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Frequently Asked Questions
WHAT IS CHAPTER 7 BANKRUPTCY?
Bankruptcy is a procedure brought in federal court. About 6 months after your case is filed, the bankruptcy court in the area where you reside will issue an Order declaring all your unsecured debts discharged. That means your unsecured creditors which you had before you filed bankruptcy will then forever be barred from contacting you ever again to collect on a debt.
WHAT DOES "DISCHARGED" MEAN?
One way to look at it is that it means the debt is "forgiven." The creditor
can no longer collect on it, and you no longer have a legal obligation to pay
it. The creditor, however, is not reimbursed the owed monies by the government. Instead, the creditor may consider the lost debt as an expense on its income tax forms, and thereby reduce its tax liability to the federal and state government.
WHAT DEBTS WILL BE "DISCHARGED" IN MY BANKRUPTCY
(and, What is the difference between UNSECURED debt and SECURED debt)?
Bankruptcy will discharge all unsecured debt, which includes: Medical bills, credit cards (Visa, Mastercard, Discover, Sears, Providian, Capital One, Chase, etc.), all department store charge accounts, account for legal services owed to attorneys, personal loans to bank, credit unions, friends, relatives and finance companies, supply charges for small businesses, past utility bills, collection accounts for retail items, automobile repossession accounts, home repossession accounts, and similar debts. "Unsecured" debt means debt that is not secured by a debt. For example, a home loan, or vehicle loan, is NOT unsecured debt, because the debt IS secured by an asset. Consider: If you don't pay your Bon Ton charge, Bon Ton is NOT going to take the clothes back which were purchased with their charge card, so that kind of debt is called unsecured. On the other hand, if you don't make the mortgage pmt, or the vehicle loan pmt, then the lender is empowered to seize the asset (home or vehicle) which "secures" the loan. Home loans and vehicle loans are therefore called secured debts.
WHAT DEBTS WILL NOT BE DISCHARGED IN BANKRUPTCY?
Certain income tax debts, debts due to drunk driving, debts incurred through fraud, child support obligations, criminal restitution, criminal fines & penalties.
WILL I BE ABLE TO KEEP ALL MY PERSONAL PROPERTY?
YES, in most cases. In 99% of all Chapter 7 bankruptcy cases, bankruptcy applicants keep everythingthey own, including furniture, jewelry, vehicles, appliances, clothing, bank accounts, and retirement accounts.
WILL I BE ABLE TO KEEP MY HOME AND VEHICLES?
YES, in most cases. I will be able to answer this question more definitively on the phone when you first call or at our first meeting. However, if the home or vehicle is secured by a loan, you will need to be current and stay current on these loans, if we were to file a Chapter 7 bankruptcy. This means, you should catch up on your payments before we file your bankruptcy (unless you are filing chapter 13 for the purpose of catching up on several arrears of house mortgage payments.)
Should I continue to make payments on my house and/or auto loan during the bankruptcy, even if i want to surrender the vehicle or home?
Generally, NO. We’ll discuss more of this during our meeting. But generally, if you're sure you qualify for, and you're sure going to file bankruptcy, and you're sure you don't want to keep a vehicle or home, then it makes little sense to keep paying on these secured loans (vehicle or home loan).
IS IT OK TO TALK TO CREDITORS?
Once you have met with me, and if it is decided you are going to file bankruptcy, then I recommend you no longer talk to creditors, until your case is filed. If they call, I suggest you hang up.
I suggest: If they send you threatening letters, throw them away. If they leave threatening messages on your phone machine, ignore them. If they come to your door, tell them they're trespassing and that if they don't leave, you'll call the police. Once your bankruptcy is filed, about 3 to 12 weeks later, the court will send an order requiring all creditors to cease all contact with you. Most if not all calls will then stop. For those that don’t, I recommend you then talk to such creditors (if they call) and that you send them a copy of the bankruptcy notice which you’ll receive after your case is filed.
If they call you at work, I suggest you tell them your employer has advised you that you cannot accept calls from creditors at work, and if they continue to call you at work, that you will notify the state Attorney General's office (in Scranton) that the creditor has violated the Fair Debt Collection Practices Act. Get their name and address and offer to send them a copy of the bankruptcy notice. Then hang up. Please do NOT advise creditors to call me. I enjoy talking with them as much as you.
WILL IT BE IN THE NEWSPAPER?
No. At least not that I'm aware of, re Scranton, Wilkes-Barre and Bloomsburg newspapers.
IF I’M A COSIGNER WITH ANOTHER PERSON ON A DEBT, WILL THEY STILL OWE THE MONEY EVEN THOUGH I’VE LISTED IT ON MY BANKRUPTCY?
Yes, but your liability will be erased. They, your consigner, might therefore be billed by the creditor. The creditor may then sue your co-signor, unless the payments are made. You may still make the payments on the loan, if you want to, for the benefit of your co-signor, even after you’ve filed bankruptcy on it, but speak to me first before you do.
MUST I LIST ALL DEBTS?
Generally yes, except for monthly utilities, monthly rent, monthly chiropractor and/or doctor visits, and monthly insurance premiums. In your bankruptcy petition, I will list all your assets, your debts, and your monthly income & expenses. This is required by the court. I gain this information by the interview which I conduct with you in my office; it is recommended but not necessary that you have with you at the interview a recent pay stub, and either a credit report or a recent bill for each of your creditors and/or collection companies. Copies of any monetary judgments against you is also helpful.
WILL THERE BE A HEARING?
Yes. One short hearing. It is an informal 3 or 4 minute hearing with a Bankruptcy Trustee, whos is an attorney who helps the court administrate cases. The questions are easy, and I am right by your side. I know all the Trustees and they are all polite gentlemen. The only other parties in attendance will be other debtors and their attorneys.
HOW LONG DOES BANKRUPTCY LAST?
The whole process, once your case is filed, lasts 6 months; however, during that time you only do three things. One is to see me, one or two times; two, is to provide me some paperwork, such as pay stubs and tax returns; and three, is to attend the 3-minute meeting with the bankruptcy trustee.
WHAT HAPPENS IF I INCURRED MANY OR LARGE CASH ADVANCES JUST PRIOR TO SEEING MY BANKRUPTCY ATTORNEY, E.G., BORROWING MORE THAN $750 IN CASH ADVANCES WITHIN THE 3 MONTHS PRIOR TO SEEING THE ATTORNEY?
It is possible you may not be able to discharge (get rid of in bankruptcy) those particular debts that you incurred as cash advances more than $750, in which case, you would still owe them after bankruptcy; this only happens if the creditor files an objection during your bankruptcy, or you borrowed the money within 60 days of the time we file. We will talk about this more during our meeting. THE IMPORTANT THING IS THAT IF YOU ARE CONSIDERING BANKRUPTCY, STOP USING CREDIT CARDS OR BORROWING MONEY NOW. This is because the court consider it “fraud” to borrow money when you know you can’t pay it back or you know you’re going to file bankruptcy.
MAY I START OR CONTINUE TO HAVE BANK ACCOUNTS OR BUY CD'S OR STOCKS OR GET INCOME TAX REFUNDS OR BUY A CAR DURING MY BANKRUPTCY?
Yes.
WHAT IS THE NORMAL PROGRESSION OF HOW MY BANKRUPTCY WILL WORK THROUGH YOUR OFFICES?
- First you will meet with me. If, after going over your finances and your situation, we decide bankruptcy is a rational course of action to follow, and you decide you want to file for bankruptcy protection, then, after I collect some detailed information from you, by talking to you and interviewing you (my office does not require clients to fill out lengthy forms), you will be done with the first interview.
- Second you will arrange to go through a required 90 minute consumer credit counseling session. You may receive this on the telephone, in person at a local Consumer Credit Counseling office, or do it through the internet.
- Third, you will meet with me again to sign some final forms and finish up any remaining office tasks.
Then:
- Within 3 to 10 weeks of paying in full - You will receive in the mail a bankruptcy notice from the court, announcing to you and your creditors the filing of your case and when your 3 minute bankruptcy meeting will be. The Notice also orders the creditors to stop contacting you. For any creditors that continue to contact you after you receive the Notice, merely send that particular creditor a copy of the Notice. Always keep a copy of the meeting Notice for your permanent files.
- Within 4 weeks of the time you receive your Notice - Your bankruptcy meeting will be held. Creditors have within 60 days after the meeting to object to the discharge of their particular debt by filing papers with the court. (See #9 above.) They rarely object (four times in last 11 years), and I'll have usually notified you ahead of time if an objection is possible.
- 3 Months after you have attended the 3 minute bankruptcy meeting - You will receive in the mail your final discharge paper from the court, entitled "Discharge." Keep it for your records, as it is your proof that your pre-bankruptcy debts were discharged, in other words, eliminated, by a federal bankruptcy court. After you receive your "Discharge," should any pre-filing creditor attempt to collect a debt which you incurred prior to filing bankruptcy, do not under any circumstances pay it.
ARE THERE TAX RAMIFICATIONS TO MY FILING BANKRUPTCY?
Generally, no. Filing Chapter 7 bankruptcy is generally not a "tax event." A person does not incur less or more income taxes by filing bankruptcy. It has no effect.
IF A CREDITOR DOES NOT SHOW UP TO THE BANKRUPTCY MEETING, DOES THAT MEAN THAT THE DEBT WAS NOT OBJECTED TO BY THE CREDITOR?
No. Creditors do not have to show up to the bankruptcy meeting and rarely do. Creditors have up till 60 days from the date of the meeting to object. Again, it is as rare as snow in May that a creditor objects to a debt, and it is usually something which you and I have talked about prior.
HOW WILL BANKRUPTCY AFFECT MY CREDIT RATING AND ABILITY TO GET NEW CAR OR HOME LOANS?
You may find it difficult to qualify for credit cards again, but that is not a bad thing. :) However, you will probably be receiving credit card solicitations in the mail again right after bankruptcy. You should throw such mailings away, and if possible, keep only one active credit card, ever, for the rest of your life, which card you should apply for after your bankruptcy. You should be able to qualify for a "secured" credit card, e.g., through Capital One. You give them money to hold for deposit, and they give you a VISA or Mastercard, regardless of bankruptcy.
As far as qualifying for home and car loans, before even checking your credit report, the creditor will first determine if your income is high enough (and debts low enough - they will be zero after bankruptcy) to support the applied-for debt payment. If your income is high enough (and debts low enough), the creditor will next check your credit report, to determine what interest rate you will be charged. Within two years after your bankruptcy, you will find it difficult to get the best interest rate for car or home loans. But after two years of steady income and no bad credit, you should be able to refinance and get the benefit of lower interest rates on car or home loans. Within 6 months after your bankruptcy is over, you should obtain a copy of your credit report to verify that it reflects you filed bankruptcy on your pre-bankruptcy debts. If it does not accurately reflect that, you should file with the credit bureau an update/correction form that they automatically supply you with when you order your credit report. TRW/Experian may be reached at (888) 397 3742 and their address is: PO Box 104, Allen, TX 75013-2104. You may also get one free credit report annual through http://www.annualcreditreport.com . Finally, if your bankruptcy should mistakenly show up on a spouse's, brother's, sister's, father's, or mother's credit report, even though they didn't file bankruptcy, that person should also file an update form to the credit bureau in order to correct the error. This happens about once in every 500 cases, from my experience.
WHAT HAPPENS IF I AM SUED BY A CREDITOR (NOT THE STATE OF PENNSYLVANIA OR THE FEDERAL GOVERNMENT) IN DISTRICT JUSTICE COURT, OR THE COUNTY COURT OF COMMON PLEAS?
First, do not panic. You do NOT have to go to the hearing. If you don’t attend, it is NOT against the law, and you will NOT be arrested or summoned to jail. YOU CANNOT GO TO JAIL IN THE U.S.A. FOR FAILURE TO PAY A CONSUMER DEBT. You may go to the hearing of course, if you wish to challenge the creditor’s allegations. Do provide me this lawsuit paperwork, please, when we meet, and if we've already met, please mail it to me, or drop it off at the office. so that I may take care of it in your bankruptcy.
WHAT IF I CHANGE MY ADDRESS DURING THE BANKRUPTCY?
You may move during your bankruptcy, even out of state. However, please, so that you receive all bankruptcy paperwork from me and the bankruptcy court, file a forwarding order with the post office.
WHAT SHOULD I DO IF I AM SURRENDERING MY HOME AS PART OF THE BANKRUPTCY?
You should now stop making all mortgage payments and real estate tax payments, and make preparations to move within one to three months, depending on whether the court has started foreclosure proceedings. You should however, if possible, retain liability insurance only, in case persons injure themselves on your property prior to any sheriff sale. Since there ultimately will be a sheriff sale, either during bankruptcy or after, you should prepare to vacate the premises prior to the sheriff sale. The sheriff's office in the county where the home is can advise you when upcoming sheriff sales are. Finally, be prepared for an avalanche of paperwork from the foreclosing law firm which represents the creditor. It may even be served on you by a law enforcement office. Do not panic, and you do not need file any answers to any of these foreclosure papers, or attend any foreclosure hearings. Eventually, after the sheriff's sale, the paperwork being sent to you will cease. Likewise, your bankruptcy will have discharged any remaining deficiency debt after the foreclosing bank has arranged to re-sell or re-mortgage your property to a new owner.
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