Bankruptcy: Frequently Asked Questions
Bankruptcy is often viewed as complex, and there are many myths regarding the subject. At Jacoby & Jacoby, we welcome you to contact our Long Island bankruptcy lawyer to discuss your particular situation with an attorney at our firm. We have also included some frequently asked questions regarding bankruptcy below, for your review.
What is bankruptcy?
Bankruptcy is a legal proceeding wherein an individual is allowed to seek relief from overwhelming debt. When someone cannot pay their debt, they may seek to file for bankruptcy under Chapter 7 or Chapter 13 of the bankruptcy code. By filing for bankruptcy, creditors must stop all actions to collect debt from you. This includes harassment, wage garnishment, repossession and freezes on your bank accounts.
What is Chapter 7?
Chapter 7 bankruptcy results in a liquidation of the debtor’s non-exempt assets. A bankruptcy trustee will sell assets and the proceeds of this sale will be used to pay creditors. Chapter 7 is often a good option for those with little or no income, little or no surplus of income, who do not own a property or who have little or no equity in their property. Many Chapter 7 cases are referred to as “no asset” cases because the individual filing for bankruptcy does not have assets that qualify for liquidation. There are some long-term consequences, mainly the reduction of your credit score.
Can I keep my car?
It is possible that you can keep certain property, such as your car, even when going through a Chapter 7 bankruptcy. This is referred to as a “reaffirmation of debt.” In essence, you agree to continue to make payments or to pay off the property and will then be able to keep it.
What is Chapter 13?
Chapter 13, also referred to as “Individual Debt Adjustment” or a “wage earner’s plan,” is a good option for a person who has a steady income. The debtor is allowed to keep his or her assets and property and makes an agreement to make payments to a Chapter 13 bankruptcy trustee, who will then distribute those payments to creditors.
If I file bankruptcy will creditors stop harassing me?
Creditors are required by law to cease all actions against a debtor once bankruptcy has been filed. Creditors will not be able to initiate or continue lawsuits or even telephone calls to the debtor. At Jacoby & Jacoby, we can help you with creditor harassment if creditors do not cease contacting you after you’ve filed bankruptcy.
How will bankruptcy affect a foreclosure?
Any bankruptcy proceedings may result in a stay of foreclosure proceedings. For a Chapter 7 bankruptcy, this is not automatic, and foreclosure proceedings will continue upon the conclusion of the bankruptcy. For a Chapter 13 filing, there will be an automatic stay of all foreclosure proceedings. Additionally, the debtor may be able to keep the property by making mortgage payments throughout the life of the Chapter 13 bankruptcy or by seeking a loan modification.
How long will bankruptcy proceedings last?
For a Chapter 7 bankruptcy case, this may last 4 to 6 months. For a Chapter 13 case, this may last 3 to 5 years, as the payment plan is part of these proceedings, and the payment plan usually lasts for that amount of time.
Who will know that I filed bankruptcy?
Bankruptcy filings are considered to be public records, but the only people who will really be aware of your status are Credit Bureaus, who will record your bankruptcy on your credit record.
I’ve already filed bankruptcy once. Am I eligible to file it again?
Individuals who have not filed Chapter 7 bankruptcy more than 8 years after their previous filing can file Chapter 7 bankruptcy again. If you have previously filed Chapter 13 bankruptcy, you can file it again if at least two years have passed since you received a Chapter 13 discharge.
How long will a bankruptcy stay on my credit?
An individual’s filing for bankruptcy may remain on his or her credit report for up to 10 years. However, if the debtor successfully completes the payment plan in a Chapter 13 bankruptcy case, this may be limited to 7 years.
