Bankruptcy Q&A

Individual Bankruptcy

How long will it be on my credit history?

The bankruptcy filing can be on your credit report for up to 10 years.

How can I re-establish credit after I file a bankruptcy?

You can re-establish your credit by paying your utility bills, mortgage bills, etc. on time and by getting a "secured" credit card. Timely payments under your Chapter 13 plan can also help to rebuild your credit.

How long does a bankruptcy take to complete?

It depends on which type of bankruptcy you file. A Chapter 7 takes about 4 to 6 months, whereas a Chapter 13 typically takes 36 to 60 months. A Chapter 11 is more complex and varies depending on the issues in the case.

Do I have to list all my creditors?

Yes. You must list all your creditors in your bankruptcy schedules.

Will filing for bankruptcy stop my creditors from attaching my wages?

Yes. Even if a creditor has already started to garnish your wages, the bankruptcy filing will stop it.

What is the difference between Chapters 7, 13 and 11?

A Chapter 7 is a straight liquidation. You are allowed to keep a limited amount of property (equity in your home up to $18,450.00 per debtor, double if for a husband and wife; clothing, furniture, car, pension). The rest goes to your creditors. In most cases, the Debtor does not own anything beyond what can be protected. A Chapter 13 is an individual repayment plan. It allows a Debtor to pay his creditors over time. A Chapter 13 filing is a good solution for someone who is behind on his or her mortgage payments, or taxes, or car payments. It gives the Debtor time to catch up. The Debtor, however, must be able to keep current on the new monthly payments. A Chapter 11 is for individuals whose debts exceed the limits for Chapter 13 or who have valuable assets that they want to reorganize and use to pay creditors.

I am in the middle of a divorce. I know I will need to file bankruptcy. When is the right time?

Timing is crucial in a bankruptcy/divorce situation. Each case is different. You should consult with a bankruptcy attorney who is familiar with the interplay between bankruptcy law and matrimonial law. Make sure that you bring your case information statement to the consultation.

Can I discharge taxes?

In some instances, yes. Income tax can be discharged depending on the tax year and when you filed your return. Other types of taxes, such as withholdings and sales tax are not dischargeable.

Business Bankruptcy

How will filing bankruptcy help?

A bankruptcy filing will not, by itself, fix a broken business. Bankruptcy gives the company breathing room to formulate a plan of action without having to fend off lawsuits from collection attorneys. It can stop an eviction, stop the taxing authority from pad-locking the door, and stop the leasing company from taking the equipment.

Will my suppliers still sell to me?

It will vary with each supplier. Generally, once the business files, they are better protected than they were before and will sell to you.

Can you sell a business in bankruptcy?

Absolutely. Sales of business assets are quite common in bankruptcy. It may be in the company's best interest to sell off assets and reorganize as a small entity. In fact, a bankruptcy filing may be the only way for a troubled business to sell assets.

Which Chapter should the company file under?

If you want to try to reorganize the company or, at least, control its orderly liquidation, a Chapter 11 is probably the appropriate Chapter. A Chapter 7 is a straight liquidation. A trustee will be appointed to take possession of the assets in a Chapter 7 filing.

Are there alternatives to filing a Chapter 11?

Yes. Today's lenders do not want to foreclose on your property unless they have to. Planning and communication is important. Many lenders will allow the company to do an out-of-court "work out". It is best to consult with an experienced bankruptcy attorney to review your opinions.

Creditors' Questions

Should I file a proof of claim and how?

Yes. You want to make sure that you share in a disbursement to creditors. The claim must be filed on time with the bankruptcy court and be properly supported with the correct documentation.

The Debtor is not making post-petition (rent, lease, mortgage) payments to me. What can I do?

Hire a lawyer to file a "stay relief motion" for you so you can get the property back.

How do I object to a Debtor's discharge?

You have to file a complaint with the court. The basis for doing so is narrow and there is a short time-frame. Be sure to consult a lawyer.

Will my claim be paid?

It depends on both the priority of your claim and the success of the Debtor's reorganization.