Bankruptcy FAQs
1) IF I FILE BANKRUPTCY, WILL I LOSE MY PROPERTY?
Under the Bankruptcy Laws individuals are entitled to certain exemptions or protections both as to type of property and value. The analysis of your assets is an essential element in the Bankruptcy process. At Comfort Law Office we won't file a Chapter 7 unless we know you'll be able to keep your property.
2) CAN I FILE BANKRUPTCY IF A CREDITOR HAS OBTAINED A JUDGMENT?
In most cases a Judgment against you only increases the urgency for action. Unless a Judgment is based on fraud, it is usually dischargeable in Bankruptcy. The filing of a Bankruptcy will put an immediate stop to the enforcement of any Judgment.
3) WILL THE ELIMINATION OF DEBT CREATE NEGATIVE TAX CONSEQUENCES?
Under Federal and State Tax Law "forgiveness" of debt can result in adverse tax consequences. This often occurs where a debt is settled or written off by the creditor. When a debt is Discharged in Bankruptcy, there is technically no "forgiveness". A Discharge has no negative tax consequences.
4) WHAT IF A CREDITOR DOESN'T WANT TO GO ALONG WITH MY BANKRUPTCY?
Although there are some claims such as Income Tax due within 3 years and Student Loans that are not Dischargeable in Bankruptcy, most debts, such as personal loans, credit cards, and medical bills are Dischargeable. Although creditors have some rights (such as protection against fraud) most debt that a consumer incurs can be eliminated in Bankruptcy whether the creditor agrees or not.
5. WILL MY RETIREMENT BENEFITS BE PROTECTED?
With some very minor exceptions, qualified Pensions and Retirement Benefits, regardless of their value, are exempt or protected in Bankruptcy.
6. WILL I EVER GET CREDIT AGAIN?
Although your good credit will be gone by filing Bankruptcy, in many cases the filing of the Bankruptcy is the first step on the road to learning wise use of credit by giving the consumer a fresh start as a debt free applicant. Also, your Bankruptcy will fall off of your Credit Report after 10 years.
7. WHAT ARE SOME BENEFITS OF FILING BANKRUPTCY?
The immediate effect of every Bankruptcy is to stop all collection action, including collection of taxes, car repossessions, wage garnishments, lawsuits and foreclosures. The objective of every Bankruptcy case is to obtain a Discharge. This means you are relieved of the legal obligation to pay your debts. In the vast majority of consumer cases, this is done while the debtor keeps their assets.
8. WHY WOULD I WANT TO FILE BANKRUPTCY?
In my 32 years of practice, I never had a client who "wanted" to file Bankruptcy. It is a last resort – usually presenting itself as a difficult but necessary choice after a dramatic change in a client's personal and financial circumstances. These changes could be a loss of a job, a sudden disability, or a medical emergency not fully covered by insurance - or not covered at all. Sometimes the change can be related to increased expenses of raising a family such as tuition or child care. It could even be the death of a family member. Frequently, small business owners run out of vital working capital just short of developing a viable cash flow. It is ironic that it is often this severe action of unsympathetic and inflexible creditors that forces you to seek Bankruptcy protection.
9. WHY WOULD I WANT TO FILE A CHAPTER 13 CASE?
A Chapter 13 Reorganization is often the best option where a consumer filed a Bankruptcy within 8 years, where their assets may not be entirely exempt, where they make too much money, or where a substantial portion of their debt is tax or secured debt. It essentially enables a person to substantially reduce their monthly debt service, often eliminating most unsecured debt while keeping their property and being protected from severe enforcement activity by creditors such as levies, repossessions, or home foreclosures. Although there is a cap on the amount of debt a person can have to qualify for Chapter 13, there is no minimum debt requirement.
