BANKRUPTCY FAQ

Bankruptcy is a process provided under federal law to allow individuals and businesses the opportunity to deal with their debts. Bankruptcy can provide a fresh start to debtors and allow for the rebuilding process to begin.

Will I lose all of my property if I file for bankruptcy?

There are state and federal exemptions which allow you protect some or all of your assets from the claims of creditors. There are various rules which provide which exemptions are available to you. Oftentimes, all of a person’s personal property including their vehicle and home is protected with either a state or federal exemption.

Will my name be published in the newspaper or other form of media? 

Though bankruptcy proceedings are public record, no one other than your creditors will know that you have filed unless you choose to tell them.

Will the court put me in jail? 

Bankruptcy is a civil process and not criminal. The only time that your bankruptcy could turn criminal is if there are allegations of fraud or misrepresentation. Always answer the questions your bankruptcy attorney asks truthfully and in full detail.

I’m ready to file? What do I need to do?

The first thing you should do is contact a bankruptcy attorney. Most offer free consultations which will provide you with the best option for you. Sometimes bankruptcy may not be the best thing for you and your bankruptcy attorney will guide you to another route.

When will the bill collectors and collection agencies stop calling me?

All of your creditors and bill collectors should stop calling and harassing you after about a week after your attorney files your case. Technically all collection activities stop when the automatic stay goes into effect which is the moment your case is filed. Give your creditors enough time to receive the notice from the court and if they continue their collection calls or harassment, let your attorney know and action may need to be taken.

What debts will be affected by my bankruptcy filing? 

All of your debts will be affected one way or the other. Some debts are generally not dischargeable such as taxes, student loans, criminal fines, etc. You may choose to reaffirm your car loan and mortgage loan. Your bankruptcy attorney will discuss the consequences of reaffirmation with you.

Should I file with or without my spouse? 

If most of your debts are joint (in both of your names), it may make sense to file jointly. The costs of filing a joint case with your spouse are virtually the same so filing one case for both of you will knock two birds out with one stone. If you are separated from your spouse, filing a single case may make the most sense at the time. As always, discuss your financial situation fully with your bankruptcy attorney. Good advice from an attorney will save you time and money than trying to decide by yourself.

Shouldn’t I try debt consolidation first before bankruptcy?

Debt consolidation should be entered into very cautiously. There are many scams out there offering great results in getting your debt paid off when really the debt consolidation company is the only one getting paid. Debt consolidation plans are voluntary and if a creditor does not agree to the terms, that creditor will not be paid and you will still owe the money. If you do decide to go the debt consolidation route, I would advise you to also call a bankruptcy attorney and weigh all of your options before proceeding. Debt settlement could be a great option even if bankruptcy and debt consolation aren’t.

Which bankruptcy chapter should I file under? Chapter 7, 11, 12, or 13?

Chapter 7 is often referred to “fresh start” bankruptcy. Chapter 13 is a repayment plan over 36 to 60 months. Chapter 11 is reorganization for businesses and debtors that have too much debt for Chapter 13. Chapter 12 is similar to Chapter 13 but is specifically for family farmers and fisherman. The most common bankruptcy chapters that Sims Bankruptcy Law deals with is Chapter 13 and Chapter 7.

What if I have filed a bankruptcy in the past?

You can file one chapter 7 every 8 years. If you have filed a chapter 7 within the past 8 years, a chapter 13 still could be a good option for you. Discuss your situation with a bankruptcy attorney. The consultation is free and there is no obligation to file.

How soon can I start rebuilding my credit and when will my credit score increase? 

You can start rebuilding your credit whenever you get out of your bankruptcy. For a normal Chapter 7, the discharge order is typically entered 4 to 6 months after filing the case. Once the discharge is entered, your credit score will automatically rise because all of the bad debt has been wiped clean from your credit. Taking out a small credit card and paying it off each month after the Chapter 7 discharge will help you rebuild your credit score and credit history. The key to rebuilding your credit is not taking out more than you can handle and paying the balances off each month.

For a Chapter 13 bankruptcy, the discharge will not be entered until you complete your Chapter 13 Plan. Typically, your Plan will last 36 to 60 months though it could vary depending on number of factors. Once the discharge order is entered, your debt that didn’t get paid will be discharged unless it is debt that cannot be discharged. Similar to the Chapter 7, you can start rebuilding your credit soon after getting out of the case.

Will my credit be ruined for the rest of my life after I file bankruptcy?

That depends on how well you rebuild your credit when you get out. When you get your fresh start, be careful on how much debt you take out. After building some history of on time payment, your credit score will continue to rise.

Will bankruptcy stop the foreclosure of my home?

Yes. The automatic stay goes into effect immediately at the time of your bankruptcy filing. All creditor actions including the foreclosure of your home are stayed.

Will bankruptcy stop my car from being repossessed? 

Yes. The automatic stay prevents the repossession of your vehicle at the time of your bankruptcy filing. The creditor cannot take action until they are granted relief from the automatic stay.

I’m being sued, will bankruptcy stop the lawsuit?

Yes, the lawsuit will be stopped, and most civil debts are discharged through bankruptcy.

A creditor is garnishing me, will bankruptcy stop the garnishment of my wages or bank account?

Yes, bankruptcy will stop the garnishment of your bank account or wages. The underlying debt could be discharged in your bankruptcy case.

Yes. A Chapter 7 or Chapter 13 may be a viable option to deal with your tax debt. While you're in the bankruptcy case, the taxing authority cannot garnish or levy you unless they get relief from the automatic stay.