Frequently Asked Questions About Bankruptcy
Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows individuals to discharge most unsecured debts, such as credit card bills and medical expenses, without repaying them. In exchange, non-exempt assets may be sold to pay creditors, although most individuals keep their assets.
Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” is designed for individuals with a regular income who want to repay their debts over three to five years. It allows you to keep your assets while creating a manageable repayment plan for your creditors.
Almost never. Most individuals who qualify for Chapter 7 bankruptcy are able to keep all of their household items and essential assets. Certain exemptions protect your property, ensuring you retain necessary items for daily living.
In many cases, yes. If your car is not worth more than the allowed exemption amount, you can keep it. For Chapter 13 filers, you can include your car payments in your repayment plan, allowing you to retain ownership while catching up on missed payments.
No. Federal law prohibits discrimination against employees for filing bankruptcy. Your employer cannot terminate your employment or take adverse action against you solely based on your bankruptcy filing.
You can file for Chapter 7 bankruptcy once every eight years. For Chapter 13, you can file every two years. If you previously filed for Chapter 7, you must wait four years before you can file for Chapter 13.
Certain debts cannot be eliminated through bankruptcy, including student loans, child support, alimony, and some tax debts. Understanding which debts remain after bankruptcy is crucial for planning your financial future.
Yes. Many individuals experience an improvement in their credit scores shortly after completing the bankruptcy process. You may also be eligible for new credit, such as car loans, soon after filing, although terms may vary based on your financial situation.
Bankruptcy will impact your credit score negatively initially; however, many people find that their credit scores improve over time as they pay off debts and rebuild their credit history responsibly.
The bankruptcy process typically involves:
- Consultation: Discuss your financial situation with a bankruptcy attorney.
- Filing: Submit your bankruptcy petition and required documents to the court.
- Automatic Stay: Protection from creditor actions begins.
- 341 Meeting: Attend a meeting with creditors to discuss your financial status.
- Discharge or Repayment Plan: Complete the process with a discharge of debts (Chapter 7) or adherence to a repayment plan (Chapter 13).
