An Overview

Consumer Bankruptcy

Commercial Bankruptcy

Avoiding "Credit Repair" and "Credit Counseling" Scams

Surviving the Emotional Effects of Bankruptcy

Frequently Asked Questions about Bankruptcy

Bankruptcy Resource Links

Bankruptcy Contact Form

Frequently Asked Questions about Bankruptcy

Q: Are there alternatives to filing bankruptcy?

A: If the debtor's financial problems are only temporary, he or she can simply ask creditors to accept lower payments or grant an extended payment schedule. Creditors may be receptive to these ideas if the debtor has been a prompt payer in the past or if they wish to avoid the inconvenience of a bankruptcy proceeding. Consumer credit counselors can also help creditors work out a repayment plan. Some of these advisors work for non-profit agencies, so they charge no fees, but others charge a fee or may even be unscrupulous and should therefore be avoided.

Q: Does a Chapter 13 bankruptcy discharge eliminate all debts?

A: A Chapter 13 bankruptcy discharges only those debts provided for by the plan. In addition, a Chapter 13 discharge does not affect outstanding debts or ongoing obligations for spousal and child support; educational loans; drunk driving liabilities; criminal fines and restitution obligations; and certain other long-term obligations that extend beyond the term of the plan, such as home mortgages.

Q: Does a Chapter 7 bankruptcy discharge eliminate all debts?

A: A Chapter 7 discharge does not eliminate debts not listed on the schedules filed at the outset of the case; most student loans, unless repayment would cause undue hardship; recent federal, state, and local taxes; child support and spousal maintenance (alimony); government-imposed restitution, fines, or penalties; court fees; debts resulting from driving while intoxicated; and debts not dischargeable in a previous bankruptcy because of the debtor's fraud. Additional debts not listed may remain in force if the creditor objects to them during the case and proves that they fit certain specified categories.

Q: Are student loans discharged in a bankruptcy proceeding?

A: Educational loans are generally not discharged by bankruptcy, but may be if the court finds that paying off the loan will impose an undue hardship on the debtor and his or her dependents. Courts may determine that a hardship exists if: (1) the debtor will not be able to maintain a minimum standard of living if the loan is paid; (2) those dire financial circumstances will continue for a significant portion of the repayment period; and (3) the debtor made a good-faith effort to repay the loan prior to the bankruptcy.

Q: Are alimony and child support obligations discharged in a bankruptcy proceeding?

Under certain circumstances, and depending on the type of bankruptcy petition filed, a debtor may obtain some relief from the collection of past support obligations. Neither a Chapter 7 nor a Chapter 13 discharge affects future child or spousal support obligations, however, and thus, even at the conclusion of the bankruptcy proceeding, these on-going obligations remain.

Q: Can a debtor lose his or her home by filing bankruptcy?

A: A Chapter 7 debtor could lose his or her home if he or she is behind on the mortgage payments, depending on how much equity the debtor has in the property and the amount of the state homestead exemption. In such cases, the lender may ask the bankruptcy court to lift the automatic stay so that it can institute foreclosure proceedings. In a Chapter 13 proceeding, however, even if the debtor is behind on mortgage payments, if the plan includes paying back any missed mortgage payments and current payments are paid when due, the debtor should not lose his or her home.

Q: What property is exempt from creditors' claims?

A: Certain types of property are exempt, which means that the debtor can keep it even after filing bankruptcy. Exempt property can include motor vehicles, up to a certain value; reasonably necessary clothing; reasonably necessary household goods and furnishings; household appliances; jewelry, up to a certain value; pensions; a portion of the equity in the debtor's home; tools of the debtor's trade or profession, up to a certain value; a portion of unpaid but earned wages; public benefits, including public assistance (welfare), Social Security, and unemployment compensation, accumulated in a bank account; and damages awarded for personal injury.

Q: What property does the debtor have to give up in a bankruptcy proceeding?

A: Items that the debtor usually has to give up include expensive musical instruments, unless the debtor is a professional musician; collections of stamps, coins, and other valuable items; family heirlooms; cash, bank accounts, stocks, bonds, and other investments; a second car or truck; and a second or vacation home.

Q: How long is bankruptcy information included on the debtor's credit report?

A: A consumer credit report may include Chapter 7 and Chapter 13 bankruptcy information for ten years from the time the case is filed. One major consumer credit reporting agency is reputed to eliminate Chapter 13 information after only seven years, but it is not legally required to do so.

Q: Do I need to hire an attorney in a voluntary or involuntary bankruptcy case?

A: Yes. Lawyers specializing in bankruptcy law can help both debtors and creditors overcome obstacles to the repayment of debt. Experienced bankruptcy attorneys have the knowledge and expertise to help their clients get out from under formidable debt and emerge as productive citizens, and can also assist their creditor clients in collecting what is rightfully theirs.

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