Here are answers to frequently asked questions. If your question is not answered here, feel free to contact us. We’ll be glad to help.
Q: What does “chapter” refer to for a Chapter 7 or a Chapter 13 bankruptcy? Should I file for a Chapter 7 or a Chapter 13 bankruptcy?
A: “Chapter” refers to the particular chapter of the United States bankruptcy code. As for filing a Chapter 7 bankruptcy or Chapter 13 bankruptcy, this is perhaps the most common question yet the most difficult to answer. There are a number of differences between a Chapter 7 and Chapter 13 bankruptcy. One of them is that a Chapter 13 bankruptcy requires the person filing for bankruptcy relief (the “debtor”) to make payments to the bankruptcy trustee typically over a three or five year period but a Chapter 7 bankruptcy does not have this requirement. Some individuals cannot file for Chapter 7 bankruptcy relief because they exceed income limitations. Some individuals that could file for Chapter 7 bankruptcy relief may want to file for Chapter 13 bankruptcy relief because it provides them with greater protection for their particular circumstances. For example, if a foreclosure is pending on a house and the homeowner wants to keep the home they may be better off filing for Chapter 13 bankruptcy relief because they can pay the past due mortgage payments over a three or five year period (this is not possible in a Chapter 7 case). If you have significant assets, you may want to file for Chapter 13 bankruptcy relief if you would exceed the asset exemptions in a Chapter 7 bankruptcy. There are many other reasons why a Chapter 13 may be more advantageous than a Chapter 7 bankruptcy, these are only a few examples. Because the decision of whether to file a Chapter 7 or Chapter 13 bankruptcy is very complex, we recommend you speak with an attorney for the best advice for your particular situation.
Q: If I file for bankruptcy relief, does my spouse have to file as well?
A: Your spouse does not have to, no. Keep in mind, however, that if there are any joint debts (debts that you and your spouse are both liable for) and you file for bankruptcy relief individually, your spouse will still be legally liable for those joint debts.
Q: Will debt collectors stop calling me if I file for bankruptcy relief?
A: They are required to stop calling you under the Fair Debt Collection Practices Act (FDCPA). Usually, debt collector calls will stop within a week or so of filing for bankruptcy relief because it takes a few days for them to receive notice from the bankruptcy court that you filed for bankruptcy relief.
Q: I filed for bankruptcy relief before. Can I file again?
A: It depends on a few factors: the type of bankruptcy you filed (Chapter 7 or Chapter 13), when you filed for bankruptcy relief, and if you were granted a discharge order. The answer is very case-specific, you will want to speak with an attorney for an accurate answer for your situation.
Q: My wages are being garnished. Will filing for bankruptcy relief stop that?
A: Yes, this protection of the Bankruptcy Code is immediately provided to you when you file for bankruptcy relief. It may take one or more pay cycles for this to take effect by your payroll processor, but if you file for bankruptcy relief and your wages are still garnished your creditor is required to reimburse you for the amount garnished after you filed for bankruptcy relief.
Q: If I file for Chapter 7 bankruptcy relief, will the bankruptcy trustee sell what I own?
A: Most cases are considered “no asset” cases, meaning the value of the items owned by the person filing for bankruptcy relief (the “debtor”) are below a certain statutory threshold. In those cases, the bankruptcy trustee will not sell anything owned by the debtor. If you fully disclose your assets to your bankruptcy attorney, he or she will be able to advise you on whether there may be potential issues with your assets being above the threshold amounts.
Q: I own a car and it is paid off. Can I keep my car if I file for bankruptcy relief?
A: It depends on the value of the car, but often many older cars are not worth enough for a bankruptcy trustee to sell them. Your bankruptcy attorney should be able to advise you on whether this should be an issue in your case.
Q: I own a car and am still making payments on it. Can I keep my car if I file for bankruptcy relief? Or if I don’t want to keep the car, can I get rid of it?
A: If you are making payments on a vehicle and file for bankruptcy relief, you have the option to either (1) keep making payments on the vehicle and keep the vehicle or (2) surrender the vehicle and stop making payments on the vehicle. If you want to keep making payments on the vehicle, you must show that you can afford to continue to make the payments and a bankruptcy judge will have to approve it.
Q: I own a house and it is paid off. Can I keep my house if I file for bankruptcy relief?
A: It depends on several factors, particularly the equity in your home. Under Illinois law, the homestead exemption protects your house up to $15,000 in equity for an individual. If you are a married couple that live in the house and file for bankruptcy relief jointly, you could protect $30,000 total. Other factors apply, consult with a bankruptcy attorney for further information.
Q: I own a house and am still making payments on it. Can I keep my house if I file for bankruptcy relief? Or if I don’t want to keep the house, can I get rid of it?
A: Just like the situation described above with a car, if you are making payments on a house and file for bankruptcy relief, you have the option to either (1) keep making payments on the house and keep the house or (2) surrender the house and stop making payments on the house. If you want to keep making payments on the house, you must show that you can afford to continue to make the payments and a bankruptcy judge will have to approve it.
Q: What does it mean for a debt to be “discharged”?
A: When a debt is discharged, your legal obligation to pay is forgiven. Creditors cannot attempt to collect the debt, otherwise they violate the Fair Debt Collection Practices Act (FDCPA).
Q: I have payday loans. If I file for bankruptcy relief, are they discharged?
A: Yes, payday loans are discharged just like other unsecured debt.
Q: Can an employer fire me because I filed for bankruptcy relief?
A: No. 11 United States Code Section 525 prohibits government units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.
Q: My house was foreclosed on. The bank filed suit and was granted a deficiency judgment against me for the difference between what I owed and what it sold for at the foreclosure sale. Will that that debt be discharged if I file for bankruptcy relief?
A: Yes, that is a type of dischargeable debt.
Q: How much does it cost to file for bankruptcy relief?
A: There are basically three costs associated with filing for bankruptcy relief: court costs, third party costs, and attorney’s fees. The court filing fee for a Chapter 7 bankruptcy is $306 and the cost to file a Chapter 13 bankruptcy is $281. Third party fees (such as obtaining credit reports and completing court-required credit counseling and debtor education) total approximately $100. Attorney’s fees vary due to the complexity of the work, whether you are filing individually or jointly, and whether you are filing a Chapter 7 or Chapter 13 bankruptcy. All attorney’s fees for a Chapter 7 bankruptcy case are paid before the petition for bankruptcy relief is filed, and most attorneys will work with you to stretch out the payments according to your financial needs. Attorney’s fees for a Chapter 13 bankruptcy case may be paid after filing for bankruptcy relief from the Chapter 13 plan payments that are paid to the trustee. We would be happy to provide you with a no-obligation quote for attorney’s fees that is catered to your specific needs, please contact us for further details.
Q: I have a question not answered here. Can you please assist me?
A: Absolutely, please contact us and an attorney will contact you the same business day for a free initial phone consultation.