Bankruptcy FAQ’s – Steven D. Strauss
Here are some of the top bankruptcy FAQ‘s we are asked:
Q: What is bankruptcy?
A: Bankruptcy is a federal court process that allows you to restructure your debts – wiping out some debts, and repaying others.
Q: I have lived with my boyfriend for five years and we have accumulated of lot of debt together. Can we file jointly?
A: No, only a husband and wife can file a joint bankruptcy.
Q: What type of bankruptcies are there?
A: A Chapter 7 is the most common type of bankruptcy. Congress is in the process of rewriting those laws, so it is difficult to say what it will look like, but historically, under a Chapter 7, credit card debts were forgiven, as were some taxes, but student loans had to be repaid.
Chapter 13 is a repayment plan whereby you repay your debts over a three to five year period. You may end up repaying 100 percent of your debts, or only 10 percent, it all depends upon your situation.
Q: One of my creditors told me that I had to have at least $10,000 in debts to file Chapter 7. Is that true?
A: No, it is not. In a Chapter 7, there is no minimum or maximum amount of debt. In a Chapter 13, you can have no more than $269,250 in unsecured debt or $807,750 in secured debt.
Q: Will my employer find about my bankruptcy?
A: It is possible, but not likely. A bankruptcy filing is a public document. Anyone can go down to the court and get a copy of your petition and schedules. Your employer will not, however, receive notice of your filing like all of your creditors will (unless you list your employer as a creditor). Note though, that most communities list all bankruptcy filings for the week in a local newspaper, usually the local legal paper. Unless your employer reads these listing, there is no reason why he should ever know about it.
Q: Do I have to list the debt I owe my mother? I want to pay it, and I really don’t want her to know about this.
A: You have an obligation to list all of your debts when you file for bankruptcy. Thus, you are required to list the debt you owe your mother. But even though the debt will get legally discharged, that does not mean that you may not have a moral obligation to repay the debt. Here is what you should do: fess up, list her, and tell her that you will pay the debt back nonetheless.
Q: I am afraid that someone will come into my home and check out my stuff if I file. True?
A: No-one will come into your house (in fact, normally, the only person that can ever enter your home without your permission is a policeman with a court-issued warrant). It is also unlikely, though not impossible, that the trustee will run a credit or asset check on you. when you sign your bankruptcy paperwork, you do so under penalty of perjury, a $500,000 fine, and possible jail time should you lie. That is a pretty hefty incentive to tell the truth.
Q: Soon after I filed, I incurred a debt that I want to add to my bankruptcy. Can I do that?
A: No, you cannot. The date that you file your case is called your “petition date”. Any debts that you incur after filing, called post-petition debts, cannot be added into your case. It is only debts incurred before you filed, called prepetition debts, that can be discharged in your case.
Q: One of my utility companies requested a deposit after I filed my Chapter 7. I thought that was illegal.
A: What your utility company cannot do is to cut off service to you because you filed. However, a deposit for future service is legal, and future bills must be paid timely.
Q: I owed by brother $5,000 and paid him off about a month before I filed. The bankruptcy trustee cannot get that money, can he?
A: Oh yes he can. Transfers made to creditors within ninety days of filing are called preferential transfers. Transfer made to family, like this one, made in the year before filing are also considered preferential. The trustee can void the transfer, get the money back, and then spread it around to your other creditors.
Q: I am about to have $50,000 in debt discharged. Is that considered income for tax purposes?
A: Normally, the forgiveness of indebtedness is considered taxable income. Luckily for you though, that is not true of debts discharged through bankruptcy.
Q: My employer found out about my bankruptcy and I was fired. What can I do?
A: It is specifically illegal, pursuant to the bankruptcy code, to fire an employee because of a bankruptcy. You will need to hire an attorney and file suit in bankruptcy court.
If you are mired in debt, and want to stop unwanted collector calls, make a plan to become debt free. Debt Settlement can help you eliminate debt and help you regain your financial freedom.
Steven D. Strauss is one of the world’s leading experts on entrepreneurship. A lawyer, author, and public speaker, his latest book is The Big Idea: How Business Innovators Get Great Ideas to Market. Steve’s columns regularly appear on usatoday.com, workz.com, bizland.com, and staples.com, among others. You can sign up today for his free newsletter, Small Business Success Secrets!, at his business Web site — www.mrallbiz.com.