Bankruptcy FAQ

What is Bankruptcy?

Bankruptcy is the legal method by which a debt-ridden person may eliminate debt and obtain a new financial beginning. The filing of bankruptcy will immediately stop the efforts of creditors from seeking to collect upon debts. In most cases, bankruptcy will completely eliminate the debt one owes to creditors. Federal law provides the right to file for bankruptcy and all bankruptcy cases are handled in federal court.

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Can I go to jail for filing bankruptcy?

No. There are no debtor's prisons in the United States.

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What is Chapter 7 bankruptcy?

Chapter 7 is the most commonly filed type of personal bankruptcy. It is often referred to as a "straight bankruptcy." Chapter 7 may only be filed by individuals and is not used for businesses or partnerships. Most filers of Chapter 7 have few assets and large amounts of unsecured and credit card debt. A Chapter 7 bankruptcy often results in a complete discharge (or elimination) of all of the filers debts.

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What is Chapter 13 bankruptcy?

Chapter 13 Bankruptcy is similar to a debt adjustment. Under a Chapter 13, the filer puts together a 3-5 year plan with the goal of paying off part or all of the debts from the filer's projected future income. You must have a current source of income along with some disposable income in order to qualify for filing under Chapter 13. Like Chapter 7, a Chapter 13 bankruptcy can only be filed by an individual.

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How do I determine which method is right for me?

Basically, if you have a good income and a large amount of assets, or if you have a large amount of non-dischargable debts and valuable non-exempt property that you would like to keep, then Chapter 13 may be the best option for you. On the other hand, if you don't have much disposable income and a limited number of assets compared to a large amount of unsecured debt, then Chapter 7 may be the best option for you.

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How long does the bankruptcy process take?

The discharge of debt from a Chapter 7 filing usually takes about 4-6 months. The payout process from a Chapter 13 plan can take anywhere from 3-5 years.

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Will bankruptcy wipe out all my debts?

Yes, with some exceptions. Bankruptcy will NOT normally wipe out the following:

• money owed for child support or alimony, fines, and some taxes;
• debts not listed on your bankruptcy petition;
• loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
• debts resulting from "willful and malicious" harm;
• student loans owed to a school or government body, except if the court decides that payment would be an undue hardship;
• mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

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Can I own anything after bankruptcy?

Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

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Can I keep my home and my car?

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.

However, some of your creditors may have a "security interest" in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.
There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.

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What exemptions can I claim?

You can claim an exemption on certain personal items and property upto the legal limits under either your state or the federal law. Exempt items may include equity in your home and car, household goods, job related materials (tools, books, etc.), and certain benefits such as social security, unemployment compensation, veteran's benefits, public assistance, and pensions.

For a more complete list of exempt items and limits, see the Utah Exemption Act.

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Will bankruptcy affect my credit?

There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse.

The fact that you've filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

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Will I have to go to court?

In most bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

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What is the cost of filing bankruptcy?

The current cost of filing a Chapter 7 bankruptcy is $175. The cost of filing a Chapter 13 bankruptcy is currently $160. The costs of hiring an attorney are in addition to these filing fees and are determined between you and your attorney.

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Do I need to hire an attorney to file bankruptcy?

Although it may be possible for some people to file a bankruptcy case without an attorney, it is not a step to be taken lightly. The process is difficult and you may lose property or other rights if you do not know the law. It takes patience and careful preparation. Chapter 7 cases are easier. Very few people have been able to successfully file chapter 13 cases on their own.

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What should I bring to my first meeting with an attorney?

When you first meet with an attorney, you should be prepared to answer the following questions:

• What types of debts are causing you the most trouble?
• What are your significant assets?
• How did your debts arise and are they secured?
• Is any action about to occur to foreclose or repossess property or to shut off utility service?
• What are your goals in filing this case?
• If meeting with Harris, Carter & Sessions, LLC, you should complete the questionnaire and intake sheets located in our forms section. And, you should also bring the following information:
  
  Driver’s License and Social Security Card Last years tax return.
  A current pay stub
  A list of debts or bills from creditors.
  A list of questions for Brook to answer.
  A list of property that if you had a garage sale you might sell for over $50.00.
  A credit report.

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What else should I know?

Utility Services Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can re-quire a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

Discrimination An employer or government agency cannot discriminate against you because you have filed for bankruptcy.
Driver's License If you lost your license solely be-cause you couldn't pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.
Co-signers If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

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