Q. Someone told me that Bankruptcy no longer exists. Is that true?

A. No. The Bankruptcy laws changed October 17, 2005. Bankruptcy is still available to individuals and businesses who are in need of relief from their creditors.

Q. What is the difference between the different types of Chapters of bankruptcy?

A. The short answer is that a Chapter 7 is the bankruptcy where you don’t have to pay anyone and Chapter 11 and Chapter 13 are the bankruptcies where you have to pay all or a portion of your Creditors.

A more detailed answer is that a Chapter 7 is a liquidation form of Bankruptcy available to individuals and businesses. A Bankruptcy trustee is assigned to your case.  He will perform certain duties.  One of the Trustee’s most important duties is to evaluate your case to see if your property (assets) are valuable enough to sell (liquidate).  The Trustee subtracts most liens, such as mortgages and automobile loans, from the value of the the individual items as part of determining the value.  The Trustee also subtracts “exemption” (which are not available to businesses) you may have in, or be able to apply to, the value of the property along with an estimate of the selling costs and expenses in making the determination.

If no “net funds” or only a small amount of “net funds” are generated by selling your property the Trustee will determine your case is a “NO ASSET” case and you will most likely be able to keep your property and, if you are an individual (or married) filer you will receive a “DISCHARGE”.  Receiving a BANKRUPTCY DISCHARGE is ordinarily the purpose of an individual bankruptcy.  The vast majority of individual bankruptcies filed are individual “NO ASSET” cases where the people who file get to keep their property.  Businesses do not get a Bankruptcy Discharge, they simply cease doing business.

A Chapter 13 Bankruptcy is a repayment form of Bankruptcy available to individuals. This form of Bankruptcy  may be the only form of bankruptcy available to individuals who have “NET ASSETS” (see the answer to this question above).  This form of bankruptcy can also be used to force mortgage creditors, automobile lenders and other creditors to take a repayment agreement.  It usually is not necessary to repay your creditors the full amount of their debt in a Chapter 13.

A Chapter 11 Bankruptcy is available for some individuals who do not qualify for Chapters 7 or 13 and it is also available for businesses who wish to keep their doors open. Chapter 11 is a very complex repayment form of bankruptcy.

Q. Do I get to keep my home and car when I file for Bankruptcy?

A. With the help of a experienced Bankruptcy attorney you may be able to keep your home and car in a Chapter 7 Bankruptcy. In a Chapter 13 Bankruptcy, you ordinarily get to keep your home and car.

Q. Will they take my tax refund?

A. A tax refund is considered an asset in Bankruptcy, however with an experienced Bankruptcy attorney you may be able to keep it.

Q. Will my employer know I filed for Bankruptcy?

A. Although Bankruptcy is of public record, generally your employer, neighbors or friends will not know unless they search for it, or unless someone (you?) tells them. However, your employer may be notified if you intend to stop a wage garnishment or for other purposes

Q. What happens with the taxes I owe?

A. Some taxes do get discharged form your Bankruptcy. You should consult with an experienced Bankruptcy attorney to find out more information.

Q. I have a loan for my computer. Do I have to return it after I file for Bankruptcy?

A. A computer, furniture and/or jewelry are considered secured items. If you took out a loan or opened a credit card to purchase these items, you will have to continue paying for them if you wish to keep them.

Q. I have a credit card with a low balance. Can I exclude it from my Bankruptcy?

A. No. When you filed for Bankruptcy all of your creditors must be included.

Q. Does Bankruptcy stay on your credit report for seven years?

A. Your Bankruptcy will show on your credit report for up to ten years.

Q. Will all of my creditors stay on my credit report after my Bankruptcy?

A. Yes, Bankruptcy does not erase your creditors from your credit report. If you receive a discharge on your bankruptcy, experienced credit report readers will know that your liability to creditors which predate the Bankruptcy are discharged.

Q. Will I be able to purchase a home after Bankruptcy?

A. Yes. Some people purchase homes immediately after a Bankruptcy. For a number of reasons it is generally best to wait one to two years. You should consult with an experienced Bankruptcy attorney for details.

Q. Will I be able to get credit cards after a Bankruptcy?

A. Yes. Many credit cards companies will solicit you after bankruptcy. We recommend you take only one card with a relatively low limit to enable you to conduct your business for which a card is necessary. In addition, you may be charged higher interest rates, so you may want to choose carefully.