Frequently Asked Questions About Bankruptcy

“What is bankruptcy all about and how can I use it to help me?”

The most important thing to remember is that bankruptcy is a federal court proceeding. It can give a consumer very powerful relief from the debts owed, but it comes with great responsibility. Bankruptcy is designed to allow people to wipe out their obligation to pay certain debts and in some cases to distribute a person’s assets to his or her creditors.

To file bankruptcy, one must fill out a petition and schedules. The petition is a request of the court to give you immediate protection from your creditors and to eventually provide you relief from having to pay your debts. The schedules tell the court, a trustee, and your creditors what assets you own, what income you earn, what debts you have and what expenses you incur regularly. When you file a petition, the court grants an automatic stay which acts as an injunction or a restraining order to prevent your creditors from bothering you.

Once the bankruptcy case is filed, your creditors must stop calling you, contacting you, suing you, garnishing your wages, or harassing you in any manner. If you had your driver’s license suspended or revoked due to an uninsured automobile accident you will, in most cases, be able to get your license back immediately upon the bankruptcy filing. If your have had your utilities disconnected, we can help you get your electricity, natural gas, or telephone service reconnected immediately.

What kind of bankruptcy do most people file?

Individuals can use four basic types of bankruptcy to help them get the relief that they need. The most common forms of consumer bankruptcy are Chapter 7 bankruptcy and Chapter 13 bankruptcy. A Chapter 7 bankruptcy is a simple straightforward fresh start where you receive a discharge of your debts. A Chapter 13 bankruptcy is a reorganization of your debts where you will repay a portion of what you owe. A Chapter 11 bankruptcy is a reorganization of a business. Finally, a Chapter 12 bankruptcy is a bankruptcy specifically for family farmers.

What is a Chapter 7 bankruptcy?

Chapter 7 bankruptcy operates as a straight discharge of certain types of debt. Most of the time, people who file Chapter 7 are looking for relief from overwhelming credit card debt, large utility bills, back rent, drowning medical debt, uninsured car accidents, deficiency amounts owed on a repossessed vehicle.

In some cases, a person can keep certain debt by reaffirming the obligation to the creditor. Chapter 7 bankruptcy will not eliminate debts from some kinds of tax liability, government fines, forfeitures, restitution, criminal or fraudulent conduct, child and spousal support, drunk driving, most student loans, and debts resulting from intentional and malicious injuries.

If you have a secured loan, you may still be able to file a Chapter 7 bankruptcy and keep the property that is secured by the loan. In the case of a mortgage or a car note, you can keep the collateral and reaffirm your willingness to pay the debt. You could also decide to surrender the collateral and seek a discharge of the debt. Whether or not you are eligible to file a Chapter 7 depends on a number of factors which you should discuss with an experienced attorney.

How long will my Chapter 7 bankruptcy take?

Typically, a Chapter 7 bankruptcy takes approximately 90 days from start to finish. Within 30 to 40 days of filing the petition, a hearing is held before a trustee appointed by the Office of the United States Trustee. Creditors are given notice of the hearing and may come and ask questions. About 60 days after the hearing, assuming no complications, the court will issue an Order discharging your debts.

How often can I file a Chapter 7 bankruptcy?

You may only file a Chapter 7 bankruptcy once every eight (8) years.

What is a Chapter 13 bankruptcy?

Chapter 13 bankruptcy is a reorganization and consolidation of your debt. Just like a Chapter 7 bankruptcy, you start a Chapter 13 case by filing a petition, schedules and a Chapter 13 Plan. Chapter 13 bankruptcy differs from a Chapter 7 bankruptcy because you repay a portion of your debt over a set period of time. Most often, people who are trying to save a house or car will turn to a Chapter 13 bankruptcy to help them get caught up on those payments. A Chapter 13 bankruptcy can prevent repossession of your car or foreclosure on your house.

A Chapter 13 plan lasts anywhere between 36 months and 60 months. Credit card debt, medical bills, and other unsecured debt can also be repaid usually at a fraction of what is owed. If you complete your Chapter 13 plan, you will receive a discharge as to the remaining balance on any unsecured debt.

The key to success in a Chapter 13 bankruptcy is your ability to show the Court that you have a stable source of income to pay all your regular monthly expenses and still have enough left over to fund the Chapter 13 plan. The Court will usually order a wage assignment from your employer to pay for the Chapter 13 bankruptcy plan.

Will I lose my house, my car, and my personal property if I file bankruptcy?

No. The bankruptcy laws were specifically designed to give you relief from debt without requiring you to give the “shirt off of your back.” The law contains specific “exemptions” for certain kinds of property which allow you to keep your property. If you have assets above the allowable exemptions, you would have to turn over those assets to the trustee for distribution to your creditors. Most of our clients are able to keep everything that they own.

Can I utilize bankruptcy stop my phone or electric utilities from being disconnected?

Yes. Filing bankruptcy will stop your utilities from being disconnected. You will have to continue to pay for your utilities after you file bankruptcy and in some cases a utility can ask for a deposit for service after you file. Your past utility bills will be discharged in the bankruptcy. If your services have already been disconnected, you can use a bankruptcy to allow the services to immediately be turned back on.

Can I discharge student loans in bankruptcy?

No. Student loans are not dischargeable in bankruptcy. There is an exception where you can show an undue hardship, you may be able to discharge your student loans, but it is a rare and difficult process to do so.

If my license has been suspended because of an automobile accident, can bankruptcy help me get my driver’s license back?

Yes. We will work with you to get information to the Wisconsin Department of Motor Vehicles to let them know immediately upon your filing bankruptcy so that you can take the necessary action to get your license back.

Will filing bankruptcy destroy my credit?

A bankruptcy can stay on your credit report for up to ten years. Most of our clients are already experience credit difficulties which result in a lower credit score. In this situation, filing bankruptcy may not have that much more negative effect on a credit rating. While bankruptcy will make getting credit more difficult initially, it does not mean that you won’t be able to get credit in the future. Many of our clients are able to purchase a car or home within eighteen months of filing bankruptcy. This is possible because after filing bankruptcy your credit profile can improve substantially because you are debt free. This benefit comes with great responsibility. After you file bankruptcy, any debt you incur is not dischargeable in the bankruptcy you just filed.

It is important to note that bankruptcy by itself will not clean out your credit report. A bankruptcy will discharge your obligation to repay certain debts. Bankruptcy can give you a fresh start to rebuilding your credit. Very often, bankruptcy law firms do not recognize the power of the discharge Order from the Court in helping you get that fresh start. We work closely with our clients after bankruptcy is completed to make sure that your credit report properly reflects the bankruptcy and that harmful negative information is removed. If it is not, we will sue those creditors on your behalf to get you the fresh start that you deserve.

Do my spouse and I both have to file bankruptcy?

There is no requirement that you and your spouse file a joint bankruptcy petition. In most situations, we do advise our clients to file a joint petition since Wisconsin is a marital property state. This means that in a case where one spouse files for bankruptcy and one spouse chooses not to participate, a creditor of the filing spouse may look in some cases to the assets of the non-filing spouse for payment.

How much does bankruptcy cost?

Attorneys at Maxwell Attorneys LLC are ready to help you understand all your bankruptcy options and the costs associated with each. Please call 414-727-0123 today to make a free consultation appointment. You can expect to receive an appointment to see our attorneys within one or two days of your call.