Answers to Your Bankruptcy Questions

Chapter 7: Known as a “straight bankruptcy” allows you to discharge your debts and get a fresh start. Ultimately, Chapter 7 is a good option for those without significant assets or equity in real estate.

Chapter 13: Often called the “wage earner’s” or “reorganization” bankruptcy helps those who are seeking to stop foreclosure or repossession and want to offer a plan to continue payments on their house or car. Filing for relief under

Chapter 13 allows you to provide a 36 to 60 month plan to pay off cars, catch up on house payments while eliminating your other unsecured debts like credit cards, medical bills and personal loans.

Bankruptcy can immediately stop foreclosure and force your mortgage company to allow you to resume payments and cure your arrearage over time. It also ends harassment from bill collectors, and reorganize finances. In most cases, bankruptcy can also help mortgage borrowers save their homes permanently.

In Chapter 13 bankruptcy, if the lender has not repossessed your car and you file for bankruptcy, the automatic stay prevents the lender from repossessing your car.

Then, if your Chapter 13 repayment plan deals with the back payments (the arrearage) on your car loan, the lender cannot repossess your car during and after the bankruptcy.

Yes. After filing a bankruptcy case your creditors are not allowed to contact you at all. Also, under the Fair Debt Collection Practices Act, creditors are prohibited from contacting you once they are made aware of the fact that you have hired an attorney to handle your debt situation. If creditors violate this Act, they can be sued in Federal or State court with attorney’s fees, actual damages and sometimes punitive damages awarded to the Plaintiff.

If you have an unpaid bill, a creditor or collection agency might threaten garnishment. Garnishment is a legal procedure to take your money, for example from your bank account or your wages. However, garnishment is not allowed until a court has determined that you owe the money. A creditor can not garnish any of your income until it first sues you and gets a court judgment.

When you file bankruptcy, an automatic stay goes into effect that prohibits and stops most collection activities by creditors. This means that wage garnishments are also stopped as long as the bankruptcy stay is in effect. If a creditor wants to resume collection efforts, it must ask the court to lift the stay. The court will lift the stay only if the creditor has a valid reason for doing so. An unsecured creditor such as a credit card company simply wishing to resume a wage garnishment is not a valid reason for the court to lift the stay.

The Chapter 13 plan is a 3 to 5 year plan to pay off and retain items you want to keep (home, car, etc…) and be debt free. Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, IRS debt, student loans. Most of the unsecured debt like credit cards, medical bills and personal loans usually receive a minimal payout and with the balance discharged. You can now “strip” 2nd mortgages or equity lines from your home. IRS Debt can be paid over time without penalties and interest and sometimes eliminated altogether as unsecured debt.

The process for Chapter 7 bankruptcy typically only lasts 3-5 months whereas the Chapter 13 bankruptcy and repayment plan typically runs 3-5 years.

Married debtors have the option to file bankruptcy jointly with a spouse, or to file an individual bankruptcy without including their spouse.

About 30 to 40 days after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but a person appointed by the United States Trustee to oversee bankruptcy cases.

At the First Meeting of Creditors, the trustee will ask you questions (under oath) about your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask you questions. However, usually creditors do not attend these meetings if you have filed for Chapter 7 bankruptcy.

If you file for a Chapter 7 Bankruptcy, you normally do not need to return to court. If you filed for a Chapter 13 Bankruptcy, you may need to return to court for a confirmation hearing before the bankruptcy judge.
Who notifies the creditors and bill collectors?

After the bankruptcy petition is filed, the court immediately mails a notice to all the creditors listed in the schedules. Your bankruptcy attorney will usually directly contact any creditors attempting to garnish, repossess or foreclose.
What will happen to my house and car?

Generally if you want to keep your house and car in bankruptcy you continue the payments directly in Chapter 7 or you arrange to make your payments through a Chapter 13 plan. The main consideration with your house is how much equity you have in the property.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. Contact Attorney John Hicks (248) 542-1500 to learn more.

A bankruptcy is reported on a credit report for up to 10 years, but that does not mean you cannot rebuild good credit during that time. The law allows a lender to loan money whenever the lender wants to, and nothing in bankruptcy prohibits a lender from making a loan after bankruptcy. Good credit is a history of paying bills on time and that is your goal after bankruptcy. Your credit score starts going up from the time you file and Attorney John Hicks can provide a estimate of your score at filing and after 12 months post bankruptcy filing.

You cannot borrow any money without court permission IF you file a chapter 13 bankruptcy while your chapter 13 bankruptcy payment plan is still operating, so the answer for that specific time frame would be NO.

However, if you file a chapter 7 bankruptcy, then you may keep any credit card you have if the bank issuing the credit card will allow it.
Will I ever get credit again?

The short answer is yes, you will. Your credit score starts building after filing and sometimes goes up 100 to 150 points just in the first year. While it will take patience and diligence to rebuild your good credit standing, you should be able to get some level of credit almost immediately after filing, regardless of whether you have opted for Chapter 7 or Chapter 13 bankruptcy.

Congress overhauled the bankruptcy laws in 2005. Under the new law, virtually all retirement account and pension plan funds are exempt from creditors, meaning you get to keep them if you file for Chapter 7 bankruptcy. In Chapter 13 bankruptcy, because your retirement accounts are exempt, they won’t affect how much you must repay unsecured creditors.

Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the numbers of people filing are so massive, very few publications have the space, the manpower or the inclination to run all of them.

No employer — government or private — may fire you because you filed for bankruptcy. Nor may an employer discriminate against you in other terms and conditions of employment — for example, by reducing your salary, demoting you, or taking away responsibilities — because of your bankruptcy.