Bankruptcy FAQ

1. Do I have to go to Court? - You will have one appearance in bankruptcy court with a bankruptcy trustee. Your attorney will attend with you. In most cases, your appearance lasts only a few short minutes.

2. Are my creditors allowed to come to Court and question me? - Although your court appearance is referred to as the Meeting of Creditors, it is rare for a creditor to appear. If a creditor does come to the Meeting, they are very limited in what they can ask and your attorney will be there to protect you from harassment.

3. Can I keep my house and my car? - In most Chapter 7 and Chapter 13 bankruptcy cases, it is possible to keep your home and vehicles, as long as you can afford the payments. If you are behind in payments then there are options available to give you time to bring the payments current.

4. Do I have to turn over my tax refund to the Court? - This depends on whether a debtor files for Chapter 7 or Chapter 13 bankruptcy protection. Generally speaking in a Chapter 7 case, in the state of Kentucky, the majority of people who file bankruptcy will be able to protect their tax refund with the property exemptions that debtors in bankruptcy are allowed to use when the case is filed. In Indiana, it is slightly more difficult, but you are always able to keep the Earned Income Credit (EIC) portion of the tax refund. In a Chapter 13 case in the Louisville Division the Court will require a debtor to turn over tax refunds if the debtor is not paying their creditors in full. In a Chapter 13 in Indiana the debtor will normally get to keep their tax refunds except in certain limited circumstances. Again, the EIC is not subject to the turnover requirement in either state in a Chapter 13 case.

5. How long will bankruptcy stay on my credit report? - The bankruptcy will be reported on your credit report for ten (10) years. However, this does not mean you won't be able to get credit. Most people who are granted a bankruptcy discharge will receive credit offers immediately, and there is some evidence that suggests filing bankruptcy actually begins to improve some debtors' credit scores after the bankruptcy case is over.

6. Can all my debts be included in bankruptcy? - In a Chapter 7 bankruptcy, most debts are dischargeable (i.e., eliminated); including credit cards, medical bills, personal loans, deficiency balances from repossessions, and most lawsuit judgments. Some tax debt is also dischargeable. Debts that cannot be discharged include: student loan debt, child support, certain types of taxes, and some debts stemming from personal injury to others (primarily damages from drunk driving or the like).

7. Can the Court deny my bankruptcy? - Yes. If you file a Chapter 7 bankruptcy and the Court finds that it is an abuse of the system, they will ask you to convert to a Chapter 13 or dismiss the case. This type of situation does not arise often, but could happen if your disposable income is found to be enough to repay your debts in a Chapter 13 bankruptcy. This determination is made prior to filing a case, so denial of a discharge is extremely rare.

8. If I am also going through a divorce, will a bankruptcy disrupt those proceedings? - No. In many cases, filing bankruptcy can actually make a divorce case easier to settle. However, it is important to notify both your divorce attorney and bankruptcy attorney if you are in the midst of a divorce, so that the proper information can be reviewed.

9. What if my house is in foreclosure? What if I 'm being sued in court for an old credit card? What if I have a garnishment? When a bankruptcy case is filed, whether it's a Chapter 7 or Chapter 13, the Bankruptcy Code puts in effect an Automatic stay. Basically this is a time out for the debtor and his or her creditors. All collection activity has to stop...and that includes collection letters, phone calls, lawsuits, foreclosures, and garnishments. There may be a slight delay between the filing of a bankruptcy and a creditor receiving notice of it, but any funds garnished after the filing of the bankruptcy case will generally be returned without a fight. In some limited cases creditors may even have to return funds garnished before the bankruptcy was even filed . Filing a bankruptcy case gives the debtor the relief from creditor action that is often needed to get back on their feet and start fresh.

10. My car is about to be repossessed, what can I do? Filing a bankruptcy stops all collection action, and that includes repossession of collateral such as automobiles. Depending on how many payments a debtor is behind will determine whether they can ultimately keep their car. It's also a factor of how much is owed on car in relation to how much it's worth. Keeping a $1,000 car and paying $10,000 for it just doesn't make sense. But luckily there are options available under Chapter 13 cases, and there is also the debtor's right to redeem the property by paying the fair market value (although that is harder when the automobile is worth a lot of money). Regardless, filing the bankruptcy case will give the debtor a period of time, usually 2-3 months, to determine what they want to do with their car without having to worry about it being taken in the middle of the night by a repo company.

If you are considering filing bankruptcy, or have further questions, contact us now to schedule a consultation to discuss your particular facts and circumstances.