General Bankruptcy FAQ
Q. What advantages are there to filing bankruptcy ?
A. Bankruptcy offers the most protection for the debtor than any debt relief scheme. Additionally, once debts are discharged through the bankruptcy court they’re gone forever, and the creditors have no right to ever pursue you for those debts. Perhaps one of the greatest advantages of filing for bankruptcy is the enormous financial freedom and relief that you regain through the process. Our clients get control of their life again as well as a discharge of their debts.
Q. How does Bankruptcy affect my credit score ?
A. A Bankruptcy will last on your credit report for 7-10 years. However, it does not have to affect your credit score for 7-10 years! In most cases, a person can receive financing with interests rates as if they never filed bankruptcy in as early as 12 months if that person actively works on rebuilding his or her credit score. Credit scores are affected by many factors, not just bankruptcy. The best thing a person can do to rebuild their credit score after bankruptcy is to obtain new credit cards and use them on a monthly basis as debit cards. This means you charge a purchase on your credit card only if you have the funds in your bank account to pat that entire amount off the very month you charge it. Remember this one important thing: rebuilding credit depends on how aggressively you work on it!
Q. How long will my Bankruptcy case last ?
A. In most cases, Chapter 7 Bankruptcy cases may be filed in days and finished in 2-5 months. Chapter 13 Bankruptcy cases may take several months before we get your plan approved and then three to five years for the plan to be completed.
Q. What types of debts are non-dischargeable?
A. Some federal taxes and student loans (although there exceptions to this rule in special cases where payment would create an “undue hardship,”) back alimony, back child support, criminal restitution, judgments for fraud or misrepresentation, judgments for which you caused personal injury, etc. For the exact list look at the federal laws for non-dischargeable items.
Q. Can you pick and choose which assets to put into bankruptcy?
A. No. Everything you own in your name must be listed in your bankruptcy. After that we apply the exemptions to protect those assets. In most cases, all of your personal and tangible assets will be exempted, along with your car and your house, etc.
Q. Will I have to go to court in front of a judge?
A. No, you and your attorney will meet with a trustee at a meeting called a “341 Hearing.” This is much less formal than a trial, and typically lasts anywhere from 10-20 minutes.
Q. What does the trustee do?
A. The United States Bankruptcy Trustee is not your friend! His or her job is to find assets with equity, liquidate them and distribute the money left after paying off the secured creditors to the unsecured creditors.
Q. Can I keep a non-exempt asset?
A. Yes, you may try to buy them back from the trustee. Or alternatively, when an asset’s liquidation value can’t even pay off the secured creditors, the trustee “abandons” it, or simply put; gives it back to the debtor.
Q. How can a bankruptcy stop my foreclosure or my repossession?
A. When you file bankruptcy an ” automatic stay” on litigation such as foreclosures and sheriff’s sales goes into place. It is a part of the bankruptcy code which protects debtors from creditors. In fact, creditors may get sued if they violate this stay and pay hefty fines. However, a creditor may get around the automatic stay if they go into court and ask the bankruptcy judge for a “relief from stay.” If the judge grants the stay to be lifted then they are allowed to continue with their plans to collect the debt you owe them, including but not limited to taking back your asset.
Q. When would a judge lift an automatic stay?
A. In most cases, a judge would lift the automatic stay for the following reasons:
- You default on your scheduled Chapter 13.
- You fail to file all of the documents associated with your bankruptcy on time.
- Your income does not support a reorganization plan within the court’s guidelines.
- The value of the asset is rapidly decreasing.
Q. Can I keep a credit card out of my bankruptcy?
A. NOT a good idea. Legally you can keep any debt out of your bankruptcy by not listing it. However, any debt not listed will not be discharged. While having a credit card can be a valid concern, for car rental or online purchases, etc., debtors can be better served by including all debt in their bankruptcy and getting a new credit card. Credit card companies will gladly extend new credit card offers almost the day after you file for bankruptcy! Take them up on a few of these offers and use them as debit cards (i.e. pay them off every single month).
Q. Can I change my Chapter 13 to a Chapter 7?
A. Yes. In fact, you can change a Chapter 7 into a Chapter 13 as well. Simply file a motion to convert a case after the petition is filed. If approved by the bankruptcy judge then your case becomes converted. If a Chapter 13 looks like it will fail or has failed either or both parties may desire a conversion to chapter 7. Conversely, if creditors think that money might be available to pay unsecured creditors they may make a motion for conversion to a Chapter 13.
Q. Can I keep my house and car if I file a bankruptcy?
A. Arizona and Federal Bankruptcy laws allow an individual debtor to retain one car and one piece of real estate, and a joint debtors two cars and one piece of real estate, with certain limits and exceptions. The equity in your car may not exceed $5,000.00 and the equity in your home may not exceed $150,000.00. Additionally, in order to retain your house or your car under a chapter 7 bankruptcy you must be current on your payments to the lender; whereas in a chapter 13 you may be late.
Q. Can I keep my pets?
A. Although you should report animals of any value on your schedules such as pedigree dogs or cats, horses etc., you will most likely be able to exempt them from bankruptcy and keep your pets.
Can I file alone or must my spouse and I file jointly?
A. There is no federal or Arizona law about who must file, the decision should be made based on the debt, credit and personal situations. Consulting an experienced bankruptcy attorney is strongly recommended. Here are a few quick examples:
- If all of the debt is in the name of only one spouse, then potentially only that spouse need file.
- If all debt is joint and you want a Chapter 7 discharge then both should file.
- If the goal is stopping a foreclosure with a Chapter 13, then potentially only one spouse need file.
Remember that Arizona is a community property state and that all debts incurred during the marriage by either spouse is likely community debt irrespective of whose name is on that debt. This may change some of our recommendations depending on your exposure. You should really consult an experienced bankruptcy attorney if attempting to file individually if you are married.
Q. Will my credit be ruined after bankruptcy?
A. If you are drowning in overwhelming debt, there is a fairly good chance that your credit is already suffering. Believe it or not, it is entirely possible to rebuild your credit within a few short years after filing bankruptcy. There are specific steps that can be taken that can reestablish one’s credit and their fico score after a bankruptcy discharge. All it takes is following a solid budget, living within your means and taking a few simple and effective steps to rebuild your credit score. An attorney can help explain what actions you can take to be on your way to good credit once more!
Q. Should I hire an attorney if I am starting a business?
A. Business law is a unique area of law that has its own set of rules and language. If you are interested in starting your own business or partnership, it will be absolutely vital to learn about the different types of entities out there such as limited liability companies (LLC), corporations and partnerships among others. Once you have a good understanding of your business options as well as the legal ramifications and liabilities of each, you will be in an advantageous position to start the right kind of business that suits your needs. An attorney can advise you of your legal rights and responsibilities as well as help you draw up the legal documents involved.
Q. I was named an executor of an estate, do I need an attorney?
A. Executors have a lot of responsibilities when it comes to carrying out the wishes of the deceased. They have a fiduciary duty to adhere to moral, ethical and legal standards when carrying out their duties. As an executor, it is always in your best interests to discuss your responsibilities with a qualified estate planning attorney.
Q. Can child support be changed?
A. Child support obligations are not permanent. Either party can petition for a child support modification if there has been a significant change in circumstances; however, the burden of proof is on the petitioning party to show that there has been a large enough change to permit an upwards or downwards modification. Reasons such as a sudden involuntary job loss, a health or medical condition for either parent, or a substantial increase in income all may warrant an upwards or downwards modification among other reasons.
Q. I am buying a house and I feel like the sellers are hiding something, should I hire an attorney?
A. Whenever you don’t feel comfortable with a real estate transaction, it is always a good idea to have a qualified real estate attorney go over the contract. The last thing you want to have happen is find out that there is something wrong with the property or some tax issue after the property is yours. If nothing less, an attorney can look through the contract and assure you if everything is honest and true, as well as advise you of any legal issues or concerns associated with the purchase.