“We are a debt relief agency. We help people file for relief under the Bankruptcy Code.”
- What are the different types of bankruptcy? There are two main types of consumer bankruptcy – Chapters 7 and 13 (there are others that are beyond the scope of this FAQ). Chapter 7 allows for all of your debts (with some exceptions) to be discharged (made non-collectible) within about 90-120 days of filing your petition for bankruptcy. There are income limits on Chapter 7 and it is possible, though not likely, to lose some of your personal property such as clothes, jewelry, electronics and automobiles in Chapter 7. Qualified retirement accounts such as 401(k)’s and IRA’s are always safe from seizure except for funds contributed in the 120 days prior to the filing of bankruptcy. Chapter 13 requires the debtor to have a regular income; in Chapter 13 debtors repay a portion of their unsecured debt over three to five years. Personal property is not subject to seizure in Chapter 13 and debts are not discharged until the successful completion of the repayment plan.
- How much does it cost to file bankruptcy? Court fees are $335 for Chapter 7 and $310 for Chapter 13. Attorney fees are additional. Chapter 7 usually runs $1,500 and must be paid to the attorney up front. Chapter 13 is more expensive but can be paid off over time.
- Can I save my house in bankruptcy? Not in Chapter 7 unless you can make yourself current within 90 days of filing your petition. Chapter 13 provides an opportunity to make up arrearage during the term of your plan. Neither Chapter allows for changes in the terms of the loan so, if you have a bad ARM, the bad terms will still apply during and after the bankruptcy.
- I heard the new law made it impossible to file bankruptcy. Is this true? No. However, bankruptcy is a detailed process and takes a lot of hard work on your part as well as the attorney’s.
- What does bankruptcy do to your credit? A bankruptcy filing will be on your credit report for 10 years. It will usually negatively impact your credit score for 2 years. You will be ineligible for an FHA mortgage loan for 2 years after the date of your discharge. In some cases, a bankruptcy can provide for an opportunity to raise your credit score after 1 year.
- What is an automatic stay? Usually, when you file a bankruptcy petition, it serves as an order generally preventing creditors from taking any collection action against you during the automatic stay. Other court cases where you are a defendant are stayed either permanently or until the end of the bankruptcy. In order to take collection action against you, a creditor must ask the permission of the bankruptcy court. Some things are not automatically stayed, most prominently domestic support cases or orders.
- What if my employer finds out about my bankruptcy? It is illegal to fire someone solely because they filed for bankruptcy protection.
- What documents should I gather? For your initial meeting with an attorney, make sure you bring your driver’s license, social security card, pay stubs for the last seven months, profit and loss for the last seven months (if you own your own business) and tax returns (with W-2’s and 1099’s) for the last two years. If you can, you should also bring titles to any motor vehicles and recorded deeds and recorded mortgages for any real estate. You will need more documents after your first meeting with an attorney.
- Do I have to take credit counseling prior to filing bankruptcy? Yes. The counseling is good for 180 days. We recommend www.cricketdebt.com. If you do not have a home computer you can use a public library or make an appointment with us to use our office and computer.