Frequently Asked Questions (FAQ)

Frequently Asked Questions

Most likely. It depends on the type of judgment entered against the Debtor and the assets that secure the
            judgment if a certified copy has been recorded. Yes, you can wipe out or reorganize most credit cards and
            medical bills.

It depends on several factors including, the type of tax owed, the date the return was filed, if the return
            was filed on time, whether a lien has been recorded, and several other factors. Typically, federal income
            taxes that are at least 3 years old and were filed on time may be subject to the bankruptcy discharge.

Typically, student loans are not dischargeable in Bankruptcy; however, in limited circumstances, student
            loans may be dischargeable. The type of loan the Debtor took out, the age of the loan, if payments were made
            on the loan, if the Debtor refinanced the loan, who the loan was disbursed to originally, financial
            hardship, and several other factors play a role in determining if a student loan is subject to a bankruptcy
            discharge.

In most instances, yes, you can file for bankruptcy protection to save your property from a foreclosure sale.

Yes.

If a Debtor wishes to keep their car, there are options that may lower the car payments or overall
            out-of-pocket expenses in a Chapter 13 bankruptcy. If it has been at least 910 days (2.5 years) since a
            vehicle loan was made before a bankruptcy is filed, the loan balance may be able to be reduced to the
            current value of the vehicle. This is called a cramdown. Cramdowns depend on several factors including the
            date the loan was taken, the terms of the original loan, the value of the vehicle, and the prime interest
            rate on the date of the bankruptcy filing. If the auto loan was taken less than 910 days prior to filing a
            Chapter 13 bankruptcy, there may be other options to lower the monthly loan payment or overall out of pocket
            expenses.

No, but bankruptcy may eliminate other debt, which may make catching up on past-due child support easier. In
            a Chapter 13 bankruptcy, child support arrearages are repaid over a five-year plan term while potentially
            repaying only a small portion of other unsecured debt.

Fed. R. Bankr. P. 1016.
        That rule states as follows: Death or incompetency of the debtor shall not abate a liquidation case under
        chapter 7 of the Code. In such event the estate shall be administered and the case concluded in the same manner,
        so far as possible, as though the death or incompetency had not occurred. If a reorganization, family farmer’s
        debt adjustment, or individual’s debt adjustment case is pending under chapter 11, chapter 12, or chapter 13,
        the case may be dismissed; or if further administration is possible and in the best interest of the parties, the
        case may proceed and be concluded in the same manner, so far as possible, as though the death or incompetency
        had not occurred.

In most cases, Debtor(s) are only required to attend one Bankruptcy hearing called a 341 Meeting of the
            Creditors. This meeting usually takes place between 30-60 days after a Bankruptcy is filed and is held by
            the Chapter 13 Trustee. Generally, no judge is present at a 341 Meeting of Creditors.

Debtors are required to
        bring their original Driver’s License and Social Security Card for the Trustee to verify the Debtor’s identity.
        In a Chapter 13 case, the first payment is also required to be brought to that meeting or submitted to the
        trustee prior to the meeting.

Chapter 13 Bankruptcy, also phrased as a reorganization, is a legal process by which a Debtor can catch up on
            past due debts, reinstate mortgage, auto, and other secured loans, and/or if they qualify, repay a portion
            of their unsecured debt without the worry of losing any assets. Chapter 13 is also often an alternative
            bankruptcy option for a Debtor who is unable to qualify for a Chapter 7 Bankruptcy. In a Chapter 13
            Bankruptcy, Debtors are required to make monthly payments to the Chapter 13 Trustee for a period of 36-60
            months. The amount of the monthly payment and number of monthly payments required depends on the Debtor’s
            specific circumstances.

Chapter 7 Bankruptcy, also phrased as a liquidation, typically wipes out most of a Debtor’s general unsecured
debts, including credit cards and medical bills, without the need to repay any of the debts. However, if a
            Debtor has any unexempt assets, those assets may be sold by the trustee to pay their Creditors. If a Debtor
            has limited assets, such as an older or fully encumbered car, it is possible they will be able to keep the
            car and still wipe out all the dischargeable debts without losing that asset. The outcome varies depending
            on each Debtor’s unique situation.

There are many variables which can affect whether a Debtor qualifies for a Chapter 7 Bankruptcy or whether a Chapter 7 Bankruptcy is the best option. Often, the Means Test under the Bankruptcy Code can be the determining factor. Typically, if the gross annual income of a Debtor is under $48,000 as a single member household and under $58,960 as a two-member household then the Debtor(s) is presumed to qualify for Chapter 7 Bankruptcy. The annual salary amounts are adjusted each year.

It depends on the agency searching the Debtor’s credit. Typically, it will appear for 7-10 years.

It depends on the agency searching the Debtor’s credit. Typically, it will appear for 7-10 years.

Bankruptcy is an excellent option for Debtors who are experiencing hardships that result in falling behind on monthly mortgage loan payment(s), homeowner’s association payments, auto loan payments and/or secured debts.

It depends on the agency searching the Debtor’s credit. Typically, it will appear for 7-10 years.

Bankruptcy law assumes a reasonable lifestyle, not the filer’s actual lifestyle, most people must live frugally under a Chapter 13 plan. Also, your disposable income is not static. The amount you’re expected to pay can change throughout the repayment period. If the court agrees, the court will deny the early payoff and likely require you to increase your payments to reflect your additional income.

Unless the Debtor has extreme mitigating circumstances and has tendered their first payment to the trustee (in a Chapter 13 case), their case will likely be dismissed if they do not attend the 341 Meeting of Creditors.

Debtors with income that is over the median income must then complete a schedule of expenses (the Means Test), most of which are based on numbers (caps) from the Census Bureau and the IRS. Additionally, current income and expenses are calculated on Income & Expense schedules. The debtor is required to repay to the allowed creditors an amount equal to the highest indication produced by the means test, the income/expense schedules, liquidation test, and various other factors that could increase the required repayment. Read more about repayment criteria here.

The 341 Meeting of the Creditors takes place before the Bankruptcy Trustee and allows the Trustee and the Debtor’s Creditors the opportunity to meet with the Debtor(s) and their attorney and ask questions about the circumstances surrounding the Bankruptcy filing. Typically, if the Debtor is truthful when completing their paperwork, provides all necessary documentation to the Court, and no extenuating circumstances exist, then Creditors will rarely come to the 341 Meeting.

In Chapter 13, there is a trustee’s fee of 10%. Debtors to pay to the trustee for a period of 36-60 months
normally. For the repayment plan, Debtors must normally adhere to the provisions of the “applicable
commitment period,” or the minimum duration of, which is determined by the debtor’s income. -> Read more about it here.

A Debtor is a person or entity who owes a person or institution money. The person or institution that a Debtor owes money to is a Creditor. When you have a car loan you are the Debtor and your auto loan lender is the creditor. If you have credit card debt, mortgage debt, personal loans, or any other type of debt, even if you are current with your payments, you are a Debtor, as are more than 80% of Americans, who has a debt owed to a Creditor(s).

Likely, Debtor’s credit card accounts will be closed by their Creditors after filing Bankruptcy.

Results vary but we recommend opening a Secured Credit Card at a local Bank or Credit Union immediately after obtaining a discharge in Bankruptcy. Use it often to pay bills and make sure that the balances are paid on time. After 3-6 months, begin applying for regular unsecured Credit Cards. Using a credit card to pay normal  living expenses and making payments on time will help to reestablish good credit.

Debtor(s) must make their first payment 30 days after the Bankruptcy is filed and continue to make monthly payments until the plan is completed.