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Bankruptcy FAQ

What is Bankruptcy?

Bankruptcy is a federal law which enables people who owe money (debtors) to be protected from their creditors’ collection activities. It is a law that helps debtors eliminate their obligation to pay back some or all of their debt, stops collection activity such as phone calls and threatening letters, stops foreclosure and repossession proceedings and gives people a fresh financial start.

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What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is known as a liquidation bankruptcy in which an individual wipes out all of his unsecured debt, such as credit card bills, medical bills, unsecured personal loans and utility bills just to name a few. The whole chapter 7 process takes about six months, involves one court hearing in which a trustee reviews the paperwork, and ends in a discharge in which the court enters an order legally wiping out your debt.

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What is a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is known as a repayment, or reorganization bankruptcy and involves a three or five year repayment plan of your debt. A chapter 13 bankruptcy is typically used to stop foreclosure or repossessions and allows the individual to keep the house and/or vehicle and catch up on the payments.

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Will Filing for Bankruptcy Get My Creditors to Stop Calling and Harassing Me?

Many people in debt are facing harassing phone calls from their creditors calling them at home, at work, or calling family members to try to collect debts. This is an extremely stressful situation which can be stopped by filing for bankruptcy. As soon as a bankruptcy is filed, you are under the protection of the Automatic Stay of Proceedings and once your creditors are served notice of the bankruptcy they are prohibited, by law, from contacting you. Should they contact you, they can be sued in bankruptcy court which is why the phone calls will immediately stop.

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Will Bankruptcy Stop Me From Receiving Harassing the Letters in the Mail?

Yes, as soon as the Bankruptcy is filed you are under protection of the Automatic Stay of Proceedings which means it is against the law for your creditors to contact you while you are going through bankruptcy.

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Can Creditors Try to Collect the Debt After the Bankruptcy is Over?

If you file for a Chapter 7 liquidation bankruptcy, once the court approves the discharge then the debt no longer exists and the creditor is no longer allowed to try to collect the debt after the fact. However, if you file a Chapter 13 bankruptcy to save your house or vehicle, you are required to maintain regular monthly payments on the mortgage and/or car loan and if you fail to do so after the bankruptcy is discharged in the creditor can resume collection activity again.

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Will I be able to Get Credit Ever Again?

Yes, in fact bankruptcy may actually help you to get credit if you cannot get credit now due to a poor credit rating. Once the bankruptcy is discharged the best way to reestablish credit is to make your regular monthly mortgage payments or car payments on time. You will also be able to get small credit cards and I always suggest to my clients charging a small amount every month and making sure to pay it back on time. Most of my clients get some sort of credit back within a year of the bankruptcy discharge.

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Will I Lose My House?

If you file for Chapter 7 liquidation bankruptcy to wipe out your credit card and other debt, so long as you pay your mortgage is current your house cannot be foreclosed upon. If you are filing for Chapter 13 bankruptcy to save your home from foreclosure, so long as you make your regular monthly mortgage payments plus the catch-up payment to the bankruptcy court than the mortgage company cannot go to foreclosure.

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I Have a Sheriff Sale Scheduled for My Home. Is It too Late to Save It?

Nothing can be more stressful than the thought of losing your home in a Sheriff Sale. Filing for Chapter 13 bankruptcy will allow you to keep your home and catch up on your mortgage arrears. As soon as the bankruptcy is filed you are under protection of the automatic stay of proceedings which automatically stops the sheriff sale. So long as you make your regular payments to the mortgage company and the catch-up payment to the bankruptcy court the house cannot go to sheriff sale.

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Will I Have to Go to Court?

There is a minimum of one hearing which you will be required to attend and is known as a Meeting of Creditors in which a bankruptcy trustee, who is a lawyer employed by the bankruptcy court, will review the bankruptcy petition and ask you to verify some information such as income and expenses. Most cases this is the only hearing that you will have to attend but there can be other hearings scheduled in certain circumstances.

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I am Behind on My Taxes, can Bankruptcy Help?

Generally speaking, taxes are not dischargeable through a Chapter 7 bankruptcy. However, if you file a Chapter 13 bankruptcy, any tax debt owed to the government can be repaid over three or five years. In many situations the amount of debt repaid will be less than what is owed as some late fees and other fees do not get repaid in the bankruptcy and are wiped out. Additionally, once you are finished repaying the tax debt, any remaining unsecured debt such as credit cards medical bills and other debts are discharged (wiped out) by the Bankruptcy Court.

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Will a Bankruptcy Stop a Wage Garnishment by the IRS?

If you are facing a wage garnishment by the IRS, filing for bankruptcy places you under protection of the automatic stay of proceedings which will stop any wage garnishment.

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I am Being Sued in Court for My Debt

Filing for Chapter 7 bankruptcy will stop the lawsuit if you file the bankruptcy before the creditor get a judgment against you in court. Any debt associated will be discharged, wiped out by court order.

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I was Sued in Court and the Creditor Has a Judgment Against Me

If the creditor has sued you in court and obtained a judgment they now are permitted to collect on the judgment which is usually by way of a sheriff sale of your personal property and also could lead to freezing any bank accounts that you have in your name. Filing Chapter 7 will stop all collection activity and the judgment against you can be avoided in bankruptcy court. At the end of the Chapter 7 bankruptcy the court enters an order discharging all of your debt and voids the court judgment against you.

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I Have a Good Income. Can I Still File for Chapter 7 Bankruptcy to Wipe Out My Debt?

Even if you have a nice income, you still can be eligible to wipe out all of your debt through a Chapter 7 bankruptcy as long as you pass the means test. The means test looks at your monthly income and monthly expenses so even if you have a high income it will take into account any mortgage payments, car loan payments and other cost of living expenses. If you pass the means test then you are eligible for Chapter 7 to wipe out all of your debt. If you “fail” the means test, you would be required to file for Chapter 13 bankruptcy to pay back some or all of your debt over three or five years. In this situation, many clients are only paying a portion of their debt with any remainder getting discharged at the end of the repayment plan.

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A Family Member Cosigned a Debt for Me. Can They be in Trouble?

If a family member cosigned a loan for you, such as a car loan or credit card, the creditor can still try to collect the debt from the cosigner. You would be protected from collection activity through bankruptcy but your cosigner would not.

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I Cannot Afford My Car Payments

You can choose to surrender your vehicle and not be required to pay for it in a “voluntary surrender.” The property will eventually be sold at sheriff sale or auction and if the sale price is less that what it owed on the property, you cannot be forced to repay the deficiency if your bankruptcy is discharged.

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I Cannot Afford My Regular Mortgage Payments

If you simply cannot afford your regular mortgage payments, you can choose to surrender your home and not be responsible for any debt associated with it by filing for Chapter 7. For instance, if you surrender your home and you owe $100,000 on it and it sells at auction for $50,000, unless you file for Chapter 7 Bankruptcy, you will be responsible for the $50,000 deficiency. You will not be responsible for any deficiency if you receive a Chapter 7 discharge.

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I Have Filed for Bankruptcy Before, can I File Again?

Chapter 7 bankruptcy can be filed again if more than eight years has elapsed from the date the discharge was received on the previous case. For Chapter 13 bankruptcy, if a repayment plan was not completed and was dismissed there is no time limit to file again. This situation typically arises in a mortgage foreclosure situation where the homeowner cannot remain current on his payments. The court will eventually dismiss the case and foreclosure beings again. An individual in this situation may file another chapter 13 bankruptcy to try again to become current on his mortgage.

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Can I Leave a Credit Card Out of the Bankruptcy?

No, all debt must be put into the bankruptcy and you cannot show a preference as to who gets paid and who does not. However, once the bankruptcy is discharged, you should be eligible for small lines of credit which is a good way to reestablish your credit rating.

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Will a Bankruptcy Affect My Credit Rating?

The short answer is yes, it will affect your credit rating because it will appear on your credit report. Filing for bankruptcy can certainly affect future loan eligibility. However, if your current credit rating is poor, bankruptcy may actually help you to re-establish good credit. Most clients within a year of the discharge are able to get some sort of credit, typically with credit cards with small lines of credit. Over time, if you make all payments on time, your credit rating may actually be better than it was before you filed for Bankruptcy.

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How Long Does a Bankruptcy Stay on My Credit Report?

Bankruptcy will remain on your credit report for up to 10 years.

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I am Embarrassed to File for Bankruptcy

Don’t be embarrassed. Bankruptcy is a law that was put into place to protect people from their creditors. It is a legal way to wipe out or reorganize your debt. Millions of people take advantage of this law every year. People lose jobs, get sick, or just simply accrue too much debt to be paid back. If you call us for a free consultation, we promise to treat you with kindness and respect. We treat our clients the way we would want to be treated if we were experiencing legal problems. In fact, many of my clients after their cases ended have told me that they wished they contacted me to file for Bankruptcy years ago.

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Call Us to See How We can Help!

Call one of the experienced attorneys at Ellis B. Klein & Associates for a free consultation. We have helped thousands of clients get a fresh financial start over the last 20+ years in practice. We will gladly answer all of your questions and we will even quote you a fee and a flexible payment plan right over the phone. Stop the harassing phone calls, stop the stress and achieve financial freedom.

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Client Reviews
Ellis Klein is a terrific attorney who represented my son in a DUI case. Ellis was understanding and sympathetic yet very forthright regarding the seriousness of the issue. He was extremely knowledgeable of the process and kept us informed at every step. He had a very professional presence, was confident (but not arrogant) and kept us calm throughout a very traumatic situation. He was a critical factor in my son receiving the best possible outcome from this DUI event. John Doe
Recently Mr. Klein helped me out with a criminal charge in which the outcome was the best possible situation for me. Ellis worked with me as far as a payment plan, knew the judge and officer and I couldn't ask for anything more out of a lawyer. I'm very happy with his performance and would recommend him to anyone. Jane Doe
Ellis literally gave me a new lease on life. I was facing a DUI, which would have affected my livelihood, my freedom and would have left me with a criminal record. Mr. Klein was able to have all the evidence suppressed by challenging the officer's cause for pulling me over. He was very thorough, leaving no stone unturned. His demeanor in court was confident and knowledgeable. He saved my reputation and my family from facing serious economic hardship. Thank You Anonymous
Ellis Klein served as my lawyer in a very difficult case that I was facing and with his help, the outcome of my case turned out wonderful. Mr. Klein helped me very much with his knowledge of my case. Thanks Ellis! Anonymous
Like many young adults, I made a bad decision that resulted in very serious consequences. I was afraid and nervous. Ellis was very straight-forward when he explained things to me, telling what the best outcome could be as well as the worst. Through his knowledge, professionalism, and legal reputation, my case was resolved with the best possible outcome. I advise my friends not to make the same mistake that I did, but if they do I will highly recommend Ellis. I feel like I have been given a second chance. Anonymous