Considering Bankruptcy? Online Courses are Part of the Process

Frequently Asked Questions About Bankruptcy

• How does bankruptcy affect my credit?

  Bankruptcy will have a severely negative effect on your credit score and impact your ability to open new credit cards or apply for loans. Bankruptcy remains on your credit report between 7 and 10 years, during which you may find it challenging to obtain new credit or be approved for loans. If you are approved, you will likely face high interest rates and other unfavorable terms.

• Is bankruptcy counseling a requirement when filing for bankruptcy?

  Yes. Federal law requires you to take pre-filing and post-filing courses when filing for bankruptcy. Each course must be from an approved credit counseling agency like Take Charge America. Upon completion of each course, you will receive a certificate that must be filed with the bankruptcy court.

• How long will each course take to complete?

  The length for each will depend on your personal circumstances and how much documentation you need to collect before starting. But generally, the pre-filing course will take a minimum of 90 minutes, and the post-filing course will take about 2 hours. Our courses are available online 24/7, so if you do not have time to finish in one sitting, you can save your progress and return to complete it later.

• How long are completion certificates good for?

  Pre-filing completion certificates are good for 180 days.

  Post-filing completion certificates are good until your court-ordered date for discharge.

• Is it necessary to meet with an attorney before I complete the bankruptcy counseling courses?

  No. You can complete each of the bankruptcy counseling courses before or after you meet with an attorney. However, keep in mind you will need to file within 180 days after taking the pre-filing course and you should not take the post-filing course until you have filed.

• Should I hire an attorney to help me file for bankruptcy?

  Although it is not necessary, we recommend most people hire an attorney when considering bankruptcy because the process can be complex and emotional. Your attorney will serve on your behalf, represent you during court hearings, negotiate with creditors and provide relevant legal advice to your specific circumstances.

• When I file for bankruptcy, do I have to go to court?

  Yes, a court hearing is required for all bankruptcy filings, during which the trustee assigned to your case will ask you questions about your bankruptcy filing and personal circumstances. Your creditors also will be allowed to ask you questions if they choose to attend.

• What is a reaffirmation agreement?

  A reaffirmation agreement is a voluntary contract between you and a creditor for a debt you promise to repay. Such agreements are not part of or required by the bankruptcy process, although there are many reasons you might want to enter into one. For example, you may want to negotiate a plan with your auto loan lender so you can keep your vehicle. The bankruptcy court must approve reaffirmation agreements before they become binding.

  Reaffirmation agreements must meet the following rules:

  • Must be voluntary
  • Must not place too heavy a burden on you or your family
  • Must be in your best interest

  You can cancel reaffirmation agreements any time before the court issues your debt discharge or within 60 days after the agreement is filed with the court, whichever gives you the most time.

  If you reaffirm a debt but fail to pay it, the creditor can take action to recover any property on which it has a lien or mortgage such as your vehicle or home. The creditor can also take legal action against you.

• Can I keep a credit card out of my bankruptcy?

  Generally, no. You must include all your credit cards when you file for bankruptcy. There may be some instances where you can keep a credit card out of your filing, but you will want to discuss it with your attorney.

• If I’m married, do we have to file together?

  No, although a joint filing can save on fees, court costs and other expenses if you both ultimately decide to file. You should be able to file without your spouse if all the debt is in your name only. However, filing individually may lead some creditors to seek repayment from your spouse. Your spouse will always be involved as part of a Chapter 13 bankruptcy filing. You will want to consult with your attorney to determine the best approach for your situation.

• How long does the bankruptcy process take?

  Depending on which chapter you file under, the bankruptcy process can take anywhere from a few months to a few years.

• Can bankruptcy stop creditors from calling me?

  Yes. Creditors are not allowed to contact you in any way after you file for bankruptcy. If you hire an attorney, they will likely notify your creditors on your behalf to stop contacting you.

• What is a bankruptcy discharge and how does it work?

  A bankruptcy discharge is a court order that frees you from having to pay back most of your debts. When issued, it will be sent to your creditors, who will not be allowed to take further action to collect the debt. Although the discharge eliminates the debt, certain creditors may still repossess property such as a home or vehicle even if the debt has been discharged. The discharge will remain on your credit reports for 7 to 10 years.

  Although a discharge eliminates most debts, certain debts cannot be discharged, including:

  • Child support
  • Alimony
  • Most taxes
  • Most student loans
  • Court fines and criminal restitution
  • Personal injury caused by driving under the influence of drugs or alcohol
• Will bankruptcy help me save my home?

  If you are at risk for foreclosure, bankruptcy may stall or avoid it with an automatic stay, which postpones foreclosure activity while bankruptcy is pending. However, a lender may be able to obtain a motion to lift the stay from the bankruptcy court. If your foreclosure notice was issued before your bankruptcy filing, the automatic stay would not postpone the foreclosure process.

  Factors related to mortgage debt vary between Chapter 7 and Chapter 13 bankruptcy filings. We recommend contacting an attorney in your state to clearly understand your specific circumstances. Following a bankruptcy discharge, a lender can still foreclose on your home if you do not make your payments.

• Can the bankruptcy court take all of my property?

  Most states exempt certain types of property from liquidation during bankruptcy proceedings. Exempt property usually includes:

  • Motor vehicles
  • Necessary clothing
  • Necessary household furnishings and goods
  • Household appliances
  • Jewelry up to a certain value
  • Life insurance up to a certain value
  • Pensions
  • A portion of your home’s equity
  • Tools of your trade or profession up to a certain value
  • Public benefits (Social Security, unemployment payments, etc.) accumulated in a bank account

  Property that may have to be liquidated in bankruptcy includes:

  • Second or vacation homes
  • Second car or truck
  • Expensive musical instruments (unless you’re a professional musician)
  • Stamp, coin and other collections
  • Family heirlooms
  • High-valued jewelry
  • Cash, bank accounts, stocks, bonds and other investments.
• Are there ways to eliminate tax debts by filing for bankruptcy?

  Generally, most tax debts cannot be wiped out in bankruptcy. However, tax debt may be discharged under the following circumstances:

  • The taxes are for income taxes
  • The tax debt is at least three years old
  • The IRS assessed the tax debt at least eight months before your bankruptcy filing
  • You did not commit fraud or attempt to evade the tax