Will my spouse and I lose our jobs if we file bankruptcy?
People do not automatically lose their jobs if they file bankruptcy and their employer learns of it. In fact, it is illegal to terminate someone because he/she filed for bankruptcy.
If I file bankruptcy, does my spouse have to file too?
Bankruptcy is an individual process, and one spouse files without the other all the time. However, spouses often find it makes sense to file together as both owe money to the same creditors. In many cases, both spouses are not liable for the debts. One spouse may have taken out all the loans and credit cards. Or one of the spouses may have incurred the debts before the marriage, so the debts are only in that person's name. In such cases, one individual filing makes sense and is desirable. However, the non-filing spouse's income must be counted subject to his or her own offsets in working out the filer's means test.
Will I lose everything if I file bankruptcy?
There are ways to predict what you might lose and how to make an assessment of what is at risk. What is protected in bankruptcy and what is lost will depend in large part on what state you live in.
The following is not intended to provide legal advice but to only provide general guidelines. A lawyer should be seen to learn the exact exemptions in each state and how they operate in a given case.
Please note: There are two options for bankruptcy exemptions in California. The two systems cannot be mixed, and the dollar amounts will change every year.
|Homestead up to:
||$75,000 if single and not disable
$100,000 if a member of a family or no one else is claiming a homestead
$150,000 if 65 or older or disabled; if you are single, $100,000 for 55 or older, and earn less than $150,000 per year; or if you are married, 55 or older, and earn less than $20,000
|Motor Vehicle up to:
|Personal Property up to:
All food, clothing, appliances, furnishings, and health aids
|Homestead up to:
|Motor Vehicle up to:
|Personal Property up to:
||Clothing, household goods, appliances, furnishing, animals, books, musical instruments, and crops-$525 per item
||$1,100 and any unused portion of the homestead exemption can be used to protect personal property. Possibly total= $21,825.00
|WHAT A CREDITOR CAN AND CANNOT DO
Can a creditor have me put in jail?
One cannot be arrested and put in jail for a civil debt owed to a credit card company or a bank.
Can a creditor seize my property?
A creditor can threaten you by saying such things but this cannot happen. A creditor would have to get a court order before invading your home or office.
Can a creditor seize my tax refunds?
A private company cannot have the government seize your tax refunds.
Can a creditor have my wage garnished?
Yes, this is allowed in most, but not all, states.
What is an automatic stay?
For many people, one of the main reason they file bankruptcy is to stop phone calls from creditors. The automatic stay is what accomplishes this.
An automatic stay is a court order forbidding contact with the debtor by the creditor. The creditors are ordered to stop collection phone calls, letters, and lawsuits. For a temporary period of time, creditors are unable to garnish your wages, empty your bank account, repossess your car, house, other property, or cut off your welfare benefits or utility services. Also, monthly statements stop coming and often people get into trouble with the creditor for not making timely payments on items they wish to keep.
If a creditor wants to continue to try and foreclose on your home, he/she must go to court and ask the judge to lift the stay. This is often granted in a Chapter 7 case. In a Chapter 13 case, though, it is much harder for the creditor to have an automatic stay lifted.
What is a trustee, and what does he/she do?
Once your petition is filed, a trustee is assigned for your case. The trustee's job is to represent the creditors in general and obtain as much money as he/she can from you to be paid to your creditors. Your lawyer will use the exemptions your state provides to protect as much of your property and assets as possible.
Your only contact with the trustee will be at the Section 341 meeting, which takes places about a month after you file. There, the trustee will ask you a short series of questions with two purposes in mind. They're seeking your affirmation, under oath, that you put a proper value on all listed property, that you listed all your property, and that you have not improperly transferred money or property to a third person. They will also ask questions about how you came up with the listed value for your home, car, and other property.
What is a Section 341 meeting aka Meeting of Creditor?
The Section 341 meeting is often called a meeting of creditors or first meeting of creditors as this is the creditors' chance to ask questions. The bankruptcy trustee runs the meeting and after swearing you in, may ask you questions about your bankruptcy and your filed petition. This meeting lasts about 5 to 15 minutes and is generally the only hearing you will attend. We will notify you of the required forms of identification necessary for the meeting.
Will creditors come to the 341 meeting?
Most creditors will not bother to come and ask questions. However, there is no rule forbidding them from doing so. A creditor may ask about statements concerning assets and income you made on loan applications.
The questions asked by the trustee and creditors are normally low-key, and the short period of this meeting does not allow lengthy questions. Also, there is normally not much need for extended questioning, as the information on the petition is accurate and complete, and the careful loan application will have a put a fair value on all property in the loan application.
What types of problem arise at the 341 meeting?
In the great majority of cases, the meeting of creditors goes smoothly, and all the petitioner needs do is wait for his/her discharge papers. But sometimes problems do come up.
- One has already been mentioned-transfers to family members within two years prior to the petition being filed.
- Another is large payments to one creditor within a short time of filing the petition. The system does not want one creditor favored over another.
What happens after the 341 meeting?
In the vast majority of Chapter 7 cases, the hearing marks the last step in the process that involves the petitioner. The petitioner then waits about three months to receive his or her discharge letter.
There may be some ministerial steps, the filer may elect to reaffirm some debts. The normal reason to do this is to keep property, such as cars, on which the creditor has a lien and which a creditor could take. You should get the advice of your lawyer before signing such documents.
What happens if I forget to list something in my bankruptcy petition?
Sometimes in the stress and rush of preparing the bankruptcy petition, a person will find that he/she forgot to list a debt or an asset. This can be easily overcome, if it is discovered shortly after filing the petition, by adding an amendment to the petition. If it is found later, it can be a larger problem. The trustee or a creditor may conclude you were trying to hide the asset. And if the case has been closed without a creditor being listed, you might not have that debt discharged. Normally, only creditors listed in the bankruptcy have their debts done away with. Even in such a case, there may be ways around this, but it is far better and safer to be very thorough when you supply information for the court in the original filing.
Other problems in the bankruptcy you should be aware of.
Sometimes hospitals will refuse to release medical information because their debt was discharged in a bankruptcy. Other times creditors, or someone who purchased the debt, will try to collect on a debt that was listed and discharged in a bankruptcy. Lenders may refuse to grant a loan until you prove that a given debt was discharged in your bankruptcy. (This often occurs because the credit report is not complete or correct.) Most of these problems can be overcome if you are careful to hold on to your discharge letter and petition.