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BANKRUPTCY FAQs Bankruptcy Frequently asked Questions FAQs
Q. What Is Bankruptcy? Q. Do I need an Attorney to represent me for the
filing of a Bankruptcy? Q. What types of Bankruptcy are available to me as
an individual? Q. What is the difference between a Chapter 7
Bankruptcy and a Chapter 13 Bankruptcy? In a Chapter 7 Liquidation, the debtor assembles all assets, sets aside exempt assets, and decides what to do with secured assets. If there are any non-exempt assets left, the Trustee seizes such assets, liquidates them, divides the proceeds of the sale, and distributes the proceeds, pro-rata, to the debtor's unsecured creditors, satisfying as much of the outstanding balances as possible. Any remaining debts owed are then discharged. As mentioned above, for the average consumer, most assets are found to fall into the exempt category and thus are not susceptible to seizure by the trustee. In a Chapter 13 Reorganization, the debtor generally keeps all assets that he or she wishes to while reorganizing his or her debts in a manner that reduces the principal amounts of the debt that is due, stops interest, late-payments and over-the-limit-charges on the remaining balances, and establishes a monthly payment that must be made to the Trustee to satisfy all debts through the court approved re-payment plan. Details of both types of consumer bankruptcies briefly described above should be discussed in detail with an Attorney, specifically addressing the facts and circumstances of your individual case. Q. What types of debts are dischargeable in
Bankruptcy? Q. What is the difference between a secured creditor
and an unsecured creditor? Q. What types of debts are not dischargeable? Q. Can Student Loans be Discharged in Bankruptcy? A. Generally speaking, student loans cannot be discharged in a bankruptcy, however, this an undue hardship exception. Student Loan Hardship DischargeStudent loans are no longer dischargeable in bankruptcy just because they have been in pay status for a given period of time. The only way the loan can be discharged is by proving that repayment of the loan will create an undue hardship on the debtor/borrower and his family.
This standard is generally interpreted to mean that the debtor cannot maintain a minimally adequate standard of living and repay the loan. It usually requires a showing that the conditions that make repayment a hardship are unlikely to improve substantially over time.
Courts in some circuits will permit the judge to find that the debtor can repay a portion of the loan without hardship, and to discharge the balance of the loan. The debtor's wrongful conduct may make some debts non-dischargeable in a Chapter 7 Liquidation, such as incurring credit card charges when the debtor had no intent or ability to repay, or obtaining loans using false financial information. Q. The balance on one or more of my accounts may be
different now than originally reported to my Bankruptcy Preparer or
Attorney , does that matter? Q. May I keep assets despite filing Bankruptcy?
Automobile exemption - $1,000 to about $7,000
in equity. | Personal Property exemption - $1,000 to
unlimited | IRS Approved Retirement Instruments (i.e.,
401(k); IRA, etc.) - unlimited $ amount in most states | Life Insurance Policies - unlimited $ amount
in most states | Social Security Income / Disability -
reasonable $ amount | Head of Household Wages | You may also keep secured assets, despite the fact that you are filing Bankruptcy, if you chose to re-affirm the debt that is secured by the asset. For example, if you own a home, you may keep the home provided that you continue to make your mortgage payments and arrange, to re-affirm your obligation to the mortgage lender after the Bankruptcy has been filed. Q. May I transfer / sell assets prior to filing
Bankruptcy? If you are contemplating both the filing of a Bankruptcy and the sale or transfer of assets, it is best that your first discuss whether such transactions are allowable. Otherwise, transferring assets may jeopardize your case and prevent the discharge of your debts. Q. May I keep certain credit cards out of the
Bankruptcy? Q. Should I continue to pay my debts until my
Bankruptcy case has started? If, however, you do not have a positive payment history with your unsecured creditors, then paying them will not preserve a good payment history, as it is already blemished. Q. How does my Bankruptcy case commence? Q. When does the Section 341 Meeting take place? Q. What should I bring to the Section 341 Meeting? Q. Should I have an attorney present with me at the
Section 341 Meeting? Q. Will I have to attend any other meetings? If you are filing a Chapter 13 Bankruptcy, you will not typically need to attend another meeting. Your attorney, however, will attend your Plan Confirmation Hearing for you. You will have to attend an additional meeting or hearing only if the Court determines that an additional adversary proceeding or a final evidentiary hearing is necessary to resolve unique issues in your case. But again, absent unusual circumstances this is rare. Q. When will I receive my discharge from the
Bankruptcy court? Q. Will I be able to establish new credit after
filing Bankruptcy? Click Here for Free Credit Repair Manuals Q. What is the best way to establish and rebuild
credit after filing Bankruptcy? First, continue to make timely payments on secured assets, such as your home or your car. This will demonstrate your ability to make responsible payments to your creditors. Second, apply for a secured credit card. After you have obtained the card, make purchases on the card up to the pre-set limit. After your purchases, re-deposit an amount of money equal to the amount of your purchases. After you have done this for a few months, you will have established a responsible payment pattern, and your credit card limit will likely be increased. Soon thereafter, provided you continue to show responsible use of the card, you will likely be give an usecured card. Continue to use it responsibly and you are well on your way to re-establishing your credit. Q. How long will a Bankruptcy show up on my credit
report? Q. What are the consequences of filing Bankruptcy? Q. Is there Life After Bankruptcy? WHAT IS A DISCHARGE? The filing of a chapter 7 petition is designed to result in a discharge of most of the debts you listed on your bankruptcy schedules. A discharge is a court order that says you do not have to repay your debts, but there are a number of exceptions. Debts which may not be discharged in your chapter 7 case include, for example, most taxes, child support, alimony, and student loans; court ordered fines and restitution; debts obtained through fraud or deception; and personal injury debts caused by driving while intoxicated or taking drugs. Your discharge may be denied entirely if you, for example, destroy or conceal property; destroy, conceal or falsify records; or make a false oath. Creditors cannot ask you to pay any debts which have been discharged. Once you receive a chapter 7 discharge, you may not file another chapter 7 case for a period of eight (8) years. WHAT ARE THE POTENTIAL EFFECTS OF A DISCHARGE? The fact that you filed bankruptcy may appear on your credit report for up to 10 years. Thus, filing a bankruptcy petition may affect your ability to obtain credit in the future. However, if you follow our credit restoration program, you will quickly begin receiving offers of credit and even a mortgage! It is not uncommon for our clients to obtain a mortgage within six months to two years of receiving a discharge. WHAT IS AN EXEMPTION
Bankruptcy laws explain exemption as the bankruptcy code that allows you
to "exempt" (or keep) from your creditors a large amount of value in
your personal and real property. For example, in most jurisdictions a
debtor is allowed to keep his or her car if the equity in the car does
not exceed $1,000 to $7,000. HOW CHAPTER 7 WORKS
A chapter 7 case begins with the filing of a petition with the
bankruptcy court. In addition to the petition, you are also required to
file with the court several schedules of assets and liabilities, a
schedule of current income and expenditures, a statement of financial
affairs, and a schedule of executory contracts and co-debtors. A
husband and wife may file a joint petition or individual petitions. If a husband and wife have filed a joint petition, they both must attend the creditors' meeting. ROLE OF THE BANKRUPTCY CASE TRUSTEE Upon filing of the chapter 7 petition, an impartial Bankruptcy case trustee is appointed by the United States Trustee to administer the case and liquidate the debtor's nonexempt assets. If, as is often the case, all of the debtor’s assets are exempt or subject to valid liens, there will be no distribution to creditors. Typically, most chapter 7 cases involving individual debtors are "no asset" cases. DISCHARGE As a general rule, excluding cases which are dismissed or converted, individual debtors are discharged in more than 99 percent of chapter 7 cases. In most cases, the discharge will be granted to a chapter 7 debtor relatively early in the case, that is, 60 to 90 days after the date first set for the meeting of creditors.The grounds for denying an individual debtor a discharge in a chapter 7 case are very narrow and are construed against a creditor or trustee seeking to deny the debtor a chapter 7 discharge. Among the grounds for denying a discharge to a chapter 7 debtor are that the debtor failed to explain satisfactorily any loss of assets; the debtor committed a bankruptcy crime such as perjury; the debtor failed to obey a lawful order of the bankruptcy court; or the debtor fraudulently transferred, concealed, or destroyed property that would have become property of the estate. While the information about Federal bankruptcy laws presented in this fact sheet is accurate as of the date of publication, it should not be cited or relied upon as legal authority. It should not be used as a substitute for reference to the United States Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, both of which may be reviewed at local law libraries, and any local rules or practices adopted and disseminated by each bankruptcy court.
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