The answers provided below contain only general principles of law and is not a substitute for legal advice. Readers who have questions or need further information as to how bankruptcy laws apply to their specific case, should consult an attorney.

 

FAQHow do I know if it is the time to file bankruptcy?

If you are deeply in debts, and your creditors are taking actions against your assets and income, you may want to consider filing bankruptcy as one of your options.  Before filing bankruptcy, you should consider if other options are available.  Other options include working out or restructuring debts, defending creditors in court, etc.  

 
What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is often referred to as "straight bankruptcy" and it is the most commonly used way to discharge debts.  Most, if not all, of the credit card debts, gambling debts, and other unsecured debts are discharged during the proceeding.  

 
Is it okay to charge up my credit card bills and then file for bankruptcy?

Generally speaking, it is not okay to charge up luxury items or take out cash advance during the 90 days before filing bankruptcy.  It is also not okay to charge credit cards when you know you do not have the ability to pay back.   

 
Are gambling debts dischargeable?

Yes, gambling debts, if unsecured, just like any other unsecured debts, and are mostly dischargeable. However, if you obtained credit by signing markers in, say, state of Nevada, you may face criminal charges, or a non-dischargeability action in bankruptcy court.

 

Do I have to pay my bills during bankruptcy?

On secured debts, if you wish to keep the secured property, such as car or home, you should pay your payments during bankruptcy.  If they're unsecured debts, such as credit card debt, you do not have to pay the debt during bankruptcy.

 
About how long does it take to complete the bankruptcy process?

In Chapter 7 cases, the process will take about 3-4 months.  In Chapter 13 cases, it will last until the end of the installment plan which is about 3-5 years.

 
Can I keep my existing property, such as my car and house?

Car, house, personal effects, and other property can be kept if they are within the limit of the exemption.  

 

What is Chapter 13 bankruptcy?

Under a Chapter 13 bankruptcy case, a debtor proposes an installment repayment plan to pay off some or all of the debts within 36 months or 60 months if the court allows.  To file, you must have regular income.  

 

What is the difference between Chapter 13 bankruptcy and Chapter 7 bankruptcy?

In Chapter 7 bankruptcy, all assets, minus statutory exemptions, are turned over to the trustee and liquidated. In Chapter 13, you are allowed to keep assets beyond the exemption amount.  Chapter 13 sometimes is preferable in situations where debtors have valuable nonexempt property, have above median income, wish to stop foreclosure, seek to reduce taxes, or need time to pay their overdue payments.

 

Will filing bankruptcy stop actions from my creditors?

Yes, federal law imposes a conditional "automatic stay" at the time of filing which precludes most of your creditors from taking any action to collect debts against you.  

 

Will filing bankruptcy stop lawsuits from my creditors?

Yes, the "automatic stay" also applies to pending lawsuits from your creditors.

Will I have to go to court?

Unless the Trustee, the U.S. Trustee, or your creditor files a claim for nondischargeability, or other types of claims or motions, most bankruptcy cases requires only one or more meetings with a bankruptcy trustee.

 

How would bankruptcy affect my credit?

The record of filing may stay on your credit report for up to 10 years.  However, you can rebuild your credit right after the discharge.  For example, you may obtain secured credit cards, sub-prime credit cards, gas cards, or department store cards easily.  And you can regain an A- credit rating within just a few years of discharge.

 

What is a 341 (a) meeting?

Even though this is called a meeting of creditors, it is actually a meeting where the bankruptcy trustee will ask questions to the debtor under oath regarding his/her assets and debts.  The questions are usually short and easy to answer and the entire session will last only a few minutes.  The meeting itself will last anywhere from 1-2 hours depending on the calendar congestion.

 

How much time do creditors have to object to the discharge of the debts?

Creditors will have 60 days after the meeting to object to the discharge of the debts.  After the 60 days, the court, in most of the cases, will issue an order of discharge.  Corporations do not receive a discharge.

 
Who is a Chapter 7 Trustee?

In chapter 7 cases, a trustee, who is a private individual appointed by the United States Trustee, has the responsibility to administer the bankruptcy estate, which consists of all non-exempt property of the debtors. It is the duty of the trustee to identify, collect and turn into cash the debtor's non-exempt assets.

 

What is a discharge?

A discharge is a court order that says debts do not have to be repaid, with some exceptions. Debts that cannot be discharged include, for example, most taxes, child support or alimony, most student loans, court fines and criminal restitution, debts incurred through fraud or deception, and personal injury debts caused by drunk driving or under the influence of drugs.

 

What are the potential effects of a discharge?

It can appear on an individual's credit report for as long as 10 years. If credit is not rebuilt after the discharge, it may impair the ability to obtain credit in the future.

 

What is Chapter 11 bankruptcy?

Chapter 11 is for reorganization of a business, which is the most commonly used by businesses but is also available to individuals. The debtor proposes a repayment plan, often at a discount, and creditors vote on whether to accept or reject the plan, which also must be approved by the court.

 

What is Chapter 12 bankruptcy?

Chapter 12 offers relief to those who qualify as family farmers. Family farmers must propose a plan to repay their creditors over a three-to-five year period, which must be approved by the court.

 

What is "Chapter 20" bankruptcy?

Some refer the combination of chapter 7 and 13 as chapter 20 bankruptcy. This is not an official term and there is no such chapter bankruptcy under the code. A debtor files a chapter 13 and proposes a plan. When the plan does not work out, the debtor switches to chapter 7 for a liquidation of his assets; or a debtor files a Chapter 7 to discharge all dischargeable debt and then later files a chapter 13 to pay mortgage arrearages, priority taxes, student loans and other priority claims in installments.

Disclaimer: Materials on this website have been prepared by Law Offices of Michael Y. Lo for general informational purposes only. They are not legal advice. The transmission and receipt of information, through viewing, printing, e-mail or otherwise, is not intended to create or constitute an attorney-client relationship. Persons should not rely or act upon the information without seeking professional counsel. If these materials are not consistent with the rules governing attorney communications in a particular state, and the materials result in client contact in the state, Law Offices of Michael Y. Lo will not assume the representation of clients from those states. The materials contained herein do not constitute an offer to represent you. These materials may be considered advertising not complying with State Bar requirements in your state. 

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