FAQS

Get a Fresh Start Without Total Loss

Question: What will Bankruptcy do for me?

Answer : It will give you a discharge on your debts. A discharge is an order from the Bankruptcy Court addressed individually to each of your creditors informing them that you do not owe the debt anymore. This is a legally enforceable court order.

Creditors pay a lot of money in fines if they violate it. Creditors even have to pay your attorney fees if you have to sue them to enforce your rights. Creditors know this - for the most part you never hear from them again.

Question: What will Bankruptcy do to me?

Answer: Bankruptcy is not designed to hurt you.. You turn to the Bankruptcy Court for protection, and it protects you. So many people fear that in filing for bankruptcy they are somehow committing a crime, or doing something dishonest. People fear that they will be punished for filing for bankruptcy. Please take a deep breath. This is not about wrongdoing or punishment. It is about debt relief and a fresh start. Filing for bankruptcy is a business decision, designed to permit healthy growth. It worked for Chrysler, it worked for Continental, and it works well for thousands of individuals every year. The fact that you file for bankruptcy stays on your credit report for ten years. So often people think that this means that for ten years they cannot get credit, buy a house, buy a car. It does not mean that. When your financial situation is already negative, bankruptcy improves it. When it is all over, you feel a great sense of relief.

This is how you get your fresh start. Your fresh start means that you no longer owe the old debt, and your income is available to satisfy your present and future needs.

Question: What will I have to give up?

Answer: Your debt! Remember, the bankruptcy code is not about punishing you. You don't have to give up your house or your car because you have somehow become unworthy of the necessities of life. In terms of giving something up, the only question is whether what you have is so valuable that its sale will result in substantial money for your creditors. If what you have has a mortgage (your house) or another type of lien (your car), the sale would have no benefit to your creditors. So, there is no reason that you should have to give it up. Some things have substantial value, but may still be unavailable to your creditors - this would include Individual Retirement Accounts and most other retirement plans. Congress has decided that protecting your retirement serves the national interest. You do not have to give your creditors your retirement plans. Talk this over in detail with your attorney. Every case turns on its own facts-close examination of accurate facts is critical to your financial success.

Question: How can it be this easy - why do they let me do this?

Answer: A lot of people ask some variation of this question, usually adding "I borrowed the money, I should have to pay it back:" or "I was always taught you pay your bills." Of course, we all want to pay back the money that we have borrowed, but sometimes we cannot. And sometimes, the effort to just maintain the debt load drains our energy from things we value more, like relaxed, enjoyable time time with our family. The worry about the debt can make us ill, make it hard to sleep, cause us to be withdrawn and unfriendly at work. It can even increase our chances of having an accident on the job, or while driving. When it enacted the bankruptcy code in 1978, Congress spent eight years studying these issues. Congress has the authority, under the Constitution, to enact the Bankruptcy Code. Further, it has the responsibility, under the Constitution, to protect general welfare. To protect the general welfare, congress weighs competing social interests.

On one side of the scale, Congress places the value to the country of maximum profits to lenders. On the other side of the scale, it places the value to society of your physical, mental and emotional health, your ability to turn your mind from worry, your ability to care for your family, your improved workplace performance.

Balancing these issues is Congress' special job under the Constitution. The Bankruptcy Code reflects a wholesome national policy that favors your health over maximum lender profits.

Question: What do I have to do to qualify?

Answer: Be honest. The code requires creditors to be fair, to stop collecting and to write off the debt. The code requires us to be fair as well. We are fair when we fully disclose all assets, liabilities, income, and expenses. Disclosing your assets does not mean that you will lose them. In most cases, our personal assets would have no real money value to our creditors. And, these are the things we need for our fresh start. Therefore, as a general rule, the creditors just cannot have them. However, if you have a Picasso, or the Hope Diamond, that is different. Please have the courage to talk with your attorney about what you have and what you are afraid of losing. When we openly explore all legitimate options, things work out fine.

Question: Why is it called "Chapter" 7, 13, etc?

Answer: All of Federal Law (Bankruptcy is part of Federal Law) is published in books. The books have informative and creative titles like "Title 1", "Title 2"... etc. The Bankruptcy Code is in Title 11. Because the law is published in books, the sections are divided into Chapters. Chapter 7 contains provisions for people who have nothing to lose but their debt. Chapter 13 contains specialized provisions for people who have equity they need to protect; who have negative equity they want to get rid of ; who need time to catch up on mortgage payments; who have debt which is not dischargeable in a Chapter 7 (some tax debt, debt incurred through fraud); or who do not qualify for a Chapter 7. Deciding which chapter is right for you requires a careful look at your assets, liabilities, income and expenses, as well as a discussion of your priorities and goals.

Question: What about my credit - will I ever be able to buy a house?

Answer: Please bear with me on this next statement, because it will shock you. Bankruptcy can improve your credit. It can enhance your chance to buy a house. How can this be? If you already have no debt, or debt which is perfectly manageable (that is, you are making payments that rapidly retire the debt), then you do not file for bankruptcy to improve your credit. But if that is your situation, you are not reading this website (unless you are helping out someone else). However, if you are only making minimum payments on debt that you cannot reasonably retire, if your accounts are delinquent or in collections, then you already have, or soon will have, negative credit. Bankruptcy does two things to improve your chance for a loan in the future. First it stops collection efforts, including the creditors right to report you as delinquent. Second the negative credit reporting has to stop. Also, It dramatically improves your debt to income ratio. And with any luck, when you are no longer paying old credit card, medical and other debt, you may actually be able to save money for a down payment. The fact that you file for bankruptcy stays on your credit report for 10 years, but that does not mean that you have to wait ten years before you can hope to buy a house or obtain credit for other purchases. When a creditor looks at your credit report, it is to assess whether you can pay the loan under consideration. Old debt would interfere with that. With the old debt gone, your chances are better. Combine with that your affirmative steps to reestablish your credit, and within a few years, you may qualify for a new home mortgage just like everyone else.

Question: What about debt I want to keep?

Answer: Generally, it is perfectly ok to keep some debt. People usually want to keep paying on their house or car. This is your decision - you decide what makes financial sense to you. People often want to pay debts to personal physicians. People also feel loyalty to a credit union, and want to maintain that relationship. That is fine also. Bankruptcy cuts off the creditor's right to collect from you. The creditor cannot write, call, sue, or send the debt to a collection agency. However, nothing interferes with your decision to make voluntary payments after the bankruptcy. Most importantly, almost everyone wants to pay debts to friends and relatives. Please do not do this before you file for bankruptcy. However, you can pay anyone you want after the bankruptcy has been filed.