Bankruptcy Questions and Answers
The following information is being provided for informational purposes and is not intended as legal advice.
What is bankruptcy?
Bankruptcy is a process provided under our federal consitution. It helps people who are unable to repay their debts find debt relief.
What are the different types of bankruptcy?
Chapter 7 refers to the chapter of the Bankruptcy Code providing for liquidation of debt. The court will evaluate the debtor's income and expenses to determine if the debtor may proceed under Chapter 7. In most chapter 7 bankruptcies, you keep all your assets and are legally allowed to wipe away your debts
Chapter 11 bankruptcy involves the reorganization of a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.
Chapter 13 provides for the adjustment of debts of an individual with regular income, often referred to as a wage-earner plan. Chapter 13 allows a debtor to keep property and use his or her disposable income to pay debts over time, usually three to five years. Most chapter 13 bankruptcies do not require you to pay all your creditors back.
How long will bankruptcy stay on my credit report?
A Chapter 7 bankruptcy (liquidation of debts) will generally stay on your credit report for 10 years.
A Chapter 13 bankruptcy (wage-earner plan) will generally stay on your credit report for 7 years from the date of filing.
What property is included in bankruptcy?
When you file Chapter 7 bankruptcy, all your possessions must be listed however, Indiana has created a list of assets called "exemptions" which can not be taken from you. These include vehicles, tools and household furnishings as example.
If you file Chapter 13 bankruptcy, you usually are able to keep many of your assets, as long as you maintain steady income and continue to make your agreed-upon payments.
What debts can't be included in bankruptcy?
Some debts are not dischargeable in bankruptcy, including most student loan debt, back taxes less than three years old, alimony, child support, and debts incurred through fraud.
How will bankruptcy impact my spouse or cosigner?
While you can certainly file bankruptcy as an individual, if you are married and both of you have significant debt, you may consider filing a joint petition for bankruptcy.
If you file separately, only your own debts will be discharged. Therefore, if your spouse has debt that isn't in your name, those will not be impacted. For joint accounts, your debt may be discharged, but the lender can still try to collect from your spouse.
The same is true for a cosigner. If you had a family member or friend cosign on a loan for you, even if the loan is discharged for you, it will not be discharged for your cosigner. The lender will require your cosigner to pay the entire remaining balance of the debt.
For joint property, the impact on your spouse depends on the laws in the state where you live. For the most part, if you own a home, you should be able to protect it, but remeber each case is different.
What's pre-filing bankruptcy counseling?
Obtaining a bankruptcy counseling certificate is a prerequisite to filing for personal bankruptcy under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This requirement is to help ensure that consumers are educated about the bankruptcy process.
We will help you obtain this certificate and it can be done from the comfort of your own home by either phone or online.
What's pre-discharge education?
Also mandated by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, all debtors must complete "an instructional course concerning personal financial management" prior to receiving their bankruptcy discharge. These provisions were included to provide debtors in bankruptcy with the skills and tools needed to avoid future financial problems.