Frequently Asked Bankruptcy Questions

What happens if I file a chapter 7 bankruptcy?

You commence a chapter 7 bankruptcy proceeding by filing a "petition" with the bankruptcy court. The person filing a Chapter 7 is referred to as the "debtor." The debtor is required to disclose to the court all his or her property and debts and turn over all nonexempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors. The debtor then receives a discharge of all dischargeable debts.

Who can file a Chapter 7 bankruptcy petition?

Almost any individual, partnership, corporation or Massachusetts business trust may file a chapter 7 bankruptcy petition if he or she resides, has a domicile, a place of business, or property in the United States, or a municipality. If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition and should check 11 U.S.C. sec. 109(g).

You can file a Chapter 7 bankruptcy petition regardless of whether or not you are employed.

If you were granted or denied a chapter 7 discharge in a prior case within the last 6 years or completed a chapter 13 plan in a prior case, you might not be entitled to receive a discharge in bankruptcy and probably are not a candidate for a chapter 7 bankruptcy proceeding. This rule does have some exceptions.

What are the most common reasons for a Chapter 7 bankruptcy?

The most common reasons for consumer bankruptcy are: unemployment; large medical expenses; seriously over-extended credit; marital problems and other large unexpected expenses.

Who can file a chapter 13 bankruptcy petition?

Individuals may file chapter 13 bankruptcy petitions if they:

(1) reside, have a domicile, a place of business, or property in the United States, or a municipality;

(2) have a source of regular income; and

(3) on the date the petition is filed owe less than $250,000 in noncontingent, liquidated, unsecured debts and less than $750,000 in noncontingent, liquidated, secured debts.

Corporations and partnerships may not file a chapter 13 bankruptcy petition.

If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition and should check 11 U.S.C. sec. 109(g).

Will the bankruptcy stop bill collectors from calling?

Yes. The automatic stay prevents bill collectors from taking any action to collect debts.

How long after filing will the creditors stop calling?

Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with the "docket number" for your case. In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a law suit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy they may be liable for court sanctions and attorney fees for this conduct.

Who notifies the creditors and bill collectors?

After the bankruptcy petition is filed, the court mails a notice to all the creditors listed in the schedules. This usually takes a couple of weeks.

Who deals with my creditors and bill collectors during the bankruptcy?

Usually, your attorney deals with all creditors.

Will my employer and landlord find out about my bankruptcy?

Bankruptcy petitions are public records. However, under normal circumstances, unless your employer or landlord is a creditor, it will not know you filed a bankruptcy petition. If your employer or landlord is a creditor it must be listed as a creditor on the schedules and receive notice of the bankruptcy proceeding. In some states, chapter 13 debtors are required to make payments through wage garnishment and their employer will learn about the bankruptcy.

Can my employer fire me for filing bankruptcy?

No. 11 U.S.C. sec. 525 prohibits government units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.

Can I go to jail if I file bankruptcy or don't pay my debts?

No. There are no debtor's prisons in the United States.

Does the spouse of a married person also have to file bankruptcy?

No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable then it might be advisable to have only one spouse file. If the spouses have joint debts, the fact that one spouse discharged the debt may show on the other spouses credit report.

Can I keep any credit cards?

Under some circumstances you may be able to keep some credit cards if the creditor agrees. There are many factors which must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt.

Will I have to fill out forms?

Filing bankruptcy means filling out forms. The attorney you hire may ask you to fill out forms to provide him or her with the information needed to file the bankruptcy petition. The attorney will use the information you provide to complete the official forms, usually using a specialized computer program.

Will I have to go to court?

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 an individual appointed by the United States Trustee to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask you questions, although in the majority of cases creditors do not ask questions at the First Meeting of Creditors.

After the initial meeting you normally do not need to return to court. However, if a creditor or the trustee files a motion or an adversary action you may have to appear in court with your attorney.

Are there alternatives to bankruptcy?

Yes. Sometimes payment plans can be negotiated with creditors. Obtaining loan extensions, compromises and workout agreements require negotiation skills and experience. These alternatives may alert your creditors to the existence of nonexempt property that the creditor could reach and can involve considerable expense. You also have the option of doing nothing. In any event you should seek professional advise in dealing with most of these alternatives.

What should I do to prepare for filing bankruptcy?

First, you should consult with an attorney. An attorney can help you plan for the bankruptcy, decide when to file a bankruptcy petition, or even avoid filing for bankruptcy. A few specific items are worth mentioning.

1. If you intend to file bankruptcy you should stop using your credit cards. If you borrow money with the specific intent of discharging the debt in bankruptcy instead of paying it back, the debt is not dischargeable. In addition, three specific circumstances are worth mentioning: (a) certain luxury purchases over $1000 within 60 days of the bankruptcy filing are presumed nondischargeable; (b) cash advances aggregating $1000 within 60 days of the bankruptcy filing are presumed nondischargeable; and, (c)debts involving materially false financial statements are nondischargeable under certain circumstances.

2. Don't transfer your assets to friends, family and business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge.

3. Don't destroy any business or financial records. You can lose your right to a bankruptcy discharge as a result.

4. Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away. Your attorney should advise you on what debts should and should not be paid while you prepare to file a bankruptcy petition.

Can I file a bankruptcy for my debts, but not include my assets?

No.

Can I file bankruptcy to delay a creditor?

Rule 9011 of the Rules of Bankruptcy Procedure requires you or your attorney to certify that your petition is not filed "for any improper purpose, such as to harass or to cause unnecessary delay.." Bankruptcy is intended as a tool for dealing with debts that can not otherwise be paid. You should not file a bankruptcy petition for the sole reason of delaying a creditor's actions.

Do I have to disclose all of my assets?

Yes. If you knowingly and fraudulently conceal an asset from the court you have committed a felony and can be fined up to $5,000, imprisoned for up to five years, or both. In addition, the court can deny you your discharge, or dismiss or convert your bankruptcy proceeding.

How can I learn more about bankruptcy?

The Internet is a useful resource for learning about bankruptcy. The Bankruptcy LawTrove includes links to a number of on-line bankruptcy law guides, including one at Cornell School of Law. In addition, most law libraries will have copies of "Norton Bankruptcy Law and Practice, 2d," a comprehensive treatise on bankruptcy law and "Chapter 13 Bankruptcy" by Keith M. Lundin.

What if my question isn't answered here?

Send your question to Warren E. Agin of Swiggart & Agin, LLC using the Feedback page and we will try to help you. Make sure you state where you live. Please keep in mind that we can not provide legal advice over the Internet or answer questions about state law (other than in Massachusetts).

You may want to contact an attorney. Most bankruptcy attorneys do provide free initial consultations and can provide you with the guidance you need to decide whether to file a bankruptcy petition.