Answers to Common Bankruptcy Questions
Q: How does bankruptcy handle my debts?
Bankruptcy is a congressionally mandated method of allowing a person or business that has too much debt to get relief from their creditors and get a new start. There are several types of bankruptcy protection including Chapter 7 and Chapter 13. In Chapter 7 the court will ordinarily dismiss (eliminate) all of your unsecured debts including credit cards and such things as medical bills allowing you to start fresh with no debt. Chapter 13 gives an individual or business the opportunity to pay back their debts over an extended time with no interest. To learn more you should speak to a Nashville bankruptcy attorney at Cain & Associates, PLLC.
Q: How do I find out if I qualify for Chapter 7 bankruptcy?
There is a process that determines which type of bankruptcy protection you are eligible for. It is called the means test. If your income falls below the median income for residents of Tennessee you should qualify.
Q: How does Means Testing work?
When you file for bankruptcy you must file a document called a Statement of Current Monthly Income and Means Testing Calculation. We can help you prepare these documents when you meet with your lawyer at our offices. The form includes a list of your current income and a list of all your current expenses. If your available income falls below a certain amount you will be allowed to file under Chapter 7. If your income exceeds the allowed amount you will normally still be eligible to file under Chapter 13 protection.
Q: Can a married couple file for Chapter 7?
Yes. You will both need to file the required application jointly and there will only be one fee. Both of you will also need to complete mandatory credit counseling as part of the bankruptcy process.
Q: Will I lose everything if I file for bankruptcy?
No. Generally with bankruptcy there are exemptions that are not eligible for liquidation. Your personal belongings such as your car, your house and your household goods and personal property can all be protected. In fact, your property is more at risk if you don’t file for bankruptcy because you are delinquent on your payments, the creditors can sue you, garnish your wages, garnish your bank accounts and seize your property if things get out of your control. Talk to your attorney about how these exemptions can be used to protect your valuable assets and property when filing for bankruptcy.
Q: If I file for bankruptcy will creditors stop harassing me?
Yes. By law, after a debtor files for bankruptcy, creditors are not permitted to contact you, file a lawsuit, garnish your wages, call your phone or do any such thing. You will be protected under what is called the “Automatic Stay” which puts restrictions on creditors from trying to collect debts from the very moment bankruptcy is filed. This is found in the U.S. code § 362of the bankruptcy code.
Q: Will bankruptcy discharge all of my debts?
Bankruptcy will discharge most, if not all, of your unsecured debts. There are some exceptions including overdue child support, alimony, court fines and some taxes. All debts that are not listed on your bankruptcy petition are also not eligible to be discharged. If you acquired a loan by giving a creditor false information, then you will probably be responsible for paying that off as well. If you acquired any debt from violent or malicious crimes such as driving under the influence or committing another crime, those debts are still outstanding when filing bankruptcy. Some student loans, if not all, will be forgiven if they are perceived as an unwarranted hardship on the debtor.
Q: How will my credit rating be affected?
If you are currently behind or delinquent on your bills your credit has already been seriously affected. Once your debts have been dismissed, you can then begin to rebuild your credit. While filing for bankruptcy it will remain on your credit report for 10 years, but it is possible to begin repairing your credit almost immediately. After only two years following your bankruptcy petition, you will be eligible for mortgage loans again, secure credit cards and more. The truth is, sometimes filing for bankruptcy will improve your credit score more in the long run that it would have before.
Q: Who will know that I have filed for bankruptcy?
A Chapter 7 bankruptcy is a public record but no one will know you have filed unless you are a prominent social figure and your life has high public disclosure. The only people who will find out are the creditors, the bankruptcy court, the IRS and the people who you choose to share it with. If you fail to pay creditors and they begin to garnish your wages, then your employer will be notified. Other than that, bankruptcy is not an open book and will not be announced as public knowledge, it does however stay on your credit report for 10 years after filing.
Q: Does filing for bankruptcy make me a bad person or a financial failure?
Not in the slightest. There were more than a million bankruptcy filings in the last year; you are not alone in this time of financial hardship. Many good and hardworking people stumble upon hard times and 9 times out of 10 it was because of circumstantial situations. Many people may have lost their job during the economic downturn, took a cut in pay, or are going through a divorce and after a while the bills and payments got to be too much. Bankruptcy is a very difficult decision but if you are in over your head with debt, being harassed by creditors and you see no end in sight, then bankruptcy may be just the thing to give you that fresh start you so desperately need and deserve. The credit companies don’t care about your wellbeing and your financial difficulties or the last time you were able to take a vacation. Contact a bankruptcy attorney today and find out if bankruptcy is right for you and learn about the alternatives to bankruptcy as well. At Cain & Associates, PLLC we want to help you build for a brighter future so you can experience the joys of financial freedom.
For more information and get your questions answered contact Attorney Cain at our offices today.