Frequently Asked Questions
Here are some common questions my clients in Northeast Ohio often ask during the initial consultation or throughout the bankruptcy process:
- I have been sued and the creditor obtained a judgment against me. What can the creditor do to me? Answer
- Can I stop paying my utilities? Answer
- Can I pay back relatives or friends before I file bankruptcy? Answer
- If I owe money to the same bank I do my banking with, can the bank take money from my account to pay for the debts owed to the bank? Answer
- Will I lose my tax refund in the bankruptcy? Answer
- Do I have to do credit counseling and when? Answer
- Will I have to see a judge or the inside of a courtroom as part of this process? Answer
- How long will it take to receive my discharge? Answer
- What happens when I get my discharge? Answer
- How will filing for bankruptcy affect my credit rating? Answer
- How long does a bankruptcy stay on my credit report? Answer
- What types of information does my attorney need to do a bankruptcy? Answer
- How important is it to retain an experienced attorney? Answer
- Will I lose everything if I file bankruptcy? Answer
- How much do I have to owe to qualify for filing bankruptcy? Answer
- Can anyone discriminate against me for filing bankruptcy? Answer
Prior to the filing of the bankruptcy, the creditor can garnish your wages, garnish your bank accounts and put a lien against your home. The bankruptcy will stop the garnishments. It may be possible to get rid of the lien in bankruptcy by filing a Motion to Avoid the Judgment Lien.
You should continue paying your utilities to avoid a cutoff. You can include high balance utilities in the bankruptcy but may be required to pay an additional security deposit to continue receiving the service.
You should not pay back relatives or friends before you file your bankruptcy. There is a one-year look back period for repayments to insiders and the trustee can attempt to recover these funds from the person you repaid.
Sometimes banks retain the right to offset your account and, thus, do not have to file a lawsuit and obtain a judgment to take money from your account for debts owed to the bank on which you are behind. The bank cannot offset your account after the bankruptcy is filed.
Under certain circumstances, tax refunds are taken in the bankruptcy. You should discuss this in detail with your attorney.
You have to do 2 creditor counseling courses. The first one is approximately one hour long and you must do this before your bankruptcy can be filed. The second one is approximately 2 hours long and you must do this in order to obtain your bankruptcy discharge. You may take your counseling course on-line, over the phone, or in person.
You will not have to see a judge or the inside of courtroom, except under very unusual circumstances. You should only have to make one appearance in this case and that is with a trustee. Every case is assigned a trustee. The trustee will ask you questions in a meeting called the “Meeting of Creditors.” It is unusual for the creditors to come to this meeting. This should be the only appearance you have to make in your case. During the meeting, the trustee will review your bankruptcy schedules that have been filed with the Court and ask you certain questions, most of which are designed to find out the value of your property.
In a Chapter 7 bankruptcy, you receive your discharge approximately 4 to 5 months after your bankruptcy is filed. In a Chapter 13 bankruptcy, you will receive your discharge after your Chapter 13 plan ends–3 to 5 years from the date of the filing of the bankruptcy.
The creditors are prohibited from attempting to collect on those debts that have been discharged in bankruptcy.
Filing bankruptcy will negatively impact your credit score. However, filing bankruptcy can be the first step in improving your credit rating. In fact, many people come to me with the goal of rebuilding their credit by filing a bankruptcy.
Because you have no more negative credit reporting after the bankruptcy is filed, you should begin to see your credit score go back up. There are financial institutions that are willing to extend you credit if you are willing to pay the higher interest rates. Many people begin to qualify for home loan financing 2 years after they obtain their discharge.
The more time that passes, the less the bankruptcy will negatively impact your credit rating.
In a Chapter 7 bankruptcy, the bankruptcy stays on the credit report for a period of 10 years. In a Chapter 13 bankruptcy, it stays on the credit report for 7 years. However, realistically speaking, what’s important in the eyes of a creditor is the credit score and this should begin to go back up because there is no more negative credit reporting.
You will have to provide a number of documents to your attorney and provide answers to numerous questions that are included in the official forms that must be filed with the court. Some of the most important documents that you must provide are bank statements and paystubs going back 6 months. The official forms that must be filed with the court total 50 to 60 pages. Your bankruptcy may be audited by the U.S. Trustee’s office and the auditor requires certain documents, including bank statements with adequate explanations of certain withdrawals and deposits.
It is very important to retain the services of an experienced bankruptcy attorney. It is very important to provide correct information to the Court and your bankruptcy petition and schedules can be audited by the U.S. Trustee’s office. An experienced attorney can help avoid having problems with an audit. Also an experienced attorney can advise you regarding the best ways to protect your property and qualify for a Chapter 7 bankruptcy or minimize payments into a Chapter 13 plan.
There are a number of exemptions provided by law, which protect you from losing your assets.
Most people can keep their homes, cars, furniture, appliances and personal belongings. There are exemptions for the tools one uses to earn a living. There are exemptions for cash value in life insurance policies and annuities, pensions, IRA, 401(k) and other such retirement accounts.
Can anyone discriminate against me for filing bankruptcy?
It is against the law for anyone to discriminate against you for filing bankruptcy. Filing bankruptcy will not affect your civil rights, nor will it affect your eligibility for Federal student loans and grants.