Bankruptcy Law

People tend to think of bankruptcy as a financial matter. Bankruptcy is more accurately described as a legal proceeding involving money. It is a legal resource intended to be used when a person or business has exhausted all other options and is unable to repay outstanding debts or obligations.

The process is handled in federal courts and follows the U.S. Bankruptcy Code rules. Typically, a judge and court trustee review the person or business’s assets and liabilities to determine which debts can be discharged (i.e., not legally required to pay) and which need to be paid.

This process gives people and businesses a chance at a new start, despite their finances collapsing.

Bankruptcy Process

The bankruptcy process is governed by the Federal Rules of Bankruptcy Procedure and includes very precise requirements spanning procedural steps, legal forms, and deadlines that must be met. These proceedings are fairly uniform across the 90+ across the United States.

While the process may seem daunting, remember that the creation of the Bankruptcy Code in 1978 was to provide relief and a fresh start to individuals, families, and companies struggling with burdensome debt. Depending on the type of bankruptcy that is filed, all debts may be eliminated, some debts may be eliminated, or a reasonable debt repayment plan may be set in place by the court.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

If you have assessed your financial situation and determined that the only option for managing your debt is to pursue bankruptcy, there are two primary ways to file. The first is to hire a qualified attorney that can guide you through the process. The second is to file your own bankruptcy, a process called “filing pro se.”

While filing bankruptcy on your own is technically an option, the website USCorts.gov strongly recommends bankruptcy filers utilize a qualified attorney with expertise in bankruptcy proceedings.

What are the risks of filing pro se?

Bankruptcies are managed through federal court. There are very specific forms, formulas, and deadlines involved in the process, and failing to follow every requirement can get your bankruptcy dismissed from court. This can result in a significant loss of time and fees paid to the court.

Losing money in fees paid can be particularly painful at a time when an individual or business is struggling with overwhelming debt. Less obvious, yet also a big risk, is the loss of time. In bankruptcy proceedings, the debtor often receives “protection” from creditors, meaning that creditors cannot attempt to collect a debt covered in the bankruptcy. The collection calls and letters stop. If your bankruptcy is delayed, creditors have more time to assertively pursue payment, repossess property, place liens, and more.

It is important to note that there are six different types of bankruptcy. Each type of bankruptcy has its own set of rules for filing and offers different protections.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Here are the five steps for filing bankruptcy.

1. Compile all of your financial records

Before filing for bankruptcy, you’ll want to gather all your financial records, including your debts, assets, income, and expenses. This information will give you, anyone assisting you like a bankruptcy lawyer, and the court a clear understanding of your situation.

2. Go to credit counseling before filing

You need to complete credit counseling within 180 days before filing for bankruptcy. This step lets the courts know that you’ve attempted all other possibilities before filing for bankruptcy.

You need to select an approved provider from the U.S. Courts website. You can often complete the counseling online or by phone. The certificate you receive from completing the counseling needs to be included in the bankruptcy paperwork you file, or your filing will be denied.

3. Hire a bankruptcy lawyer

If you’ve decided to hire a bankruptcy lawyer, you’ll want to initiate that step before filing your petition.

A bankruptcy lawyer can assist you with assessing your financial circumstances and advising you on your best options (including the type of bankruptcy to file). The lawyer will help you complete the necessary paperwork, meet deadlines, and follow all procedures and formalities of the court.

When researching lawyers, restrict your search to those who specialize in bankruptcy. Ideally, find at least three lawyers to talk to before choosing one.

Find referrals for lawyers from:

• Trusted friends or family
• Other lawyers you may have worked with or know
• An employer sponsored group legal plan, if available
• Your local bar association referral service, if available

When you meet with each of the lawyers, you’ll want to ask them:

• About their experience with situations similar to your case
• Their familiarity with local court rules and bankruptcy trustees
• What they charge and what services the fees cover
• How they and their staff will communicate with you during the process

4. File the petition

If you’ve hired a bankruptcy lawyer, they will assist you with filing your petition. Otherwise, you’ll need to file on your own.

If you’re representing yourself, make sure you fully understand both the federal and your state bankruptcy laws to ensure you fill out all paperwork correctly and understand what assets are exempt or you might negatively impact your case’s outcome.

5. Meet with creditors

After your petition is accepted, you’ll be assigned to a bankruptcy trustee. This person sets up a meeting with your creditors. While you are required to attend, the creditors are not. This meeting provides an opportunity for creditors to ask you or your court trustee questions about your case.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

There are six types of bankruptcy that address different situations and needs.

These include:

Chapter 7

Chapter 7 is the most common form of bankruptcy for individuals. It’s sometimes also referred to as liquidation or straight bankruptcy.

Chapter 7 bankruptcy helps people discharge their unsecured debts like medical bills and credit cards by selling their assets (or anything you own that has value). Exempt assets vary from state to state.

In this situation, a court-appointed trustee typically oversees the sale (or liquidation) of your assets, which are used to pay off your creditors.

At the end of the process, most parties will be debt-free or mostly debt-free. All unsecured debts such as personal loans or credit cards are “wiped clean.” Certain secured debts such as auto loans may be negotiated for repayment. Debts such as more IRS taxes, child or spousal support, drunk driving penalties or judgments, and student loans are prohibited from discharge by the Bankruptcy Code.

Chapter 9

There are cases in which the entity seeking debt relief is neither a person nor a business. Municipalities can also run into financial distress that prevents them from meeting obligations to their creditors. For the purposes of bankruptcy, the term municipality has in the past been applied to: cities, counties, townships, school districts, and public improvement districts, bridge authorities, highway authorities, and gas authorities.
Filing for Chapter 9 bankruptcy grants them protection from creditors while they create a plan for adjusting their debts. They do not have to liquidate their assets.

Chapter 11

Chapter 11 bankruptcy is typically used by struggling businesses that want an opportunity to restructure their debt for future repayment while continuing to operate. Occasionally, individuals can also file for this type of bankruptcy.

In this form of bankruptcy, the business remains in control of operations and does not sell off all their assets. The goal is for the business to restructure their debts so they can be repaid while having time to create a plan to become profitable again. For instance, the company may be able to cut costs or find additional ways to increase revenue.

Chapter 12

Family farms and fisheries under financial strain can use Chapter 12 bankruptcy. As part of the filing, they develop a plan to repay creditors.

This industry-specific type of bankruptcy provides streamlined procedures that allow filers to reorganize business affairs, repay all or part of their debts, and continue operating. Unlike Chapter 11, the bankruptcy is not discharged when the plan is made, but instead when all payments have been completed. Most repayment plans span three to five years.

Chapter 13

Along with Chapter 7, Chapter 13 is the most common form of bankruptcy filed in the United States. This version of bankruptcy is most often used by individuals with jobs, or “wage-earners” to reorganize their finances and debts under a repayment plan.

Filers are required to complete all repayment within three or five years. To be eligible, a consumer must have a regular source of income, and their total debt must not exceed the parameters set forth in the Bankruptcy Code. Once a repayment plan is in place, and for as long as the debtor makes timely payments, creditors are legally restrained from continuing or initiating collection efforts.

Under Chapter 7, all debts qualifying are fully discharged, which means that all pertinent lines of credit are closed and inaccessible. Under Chapter 13, debtors are able to keep more of their assets, and under certain repayment plans, and keep credit accounts even if use is temporarily restricted. A simplified way of describing the difference between Chapters 7 and 13 is that 7 makes the debt go away, while 13 allows you to make good on the debt.

Chapter 15

Chapter 15 bankruptcy is used to deal with cross-border situations where the debtor, creditors, assets, or other involved parties are in more than one country. This form of bankruptcy allows for cooperation when more than one country is involved.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Bankruptcy makes sense for people and businesses who have significantly more debt than money and who don’t anticipate the situation changing in the near future.

Additionally, sometimes people will file for bankruptcy when they need to restructure the terms of their debt, like repaying mortgage arrears or taxes in a structured repayment plan.

In the U.S., more people (or non-businesses) file for bankruptcy than businesses. In 2021, 399,269 non-businesses filed for bankruptcy compared to 14,347 businesses.

Is a bankruptcy petition guaranteed to be approved?

Filing a petition for bankruptcy protection does not guarantee that it will be approved. There are many procedural steps that, if missed, may disqualify a filer from proceeding with the bankruptcy. There are also reviews, tests, and regulations that may impede an entity from either filing for bankruptcy altogether or may limit the type of bankruptcy filed.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Most filings for bankruptcy are due to financial hardship, like unexpected major expenses, not because of unchecked spending.

Here are the four most common reasons why people file for bankruptcy.

Medical debt

Medical expenses can quickly add up and overwhelm a household’s finances, especially when the event is unexpected. Additionally, medical expenses can often exceed what medical insurance covers, leaving people in debt. Fortunately, bankruptcy can be an effective way to address medical debt.

Divorce

Divorce can lead to financial difficulties, especially if money problems were present before the marriage ended. It also can be challenging for people to maintain the same level of lifestyle after separating since the income supporting one household may now have to support two. Also, alimony and child support obligations can add additional financial strain that can lead to bankruptcy.

Job loss

Most households have a set budget based on their income. Unfortunately, when a person loses their job, it can be challenging to keep up with expenses. For instance, the loss of a steady income can make it hard to pay your mortgage, utilities, car payments, or meet your daily living requirements. Additionally, the job loss may cause the household to lose their health insurance, leading to additional financial strain if a medical event occurs.

Credit card debt

Carrying a large amount of consumer debt on credit cards can frequently lead to bankruptcy. Credit card interest adds up quickly. Plus, this leaves the person or household vulnerable to overwhelming financial obligations if an unexpected expense occurs in addition to the debt already owed.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Before deciding to file for bankruptcy, it’s important to consider all your options. However, there are times when bankruptcy may be the best solution.

For instance, you may want to file for bankruptcy if:

• Attempts to negotiate with creditors haven’t worked
• Your debt or liabilities well exceed your assets and income
• You’ve received notice that your wages will be garnished
• Your financial situation is unlikely to change in the near future

When overwhelmed by debts, one option is to try and negotiate a payment with creditors. However, sometimes creditors are unable or unwilling to change the terms of your repayment plan. In these cases, bankruptcy may be the best option.

Interest rates adding up

Another situation occurs when you find yourself only able to pay the required minimum on debts, like credit cards or mortgages. While you may be able to make the minimum requirement, the interest rates keep adding up, especially if you’ve missed payments. The resulting high interest rates and additional debt can quickly become unmanageable.

Protect your wages

In some situations, a lender may get a court order to garnish your wages. If that happens, the lender will receive money directly out of your paycheck. If you’re already struggling financially, this can add additional strain. Bankruptcy can prevent the order to garnish your wages from going forward, either temporarily or permanently.

Other potential warning signs that you may not be able to get ahead of the debt without filing for bankruptcy may include if you’re paying one credit card with another or thinking of using money from retirement accounts to pay for debts.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

You don’t have to have a lawyer to file for bankruptcy. Instead, you can represent yourself, which is called filing “pro se.” However, representing yourself will require additional time, research, and could cost you more time and money in the event you make a mistake.

Risks of filing pro se

For instance, if you don’t file correctly, have pre-bankruptcy considerations that impact your case, or forget certain documents, the court can dismiss your petition.

Additionally, you could lose assets. For instance, you may not be aware of exemptions for your current state, especially if the exemptions had recently changed. As a result, you could lose an asset that otherwise could have been protected.

Evaluate your situation

When making this decision, you’ll want to consider the complexity of your situation, the type of bankruptcy you’re filing, and your comfort level in completing the paperwork and conducting the necessary research. For instance, filing a straightforward, Chapter 7 bankruptcy where few to no assets are involved may be possible to conduct pro se.

However, more complicated forms of bankruptcy, like a complex Chapter 7 or Chapter 13 filing, are more likely to require the assistance of a lawyer. For instance, a Chapter 13 filing also requires you to create a proposed repayment plan, typically requiring specialized software.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Bankruptcy helps you resolve many kinds of unsecured debts, like personal loans or credit card debt. But, filing for bankruptcy doesn’t discharge all types of debts.

The U.S. Bankruptcy Code specifies 19 categories of debts that can’t be discharged for Chapters 7, 11, and 12. Chapter 13 bankruptcy has a more limited list.

Common types of non-dischargeable debts

That said, the most common types of non-dischargeable debts include:

• Child support and alimony
• Willful and malicious injury to property or another person
• Some types of unpaid taxes like tax liens
• Income taxes within the last three years (and sometimes longer)
• Personal injury or death caused by the debtor using a motor vehicle while under the influence of alcohol or other substances
• Those not listed in your bankruptcy filing

Federal student loans are difficult to resolve through bankruptcy, but sometimes can be discharged, although you’ll have to file a separate action.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Bankruptcy sometimes is the right solution to overwhelming debt and financial burden, but it’s not the only option. Therefore, it’s important to consider all options, including the pros and cons, before proceeding with filing for bankruptcy.

For instance, bankruptcy has consequences that can impact you for years. A Chapter 13 bankruptcy will be on your credit report for 7 years and a Chapter 7 will remain for 10 years. And you are more likely to have higher insurance rates.

Additionally, bankruptcy can make it harder to obtain loans with reasonable rates and impact your employment. For instance, bankruptcy can interfere with some jobs that require security clearance. If you’re a homeowner, you could lose your home to foreclosure. Therefore, you may want to consider debt relief alternatives before filing.

Debt settlement

One alternative is attempting to negotiate with your creditors without involving the courts, such as through debt settlement. For instance, if you can’t make your mortgage payments, you could call your loan servicer to discuss options other than filing for bankruptcy, like forbearance.

You could also work with a certified credit counselor to devise a plan to restructure your debt. This can allow you to repay your debt gradually without involving the courts and any consequences of bankruptcy.

Debt settlement options can often allow you to reach an agreement with creditors where you pay less than what you owe. You can select a debt settlement company or do it yourself. Typically for this to work, you must be in default.

However, before hiring a debt settlement company, research their track records and don’t use companies that require you to pay a fee upfront.

Debt consolidation

Debt consolidation can allow you to save on interest and consolidate your payments so you’re not paying multiple bills each month. For this to work, you’ll need to obtain a credit line or loan that will let you pay off your debts, like a personal loan or home equity loan.

While you can do this yourself, you may want to consult with a qualified credit counselor or financial advisor before consolidating to ensure it’s the right choice for you.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Filing for bankruptcy is a financial decision that can have long-term financial, business, and life impacts. A qualified lawyer can ensure that you make decisions that are aligned with your unique circumstances and financial needs.

Specific support from an attorney will vary based on the type of bankruptcy you file and the requirements of the court you file in.

Main areas in which your lawyer will guide you

• Determining whether or not bankruptcy is the appropriate course of action based on your circumstances.
• Analyzing your debt and determining which balances can be discharged by bankruptcy and which debts stay with you (such as student loans and most back taxes).
• Choosing the type of bankruptcy that pertains to your specific situation.
• Understanding whether or not you will be able to keep your home, car, or other property.
• Assessing the tax consequences of bankruptcy and whether you should continue to pay your creditors.
• Explaining bankruptcy law and guiding you through the procedures and strict deadlines.
• Completing and filing forms. Paying fees correctly and on time.
• Knowing when to appear in court, what to say, and what documents to present.
• The steps for filing bankruptcy are explained in the Bankruptcy Code and also in The Federal Rules of Bankruptcy Procedures which you can find at most libraries. The USCourts.gov website warns that:

“Misunderstandings of the law or making mistakes in the process can affect your rights. Court employees and bankruptcy judges are prohibited by law from offering legal advice”

Before attempting to file bankruptcy on your own (filing per se) it is important that you realistically assess your capacity for understanding complex codes of law, completing legal documents, meeting strict deadlines, and presenting cases to court officials.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Ironically, despite a bankruptcy filing being a life-changing event, the debtor had limited contact with the court, especially if represented by an attorney. In very rare instances will the debtor actually meet the judge, as all court interaction is through the Trustee.

Trustee

When meeting with the Trustee and/or creditors, petitioners are expected to be 100% truthful in their responses. Any lies, omissions, or falsification of documents may constitute bankruptcy fraud, a federal offense punishable by law.

The filer must be prepared to complete many forms and provide extensive financial documents such as bank statements, tax forms, pay stubs, investment records, deeds, credit card and loan statements, expense reports, receipts, and more

Deadlines

During bankruptcy proceedings, it is crucial to pay attention to deadlines. Attorneys provide clients with important dates such as when to complete credit counseling and make court appearances. For individuals that are self-representing (a per se filer), meeting all deadlines is imperative to avoid having the case dismissed.

Patience

Finally, petitioners benefit from having patience. The number of filings can vary from year to year and even from week to week, putting pressure on court resources that are often already stretched thin. Even in best-case scenarios, bankruptcy discharges can take months.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

A primary reason individuals and businesses file for bankruptcy is to have their debts discharged or reorganized. Under a debt reorganization, such as a Chapter 11 or Chapter 13 Bankruptcy, the filer works with court representatives to restructure their debts into a reasonable repayment plan. They keep the debt, yet often interest and fees are paused during the repayment period, and in some cases, a lower repayment amount is negotiated.

Other bankruptcy proceedings, such as Chapter 7, receive a “discharge,” which is a court order stating that the filer does not have to repay their debts. A discharge may not apply to all of the filer’s debt as some debts are not eligible for discharge, including:

• Alimony
• Child support
• Most taxes
• Most student loans
• Court fines and criminal restitution
• Personal injury caused by driving drunk or under the influence of drugs.

The discharge only applies to debts that arose before the date you filed. Also, if the judge finds that you received money or property by fraud, that debt may not be discharged.

It is important to list all your property and debts in your bankruptcy schedules. If you do not list a debt, for example, it is possible the debt will not be discharged. The judge can also deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, or lie, or if you disobey a court order.

You can only receive a chapter 7 discharge once every eight years. Other rules may apply if you previously received a discharge in a chapter 13 case. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign a reaffirmation agreement (see below) or any other kind of document to do this.

Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car). You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.

What Is a Reaffirmation Agreement?

Even if a debt can be discharged, you may have special reasons why you want to promise to pay it. For example, you may want to work out a plan with the bank to keep your car. To promise to pay that debt, you must sign and file a reaffirmation agreement with the court. Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law.

Reaffirmation agreements–

• must be voluntary
• must not place too heavy a burden on you or your family;
• must be in your best interest;
• can be canceled anytime before the court issues your discharge or within 60 days after the agreement is filed with the court, whichever gives you the most time.

If you are an individual and you are not represented by an attorney, the court must hold a hearing to decide whether to approve the reaffirmation agreement. The agreement will not be legally binding until the court approves it.

If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

The Federal Bureau of Investigation (FBI) estimates that 10 percent of all bankruptcy filings involve fraud. According to UScourts.gov 413,616 bankruptcies were filed in the U.S. in 2021. That means that over 40,000 cases were fraudulent.

In discussing bankruptcy fraud, most people assume it means a person or company who has inappropriately filed for one of the six types of bankruptcy in order to avoid paying debts. That is true, however, bankruptcy fraud can be complex and involve multiple parties. According to Britanica.com there are four primary types of bankruptcy: concealment of assets, petition mills, multiple-filing schemes, and bust-out schemes.

Bankruptcy Fraud – Concealment of Assets

The Cornell School of Law states that approximately 70% of all bankruptcy fraud is based on the concealment of assets. This refers to an individual, business, and/or third party who knowingly omits critical information or falsifies documents to hide assets that show the filer can pay their debts. In some cases, it may also involve creating false debt or obligations that make the filer seem insolvent (debt exceeds assets).

In August 2022, the Department of Justice published the case of an attorney who pleaded guilty to bankruptcy fraud and accepted the penalty of disbarment after he falsified documents to hide over $1M of his client’s assets.

Bankruptcy Fraud – Petition Mills

Petition Mills propagate a particularly insidious form of bankruptcy fraud as often the filer has no idea that they are caught up in a scheme. Representatives from mills proactive contact individuals in financial distress and/or advertise themselves as consumer advocates.

Typically, they attract individuals attempting to safeguard their housing situation, often renters seeking landlord protection. Instead of contacting landlords, mill operators file bankruptcy on behalf of the client, dragging out the process and charging high fees along the way. Victims often end up in a worse financial status, with no savings, credit impacted by bankruptcy, and the same or worse housing conflict.

Bankruptcy Fraud – Multiple Filings

At times, individuals intentionally “work the system” by filing for bankruptcy in more than one state. They may use their real identity or stolen identities. Often they intentionally limit the assets they disclose to get debt dismissed while avoiding any liquidation of their hidden assets. In addition, they may qualify for a full discharge of debt instead of a repayment plan, because the small assets make them appear insolvent (more debt than assets).

Bankruptcy Fraud – Bust Out Schemes

The courts and FBI have been more proactive in identifying and prosecuting this type of fraud. Bust Out Schemes refer to individuals who apply for one or more lines of credit and then maxes them out with no intention of repaying the best. The lines of credit may include credit cards, store cards, home equity lines of credit, and other forms of revolving credit.

Some offenders rack up debt quickly within 3 to 4 months and seek bankruptcy relief soon after. Others intentionally begin with good credit habits. They make reasonable charges and make timely and consistent payments. Over a period of one to two years, they often qualify for credit increases and continue opening different credit accounts based on their favorable credit history. Once they have accrued a high dollar amount of available credit, they increase their purchases, maxing out every available credit line. The debt is often so significant that it is impossible for them to repay and they file for bankruptcy.

This type of fraud can be difficult to provide, and only recently has prosecution of these cases become more common. Credit card companies have devised software that can detect Bust Out Scheme spending patterns, making it easier to minimize exposure, conduct investigations, and collaborate with law enforcement.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Filing for bankruptcy shouldn’t be the first option considered when you’re faced with significant debts.

Before filing, you’ll want to explore other options like debt consolidation or negotiation.

Additionally, bankruptcy doesn’t solve all financial situations or discharge all types of debt, like private student loans. So before filing, you’ll want to make sure that bankruptcy will help with your specific situation.

Here are some scenarios or reasons why you shouldn’t file for bankruptcy.

Transferred assets

You’ve recently transferred property, vehicles, or other major assets to a relative or friend, such as within the last few months.

Filing soon after making these types of transfers can result in negative consequences, such as bringing up questions of potential bankruptcy fraud, potentially jeopardizing your bankruptcy case, or having a trustee reverse the transferred assets. In this situation, you’ll want to wait before considering filing.

Student loans

Student loans are your only source of debt that you want to discharge.

While some federal student loans can be discharged, it isn’t easy, especially if you’re employed. Plus, you may have other options that won’t carry the consequences of bankruptcy.

Temporary situation

Your situation is temporary, and you know that your financial prospects will be improving soon.

In this case, you may want to wait and see if your new or higher income will be sufficient to help you repay your debt.
Taxes are your main source of debt. Many types of taxes can’t be discharged through bankruptcy. Additionally, the taxes typically must be at least three years old to qualify.

Risk of losing assets

You’re at high risk of losing assets if you file for bankruptcy.

Exemption laws for assets vary per state. So if you have certain assets you don’t want to lose, like your home or car, you may want to talk with a bankruptcy attorney to see if those assets are exempt or not.

Repayment plan

You haven’t yet attempted negotiation or debt consolidation options.

Sometimes creditors will work with you to negotiate a repayment plan or even excuse you from some of the debt. This approach can allow you to avoid filing for bankruptcy, get out from under your debts, and the creditor will receive at least some of the debt owed.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.

Bankruptcy can help you discharge overwhelming debt, but it also impacts your credit, job, and personal relationships.

Getting a mortgage after bankruptcy

A bankruptcy shows on a credit report for 7 to 10 years from the date filed, depending on the type of bankruptcy. In the vast majority of cases to even be eligible for a mortgage, you have to wait a minimum of years. And even if you are eligible, it can be extremely difficult to obtain a mortgage from a lender.

Getting a credit card after bankruptcy

Similar to obtaining a mortgage, you may find it hard to get a credit card after bankruptcy since the bankruptcy will show on your credit report.

Lenders may be unwilling to provide you credit or may only offer options with high-interest rates or unfavorable terms.

Getting a car after bankruptcy

You may need to get a car before a bankruptcy falls off your credit report. Fortunately, it is possible to get a car, but it is not simple. For instance, auto loan lenders are likely to only offer you loans with higher interest rates or less favorable terms due to your bankruptcy.

If you know you’re going to need a car after bankruptcy, you’ll want to wait to buy for as long as possible. Use that time to rebuild your credit so you can get more favorable terms on a loan. Additionally, you can set aside more money for the car so you can make a bigger down payment or pay for it with cash.

Getting hired after bankruptcy

Employers often check applicants’ credit as part of the hiring process, especially if the job involves a security clearance, finance, accounting, or handling valuable merchandise.

A government employer can’t deny you a job solely due to past bankruptcy, but it may be a factor they consider. Private employers, however, could decide not to hire you based on a previous bankruptcy filing.

One additional scenario to consider is if you hold a professional license. You may be required to report it to the licensing board or risk losing your license, potentially impacting future jobs.

Bankruptcy’s impact on your marriage

If you’re married, you or your spouse can file for bankruptcy, or you can file jointly. However, all of these situations can impact your significant other, so it’s important to understand the consequences before one or both of you file.

If you or your spouse files but the other doesn’t, only the debts of the person who filed will be discharged. So the non-filing spouse will still owe on any jointly held debts. But only the filing spouse’s credit report will show a bankruptcy filing.

Additionally, any assets held solely by the non-filing spouse can not be used in the filing spouse’s bankruptcy. So it’s important to consider how assets are held before deciding.

Lastly, you can file jointly, creating one case filed under both parties’ names.

Bankruptcy’s impact on child support payments

Bankruptcy does not discharge past child support owed or modify future payments. However, since it’s a “priority debt,” it will get paid first by any available money.

Regardless of the type of bankruptcy filed, you will be responsible for any remaining child support balance and future payments even after you receive a discharge.

However, bankruptcy can still help you meet child support obligations since you may not have payments to make to other creditors, so you can use that money towards child support. Or, if you’ve filed a Chapter 13 bankruptcy, the repayment plan will help reorganize all debts so you meet your child support obligations.

Bankruptcy’s impact on your taxes

You’re still required to file your income taxes even if you’ve filed bankruptcy. Additionally, as discussed earlier, most tax debt can’t be discharged through bankruptcy. So if you owe taxes, it’s unlikely to be erased.

If you get a tax refund the year that you file for your bankruptcy, your tax refund is often considered an asset and can be used to pay creditors.

Bankruptcy’s impact on your retirement / 401k

Most of the time, your retirement or 401k plan is protected during bankruptcy by the Employee Retirement Income Security Act (ERISA). This act prevents trustees from selling your savings to pay off debt, as in a Chapter 7 bankruptcy. However, you’ll want to check that your retirement plan qualifies.

There are some circumstances where the protections don’t apply. For example, if you transfer funds from your 401k to a non-exempt account, that money may be at risk.

This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.