Frequently Asked Questions (FAQs) on Bankruptcy Law

1. Can I protect my home and personal property in bankruptcy?
2. How does the Automatic Stay work?
3. Will my creditors be able to sue me after I file bankruptcy?
4. Can I keep my credit cards after filing bankruptcy?
5. How are creditors notified when I file bankruptcy?
6. How long does a bankruptcy case take?
7. Do I have to go to court?
8. What happens in a Meeting of Creditors?
9. How does bankruptcy affect my credit and how long will it stay on my credit report?
10. How do I re-establish credit following bankruptcy?
11. If I have filed for Chapter 7 Bankruptcy in the past how long do I have to wait to file again?
12. Can my employer discriminate against me for filing bankruptcy?

Can I protect my home and personal property in bankruptcy?

Certain property, called “exempt property,” is not lost in a bankruptcy. Notwithstanding the fact that you may owe substantial debt, the law provides that you are entitled to protect certain assets, such as, the equity in your home or auto. It also allows you to keep specified amounts for clothing, home furnishings, claims, bank accounts, and other assets. Refer to Exempt Property. So the answer is a qualified “maybe.” The answer depends on the value of the property. In the event your property exceeds the exemption amounts, the property may be sold or liquidated by the trustee in a Chapter 7 bankruptcy to repay creditors.

How does the Automatic Stay work?

Upon filing of the Bankruptcy Petition to the court the AUTOMATIC STAY immediately stops all creditors from seeking to collect a debt while the Federal Court assesses the individual’s situation and determines if a bankruptcy will be granted. Within 7 – 10 business days of your bankruptcy filing, the Bankruptcy Court mails a notice of the bankruptcy to all creditors listed in your petition and related schedules. You may also directly contact the creditor after the filing and supply the creditor with your case number and the date of the filing. Once notified of your filing, the creditor MUST STOP all collection efforts against you.

Will my creditors be able to sue me after I file bankruptcy?

The answer is NO. Once you file your bankruptcy, notice is give to all your creditors that the automatic stay is in force and they may not take any further action against you to collect an existing debt. This includes any phone calls, prosecution of judgments, wage garnishments, repossessions and foreclosures. Even if you have been served with a summons to appear in court regarding the collection of a debt the automatic stay immediately stops the lawsuit. The creditor’s attorney must abide by the requirements of bankruptcy law.

Can I keep my credit cards after filing bankruptcy?

It depends. When you file for bankruptcy, you must list all credit cards you have with a balance owing on the schedule of debts. If you have a credit card with a zero balance at the time of filing, it does not have to be included because that lender or servicing agent is technically not a creditor and therefore would not be discharged in bankruptcy.

For those credit cards you do have with a balance, you and the lender may make an agreement after you file bankruptcy for you to keep the account. This reaffirmation will require you and the lender to execute a document called a Reaffirmation Agreement that, in most cases, requires the approval of the Bankruptcy Court.

How are my creditors notified when I file bankruptcy?

The Bankruptcy Court Trustee will mail notices of the bankruptcy filing to all creditors listed in your bankruptcy petition within 7 - 10 business days after the filing of the petition. There are situations where you may have to contact an individual creditor directly to obtain immediate relief and provide that creditor with your case number and the date of your filing the petition. Once notified by either you or the court, the creditor must immediately cease all collection efforts.

How long does a bankruptcy case take?

As with all legal proceedings there are factors that will determine the exact time that your case will take. Generally, a Chapter 7 bankruptcy will last between 4 - 6 months. Your duty, once you have filed bankruptcy is to appear at court one time for the Creditor’s Meeting. For Chapter 13 cases the case will take between 3 - 5 years to complete and you will have to make payments to the bankruptcy court on a regular basis, typically monthly.

Do I have to go to court?

For Chapter 7 there is one mandatory appearance that you will have to attend. This is the Meeting of Creditors which typically occurs 20 - 40 days after the petition is filed.

For Chapter 13 you are also required to appear at the Meeting of Creditors. Additionally, you may have to appear at a Confirmation Hearing where the court will consider final approval of your plan for repayment. The hearing typically occurs 3 - 6 months after your petition is filed. In many cases you will not have to appear at the Confirmation Hearing. Your attorney will advise you.

What happens at the Meeting of Creditors?

Bankruptcy Code Section 341 provides creditors the right to meet with the debtor to determine if a bankruptcy discharge or reorganization of a debt is appropriate based on the facts and circumstances in your bankruptcy petition. Creditors have the right to attend the proceeding and to question the debtor, in practice; the creditors rarely appear at these proceedings.

For a Chapter 7 bankruptcy, the Meeting of Creditors has two key purposes: (1) the court appointed Trustee verifies all of the representations in your petition to be true and correct to the best of your belief and (2) The Trustee verifies that there are no assets that maybe considered non-exempt, which could be sold by the Trustee to repay some or all of your debt. The average Meeting of Creditors last approximately 10 - 15 minutes.

For a Chapter 13 bankruptcy the debtor must also appear before the Trustee. The purpose of the Meeting of Creditors is somewhat different from a Chapter 7 proceeding because the Trustee will also verify that the debtor has the financial ability to make the payments proposed in the Chapter 13 plan.

The debtor’s ability to make payments is based upon the debtor’s testimony and documentation which may include tax returns and pay stubs from employers. The meeting is generally short, lasting 10 - 15 minutes.

How long does bankruptcy affect my credit and how long will it stay on my credit report?

The Fair Credit Reporting Act provides that the filing of a bankruptcy petition shall remain on an individual’s credit report for 10 years in a Chapter 7 and for 7 years if a debtor successfully completes a Chapter 13 plan.

How do I re-establish credit following bankruptcy?

Establishing credit following your bankruptcy is important and will take effort and time. The decision by a creditor to extend credit following bankruptcy is strictly up to the individual creditor. You should anticipate a period of time to re-establish your credit.

Following your Chapter 7 bankruptcy, there are several things you can do to re-establish your credit. 

1. Pay all debts not discharged on time.
2. Many bankruptcy filers are able to obtain a secured credit card from a major grantor.
3. If you re-affirmed any debts, be sure they are paid on time.

We urge all of our clients to obtain a post bankruptcy credit report to ensure that all debts were properly reported by the credit reporting agencies as “discharged in Chapter 7.” Any debt not properly reported can then be timely corrected by the relevant credit bureau.

If I have filed for Chapter 7 Bankruptcy in the past how long do I have to wait to file again?

You may file a Chapter 7 bankruptcy every eight (8) years. It is important to note that the eight years begins to run from the date your bankruptcy is discharged and not the date it was originally filed.

If you dismiss your bankruptcy case, you must wait 180 days to re-submit your case. Also in this scenario, your automatic stay will only last 30 days unless you can show the court you had a good reason to file a second time.

Can my employer discriminate against me for filing bankruptcy?

NO. Federal law strictly prohibits any employer, public or private from discriminating against your for filing bankruptcy or for you having failed to pay a dischargeable debt.