I have been assisting debtors to obtain debt relief under the Bankruptcy Code for more than 10 years. Because I have handled cases in a number of areas, such as family law (divorce), real estate, foreclosure, and collections, I am knowledgeable in how those areas of law can impact the decision of whether and when to file for bankruptcy. Some large out of town firms might try to talk you into a Chapter 13 plan because it will generate larger fees for them. Conversely, other firms advertise that they “just do Chapter 7s.” What you may want is someone to tell you which type of bankruptcy is right for you, without any preconceptions.
In some cases, it may not make sense to file for bankruptcy at all; for example if you have few assets and your source of income is exempt, like Social Security. I have sued the banks to stop foreclosure when the client wants to stay in their home and avoid bankruptcy. I have attended Max Gardiner’s “Bankruptcy Bootcamp” course and have helped more than 100 local residents with bankruptcy, foreclosure, and collections issues since the beginning of the recession and foreclosure crisis.
Q: If I declare bankruptcy, will I lose everything I own?
A: No. Most people do not lose their personal possessions through bankruptcy. There are provisions under State law called “exemptions” that protect most of your property. Unless you own property with significant value over any debt you owe on it, your personal possessions are usually protected. You may be required to surrender property that is not exempt. However, with prudent planning, you can avoid losing most property.
Q: Will I ever be able to get credit again after bankruptcy?
A: Yes. Most people qualify for credit again after filing bankruptcy. If you save and spend prudently, you should be able to repair your credit within a few years. You will might be charged a higher interest rate or be required to make a larger down payment until you re-establish your credit. You can re-establish your credit by paying your existing car payment, house payment, and other obligations on time every month. Your bankruptcy can be reported on your credit for up to 10 years.
Q: Is there a minimum amount of debt required to file for bankruptcy?
A: No. You can file bankruptcy with very little debt. There is no minimum debt requirement for filing a Chapter 7. Each person’s situation is unique. For some people, $5,000 worth of debt might prevent them from making their house payment or buying food or necessary medications. A wage garnishment, particularly in a single income household, might prevent you from meeting basic survival expenses. You peace of mind may make filing for bankruptcy worthwhile for you, even with little debt. Creditor harassment and garnishments from court judgments are two major reasons individuals file for bankruptcy protection.
Q: Will my spouse’s credit be ruined if I file for bankruptcy individually?
A: No. You can file an individual bankruptcy and not include your spouse. You can discharge your debt and your spouse will keep his or her good credit. If your spouse is not legally responsible for your debts, he or she should not be affected by your bankruptcy. Your spouse’s income will need to be included in the means test calculation of household income. Each situation is different. Discuss any joint obligations you have with your bankruptcy attorney.
Q: Can the bankruptcy court take my retirement savings?
A: No. Qualified retirement plans are exempt in bankruptcy. If your plan qualifies as an IRA, 401(k), or similar pension plan, it will be protected from creditors. Many people make the mistake of borrowing against their retirement accounts to make house payments and avoid foreclosure. They may end up owing significant income taxes, lose their home, and be left without a retirement cushion. Because of this, it is generally not advisable to borrow against retirement accounts to pay unsecured creditors.
Q: Can I file for Chapter 7 bankruptcy if I have filed before?
A: Chapter 7 cannot be filed unless the debtor was discharged from the previous Chapter 7 or bankruptcy more than eight years ago. A debtor cannot file a Chapter 13 unless: (1) the debtor received a discharge under Chapter 7, 11 or 12 more than four years ago; or (2) the debtor received a discharge under Chapter 13 more than two years ago.
Q: Will everyone know that I’ve filed bankruptcy?
A: Your bankruptcy petition is a public record. However, someone would have to be looking for the record to find it. Many people think that the local newspaper prints bankruptcy filings. That is usually not the case.
Q: Will my taxes be discharged?
A: Tax debts are generally subject to discharge only if you file personal bankruptcy more than three years after you file a timely tax return. If your return is filed late, the taxes are generally discharged only if you file bankruptcy more than two years after filing a truthful tax return.
Q: Can they still take my house if I file for bankruptcy?
A: When you file Bankruptcy, you receive an “automatic stay” on court actions such as foreclosures and sheriff’s sales. A creditor can still go to court and ask the for “relief from stay,” If the motion is granted, the creditor can proceed to foreclose.
Q: Can my social security, disability or other public benefits be garnished or taken in bankruptcy?
A: Most public benefits are exempt under Oregon law, including old age assistance, aid to the disabled, veteran’s benefits, unemployment compensation, vocational rehabilitation, public assistance, and workers’ compensation.
Q: What is a Chapter 7 Bankruptcy?
A Chapter 7 “fresh start” bankruptcy, sometimes called “liquidation,” allows you to discharge, or be relieved of liability for, most of the debts you owe. You do not have to make any further payments, and your creditors cannot attempt to collect those debts after the date you file. Some debts cannot be discharged, such as criminal fines and alimony or child support. Other debts, such as taxes, student loans, money obtained by fraud, and luxury goods or cash advances more than $500 within 90 days of filing, may not be dischargeable. You can file a Chapter 7 bankruptcy only once every eight years. Bankruptcy should be considered as a last resort, as it will remain on your credit record for 10 years.
You can protect, or exempt, certain property. If all of your property is exempt, you will keep your property after the bankruptcy. Property which is exempt includes equity in a car up to $3000, household furnishings, clothes, musical instruments, a portion of your wages, most government benefits, retirement and IRA accounts, and some equity in your home.
Q: What is the process for Chapter 7?
You must first complete a credit counseling course, which can be completed in person, on the internet, or by telephone. You can then prepare the bankruptcy petition, which includes descriptions of your property, the exemptions you claim, the names and addresses of your creditors and the amount you owe, your current income and expenses, and a statement of your financial affairs. You must also prepare a statement of your intentions for property which is used as collateral to secure consumer debts (such as a car or any property financed on credit by installment payments). You must either reaffirm this debt or surrender the property. If you choose to reaffirm, you will be liable for this debt despite the bankruptcy. You must disclose all of the creditors that you know about, including friends and relatives. It is a good idea to order a copy of your credit report to ensure all creditors are listed. You can get a free copy of your credit report once each 12 months at www.annualcreditreport.com. You must also completely disclose all of your assets.
Q: What is a Chapter 13 Bankruptcy?
You may file a Chapter 13 petition if you have debts within a certain dollar range and have regular income, and you want to pay-off some or all of your debts. Your unsecured debts must be less than $336,900 and your secured debts must be less than $1,010,650. A secured debt is one that a creditor has a mortgage or security interest in, such as a house mortgage or automobile lien.
Chapter 13 requires that you propose a plan to the bankruptcy court for paying off your debts within three to five years. Chapter 13 allows you to discharge more types of debts than in Chapter 7, but the judge must approve the plan you propose. You will be required to make your first payment to the trustee within 30 days of the date you filed your plan. You will give a portion of your income to a trustee who will distribute that money among your creditors on a pro-rata basis. You will have to make the payments each month for a specified time period. You generally will not lose any of your property in a Chapter 13 case, and the court will restrain your creditors from garnishing your wages or taking other action against you and your property. You cannot file a Chapter 13 if you are a corporation or partnership.
Q: Do I need a bankruptcy attorney?
Completing all the required documents can be difficult. If your petition is not properly completed or if required information is not provided, your case may be dismissed, and this may affect your rights if you file for bankruptcy again. If the debts you hoped to have discharged are not discharged, you will not be permitted to seek a discharge again for eight years.
Only an attorney can give you appropriate legal advice concerning your exemptions. Making some of your property exempt to prevent it from being taken by the bankruptcy trustee will only happen if you take appropriate steps to arrange your affairs before you file bankruptcy. Appropriate planning before filing your petition can potentially save you hundreds or thousands of dollars.
Q: Will my spouse’s credit be ruined if I file for bankruptcy individually?
No. You can file an individual bankruptcy and not include your spouse. You can discharge your debt and your spouse will keep his or her good credit. If your spouse is not legally responsible for your debts, he or she should not be affected by your bankruptcy. Your spouse’s income will need to be included in the means test calculation of household income. Each situation is different. Discuss any joint obligations you have with your bankruptcy attorney.
Q: Isn’t it immoral to file for bankruptcy to escape payment of debts?
Many major religions include forgiveness of debt in their moral principles. Everyone is entitled to a fresh start. The Bible says: “At the end of every seven-year period you shall have a relaxation of debts . . .. Every creditor shall relax his claim on what he has loaned his neighbor . . ..” Deuteronomy 15:1-2. (Congress has rewritten the Bible to provide that Chapter 7 debt relief is available every eight years).
If you feel you can benefit from a bankruptcy attorney and would like to engage our services, please fill out our bankruptcy intake form (PDF form).
- Frequently Asked Bankruptcy Questions (a printable PDF document)
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- Bankruptcy education resources (a printable PDF document)
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