Bankruptcy FAQs – Before Filing | Eastern North Carolina Bankruptcy Attorneys
Most clients are not familiar with the federal bankruptcy process, and unfortunately, there is an enormous amount of information to take into consideration. Bankruptcy clients always seem to think of “one more question” after they leave the office. The more information our office provides, the more comfortable and helpful our clients are with the debt relief process. This is a general list of questions that may help, but please keep a list of your personal concerns for your bankruptcy attorney to discuss with you during your initial meeting.
What is bankruptcy?
Bankruptcy is a legal proceeding that assists people and businesses that cannot pay their debts. There are several different types of bankruptcies. Each type is different and all are tremendously helpful. Bankruptcy is a federal proceeding handled in federal court, not in your local state court. Filing a bankruptcy petition immediately stops all creditors from contacting you and attempting to collect the debt until the court evaluates your case.
What is the most important rule in bankruptcy?
Tell your bankruptcy attorney everything. Do not hide anything.
What can bankruptcy do for me?
- Discharge (eliminate your obligation to pay) some or all of your debts
- Stop foreclosure on your house, allow you to catch up on payments over time and keep your home without making “double payments”. (It will NOT eliminate a mortgage and let you keep your house “for free”).
- Stop repossession of your vehicle, allow you to catch up payments and possibly reduce your payments. If your car was recently repossessed, bankruptcy can force the creditor to return it to you.
- Stop wage garnishments, harassing phone calls and other collection actions.
- Repay (without penalty) or eliminate tax debts.
What will bankruptcy NOT do for me?
- Discharge secured debts on items you wish to keep such as mortgages and car loans.
- Discharge child support, alimony, student loans, some tax debts, court fines, costs and restitution.
- Discharge a co-signor’s responsibility to pay a debt.
- Discharge debts incurred after you file your petition.
What are the different types of Bankruptcy Cases?
- Chapter 7: This is frequently called a “fresh start” or “liquidation” bankruptcy.
- Chapter 13: This is frequently called a “wage earner “ or “reorganization” bankruptcy.
- Chapter 12: This only applies to family farmers or fishermen.
- Chapter 11: This is a reorganization bankruptcy. Businesses and individuals with large amounts of debt file this.
What is a discharge?
This is a court order releasing the debtor from paying certain debts. It prohibits creditors from attempting to collect these debts in the future.
What debts are not covered by my discharge?
- Child support & alimony
- Fines, penalties & some taxes owed to the court or government
- Student loans
- Unlisted or after incurred debts
- Loans obtained by giving false information
- DWI related debts
- Debt related to “willful and malicious” acts
- Mortgages and liens on real estate you keep
What do I have to do before I file?
(1) Credit Counseling with a court approved agency. This is typically an online program that involves a series of questions and answers. Details regarding this will be given at the consultation.
(2) Gather the documents required for your attorney and fill out the questionnaire(link). Do not worry if you cannot locate all documents before the first meeting with your bankruptcy attorney.
What property can I keep?
Exempt property can be kept “for free.” This is property that cannot be claimed by the creditors. NC has a list of exemptions for their residents, as does each state. There is also a list of federal exemptions that apply in some cases. NC has exemptions for real estate, cars, income from employment, IRAs, life insurance and many others. An in depth analysis of each individual’s circumstances is necessary. Exemptions are the reason why most people get to keep their house, their car, their retirement and other items when they file for bankruptcy.
Can I keep my car?
In most cases “yes.” Debtors have a lot of choices regarding a vehicle. If payments are current, you may decide to continue paying under the current contract. If you are behind, payments may be “caught up” in a chapter 13. If you are “underwater” on a car you have had for more than 910 days, the balance due may be reduced to the current value of the car. You may also choose to give up a car if you owe too much or no longer need or want the vehicle.
Can I keep my house?
In most cases “yes.” Debtors have a lot of options regarding homes. If you keep the home, you must pay the first mortgage owed as well as other liens on the property. Past due payments can be caught up in a Chapter 13. Depending on the value of the home, the second mortgage or equity line may be stripped off. Judgments may also be removed.
What can I own after bankruptcy?
All property that was exempt will be owned by you after bankruptcy.
Do I have to go to court?
All debtors must attend a “341 Meeting of Creditors.” This is held at various locations (not at the county courthouse). In some locations it is in a meeting room much like a fellowship hall. In some locations it is in a courtroom. A judge is not present. The bankruptcy trustee assigned to your case will ask several questions regarding your individual situation. His primary purpose is to insure that you have listed ALL of your property and ALL of your debts on the petition. In addition a Chapter 13 trustee discusses the proposed Chapter 13 plan amount.
What happens if I forget to list something on my petition?
Minor mistakes can be corrected. Typically people forget a car they put in their name because their child was too young or the bank account they are listed on with their child. You will be given a list to help you list all property that you have an interest in. Debts that are omitted by mistake can be added later. However there is an additional fee for amending, so it is important to list all property and debts on the original questionnaire.
What if I “forget” something on purpose?
Hiding assets from the court is a REALLY BAD idea. Bankruptcy fraud is a federal criminal offense!!! Trustees have lots of tools to help them find hidden assets. They have internet searches, disgruntled ex-spouses, angry creditors etc…. Most items can be retained if properly disclosed and planned for. Make every effort to tell your bankruptcy attorney about all your property interests in all property you have.
What if I win the lottery?
If you win the lottery, get a divorce settlement, receive a raise or bonus, receive a tax refund, inherit property, or life insurance proceeds within 180 days of filing your chapter 7 petition or any time during the course of your chapter 13 plan, the court may take it to pay your creditors. Tell your bankruptcy attorney if this happens.
What if someone cosigned for the car I am surrendering?
Your bankruptcy does not affect anyone but you and your liability for a debt. That means that Mom, Dad, Friend, Spouse etc… is still responsible for what they agreed to in the contract.
What happens to the property settlement I made with my ex-spouse?
In many cases a Chapter 13 discharges a property settlement obligation. However, these are tricky situations and should be discussed with your bankruptcy attorney.
Does my ex-wife have to know that I have filed?
In many cases “yes” the court will notify her just like other creditors. However if there are no children, no property or support agreements then “no.”
Will bankruptcy hurt my credit?
Most of the time filing bankruptcy does not make your credit worse. Usually people have already missed payments or have been involved in a judgement or foreclosure proceeding prior to filing, which has already affected their credit.
How long will bankruptcy stay on my credit?
Your filing may appear on your credit report for 7-10 years. However it is unknown whether it will “hurt” your credit. In today’s economy, credit is an ever changing process. Lots of things impact your ability to obtain credit. You should check your credit report annually for accuracy. Make sure all debts listed on your bankruptcy show a zero balance. If not, you can dispute the entry to get it corrected.
Can I lose my job because I filed bankruptcy?
It is illegal for an employer or government agency to discriminate against anyone for filing bankruptcy.
Will my bankruptcy filing get listed in the newspaper?
Typically bankruptcy filings are not listed in the newspaper. However foreclosure actions and state lawsuits against you by creditors may be published in local newspapers.
Can I file bankruptcy if I filed before?
Most people can file again. Sometimes there are extra things that must be done.
Does my spouse have to file too?
You can file together or as an individual. In some cases it is best or necessary to file both parties. In some cases it is possible to file only one spouse and protect the credit of the other spouse. This decision depends on whether the debts are in one name or both names and they type of debts.
Do I need my credit report?
Credit reports are very helpful. You are entitled to one free credit report each year. Go to www.annualcreditreport.com and request one from each agency. Be careful to use this website and not another one that may pop up. You still need to try to collect as many statements from as many creditors as you can. Credit reports may not list everything you owe.
What do I do first if I want to further explore my options?
The initial consultation is free. Call and schedule an appointment. Try to gather as many of the items on the “Required Documents” list as you can. Do not worry if you cannot get them all together before the consultation. We will talk about your individual situation and discuss your options. Following the consultation, you can think about your options and make your decisions. The more informed you are, the better the decision you will make.
Do you ever tell people bankruptcy is not right for them?
Yes. Bankruptcy does not always fit a client’s needs. There are many alternatives that may better serve a person’s needs. Some debts are better served by negotiating settlements, refinancing or in some cases the best choice may be to do nothing. All options will be explored fully during the consultation.
3110 Arendell St. Unit 0
Morehead City, NC 28557
P: (252) 240-0271
F: (252) 443-5872
Disclaimer Submission of any information to Craftlawoffice.com does not constitute an attorney-client relationship. Leslie Craft is licensed to practice law in North Carolina. Should you reside in another state, the law firm may need to associate with local counsel to assist you in accordance with the laws and regulations of your jurisdiction. Leslie Craft, Attorney at Law is a federally designated debt relief agency. She helps people and businesses file for bankruptcy.