Common Bankruptcy Questions

1. WHAT DEBTS ARE NOT DISCHARGEABLE?
The most common debts that are cannot be discharged are tax debts, debts obtained by fraud or false statements, alimony and support payments, debts from injury to another person, fines, and student loans. All of these have exceptions depending on the individual situation, but are generally not dischargeable.

2. WILL MY CREDITORS CONTINUE TO COLLECT DEBTS?
No, creditors must stop all debt collection actions the moment a bankruptcy petition is filed. They must cease lawsuits, wage garnishments, letters, and telephone calls. This is called the Automatic Stay. Some creditors can get the Automatic Stay lifted to continue to collect a debt, but this must be granted by the Bankruptcy Judge, and the debtor has the opportunity to argue against such an exception.

3. DOES MY SPOUSE HAVE TO PARTICIPATE?
No, it is very common for only one spouse to file bankruptcy. If both spouses are liable for problematic debts, they can file together to have those debts discharged. If they do not file together and both spouses are liable for a debt, the non-filing spouse will still be responsible for the debt after the bankruptcy is concluded. Only the debtor who filed can discharge their liability. There are many situations where it makes more sense for only one spouse to file for bankruptcy.

4. HOW DOES BANKRUPTCY AFFECT MY CREDIT RATING?
Bankruptcy will lower a credit rating, however, most people filing for bankruptcy have already seen their credit rating decline due to their debt problems, so the bankruptcy doesn’t always have any real effect. Additionally, after a bankruptcy is concluded, most debtors are able to begin rebuilding their credit immediately. There are steps to help better your credit and many financial institutions will extend credit after a thorough examination of your situation.

5. WILL MY EMPLOYER FIND OUT?
Employers are not notified, unless you owe them money, or unless a creditor is garnishing your wages. Should your employer become aware of your bankruptcy, it is illegal to discriminate against you because you have filed for bankruptcy.

6. WHAT HAPPENS TO MY PROPERTY?
In the vast majority of bankruptcy cases, the debtor does not lose any of his or her property. A debtor gets a set of exemptions that can be used to keep assets out of bankruptcy and protect them from creditors. Unless a debtor no longer wants a certain asset, he or she usually has no problem keeping a house, automobiles, retirement accounts, and any personal property.

7. WHAT HAPPENS AFTER THE PETITION IS FILED?
The Court will schedule the “Meeting of Creditors” about 1 month after filing. At this hearing the debtor and the trustee discuss the petition, verify that all information is accurate, and review the debts listed. Creditors are allowed to attend and question the debtor as well, although in reality, they almost never do so.

8. WHAT IS THE ROLE OF A TRUSTEE?
The trustee is appointed to examine the debtor, collect nonexempt property, and pay expenses of the estate and claims of creditors. The trustee is also in charge of making sure the debtor performs all of their duties and cooperates with the bankruptcy court.

9. WHAT IS THE ROLE OF AN ATTORNEY?
The debtor’s attorney performs many functions for the benefit of the debtor. First, they will analyze your debts and determine whether bankruptcy is the best option. If it appears that bankruptcy is the right choice, the attorney will gather the necessary information and prepare the Petition for filing. The attorney will help you retain as many of your assets as possible, assist in retaining assets that you plan to keep, prepare you for the meeting of creditors, and appear before the court whenever necessary. The attorney will attend the “Meeting of Creditors” and any other hearings that may be held. The attorney is there to guide the debtor through the process, prepare court papers, update court information, and overcome any obstacles that may arise.