General Bankruptcy Questions

When your bankruptcy is completed, many of your debts are “discharged.”  This means they are canceled and you are no longer legally obligated to pay them.

However, certain types of debts are NOT discharged in bankruptcy.  The following debts are among the debts that generally may not be canceled by bankruptcy:

• Alimony, maintenance, or support for a spouse or children.
• Student loans. Almost no student loans are canceled by bankruptcy.  But you can ask the court to discharge the loans if you can prove that paying them is an “undue hardship.”   Occasionally, student loans can be canceled for reasons not related to your bankruptcy when, for example, the school closed before you completed the program or if you have become disabled.  There are also many options for reducing your monthly payments on student loans, even if you can’t discharge them.
• Money borrowed by fraud or false pretenses. A creditor may try to prove in court during your bankruptcy case that you lied or defrauded them, so that your debt cannot be discharged.  A few creditors (mainly credit card companies) accuse debtors of fraud even when they have done nothing wrong.  Their goal is to scare honest families so that they agree to reaffirm the debt.   You should never agree to reaffirm a debt if you have done nothing wrong.  If the company files a fraud case and you win, the court may order the company to pay your lawyer’s fees.
• Most taxes. The vast majority of tax debts can not be discharged.  However, this can be a complicated issue.  If you have tax debts you will need to discuss them with your lawyer.
• Most criminal fines, penalties and restitution orders. This exception includes even minor fines, including traffic tickets.
• Drunk driving injury claims.

The results of your bankruptcy case will be part of your credit record for ten (10) years.  The ten years are counted from the date you filed your bankruptcy.

This does not mean you can’t get a house, a car, a loan, or a credit card for ten years.  In fact, you can probably get credit even before your bankruptcy is over!  The question is, how much interest and fees will you have to pay?  And, can you afford your monthly payments, so you don’t begin a new cycle of painful financial problems.

Debts discharged in your bankruptcy should be listed on your credit report as having a zero balance, meaning you do not own anything on the debt.  Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult to get credit.  You should check your credit report after your bankruptcy discharge and file a dispute with the credit reporting agency if this information is not correct.

Although it may be possible for some people to file a bankruptcy case without an attorney, it is not a step to be taken lightly.  The process is difficult and you may lose property or other rights if you do not know the law.  It takes patience and careful preparation.  Chapter 7 (straight bankruptcy) cases are somewhat easier.  Very few people have been able to successfully file chapter 13 (reorganization) cases on their own.

If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.  If you file under chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan.

An employer or government agency can not discriminate against you because you have filed for bankruptcy.  Government agencies and private entities involved in student loan programs also can not discriminate against you based on a bankruptcy filing.

Public utilities, such as the electric company, can not refuse or cut off service because you have filed for bankruptcy.  However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

After your case is filed, you must complete an approved course in personal finances.  This course will take approximately two hours to complete.  Many of the course providers give you a choice to take the course in-person at a designated location, over the Internet (usually by watching a video), or over the telephone.  Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust.  If you can not afford the fee, you should ask the agency to provide the course free of charge or at a reduced fee.  In a chapter 7 case, you should sign up for the course soon after your case is filed.  If you file a chapter 13 case, you should ask your attorney when you should take the course.

There is no clear answer to this question.  Unfortunately, if you are behind on your bills, your credit may already be bad.  Bankruptcy will probably not make things any worse.

The fact that you’ve filed a bankruptcy can appear on your credit record for ten years from the date your case was filed.  But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

If you decide to file bankruptcy, remember that debts discharged in your bankruptcy should be listed on your credit report as having a zero balance, meaning you do not own anything on the debt.  Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult or costly to get credit.  You should check your credit report after your bankruptcy discharge and file a dispute with credit reporting agencies if this information is not correct.

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come.  Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear at a hearing.  In a chapter 13 case, you may also have to appear at a hearing when the judge decides whether your plan should be approved.  If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

Yes, with some exceptions.   Bankruptcy will not normally wipe out:

• Money owed for child support or alimony;
• Most fines and penalties owed to government agencies;
• Most taxes and debts incurred to pay taxes which can not be discharged;
• Student loans, unless you can prove to the court that repaying them will be an “undue hardship”;
• Debts not listed on your bankruptcy petition;
• Loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
• Debts resulting from “willful and malicious” harm;
• Debts incurred by driving while intoxicated;
• Mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).