Bankruptcy FAQ

The federal bankruptcy law provides express prohibitions against discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during their case, or has not paid a debt that was discharged in the case.
The law prohibits the following forms of discrimination:

Terminating an employee based on their bankruptcy.
Discriminating with respect to hiring based on bankruptcy.
Denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege based on bankruptcy.
Discriminating with respect to employment if the discrimination is based solely upon the bankruptcy filing.

Bankruptcy is a process that allows an individual or business to wipe out (discharge) most debts under the protection of the federal bankruptcy court. There are different types of bankruptcy each one used for a particular purpose to solve a specific problem.

When you file bankruptcy, a court order called an “automatic stay” goes into effect. The automatic stay prohibits most creditors from taking any action to collect the debts you owe them.

Bankruptcy makes it possible for you to:

Eliminate the legal obligation to pay most or all of your debts. This is called a discharge of debts and it is designed to give you a fresh financial start.
Stop the foreclosure on your home and allow you the opportunity to catch up on missed payments. Bankruptcy does not automatically eliminate mortgages and other liens on your property without payment however.
Prevent repossession of your car or other property.
Stop wage garnishment and debt collection harassment.
Allow you to challenge the claims of creditors who are trying to collect more than you really owe.

Bankruptcy is not a solution for every financial problem and it cannot:

Eliminate certain rights of secured creditors. A secured creditor has taken a mortgage or other lien on property as collateral for the loan and common examples are car loans and home mortgages. Through the bankruptcy process, you can force secured creditors to take payments over time. Bankruptcy can eliminate your obligation to pay any additional money if your property is taken although you generally cannot keep the collateral unless you continue to pay the debt.
Debts singled out by the bankruptcy law for special circumstances such as child support, alimony, certain debts related to divorce, court restitution orders, criminal fines, and some taxes.
Debts not listed on your bankruptcy petition.
Loans you obtained by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan.
Debts resulting from willful and malicious harm.
Student loans owed to a school or government body, except if the court decides that payments would be an undue hardship.
Mortgages and other liens, which are not paid in, the bankruptcy case but the bankruptcy will wipe out the obligation to pay any additional money if the creditor sells the property.
Protect cosigners on your debts. When a relative or friend has co-signed a loan and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
Discharge debts that occur after your bankruptcy has been filed.

The four types of bankruptcy protection provided under the law are:

Chapter 7 is known as straight bankruptcy or liquidation. An individual or business seeks relief from the bankruptcy court to wipe out (discharge) their debts, giving them a fresh start. All unsecured debt may be wiped out. Secured debt, however, must be paid if you intend to keep the collateral, such as, cars, boats and houses, etc.
Chapter 11 is known as reorganization usually used by businesses whose debts are very large.
Chapter 12 is reserved for family farmers.
Chapter 13 is called debt adjustment. An individual seeks relief from the bankruptcy court to eliminate or modify their debt while retaining all of their property. Under a Chapter 13 bankruptcy, a plan is filed with the bankruptcy court proposing how you will repay or catch up all or some of the debt over a 3 to 5 year period. You must repay some debts in full; others may be repaid only partially or not at all, depending on what you can afford.

Most people filing bankruptcy file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.

When eight years has passed from the date of your last filing, you can re-file for Chapter 7 Bankruptcy. A Chapter 13 Bankruptcy can be filed after four years.

Many people believe that they cannot own anything for a period of time after filing for bankruptcy but this is not true. You will be able to keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt. You can also keep any property covered by Florida Bankruptcy exemptions through the bankruptcy.

You can keep secured debt, such as your home and car, as long as you continue to make payments. As far as credit card debt, you will be required to list all of your existing credit card debt, which will be forgiven. Although not technically a credit card, you will be allowed to keep your debit card to perform activities for which you normally would use a credit card. You also may be able to keep one of your existing credit cards if the creditor grants approval. Sometimes, credit card companies consider you a better risk after bankruptcy and they will send you credit card offers immediately. It is recommended that you keep one for emergencies or to book airline tickets and a rental car if necessary.

There is no clear answer to this question. When you file for bankruptcy, if you are behind on your bills your credit may already be negatively affected. Bankruptcy will probably not make things any worse for you however. Since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your bills and if you keep current, you can establish good credit within 18 to 24 months. There will be an entry on your credit report showing your bankruptcy and the date you filed. This will appear on your credit record for ten years (seven for Chapter 13 Bankruptcy) because credit-reporting agencies are allowed by law to report the information that long. It is important that the “Bankruptcy” entry be in your credit report for that same time period. If not, anyone pulling your credit report would not see that all of your bad credit debt was forgiven by Bankruptcy and no longer owed by you.

The automatic stay prevents bill collectors from taking any action to collect debts. Once a creditor or bill collector becomes aware that you have filed for bankruptcy protection, they must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. Creditors will also stop calling if you inform them that you filed the bankruptcy petition and supply them with your case number. Sometimes, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a lawsuit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy, they are liable for court sanctions and attorney fees.

In most bankruptcy cases, you only have to attend a proceeding called the Meeting of Creditors to meet with the bankruptcy trustee and any creditors who choose to come. The trustee is not a judge but an individual appointed by the United States Trustee to oversee your case. The Bankruptcy Code prohibits the bankruptcy Judge from participating in the Meeting. In most cases, this meeting will be a short and simple procedure where you are asked questions about your bankruptcy forms and your financial situation. Occasionally, if a creditor or the trustee files a motion or an adversary action or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and from your attorney. These are unusual circumstances where further appearances are required or would be to your advantage and to discuss this situation, you should consult your attorney.