The Law Offices of Michael A. Fakhoury, P.C. is here to answer your questions about bankruptcy law. Deciding if bankruptcy is right for you is not easy. Understanding bankruptcy law and getting the answers to your questions so that you can make an informed decision is important.
Please keep in mind that the answers provided throughout this website are only basic, general explanations regarding bankruptcy. Every situation is unique and differs. Michael A. Fakhoury, ESQ., PC strongly urges you to seek a consultation with a qualified debt relief agency rather than rely on your interpretation of the answers provided.
What is bankruptcy?
It is the process—under federal law—that allows a debtor that is no longer able to pay it back debts or owes more money than they can reasonably come up with to either discharge certain debts or create an agreed upon repayment plan to cover a portion or all of the debts over an extended period of time. Chapter 7 and Chapter 13 are the most common, with other chapters being available for businesses.
If I file a bankruptcy petition, will it stop the harassing phone calls, bills or the enforcement of judgments?
Yes! The bankruptcy law grants you (the debtor) a very powerful tool called the automatic stay. An automatic stay means that creditors are prohibited from calling you, billing you or continue to freeze your bank account, garnish your wages, foreclose on your home, etc. It will stop the creditor harassment.
What happens when one spouse files without the other spouse?
The spouse that doesn't file may end up liable for some of the debts - if a debt is a joint debt (husband and wife are both liable or are co-signors) and one spouse files bankruptcy and receives a discharge in bankruptcy but the other spouse does not file bankruptcy, the non-filing spouse will be billed or is still liable for the joint debt.
No. The credit report record of a bankruptcy will only remain on your credit report for 10 years. Keep in mind that you can also typically repair your credit rating in a much shorter timeframe, around one to two years following your final debt discharge.
Are all debts discharged / forgiven in bankruptcy?
Unfortunately, not all debts will be automatically discharged simply because you filed for bankruptcy. Certain debts cannot be discharged in this process, including government loans, late child support payments, student loans, back taxes, and similar debts.
Will I lose my house or car if I declare bankruptcy?
In the vast majority of cases, if you own a house or car or property that you want to keep and you have a loan (such as a car loan or mortgage) and you want to retain or keep your loan, you do not lose the property. In other words, secured debts such as a mortgage or car loan remain secured debts even after the bankruptcy is closed or completed. We provide you with a reaffirmation agreement and you get to keep the property and the loan. State and federal exemptions do allow you to maintain possession of a specific amount of personal property when you file for bankruptcy.
Can I chose which debts to put in the bankruptcy?
No. You must make sure all of your debts are included in your bankruptcy. Some debts, such as your mortgage, auto loan, student loan, remain valid or are not discharged (you reaffirm these debts) and the other debts, such as your credit card debts, personal bank loans, personal loans, medical bills, are forgiven (Chapter 7). Again, you must first go through an office consultation before you can fully rely on this information. This is because your financial issues may differ than the general statements made here.
What is a Chapter 7 Case?
Chapter 7 bankruptcy provides the debtor debt relief. The relief may eliminate most forms of unsecured debt such as credit cards, medical bills, and personal loans. In most cases, you can keep your home, car, and other personal belongings. If you are being harassed by creditors, you can stop them immediately (the automatic stay). A Chapter 7 case is usually filed and closed within approximately four months. In almost all cases, you do not have to attend a Court hearing or Court appearance (you must attend a meeting with your attorney and the Trustee).
In a Chapter 7 case, you can also discharge any balance due after your car has been repossessed or if a bank forecloses on your house. If you have cosigned a debt for someone else and they do not pay the debt, a Chapter 7 discharge can eliminate your liability or your obligation to pay the creditor. A Chapter 7 bankruptcy can immediately stop wage garnishments, a lawsuit or a frozen bank account.
A Chapter 7 bankruptcy may allow you to re-establish your credit rating by reducing or eliminating your debt. With almost all of our Chapter 7 clients, the debtor is able to re-establish they credit rating within one to two years after the discharge, and, if they wish, get a car loan or mortgage within one or two years after the case is closed. In fact, many people who file Chapter 7 may face solicitations for unsecured credit within just a few months of their discharge in bankruptcy. As will be explained in more detail, if you wish to re-establish your credit rating, you should accept some forms of unsecured debt so that you can build on to your credit history.
What Is Chapter 13 Bankruptcy?
When someone files a Chapter 13 petition in bankruptcy, generally, the goal is to repay some or all debts in their name, so that they can obtain a lower / no interest or save their house from foreclosure. A person may also choose Chapter 13 if they are unable to file a Chapter 7 due to their income or non-exempt assets.
Debts will be restructured so that the debtor can use any income they have in the future to pay off some or all creditors. You have the option to propose either a three or five-year repayment plan that must be approved before it can be started.
In a Chapter 13 case, the Court approves a new payment plan for repayment of some or all of your debt. For example, if you own a home with a mortgage and you want to keep your home and you are behind in your mortgage payments or your home is in foreclosure (you have mortgage arrears) a Chapter 13 case will allow you the opportunity to pay back your arrears over a three or five-year period. In other words, you can keep your home, pay back the late payments and continue to pay your regular mortgage payment throughout the life of the plan. This will stop the foreclosure. An important criteria for a person to be able to file a Chapter 13 case that the individual must have a regular income.