Vidmer Law Office / Steve Vidmer, Attorney at Law-FAQ
·A:Bankruptcy allows individuals or businesses (debtors) who owe others (creditors) more money than they're able to pay to either work out a plan to repay the money over time or completely eliminate (discharge) most of the bills.
Q:What's the difference between secured and unsecured debt?
·A:Secured debt is a claim that's secured by some type of property, either by an agreement or involuntarily with a court judgment or taxes. Creditors can generally claim the property (and take it to pay off the debt ) in the event of bankruptcy. Unsecured debt is not tied to any type of property, and the creditor can't claim it if you file for bankruptcy. A mortgage is a secured debt on you property.
Q:Which Bankruptcy type or chapter should I file?
·Consumers typically fileChapter 13bankruptcy, where repayment is made to creditors, orChapter 7where the debts are dismissed. Each chapter of bankruptcy spells out:
oWhat bills can be eliminated
oHow long payments can be stretched out
oWhat possessions you can keep
The type depends on your circumstances and if you have assets available to repay all or part of the your debts. Bankruptcy laws can be tricky and involved, so determining if, when and which type of bankruptcy you need should be made with careful thought or the input of a bankruptcy lawyer.
Q:Can all types of debt be discharged?
·A:No. The debts that can't be discharged vary slightly between the different chapters of bankruptcy. Generally, the following cannot be discharged:
oDebts for taxes owed to local, state or federal agencies
oDebts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently
oDebts that weren't in the initial list of debts or that the debtor waived being canceled
oDebts owed to a spouse, former spouse, or child, for alimony, maintenance, or support of a spouse or child, with a separation agreement, divorce decree or other order of a court of record
oDebts owed for injury to another person or property owned by another (as in a court judgment)
oDebts for government-sponsored educational loans, unless it can be shown that repayment will cause an undue hardship
oDebts for death or personal injury caused by the debtor's drunk driving or from driving while under the influence of drugs or other substances (as in a court judgment)
oDebts incurred after a bankruptcy was filed
oAny type of legal judgment
Q:What can I keep, if anything, if I file bankruptcy?
·A:Exemptions allow an individual to "exempt", or keep, certain kinds of property. State law defines what assets are considered "exempt," but typically include:
oVehicles up to a certain amount
oEquity in a home up to a certain amount
o"Tools of the trade" or tools and equipment necessary to allow the individual to continue working
Q:Will I lose my retirement accounts or payments from social security?
·A:Generally, no. Retirement accounts that areERISA-qualifiedaren't considered property of an estate and aren't taken into consideration as assets. Social Security benefits are protected from assignment, or garnishment for debts in bankruptcy. Once paid, the benefits continue to be protected only as long as they can be identified as Social Security benefits. For example, money in a bank account where the "only" deposits into the account are direct deposits of Social Security benefits are identifiable and generally protected.
Q:Will I lose my home if I file for bankruptcy?
·A:There are many factors that impact the ability to keep your home, including:
oThe state you're in and the exemptions allowed
oThe status of your loan (current or in foreclosure)
oThe type of bankruptcy you're filing (Chapter 13 provides more protection than Chapter 7 as long as payments are current)
Q:How long does a bankruptcy stay on my record?
·A:Bankruptcies remain on credit reports anywhere from 7 up to 10 years.
Q:Can I do anything to remove a bankruptcy from my credit report?
·A:No. Although at your option, you can file an explanation with the credit reporting agencies briefly describing the events resulting in your bankruptcy. If an account is reported inaccurately, you can request the record be updated to reflect the actual situation.
Q:Can a creditor continue to contact me after I've filed for bankruptcy?
·A:During the time the debtor is working out a plan or the trustee is gathering and preparing the assets to sell, creditors are required by law to stop all collection efforts against you. As soon as the bankruptcy petition is stamped "Relief Ordered" upon filing, you're immediately protected from your creditors. This is called an automatic stay. After that time, if a creditor attempts to collect a debt, immediately notify the creditor in writing that you have filed bankruptcy, and provide them with either the case name number and filing date or a copy of the petition that shows it was filed. If the creditor still continues to collect, you may be entitled to take legal action against it.
Q:Who lets my creditors know I've filed for bankruptcy?
·The bankruptcy court notifies, by mail, all creditors advising them of:
oThe filing of the bankruptcy
oThe case number
oThe automatic stay
oThe name of the trustee assigned to the case (if filed under chapters 7 or 13)
oThe date set for the meeting of creditors
oThe deadline, if any, set for filing objections to the dismissal of debts
oWhether and where to file claims
The exact information in the notice may be slightly different depending on the chapter under which the case is filed.
Q:What's a reaffirmation agreement?
·Reaffirming a debt is voluntary and isn't required by bankruptcy codes. You may voluntarily repay any debt instead of signing a reaffirmation agreement, but there may be other reasons for wanting to reaffirm a specific debt, such as a vehicle loan or student loan.
Q:How's an inheritance treated in a bankruptcy case?
·A:How an inheritance is treated in bankruptcy depends on when you become entitled to receive it and what type of bankruptcy relief you're seeking.
Chapter 7 - if you become entitled to an inheritance within 180 days of your filing date, the inheritance will be a part of your bankruptcy estate, and can be used to pay your debts. The important date is when your right to the inheritance is fixed, which is typically on the date of a person's death. You might not receive property or money from someone's estate for many months.
Chapter 13- your inheritance can be used in determining how much you have available to pay creditors under your repayment plan, and the 180-day limit doesn't apply.
In either type of bankruptcy, you must inform the bankruptcy trustee about the inheritance. If you're thinking about filing for bankruptcy, ask a bankruptcy lawyer how an expected inheritance might factor into your plans.
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