Level One Legal Services understands that having the information you need before filing bankruptcy is important. The most common concerns of our clients are answered below. You may also find it helpful to review the materials under the "Resources" section. However, this is only general information that cannot take into account your particular situation. Your Ann Arbor bankruptcy lawyer at Level One will be able to address your specific circumstances more thoroughly at your complimentary, initial consultation.
-
Q: What is a Chapter 7 bankruptcy?
A: Chapter 7 is a provision of the Bankruptcy Code, a federal law. It allows the discharge, or dismissal, of most consumer debts, such as credit cards, medical obligations, certain judgments and garnishments, while typically allowing you to keep most ofyour personal belongings. The Code was enacted to allow a fresh start to honest, hard-working people who have experienced unexpected financial challenges. Any number of events may have occurred which have resulted in overwhelming debt from which you are finding it difficult to recover. Job loss, a medical crisis or simply the current economic situation may have left you with debt you are unable to overcome. Many people who file for bankruptcy are in a similar situation and simply need to start over, financially. We understand that for most people, bankruptcy is a last resort. However, it is a permissible, effective choice for people who find themselves no longer able to make ends meet.
-
Q: What can I keep if I file for a Chapter 7 bankruptcy?
A: People who file a
Chapter 7 bankruptcy in Ann Arbor are able to keep all of their property in the majority of cases. Such property includes your furniture, household goods, appliances, computer equipment and most likely, even your home and car if you are current on your payments (whether a purchase or a lease). We can help you protect your belongings as the Bankruptcy Code provides exemptions, or an allowed value, for your possessions that prevents them from being taken in a Chapter 7 bankruptcy.
- Q: What debts cannot be discharged?
A: In most cases, tax debts, alimony, child support obligations, most student loans, criminal fines, debts related to a drunk driving offense, debts not listed in the bankruptcy petition and some debts incurred within 60 days of filing the petition may not be dischargeable.
- Q: Will I be able to keep my house if I file a Chapter 7 bankruptcy?
A: Many of our clients who file under Chapter 7 are able to keep their home. However, it is important to consider the following:
- Are you current on your monthly payments?
- Is your equity equal to or less than the allowed homestead exemption?
If you answered yes to both questions, the Trustee will typically allow you to keep the home. It is essential that your budget will allow you to continue making monthly payments after your discharge.
- Q: Will I lose my car in a Chapter 7?
A: If you have a loan on your vehicle or are leasing, you are generally allowed to "reaffirm," or remain responsible for, the debt. You will need to agree that you will continue to make the monthly payments until the loan or lease is satisfied.
If you own your vehicle outright, you will likely be able to keep it if its fair market value is less than the exemption amount allowed for a vehicle.
- Q: Will my creditors stop harassing me if I file for a Chapter 7 bankruptcy?
A: Yes. Immediately upon your filing, all of the creditors listed in your Petition are notified, by the Court, of your bankruptcy case. An Automatic Stay is issued - a court order preventing these creditors from taking any action to collect on the debt. This includes no more phone calls, collection letters, lawsuits, enforcement of orders from prior lawsuits, repossession of property, property liens, garnishments or attachment of bank accounts. The Automatic Stay remains in effect throughout your bankruptcy and becomes permanent upon your discharge. You no longer need to pay on any of those unsecured debts you listed in your Petition which were discharged upon the conclusion of your case.
- Q: Can I stop paying creditors once I decide to file a Chapter 7 bankruptcy?
A: Yes, if it is debt that can be discharged in a Chapter 7 bankruptcy such as your credit cards, medical bills or most judgments. However, you must continue to pay your utilities, mortgage or rent and car payments.
- Q: How do I know if I should file for a Chapter 7 bankruptcy?
A: Are you paying only the minimum payments, or less, on your credit card bills? Are your creditors using collection agencies to pursue your debt? Have you been sued by one or more creditors? Do you own your home and are current on your payments but behind on all of your other debt obligations? Are you tapping into your pension or your 401(k) or other retirement accounts, taking penalties for early withdrawal, just to try and meet your personal financial obligations? Are credit card and medical bills preventing you from saving money? If you answered yes to one or more of these questions, filing a Chapter 7 bankruptcy may be right for you.
- Q: Does everyone qualify for a Chapter 7?
A: You may not qualify for a Chapter 7 bankruptcy because you earn too much money under the Bankruptcy Code guidelines, you may have primarily non-consumer debt, your mortgage is in arrears or your home is in foreclosure. In that case, a Chapter 13 filing may be right for you. In a Chapter 13 bankruptcy, your debts are not discharged but you are provided the opportunity to pay off your debts under a court-supervised plan. You are afforded the protection of the Automatic Stay, you will stop accruing interest and you may be able to achieve a reduction on the principal debt(s).
Another compelling reason to file a Chapter 13 rather than a Chapter 7 is if you have debts that are non-dischargeable in a Chapter 7 (such as IRS taxes, student loans, and child support arrearages). In a Chapter 13, creditors must accept a repayment plan and monthly payments. This will prevent garnishment of your wages, seizure of your assets, and collection lawsuits.
- Q: Does my spouse have to file bankruptcy if I do?
A: If the debts are in your name only, your spouse does not have to file. Creditors generally cannot pursue a non-filing spouse, unless he or she is legally a co-signor on the debt. Additionally, the bankruptcy should not be reflected on the non-filing spouse's credit report. If your spouse is a co-signor, your bankruptcy filing does not affect the obligation of your spouse to make payment on the debt. A creditor will continue to look to the spouse for payment.
- Q: Who knows about my bankruptcy filing?
A: Other than people you choose to tell, only your creditors and the IRS are provided notice that you have filed bankruptcy. Your employer and even your landlord, if you are a renter, will not be notified of your filing unless they are creditors. However, bankruptcy records are public record, so anyone who wants to find out could determine that you had filed.
- Q: How will filing for a Chapter 7 bankruptcy affect my credit?
A: Although a bankruptcy filing will appear on your credit report for up to ten years, its overall effect is less damaging than a history of delinquent or missed payments and/or judgments. After your discharge, you should begin to reestablish your credit immediately. You have the ability to obtain a credit card or to borrow money if you have an income. You can now show you are in a much better position to pay than prior to your bankruptcy when you had significant debt. It is important to continue to make timely payments and remain current on all of your bills, whether it's newly issued credit, your utilities, home or car.
- Q: Can I be fired from my job for filing bankruptcy?
No. Federal law prohibits employers from discriminating against you for filing bankruptcy.
