Bankruptcy Information: FAQs

1. Do I keep my casino license if I file bankruptcy? 
Yes. Section 525 of the Bankruptcy Code clearly provides that no government unit such as the Casino Control Commission, private employer such as a casino can discriminate against a licensee or employee who files bankruptcy.

2. How does a bankruptcy filing affect my house? 
Section 522 of the Bankruptcy Code provides very liberal “exemptions” so no assets are lost to creditors in most cases. The homestead exemption is $40, $400.00 for a married couple, and half that for a single person, assuming that no exemptions are needed above the standard values for other assets. Remember, the Bankruptcy Code affords debtors a “Fresh Start” free of debt and creditor calls. This means that if you qualify for Chapter 7 protection, you hold on to your exempted assets and continue to earn and save money in the future as if no bankruptcy were filed.

3. How does a bankruptcy affect my automobile?
The automobile exemption when added to the unused portion of the homestead exemption is very liberal, so cars are usually not affected by the bankruptcy. Call to check.

4. How does a bankruptcy affect my cash on hand, bank accounts and jewelry?
The cash and bank account exemption is up to $22,400.00 for a married couple, and $11,200.00 for a single person, assuming that no exemptions are needed above the standard values for other assets, and one half the homestead exemption is needed. In addition, the jewelry exemption is $1,350.00 plus any of the unused exemptions mentioned above.

5. How does a bankruptcy affect my household goods and furnishings?
The household goods and furnishings exemption is $21,550.00 for a married couple and $10,775.00 for a single person. If the used value for a single item exceeds $525, a portion of unused homestead exemption applies. The values are based on a yard-sale type situation, not replacement cost.

6. How does a bankruptcy affect the personal injury claim that I have?
The personal injury exemption protects up to $20,200.00 of what you receive in a personal injury case after expenses and professional fees for the personal injury lawyer and experts. If no more than half of the homestead exemption is used, $11,200.00 can be added to this for total protection of $31,400.00. If the personal injury recovery replaces future income necessary for the support of the debtor or a dependent of the debtor, the exemption is the amount of the recovery. So a bankruptcy can hold off creditor calls and lawsuits, or discharge the debts owed to creditors while your personal injury claim is in the courts.

7. How does a bankruptcy affect the tools I use in my trade or profession?
The tools of the trade exemption is $2,025.00 plus the unused portion of the homestead exemption.

8. How does a Bankruptcy affect the cash surrender value in my life insurance?
The cash surrender value exemption is $10,775.00 plus the unused portion of the homestead exemption. Term life insurance without cash surrender buildup is fully exempt. Remember, the value of an insurance policy is not what the payment would be to a beneficiary, but the present cash in hand, or loan value of the policy.

9. How does a bankruptcy affect my checks for monthly social security, unemployment compensation, disability, unemployment benefit, alimony and support, and pensions?
Section 522 of the Bankruptcy Code exempts the right to receive any of the above checks free of creditor claims. In the case of checks for alimony, support, private pensions, and the like, the payments must be reasonably necessary for the support of the debtor and any dependent of the debtor, which is usually the situation.

10. Do I have to give up my financed automobile if I file bankruptcy?
No. You have choices here. You can continue making your payments as if no bankruptcy were filed and everything stays the same. Or you may return the car to the lender without a repossession bill if the cost of the payments, insurance and upkeep are taking too large a chunk out of your paycheck. Remember, if you traded in a car that had a payoff, the car is probably not worth the amount of the payoff because you are still paying off the old car with the new car payments.

11. Can I lower my automobile payments if I file bankruptcy?
If the car loan is over 2.5 years old, and the car is worth less than the payoff, the balance of the car loan can be lowered resulting in lower car payments. This is called the “cramdown.” If cramdown is not available, payments can be lowered if the creditor is paid 100% plus interest over a longer number of months. Each case is different, so a consultation with one of our attorneys is recommended..

12. Can I keep my house if my mortgage company is foreclosing?
Yes, if you can afford the normal monthly mortgage payments. By filing a Chapter 13, the mortgage company must reinstate the loan even after the foreclosure complaint is filed. The missed payments can be spread over a 60 month period. And, second and third mortgages can be eliminated if your home value is equal to or less than the first mortgage payoff in the case of second mortgages, and equal to or less than the first and second mortgages combined in the case of third mortgages.

13. What do I need to know about bill collectors?
Bill collectors are governed by the Federal Fair Debt Collection Practices Act This Act provides that no bill collector may call you at home during unreasonable hours, or call you on the job if the employer has a policy not to allow personal calls. Merely saying to the creditor, “please do not call me at work” will not suffice. The creditor must be informed of the employer’s policy. Unfortunately, not all bill collectors abide by the federal law. Also, if a collector speaks to someone other than you, or calls someone else at a different number, the collector may say you owe money.

14. Does bankruptcy forgive my student loan?
No. Student loans must be paid. By eliminating other debts, most folks can afford the student loan payments.

15. Does bankruptcy forgive my income taxes?
Yes, if the income taxes are more than 3 years old counting from the due date of the return, and a timely and truthful return is filed. If the return is filed late, a 2 year rule applies. If the tax is assessed by the IRS, a 240 day period must expire before the income taxes are forgiven. Special rules apply to homeowners if the IRS files a federal tax lien which have a 10-year life unless renewed. If you taxes, call for special information to supplement this answer because this subject is far too complex for an easy answer.

16. Does bankruptcy forgive my condominium or homeowner association fees?
Yes, with exceptions. If you wish to keep the condominium and the condominium association filed a condominium lien, you must pay the delinquent condominium fees. If you wish to let the condo go back to the mortgage company, we recommend that you stay in the condominium until after the foreclosure sale because you remain responsible to pay the condo fees until title is transferred out of your name..

17. Does bankruptcy forgive my motor vehicle surcharges?
Yes, with limitations. The DMV policy is to forgive DMV surcharges in a Chapter 13 filing, but just temporarily in a Chapter 7 filing. In many cases, Chapter 7 is all that is needed. However, municipal court fines must be paid or satisfactory arrangements made. The DMV policy changes frequently, so call for updates on how it works in your case.

18. Do I have to list all my creditors on my petition?
Yes, and you want to. The Bankruptcy Code requires a complete scheduling of all creditors as well as assets. We view the rule as one which protects debtors from themselves, as many folks believe that maybe just one or two creditors won’t hurt. Think back and remember whether or not your financial problems started with one or two credit cards. Enough said!

19. Will I ever be able to find a house mortgage in the future?
Yes, in most cases. The usual waiting period is 2 years, provided you otherwise qualifies. We recommend saving for a substantial down payment so the approval is easier and, more importantly, the mortgage money borrowed is less makrign for lower payments. Your payments should be low enough to allow a little cushion when the inevitable “escrow deficiency letter” arrives raising the payment a few hundred due to increases in real estate taxes or insurance. And, with more down payment, you can avoid the dreaded MIP monthly charges. MIP is short for “mortgage insurance premium” which insures the mortgage company against loss because of a small downpayment..

20. Can creditors object to my discharge?
Yes, except in very unusual cases where the debtor purposefully loads up credit cards in anticipation of filing bankruptcy and the creditor objects within 60 days following the meeting with the bankruptcy trustee. The knowledge and experience of seasoned bankruptcy lawyers is essential to avoid the pitfalls so your case won’t be another failed bankruptcy filing.

21. Should I transfer my bank account, car and house out of my name before I file bankruptcy?
No, for several reasons. The first is that last minute transferring of assets is generally unnecessary due to the very liberal exemptions afforded by Section 522 of the Bankruptcy Code. The second is that transferring of unexempt assets to defeat creditor claims doesn’t work.

22. What are my bankruptcy alternatives?
Let’s face it, the public considers bankruptcy as the last resort. Unfortunately, it is most effective if done early on before you get a “creative idea” to keep the financial bubble growing. The bubble is going to burst, so filing bankruptcy when the bubble starts its inflationary spiral is the best idea. A lot of lost sleep can be avoided along with the aggravation and feeling of helplessness. Some of the “creative ideas” which do not generally work is making payments with a debt repayment plan through a so-called “non profit” debt or credit “counselor.” These plans rarely work over the life of the plan. Also, avoid the pension loan, the second mortgage (also known as an “equity loan”), the credit balance transfer, the personal loan from a lender or from family, etc., etc. The part that really hurts is that a lot of hard-earned money goes down the drain with these misguided methods. In the case of the mortgage and pension loan, a debtor converts dischargeable unsecured debt into secured debt which cannot be forgiven when the eventual bankruptcy filing is made.

23. Will creditors keep harassing me after filing bankruptcy?
A bankruptcy filing immediately stops the calls under Section 362 of the Bankruptcy Code.

24. Do I have to talk to any creditors after filing bankruptcy?
Absolutely not. Section 362 of the Bankruptcy Code automatically prohibits creditor calls or collection activity.

25. Will I lose my pension if I file bankruptcy?
No, pensions, 401(k) plans and IRA accounts are not reachable by creditors, which is the reason pension consolidation loans do not work and are absolutely not advisable.

26. What will my life be after bankruptcy?
You will enjoy the “Fresh Start” provided by the Bankruptcy Code, without any debt or harassing creditor calls. You will live absolutely normally, maintaining your job, your bank account and your exempt assets such as your automobile.

27. Will I have to deal with wage executions after bankruptcy?
Section 362, commonly known as the “automatic stay provision” stops any form of bill collection activity including wage garnishments and lawsuits against the debtor.

28. Once filed, how long does it take until it is final?
Protection from creditor calls begins immediately. The case is concluded in about 90 days after filing.

29. What will happen to any merchandise that has a security interest on it?
You have choices. You may continue payments as if no bankruptcy was filed, or you may pay the creditor the used, yard sale value of the merchandise if less than what is owed. Of course, you may return the merchandise & pay nothing which is the best policy.

30. Will I be turned down for a student loan because I filed for bankruptcy?
No, Section 525(c)(1) of the Bankruptcy Code provides that a governmental unit or others that grant or process student grants or loans may not deny a grant, loan, loan guarantee, or loan insurance to a person who files bankruptcy. The Bankruptcy Code is worded to put meaning in the “Fresh Start” granted to everyone who files bankruptcy. In furtherance of this “Fresh Start” policy, the right to receive student grants and loans is protected because education is an important element leading to financial success.

31. Can I file bankruptcy again if I filed before?
Yes, but a Chapter 7 can only be filed once every eight years counting from the filing date and not the discharge date. However, if help is need in less time, a very desirable Chapter 13 can be filed four years after a Chapter 7 and in most cases the result is similar to a Chapter 7 discharge except usually small and affordable payments that fit in your budget are made over 36 months, with the balance of the unpaid creditor forgiven – just like a Chapter 7 discharge. Call for more information.

32. Should I try “Debt Counseling?”
The public is generally unaware of the underlying core business of the so-called “non profit debt counselor.” Most think the “counselor” represents them exclusively, and therefore do not know to ask pertinent questions before making the fateful decision to “join” the “debt repayment plan program.” Obviously, more disclosure is required to insure the public makes an informed decision. Unfortunately, fair disclosure is not yet mandated by law although it obviously should be. Many financial professionals believe better disclosure is needed to inform the unknowing public that the core business of “debt counselors” is bill collection because creditors pay them a collection commission of about 15% (called a “fair share”) of every dollar collected. That’s $15.00 for every $100.00 collected. Additional costs include a $35 initial fee, and a $6 monthly fee per credit card. Think about it. If the 15% “commission” were known, would anybody pay a “counselor” or a collection agency a monthly “maintenance fee” for the “privilege” of having a “counselor” or bill collector accept the payments? And why do “counselors” demand monthly payments in the form of a bank debit, money order, cashier’s check and the like. Why won’t they accept a personal check? Wouldn’t a “counselor,” supposedly working for you, accept payment in the form you wish to give it? Or maybe they are working for the creditors who are paying them the “commission.” Another good question is to ask why many “counselors” insist on holding the first monthly payment “in escrow.” Maybe the “counselor” plans on keeping the money down the road after you can no longer keep up the burdensome payments. These are important questions to ask and get answers for. As far as the “non-profit” marketing tool is concerned, just ask yourself where the money is coming from to pay the multimillion dollar TV ads. In any event, by the time most people turn to “counselors” their finances are too far gone to pull out, and the bankruptcy “Fresh Start” is a much wiser, and much cheaper, choice.

With over 45 years of experience, Subranni Zauber has built a reputation as a leader in solving your personal bankruptcy concerns. We approach every client we help with the individualized attention they need and the expertise to maximize the most desired outcome possible. If you would like to speak to a bankruptcy attorney, contact us today at 1.800.391.5706.

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