Frequent Questions about Bankruptcy
Are certain debts non-dischargeable?
Yes. The most common non-dischargeable debts are alimony, child support, certain property settlement agreements, certain income tax liabilities, Department of Revenue sales tax liability, Internal Revenue Service pay roll tax liability or trust fund liability, and many student loans. In addition, certain debt created by fraud, embezzlement, or conversion can be found to be non-dischargeable.
Do I have to list all of my creditors?
Yes. Bankruptcy law requires a full and complete disclosure of all debts owed. Bankruptcy schedules are signed under the penalty of perjury and the debtor will be asked under oath at the meeting of creditors if all debts were disclosed.
Can I transfer ownership of my home, car, boat, collectibles, tools, etc. to someone else to keep those items out of bankruptcy?
No. Such transfers will almost invariably violate federal and state’s fraudulent transfer statute and 11 U.S.C. §548 of the Federal Bankruptcy Code. A Chapter 7 debtor who has been found guilty of such transfers may lose his entire discharge. In addition, the debtor may be subjected to criminal prosecution. A trustee has the power to set these transfers aside. The trustee can also ask for the case to be dismissed for a bad faith filing. Moreover, federal law could be invoked to initiate criminal proceedings based on bankruptcy crimes.
Are NSF (non-sufficient funds) checks dischargeable in bankruptcy?
Often, the answer is yes because creditors usually elect not to go through the expense of challenging it under federal law. However, bankruptcy does not prevent the creditor from trying to get the state attorney’s office to threaten prosecution to force restitution on the NSF checks.
Are certain debts dischargeable in Chapter 13 that are not dischargeable in Chapter 7?
Yes. Credit card fraud, embezzlement, larceny, defalcation, conversion, and certain IRS debt owed by non-filers can be discharged in Chapter 13. Alimony, child support, student loans, personal injury in DUI cases and certain IRS debt are not dischargeable in either Chapter 7 or Chapter 13.
Will my credit union or bank close my bank accounts if I file bankruptcy?
It depends. If a credit union is going to sustain a loss, most credit unions will ask the customer to leave the credit union. However, if the debtor reaffirms the debt to the credit union, the credit union usually will not ask the debtor to leave the credit union. Most banks will not take such action. This situation should be discussed with your attorney.
Will my bankruptcy affect a co-signer on the debt?
Yes. The bankruptcy will not protect the non-filing co-signer. The creditor may continue to try to collect against the co-signer. Creditors have this right even if the bankruptcy is never filed. Additionally, the co-signer’s credit bureau report will almost always show the joint debt was included in bankruptcy. These situations should be discussed with your attorney.
Can my employer fire me for filing bankruptcy?
No. The anti-discrimination section of the Bankruptcy Code precludes a public or private employer from discriminating against any employee solely because he or she filed for bankruptcy.
How long does bankruptcy remain on my credit bureau report and can I obtain credit before that time period ends?
A bankruptcy can be kept in the public records section of your credit bureau report for 10 years. Once your discharge is entered, if certain income and employment conditions are met, new automobile financing is immediately available at most car dealerships. If certain conditions are met, new mortgage financing may be available after discharge with a substantial down payment. VA and FHA financing becomes available two-three years after discharge. Credit card solicitations usually begin almost immediately after discharge.
What is credit counseling and must I take it?
To be eligible to file a personal bankruptcy, all debtors must undergo credit counseling from an approved credit counseling agency. The course usually lasts about one hour and costs about $15-$25. Upon completion of the course, the debtor will be issued a credit counseling certificate. This course is required to be taken in order to be able to file bankruptcy. If a debtor files bankruptcy without taking the course, the case will be automatically dismissed.
What is financial education and must I take it?
To be eligible for a bankruptcy discharge, all debtors must take a financial education course from an approved provider. The course usually lasts two hours. The course cannot be taken until after your bankruptcy has been filed and you have been assigned a case number. Upon completion of the course a certificate will be issued to you. The certificate must be filed with the bankruptcy court before your projected discharge date. If you become eligible for discharge and have not completed the course and filed the certificate with the court, your case may be closed without a discharge being issued. You must then pay to have your case re-opened for the sole purpose of filing your certificate of financial education completion.
Is there life after bankruptcy?
Absolutely. Credit can be re-established and should be used discreetly and only as reasonably necessary.