FAQ’s of Bankruptcy

questions-1922476__340we have spent our entire professional careers helping our clients achieve a fresh financial start through bankruptcy.  Having helped thousands of clients through thousands of cases, we have encountered and addressed thousands of questions.  Me, Joel and our knowledgeable staff have tried to compile a list of the questions we most frequently hear.  We hope you find this information helpful and informative.  If you have a question and you don’t see it addressed here, please e-mail the question to me at: [email protected].  We will get back to you and maybe add it to the list.  Here we go…

Will bankruptcy take care of all my debts? 

Big important question.  The simple answer is “no”, but most debts that we encounter for the majority of our clients can be erased in one chapter of bankruptcy or another.  Most of our clients’ debts are credit cards, personal loans and medical bills.  With limited exceptions, these debts are erased (we called it “Discharged”) in bankruptcy.  Most of the time people who come to see us have gotten in over their heads with credit card debts resulting from a temporary loss of employment or other financial reversal.  Also, often medical insurance does not cover all medical expenses.  These debts are all dischargeable in bankruptcy.  Some examples of debts that are not dischargeable in bankruptcy are: student loans, child support and alimony, and income taxes incurred during the last three years.  When we meet for our free initial consultation, we go over all your debt obligations to determine if bankruptcy will address the type of debt you have.

Will I have to go to Court?

In all types of bankruptcy (Chapter 7, 13 and 11…more on that later) one visit to a courthouse is mandatory.  Rarely do you have to meet a judge (although all our Connecticut Bankruptcy judges are polite, courteous and patient) the appearance at court is to meet with a bankruptcy trustee.  The trustee is not a judge, but a private attorney appointed to oversee and administer your case.  The trustee is not there to harass or embarrass you.  They have an obligation to interview you (under oath) to determine if there are any assets for distribution to creditors.  The meeting with the trustee (called the “Meeting of Creditors” or “341 Hearing”) typically lasts 8 – 12 minutes once you are up at the table and sworn in.  Once this hearing is conducted, most often you need not return to the court.

Will I lose my house or car (or both!)?

Bankruptcy is designed so that you can keep your assets so we don’t file any bankruptcy case if there is a possibility of losing an asset that our clients want to keep (like houses and cars).

What is the difference between Chapter 7 and Chapter 13?

We have two very informative pages on our website regarding this topic, but here is a quick explanation of the two different bankruptcy proceedings that most people file.  Chapter 7 is a short process (approximately 100 days from the date it is filed) that discharges most debts, such as credit card debts, medical bills, unsecured personal loans.  A Chapter 7 most often discharges judgments that are obtained in court for debt that is owed.  As stated above, certain debts are non – dischargeable in Chapter 7, but the vast majority of debts will be eliminated in Chapter 7.

Chapter 13 is a longer process (up to five years) and requires payments to creditors through a Chapter 13 Trustee.  There are many reasons why people file Chapter 13 cases, but the most common are: (1) a mortgage foreclosure; (2) non – dischargeable debts like income taxes incurred in the last three years; or (3) have income that is well above the state median.  In a Chapter 13, you can still discharge all your unsecured debt while you pay off a mortgage arrearage or income taxes.  Every Chapter 13 case is different.

What is a Chapter 11 Proceeding?

A Chapter 11 is a type of bankruptcy typically used for business reorganizations.  But some individuals must file a Chapter 11 if they need bankruptcy protection and have too much debt to be in a Chapter 13 (and can’t file a Chapter 7 because they would risk losing assets).  The debt limit for Chapter 13 is approximately $1,000,000.00 of secured debt and $400,000.00 of unsecured debt.  Like Chapter 13, in a Chapter 11 a debtor files a Plan of Reorganization that proposes to pay creditors through future income or sale of assets or both.  Unlike a Chapter 13, however, creditors in a Chapter 11 must vote and approve a debtor’s plan if it is to be approved by the Bankruptcy Court.

Can creditors continue to contact me while I am in bankruptcy?

No!  With very few exceptions, once a bankruptcy case is filed, creditors must stop all collection efforts including telephone calls, collection letters, court cases and foreclosures. These activities must stop once a bankruptcy case is filed.

 How long will bankruptcy be on my credit report?

Although bankruptcy cases are on your credit report for up to ten years, it won’t impact your ability to obtain credit for nearly that long.  Typically after 2 – 3 years, some credit is available to those who have filed a bankruptcy case.

 Will my bankruptcy case be published in the newspaper or online?

No.  Bankruptcy proceedings for individuals are public, but not published.  Anyone who wants to look at documents that are filed in a bankruptcy case can go to the Bankruptcy Clerk’s office and review them.  Unless sealed by the bankruptcy judge (extremely rare) all documents are available for viewing by the public.  One exception is the debtor’s social security number.  That information is not available to the public.  The fact that someone filed a bankruptcy case is not published in newspaper or online through a Google search.