Coan, Lewendon, Gulliver & Miltenberger, LLC, Bankruptcy FAQ
Will I lose my house if I file bankruptcy?
In most cases, you will not lose your house, but careful preparation and analysis by an experienced bankruptcy attorney is critical. Whether bankruptcy might put your home at risk is determined by consideration of several important factors. First, we need to determine the current market value backed up by a written third-party valuation acceptable to the trustee. Next, we determine the balance owed on mortgages, real estate taxes and other encumbrances. Then, after consideration of all your assets, we calculate the best use of the exemptions or laws that can be applied to protect certain values from the bankruptcy estate, and we calculate the maximum exemption available for your homestead. Sometimes transfers made in the past can be relevant, and confirmation of the present title owner or owners is always important.
How much does bankruptcy cost, and how can I pay for it?
Bankruptcy fees vary tremendously with the complexity of the case. The more important issue is the quality of the preparation of your case and representation you receive. Still, when you are suffering financial stress the fees and costs can seem big. Chapter 7 fees for quality representation always are required to be paid in cleared funds before the case is filed. Sometimes fees can be paid from savings, or liquidation of stock or other assets that would be lost to the trustee anyway. Sometimes payment can be made from funds realized by stopping payments to certain creditors prior to bankruptcy once the bankruptcy decision is made.
How long does it take to file bankruptcy? How long will it be until it is over?
A bankruptcy petition can be filed on an emergency basis when necessary, such as to stop a foreclosure auction. But in the typical case we will take at least two or three weeks to properly analyze your situation and determine the proper course. Sometimes timing is significant, and we suggest further delay. In the case where no assets are liquidated and no litigation commences, which is the vast majority of properly prepared proceedings, a discharge would be expected within about 90 days and the case would be closed shortly thereafter.
Are there different kinds of bankruptcy, and how do I know what kind I should file?
Yes, individuals can file petitions under Chapter 7, Chapter 11, Chapter 12 and Chapter 13 depending on circumstances, and LLCs and corporations can file Chapter 7, Chapter 11 and Chapter 12. Basically, there are reorganization proceedings, or repayment plans, under Chapter 11, Chapter 12 and Chapter 13, and straight bankruptcy or liquidation cases under Chapter 7. The proceedings are quite different and which is best in your case will depend on your assets and liabilities, the goals you would like to achieve from the proceeding, any previous bankruptcy petitions, and other factors that you should discuss fully with your counsel.
Will I lose my disability or workers’ compensation if I file bankruptcy? What if I might get a lump sum award?
All these resources can be protected by application of laws that provide exemptions or exclusions from the bankruptcy estate. If properly handled, even lump sum distributions usually will be secure from the trustee. Personal injury recoveries, however, are at risk although sometimes proper planning can maximize protections.
Is my pension or IRA safe if I file bankruptcy?
If contributions are within the annual tax code limits, or properly transferred rollovers, almost all IRAs are protected. If you have contributed more than about $1,170,000, not counting any rollover amounts, the excess may be claimed by the trustee.
If I’ve been injured and have a lawsuit pending should I still file bankruptcy?
Proceeds of personal injury suits may be exempt from the bankruptcy estate, but only to a limited amount. The bankruptcy decision should be made only after your bankruptcy counsel considers the application of such exemptions to your situation and advises you about the possible risk to your lawsuit. You must also consider the fact that you may lose the right to make independent decisions about settlement. Bankruptcy still may be the right decision for you, but you should be sure you have all the facts before you file.
Does bankruptcy stop the phone calls? Does it stop the lawsuits?
Yes, the calls and lawsuits stop because of the automatic stay or injunction that the filing of a petition in bankruptcy immediately brings into effect. If you have had a prior bankruptcy petition within a year, the relief can be temporary without a further order of the court.
My bank account has been executed on by a creditor. Does bankruptcy help?
This depends on the timing and the availability of exemptions that could have protected the funds if you had held them in your account at the time of the bankruptcy petition. In many cases when the petition is filed within 90 days of the garnishment, the funds can be recovered.
If my paycheck is being garnished, can bankruptcy stop that? Can I get my money back?
Yes, in Connecticut the garnishment will stop, and to the extent of funds taken within 90 days, and funds that could have fit within your exemptions, you may be able to get the money back.
What if I’m behind in my mortgage or car payments when I file bankruptcy?
Although the petition in bankruptcy and the automatic stay stop creditors from commencing or proceeding with foreclosure or automobile repossession, creditors may have attorneys bring motions in the bankruptcy court asking for permission to take these steps to assist in realizing upon collateral despite the bankruptcy. In these situations Chapter 13 can provide rights that are not available to you in Chapter 7, and the decision as to which type of bankruptcy is best for you and your circumstances should be discussed with your counsel.
My mortgage company has me in foreclosure — does bankruptcy help me with that?
In Connecticut, mortgage foreclosures are always conducted in court. A petition in bankruptcy stops a foreclosure or other litigation from proceeding against you because of the automatic stay. However, if you file Chapter 7 the relief may be very temporary. Discuss your options in Chapter 13 with your counsel as an alternative.
Will my employer find out I filed bankruptcy? Could I lose my job?
While bankruptcy is a public proceeding, and anyone can find out that you filed if they have reason to search for this information, in most Chapter 7 cases people, including your employer, will not know unless you tell them. Where your paycheck is being garnished your employer will be notified. In Chapter 13, it is likely that the payments to the trustee will be handled by payroll deduction, and your employer will learn about it. Still, there is a provision in the Bankruptcy Code that bars discrimination against you as an employee, based solely on your petition in bankruptcy or your having discharged debt under the Bankruptcy Code.
Is my bankruptcy published in the newspaper?
That is very unlikely. If you are a public figure, your bankruptcy could be newsworthy, but such situations are unusual. In most cases, while a bankruptcy filing is a public proceeding, people usually do not know unless you tell them.
Are all debts wiped out in bankruptcy?
There are some exceptions to the discharge in bankruptcy. Some types of debts such as student loans, recent income taxes, withholding and similar taxes owed by people who have been in business, and domestic support obligations are automatically not discharged. In other cases such as credit obtained by use of a false financial statement or by fraud, the debt can be excepted from the discharge if the creditor commences an action against you in court (usually in the bankruptcy court) and obtains an order of the court finding that you should not be discharged due to such conduct.
Can I still file if I have filed bankruptcy before?
In many cases you can file again, but the timing is critical. There are different limits for waiting between Chapter 7 cases and other types of bankruptcy cases, and for when a Chapter 13 follows a Chapter 7, for instance. In addition, these limits usually apply to your ability to get a new discharge. You may still be able to use Chapter 13 to catch up on a mortgage, or to repay debt.
Can I file bankruptcy without my husband or wife?
Yes, a bankruptcy petition is an individual right. When a married couple files, it usually is what is referred to as a joint case, although you claim separate exemptions. In addition, even if you file without your spouse, your household income, including your non-filing spouse’s income, is relevant to the means test with some possible limitations. This test may apply to determine whether you are eligible for a Chapter 7 bankruptcy.
Can my life partner and I file bankruptcy together even though we’re not married?
Unfortunately, you can only file a joint case if you are married. In such cases where you are not married, you would have to file two separate petitions, although they could be filed essentially at the same time so you would likely have the same assigned trustee and hearing date.
Will I ever be able to buy a condo or get a mortgage after bankruptcy?
Absolutely. Of course bankruptcy affects your credit score, and will make a new mortgage very expensive for a time, but after you have reestablished credit and a record of steady income you are likely to be able to obtain a new mortgage at a competitive interest rate and cost. Although it is hard to tell what may happen with federal housing programs after the current housing recession, in the past under FHA programs, a person could be considered for a mortgage a certain period of time after a discharge in bankruptcy.
Will the trustee come to my house to look at my things?
No, such action by the trustee, or by an appraiser that the trustee might hire, would be extremely unusual. Bankruptcy requires you to disclose assets in your schedules and in your testimony under penalty of perjury. While the trustee may require various documents, the trustees rely on your honesty in such disclosures and do not view your possessions at your home.
Do I have to include in my bankruptcy relatives or friends to whom I owe money? How about my dentist and doctor?
The Bankruptcy Code and procedures require you to disclose in your schedules everyone to whom you owe money. This disclosure means the court will send notices of your case to them. You can voluntarily pay anyone on the list later without harming your rights against other creditors.
Does bankruptcy help me with my tax debt?
A bankruptcy discharge may eliminate your personal liability on older income taxes and related penalties and interest. Bankruptcy stops the IRS and other taxing authorities from taking actions against you and your assets, but for recent income taxes, withholding taxes owed by a debtor who has been in business, and some other taxes, the discharge you may receive of other debts has no effect. You may be able to pay such taxes in Chapter 13 or in Chapter 11 or, for farmers and fishermen, Chapter 12. In addition, if the trustee liquidates property in a Chapter 7 case, the taxing authorities may have high priority claims with a right to be paid before other creditors. The intersection of bankruptcy and tax is a complicated area, and you should rely on experienced bankruptcy counsel to consider how the Bankruptcy Code may affect your tax liabilities.
Can I get out of gambling debts if I file bankruptcy?
Gambling debt can be dischargeable in bankruptcy, but it can also complicate your case. You should disclose all debt, including any gambling debt to your bankruptcy counsel.
How long does bankruptcy appear on my credit report?
The bankruptcy filing can be reported by the Credit Reporting Agencies for 10 years under the present law.
What can I do after I file bankruptcy?
- Open bank accounts
- Get a safe deposit account
- Pay back certain of my discharged debts
- Transfer property
- Borrow money
- Lend money
- Change jobs
You can do all these things after bankruptcy. Bankruptcy can of course hurt your credit score, and credit-based matters will be affected. For instance, your ability to borrow money at reasonable rates may be limited for a period of time. While the case is pending, your legal right to transfer property may be curtailed until the trustee takes certain steps, but after the case is over your bankruptcy filing should not interfere with most activities.
I’m applying for a new job. Can the prospective employer refuse to hire me if I file bankruptcy?
The Bankruptcy Code contains a specific provision respecting discrimination. The code bars a private employer from terminating an employee or discriminating with respect to employment against an individual who is or has been a debtor in bankruptcy solely because of such filing, because of his or her insolvency, or because of a discharge of indebtedness under the code.
Note that it does not say the private employer cannot discriminate as to the hiring decision respecting a prospective employee. At least one court, in another part of the country, has held this kind of discrimination may be acceptable under the Bankruptcy Code. The code does provide a broader statement respecting discrimination by a governmental unit. A governmental unit may not deny employment to or terminate the employment of a person who is or has been a debtor in bankruptcy solely on that basis.
What does it mean to reaffirm a debt?
Reaffirmation is a formal process, requiring signed papers to be filed with the court in a timely way, which makes the debtor liable on the reaffirmed debt even though it would otherwise have been discharged in the bankruptcy. Generally, a debtor should avoid reaffirmation at all costs, but there are some instances where it is necessary. The Bankruptcy Code and the state law in Connecticut seem to lead to contradictory conclusions respecting reaffirmation of an auto loan, and all debtors with such loans should discuss the matter with an experienced bankruptcy lawyer.
Is bankruptcy the right option for me?
The decision to file bankruptcy is personal and cannot be determined without taking into consideration all relevant factors of the financial and other circumstances faced by the individual, his or her spouse, and household. You should only decide after reviewing all relevant facts with your experienced bankruptcy counsel.
Why do I need a lawyer in bankruptcy?
A debtor is certainly allowed to represent himself or herself in bankruptcy. However, bankruptcy is an intricate and difficult area of the law. The assistance that such counsel can provide is well worth the cost of an experienced attorney. Without experienced counsel in your corner, your bankruptcy may needlessly risk important assets or your ability to obtain a discharge of claims against you. Failure to take proper care in preparation of your case can have heavy cost for you and your family.
Where can I find more bankruptcy information?
On the links included in our resources page there are several that can provide significant information about bankruptcy. Two important sources are the websites of the United States Bankruptcy Court for the District of Connecticut and the website of the Office of the United States Trustee.
Will I be foreclosed upon in bankruptcy?
A bankruptcy filing effects an immediate and automatic stay of actions to take your property, with the limited exception of cases where you have filed a prior case within the past year or where the property has been involved in prior cases in which orders pertaining to the stay have been entered respecting the property. The stay can be removed, after at least the opportunity for a hearing, and the stay as to actions against the property will be removed when you are discharged or when the property is no longer property of the bankruptcy estate. Thus, the protection can be lost, and you should consult an experienced bankruptcy attorney respecting this important concern.
Will I be debt free following bankruptcy proceedings?
Most general debt is discharged, and being relieved of its burden can be a great feeling and truly change your life. Remember, however, that some debt is not discharged. A few of the more common and important exceptions are student loans, certain tax debt, and alimony and child support liabilities.
How do I protect valuable assets in bankruptcy?
Some valuable assets can be protected such as most pensions, IRAs and retirement funds, workers’ compensation rights, and sometimes even fairly substantial value in equity in your home. Still, there are significant limits on protection of many categories of assets, and the extent that things can be protected from the bankruptcy trustee must be considered carefully with the advice and counsel of your attorney.
Do I have to sell assets to pay creditors?
In some cases, the trustee has the right and obligation to sell assets. The money received after returning any exempt portion to you, and after payment of the trustee’s expenses and commissions will be used to pay creditors. Whether you are likely to lose any assets upon a bankruptcy filing should be carefully considered by your experienced bankruptcy counsel prior to filing.
What happens if I miss a scheduled payment during bankruptcy?
Such payments generally refer to installments on home mortgages or auto loans. Actually, if you can catch up promptly it is likely nothing will happen, but in some cases the creditor will ask the bankruptcy court to grant it “relief from stay,” meaning an exception to the injunction or automatic stay that protects you and your property during bankruptcy, so as to allow the creditor to commence or recommence a foreclosure, or repossess the car.
Thus, your assets can be put needlessly at risk by missing payments during the case, or thereafter. Remember that even though you may receive a discharge of your personal liability on the debt, the mortgage on your home, or security interest in your vehicle, usually will survive the bankruptcy process.
Contact Coan, Lewendon, Gulliver & Miltenberger, LLC, to schedule an initial consultation. Our New Haven bankruptcy attorneys can help you set goals for a fresh start and answer more of your questions and concerns. Call us at 203-901-1298.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code