Bankruptcy FAQ's

Debtor FAQ’s

• What does “bankruptcy” mean?
• I owe more than I can pay. Should I consider filing for bankruptcy?
• What are some of the most common reasons people file for bankruptcy?
• What are the different types of bankruptcy?
• What are the main differences between Chapter 7 and Chapter 13?
• What are examples of permissible expenses in Chapter 13?
• I know I have to take a credit counseling course before I can file. How do I find one?
• Will I have to go to court?
• Will the fact that I filed bankruptcy appear on credit reports?
• How can I re-establish my credit rating after bankruptcy?
• I filed for bankruptcy years ago. May I file again?
• Are spouses required to file for bankruptcy together?
• If only one spouse files, will the other spouse be affected in any way?
• What happens to joint debt when only one spouse files a bankruptcy?
• What are examples of debts that cannot be discharged in Chapter 13 bankruptcy?
• What are some examples of debts that cannot be discharged in a Chapter 7 bankruptcy?
• Under what circumstances might a bankruptcy discharge be denied?
• Will I have to pay income taxes on the canceled debt?
• What are the North Carolina exemptions?
• Is there a way to keep my non-exempt assets?
• How do I deal with secured debts in Chapter 7?
• What about federal tax liens?
• Under what circumstances should a corporation be filed into Chapter 7?
• What are good reasons to avoid a corporate Chapter 7?
• I need my credit reports to start bankruptcy proceedings. Where do I get them?
• I don’t think bankruptcy is right for me. What are some other choices?
• I am embarrassed that I have to file for bankruptcy. Is there any way to keep this private?
• How should a debtor prepare for bankruptcy?
• Is the debtor permitted to voluntarily pay debts owed to friends or family members after a Chapter 7 is filed?
• What information do I need to file a bankruptcy?
• When would I be under bankruptcy protection?
• Will filing bankruptcy stop my wages from being garnished?
• How long does the process take?
• What if my question is not answered here?

CONSUMER BANKRUPTCY LAW CHANGES

In October 2005, the U.S. Bankruptcy Code was amended to require that most individual debtors complete a special briefing from an approved credit counseling agency before filing a bankruptcy case. In most states, the United States trustee is responsible for approving the providers that offer this special pre-bankruptcy briefing, and in the six districts located in Alabama and North Carolina, the bankruptcy administrator assigned to those districts approves them. The United States trustee and the bankruptcy administrators maintain a list of approved providers.

Here are important ways that the current Bankruptcy Code differs from the old one:

* Prospective filers must finish credit counseling from an approved course within 6 months prior to filing, and provide documentation of the counseling, as well as any resulting re-payment plans, to the bankruptcy court.

* All filers must pass a two-way “means test” to decide the extent to which they can repay their debt. A judge must consider the result of this test when determining whether a filer may pursue Chapter 7 or must file under Chapter 13.

* In addition to the current requirements, debtors will also be required to file with the bankruptcy court their federal tax returns, and a host of additional documentation regarding payments from employers and monthly income and expenses. If adequate documentation is not submitted on time, the court must dismiss the case.

* An approved financial management course must be taken by filers under either Chapter 7 or Chapter 13 prior to receiving a debt discharge.

* A filer must live in a state for at least 2 years and own the homestead for at least 40 months in order to take advantage of the state’s homestead exemption in bankruptcy. This closes a loophole that could allow an abuser to quickly move to a state allowing a high equity exemption, and to then file bankruptcy there.

* Child support and alimony debts will have highest re-payment priority.

When I file for bankruptcy, will creditors and bill collectors stop calling me all the time?

Yes. Once a creditor or bill collector becomes aware of a filing for bankruptcy, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with the docket number for your case. In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a lawsuit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy, they may be liable for court sanctions and attorney fees for this conduct.

What should I do to prepare for filing bankruptcy?

* Consult with an experienced bankruptcy attorney. An attorney from the Law Offices of Bruce F. Jobe can help you plan for the bankruptcy, decide when to file a bankruptcy petition, or even avoid filing for bankruptcy.

* If you have any credit cards, stop using them immediately.

* Do not transfer your assets to friends, family or business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge.

* Do not destroy any business or financial records.

* Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away. Your attorney should advise you on what debts should and should not be paid while you prepare to file a bankruptcy petition.