Common Bankruptcy Questions
Bankruptcy exists to give debtors a new start. But, before they take advantage of this opportunity, they should clearly understand the process and its consequences. Bankruptcy also exists to protect creditors to the extent possible; not only will a debtor likely have to pay off at least some of their debts in bankruptcy, they can be forced to sell property, and will experience long lasting effects to their credit score. Common bankruptcy questions include the cost, the impact on a spouse, and the difference between popular bankruptcy chapters.
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Can I File Bankruptcy Without a Lawyer?
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The short answer is yes, you can represent yourself and file bankruptcy without a lawyer. Then again, you can defend yourself against murder charges or tax evasion, but that doesn't make it a good idea. The paperwork required during the bankruptcy process is detailed and can get technical. At best, mistakes in your documents can result in your case being dismissed. At worst, it can result in criminal charges if you misrepresent your financial picture. Unless you have very few assets, it's probably worthwhile at least consulting with an attorney for bankruptcy.
What Does It Cost?
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Many people are surprised to learn it actually costs money to declare bankruptcy. First there is the cost of the mandatory credit counseling, which can run from $50 to $100. Then there's the filing fee, anywhere from $250 to $300 in most states. And this is not counting attorney's fees and other potential costs. The good news is that if you truly cannot afford these charges, most credit counseling services and all bankruptcy courts allow petitions for fee waivers. If the cost of paying for bankruptcy will cause a legitimate hardship, you can usually gain access to the system free of charge.
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What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
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Chapters 7 and 13 are the common bankruptcy chapters for consumers, but the differences between them are profound. Under chapter 7, the trustee sells off any property you have that is not exempt (basic essentials and some financial assets like insurance, as determined by state law). The proceeds of the liquidation is divided amongst your creditors and any remaining non-priority debt is permanently forgiven. Under chapter 13, you keep your property--and your debt. You have the opportunity to renegotiate the terms, however, and draw up a 3 or 5-year repayment plan. Each month, you make a mandatory payment to the trustee, who divides it amongst the creditors according to the plan.
Does My Spouse Have to File Bankruptcy With Me?
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Probably. Your spouse might not be involved in your bankruptcy at all if his name is not on the debts in question. If, however, you live in a community property state, or have debts in a joint account, your spouse is as liable as you are and can become solely responsible if he doesn't file a joint bankruptcy petition. Because most spouses tend to thoroughly mingle their assets, property and debts, joint filings are typical for married debtors.
How Often Can You File?
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The myth that there's a limited number of times you can file for bankruptcy is not true. But there are limitations as to how often you can file depending on the type of bankruptcy. Chapter 7 can be filed 8 years after a previous chapter 7, or 6 years from a previous chapter 13 filing. You can file chapter 13 4 years from a previous chapter 7, or 2 years from a prior chapter 13 filing.
How Long Does Bankruptcy Stay on a Credit Report?
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A bankruptcy filing will appear on your credit report for 10 years. It should, but won't necessarily, disappear after that time. It might be necessary to contact a credit reporting agency to have the bankruptcy removed. Even after removal, however, an employer can ask whether you've ever filed bankruptcy. Also, some government and financial institutions might have record of your bankruptcy on file even if it is no longer on your credit report.
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References
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