Bankruptcy FAQ's
How will filing bankruptcy affect my credit?
Generally, we see clients with lower credit scores (450 - 550) increase 50 - 100 points after filing. Clients with mid range scores (600) stay about the same and higher credit scores (700 or above) decrease 40 to 80 points. We have started referring our clients to Credit Karma to check their credit score prior to filing. This allows the filer to watch how their credit score is affected. We also pull full credit reports with credit scores prior to filing and use software that estimates how our client's credit score might change.
Will bankruptcy stop a wage garnishment?
Yes. Chapter 7 or Chapter 13 will stop a wage garnishment immediately when filed. Our office can file an emergence petition with the Federal Bankruptcy Court and fax the case number to the creditor to stop a wage garnishment.
Will bankruptcy stop a bank account garnishment?
Yes. Chapter 7 or Chapter 13 will stop a bank account garnishment immediately when filed. Our office can file an emergence petition with the Federal Bankruptcy Court and fax the case number to the creditor to stop a bank account garnishment.
Will bankruptcy stop a repo / repossession of a vehicle?
Yes. Chapter 7 or Chapter 13 will stop a vehicle repossession immediately when filed. Our office can file an emergence petition with the Federal Bankruptcy Court and fax the case number to the creditor to stop the repossession of your vehicle. However, Chapter 13 bankruptcy is generally the only chapter of bankruptcy that one can file to permanently save the vehicle from being repossessed. Chapter 7 will temporarily stop the repossession but the debtor will have to redeem the vehicle prior to the expiration of the automatic stay. You should always consult with a qualified bankruptcy lawyer as there are many nuances involved with a repossession.
Do I lose everything when I file bankruptcy?
Generally not. There are Federal and State exemptions that protect a given amount of your assets. Depending on your specific situation, you might lose some things. However, if you have assets more than your allowed exemptions, as a Chapter 7 debtor you can generally work out a Buy Back. A Buy Back is negotiated by the debtor to purchase back the unencumbered, non-exempt equity in their assets. Generally, this is done over 10 to 12 months. Every case is different, so one can't be compared to the other:
- The general exceptions for a person who doesn't declare a homestead are: $5,000.00 per person filing for any personal property; $1,000.00 per person filing for one vehicle only; 100% for qualified retirement accounts; plus others.
- The general exceptions for a person who does declare a homestead are: $1,000.00 per person filing for any personal property; $1,000.00 per person filing for one vehicle only; 100% for qualified retirement accounts; plus others.
Can I purchase a car after filing bankruptcy?
Yes. However, under Chapter 7, clients have a better chance of being able to obtain financing for a vehicle after they file, rather than under Chapter 13 bankruptcy. A Chapter 7 bankruptcy is typically completed in about 4-6 months. After receiving a discharge and getting rid of all (or most) of your debts, purchasing a vehicle is possible but you might have to shop around for financing. Under Chapter 13 bankruptcy, you are already making payments to the trustee to pay off your debts. Therefore, you would have to petition the bankruptcy court in order to purchase a vehicle.
Can I purchase a house after filing bankruptcy?
Yes. However, most mortgage companies will not lend money for at least 2 years after receiving a discharge from a Chapter 7 or Chapter 13 bankruptcy.
What is a Buy Back?
A "Buy Back" is an option often exercised in a Chapter 7. It allows the debtor to make an offer to purchase their unencumbered, non-exempt assets back from the Trustee. When you file for Chapter 7 protection, you are required to list all of your assets. Your attorney then applies your State and Constitutional exemptions against the estimated value of your total assets. If your assets cannot be completely protected within those limits, then the Trustee has the right to sell your assets to the highest bidder. Generally, that is you, the debtor. Your attorney will make an offer and request that you have a reasonable amount of time to make payments until the debt is paid in full. Most trustees will allow 10 to 12 months for a Buy Back. So, a Chapter 7 bankruptcy can force you to give up the vehicles and personal belongings that are not exempt. It is always a good idea to use a qualified attorney to represent your case, as the bankruptcy attorney fees will likely be less than the value of the property you'd otherwise lose.
Can I file bankruptcy without my husband / wife / spouse?
Yes. An individual can file without their spouse or their spouse's permission. However, the spouse's income must be included to determine if the individual qualifies to file. All income and expenses for the household must be included into the equation.
Will bankruptcy affect a co-signer / co-debtor?
Yes and no. If a person files bankruptcy the co-signer / co-debtor is still liable for the debt. However, as long as the debt gets paid on time by someone, the co-signer's credit should be fine.
How long can I stay in my house after surrendering it in bankruptcy?
It just depends on how far along the state court's foreclosure proceeding is at the time you file. When a bankruptcy case is filed, the foreclosure process stops until the creditor gets relief from the automatic stay. This can take as long as 2-3 months or be as short as 20 days. Once this happens, the creditor picks up where they were in the foreclosure process. The foreclosure process generally takes 3-6 months from start to finish. However, because of the recent increase in the number of foreclosures in Florida, this process can take much longer.
What does it cost to file bankruptcy?
The cost associated with filing bankruptcy are the $299.00 court filing fee for Chapter 7 bankruptcy and $274.00 for Chapter 13 bankruptcy, $30.00 - $50.00 credit counseling fee, $30.00 - $50.00 debtor education fee and your attorney's fees. Please see our bankruptcy attorney fees and costs page to find out about the cost of filing.
Can bankruptcy stop foreclosure of my home?
Yes. Chapter 7, 11 or 13 will stop a foreclosure as long as there are no prior bankruptcy filings that might restrict another filing against the property. If you have previously filed bankruptcy, ask us. In some rare cases, the filing of a bankruptcy will not stop the foreclosure. Chapter 7 will temporarily stop a foreclosure. Chapter 11 or 13 will stop the foreclosure and allow you to reorganize the mortgage debt.
What are the Pitfalls of Chapter 7 Bankruptcy?
Chapter 7 has some pitfalls. That is why you should always hire a qualified bankruptcy attorney to guide you through the legal process. If you don't, then you may lose assets and that lost money will almost certainly exceed the cost of a good lawyer. A good bankruptcy attorney should be able to prevent your assets from being taken by the Trustee by applying the correct State and Constitutional exemptions. If the value of your assets exceeds the amount of your exemptions, then a Buy Back may be a good option. If the Buy Back amount is too high, then you may have to file a Chapter 13 bankruptcy to protect your assets.
How would the trustee know that you have bank accounts with your children or may have transferred a vehicle to a friend?
The Trustee will require you to provide them with bank statements, the trustee will also complete a background check that includes a review of the DMV's records. So, tell the truth and you will have far less difficulty throughout your bankruptcy case.
NOTE: All questions and answers are provided as general information ONLY. For legal advice and accurate answers to your bankruptcy questions, you must consult with a qualified attorney.
