Important Information to Review Before Filing for Bankruptcy

If you find yourself drowning in debt, are unable to meet your financial obligations and have creditors calling every day then you may want to consider filing for Chapter 7 or Chapter 13 bankruptcy. However, filing bankruptcy is a very serious decision, and one that will have a lasting impact on your credit report and your ability to get a credit line for years to come. In addition, filing for bankruptcy can be an emotional and tiring process, as it can come with feelings of embarrassment and guilt. The Trump administration recently mentioned making it possible to expunge student loan debt through bankruptcy, but that is not yet an option. It is important to review all of the consequences and make sure you are only filing as an absolute last resort. Below we have provided answers to the most common questions people have about bankruptcy to help you decide whether or not bankruptcy is the right choice for you. 

Frequently Asked Questions ( 9 )   Add a Question

  1. What is the difference between Chapter 13 and Chapter 7 bankruptcy?
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    Individuals and businesses who qualify for Chapter 7 bankruptcy are those who the court decides have no or very little ability to pay debts now or in the future. Chapter 13 on the other hand, allows you to reorganize your debts and make a payment plan to pay back part of what is owed to your creditors over time.

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  2. What is the cost to file for bankruptcy?
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    For Chapter 7 the fee is $306 and for Chapter 13 the fee is $281. Some courts may add an additional administrative fee. You can pay the fee in installments if you do not have the funds upfront. If you are filing for Chapter 7, the court may also decide to waive the fee.

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  3. Do I need an attorney?
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    While you can file the paperwork with the court directly, it is advisable to use a qualified attorney. Bankruptcy proceedings can be complicated and it is best to use an attorney to ensure your rights are being protected. Many bankruptcy attorneys will work with you on a payment plan for their fees.

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  4. Can I be fired for filing for bankruptcy?
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    No federal bankruptcy law specifically prevents the government as well as private employers from firing you as a result of filing for bankruptcy protection. However, filing for bankruptcy does not prevent your employer from terminating you for other reasons such as poor job performance.

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  5. What is pre-filing bankruptcy counseling?
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    This is a requirement of a bankruptcy filing. You must obtain a certificate from a qualified bankruptcy counseling agency and present it to the court. This requirement is to help ensure that you understand the process of the bankruptcy process. You will also need to attend a 2-hour pre-discharge course to help you make better financial decisions in the future.

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  6. What are the short-term effects of filing for bankruptcy?
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    Once you file for bankruptcy an Automatic Stay goes into place. This means creditors have to stop contacting you and stop collection efforts. If you are being sued by a creditor, the lawsuit stops in addition, your home cannot be foreclosed on during the stay. If you have an attorney, all communication from your creditors must go through your attorney.

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  7. Are all debts eliminated through a bankruptcy filing?
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    No, there are some types of debts that cannot be discharged through bankruptcy. They include: mortgage payments, car payments, spousal or child support, student debt and past-due tax payments. There are limited exceptions to this that your attorney can advise you on.

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  8. How long does a bankruptcy case last?
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    If you are filing for Chapter 7 bankruptcy you can expect the debt discharge process to take between three and five months. If you are filing for Chapter 13, then you can expect the repayment plan to last between three and five years.

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  9. Will anyone lend me money again?
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    Yes, but it will take time and work on your end. A Chapter 13 filing remains on your credit report for seven years and a Chapter 7 for ten years, during this time you will find it hard to get a credit line at a reasonable rate.

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