When it comes to bankruptcy, you may have a lot of questions and it is important that you get your questions answered. You want to make sure that you have a basic understanding of the bankruptcy process and complete awareness of the consequences it will have on your financial life. It makes sense to seek advice from a qualified professional (like a debt counselor or bankruptcy attorney) who will not only have in-depth and up-to-date knowledge of the process but who will also be able to address concerns that are specific to your financial circumstances.
Most individual debtors file for a Chapter 7 or Chapter 13 bankruptcy and among the questions they ask are:
1) How long will Bankruptcy affect my credit report?
A Chapter 7 bankruptcy or a bankruptcy in which your debts were discharged stays on your credit report for 10 years. But, a Chapter 13 bankruptcy, in which a part of your debt is repaid through a repayment plan, remains for a 7-year period after filing. Dismissed Chapter 7 and Chapter 13 bankruptcies also remain on file for 10 and 7 years each. Many people worry about the long-term effects of bankruptcy, but reports show that it can be quite simple to rebuild your credit.
2) Will bankruptcy wipe out all my debt?
Essentially, bankruptcy takes away your obligation to pay unsecured debts and prevents creditors from collecting on discharged debts. In reality, the debt does remain and anyone who owes the debt with you but hasn’t filed for bankruptcy is still liable.
Most of your assets will be liquidated in a Chapter 7 bankruptcy to cover some of what you owe. While under Chapter 13, you must file a plan with the bankruptcy court for full or partial repayment of some of your debts.
Bankruptcy cannot discharge of secured debts. If a creditor has a lien on your property they can foreclose on your house to meet the debt. Bankruptcy also cannot get rid of other debts like student loans, particular tax debts, child support and alimony.
3) What happens if I begin to fall behind on my payments in a Chapter 13 bankruptcy case?
In the event of unforeseen financial trouble, you should get in touch with your bankruptcy attorney right away. Most people use a bankruptcy attorney but if you did not, it is possible to apply to the court for an amendment to your Chapter 13 plan.
A Chapter 13 trustee will apply to dismiss your case, once you are two or three payments overdue. The Chapter 13 trustee collects your monthly payments and pays them to your creditors. On the hearing date, the judge will ask you about your circumstances. They will also want to know whether you are able to bring your payments up-to-date at the time of the hearing.
Adjusting your spending to accommodate for your payment plan can be a learning curve for many people. To avoid falling behind your Chapter 13 payments, you should consider having trustee payments deducted from your pay through a payroll control order.
4) Can I face eviction from my apartment if I file for bankruptcy?
If you are behind on your rent, the automatic stay you get when you apply for bankruptcy could stop an eviction. This is only if your landlord hasn’t already obtained an eviction order from the court. The landlord can apply to have the stay lifted though and if successful can proceed with an eviction. You have to keep your rent payments current once you have filed a bankruptcy petition. An “automatic stay” does not cover debts incurred after filing.
If you do not owe money on your rent when you file for bankruptcy, you should just continue to make payments to your landlord, when due. You do not need to notify them of your bankruptcy. Although your rent deposit will be listed among your assets in your bankruptcy petition, it is likely to be exempt from use, to pay your creditors.
5) Can I get fired from my job if I file for bankruptcy?
The Bankruptcy code prevents your employer from firing you for filing for bankruptcy or being unable to pay a discharged debt. But an employer can use credit reports to inform their hiring decisions or as part of the evaluation process for promotion and retention.
They do have to let you know that they are using this information though and it is against the law to deny you a job because you filed for bankruptcy. You should speak to a lawyer in the event that your employer uses your bankruptcy against you. You have little protection though if they can cite other reasons for their decision to end your employment or deny you a promotion.
6) When do I need to take the bankruptcy course?
The period for completing a debtor education or bankruptcy course varies depending on the type of bankruptcy case you filed. Under Chapter 7, you must take the course after you have filed the bankruptcy petition and within 60 days of the first meeting between you, your creditors and the bankruptcy trustee. In a Chapter 13 case, you must also take the course after you have filed but you have until your final trustee payment or the filing of the motion for discharge, to complete the course. You must engage the services of an approved bankruptcy course provider and supply a certificate of completion to the court.