1. How long will a bankruptcy stay on my credit report?
A Chapter 7 Bankruptcy filing can stay on your credit report for 10 years. For a Chapter 13 bankruptcy, credit bureaus will generally remove the bankruptcy from your credit report after 7 years. Having a bankruptcy filing on your credit report does not mean that you will have bad credit for 7 to 10 years. Most people who file for bankruptcy are able to improve their credit score to a good level after 2-3 years.
Does filing for Chapter 7 Bankruptcy mean that I will not be able to obtain credit for the next 10 years?
Generally, people who file for bankruptcy have been able to obtain credit within a few months of completing their Chapter 7 bankruptcy. Many credit card issuers and loan companies see you as less of a credit risk than you were prior to filing. That’s because when you file for bankruptcy you eliminate a lot of debt that previously made you a higher credit risk for companies lending you money or offering you a credit card.
3. Do I have to list all of my credit cards in the bankruptcy, or can I keep some of my credit cards?
The bankruptcy law requires you to list all of your debts. You cannot pick and choose which debts will be listed on your bankruptcy petition. Generally most credit cards issuers will close your account when you file for bankruptcy.
4. What debts are not discharged (forgiven) in bankruptcy?
Child support, alimony, and divorce property settlements are non-dischargeable debts. Student loans are not dischargeable, regardless of whether they are government or private student loans, unless you can show that repaying the loans would be an “undue hardship.” (This is a very rare exception). Certain taxes are non-dischargeable. Government fines are non-dischargeable. Debts incurred by fraud or embezzlement are also non-dischargeable.
5. Can I keep the car/truck that I am paying for in a Chapter 7 Bankruptcy?
Vehicle loans are secured debts, which means that the creditor has a lien against the vehicle until the loan is fully paid. Filing Chapter 7 Bankruptcy does not remove the lien. As long as you continue to make the loan payments, you can keep your vehicle. When you finish paying off the loan, the creditor’s lien is released, and you receive your vehicle title from the creditor in the same manner as you would have without a bankruptcy filing.
6. If I am married, do I have to file bankruptcy jointly with my spouse?
No. You are not required to file jointly with your spouse. You can file alone, or jointly with your spouse. Attorney Hanna can help decide which option is right for your individual situation.
7. Who will find out that I filed for bankruptcy?
Bankruptcy filings are generally not reported in newspapers. The creditors listed on your bankruptcy petition are notified by the bankruptcy court. Although the filing of a bankruptcy is a public record on file with the bankruptcy court, it is extremely unlikely that a friend or relative will find out through a public court record that you have filed for bankruptcy.
8. Will I be able to rent a house or apartment after filing bankruptcy?
Yes. While some large apartment complexes may refuse to rent to you because you don’t meet their credit criteria, smaller apartment complexes and individual landlords generally do not view your credit history (and bankruptcy filing) as the determining factor in their decision whether or not to rent to you. They are more concerned if you have stable employment and will make a good tenant. Although it may be more difficult to rent at certain places, you should be able to find a nice place to rent.
9. Will my creditors stop harassing me when I file for bankruptcy?
The instant you file for bankruptcy, federal law provides that an “automatic stay” goes into effect, immediately stopping all creditor collection action. Creditors cannot call you, send you letters, or send you emails. The automatic stay stops creditors from continuing with wage attachments or lawsuits. It also stops foreclosure sales, vehicle repossessions and utility shutoffs.
10. Can I keep my house and property if a file for bankruptcy?
Generally, most people can keep their house, cars and personal possessions. However, there are limits as to how much you are allowed to keep. Attorney Hanna will review your individual situation with you.
11. Will I have to go to court?
You will have to attend a court hearing called the “meeting of creditors.” At this meeting, a bankruptcy trustee—a lawyer appointed by the court to oversee your case, (not a judge)—will ask you questions about the information in your bankruptcy petition and about your finances. Attorney Hanna will be present with you at the meeting. These proceedings are usually very short, lasting about ten minutes. While creditors are permitted to attend the meeting, in most cases, they don’t attend.
12. What can happen if I don’t pay my debts and I don’t file for bankruptcy?
Every situation is different, but generally creditors will take aggressive action to collect the money due to them. If you don’t pay your mortgage or home equity loan the lender can foreclose and take your house. If you don’t pay your real estate taxes, the town or city can put a lien on your house and/or foreclose.
Credit card and loan creditors can file lawsuits against you in court. Once those creditors obtain a judgment they can seek to collect the debt through wage garnishment or bank attachment. They can also put a lien on your house or other real estate.
If you don’t pay your auto or truck loan the creditor will usually repossess the vehicle, sell it at an auto auction—for well below its retail value—apply that small amount to the debt, and sue you for the balance. Upon obtaining a judgment, they can garnish your wages, attach your bank account or put a lien on your house.
If you don’t pay your Federal Income Tax, the IRS has special collection powers. They are not required to bring a lawsuit. They can attach your bank account, put a lien on your property, or garnish your wages—all without ever going to court. Also note that while other creditors can garnish up to 25% of your take home pay, the IRS can take 100% of your take home pay.