Bankruptcy FAQ

Will everybody know I filed bankruptcy?

Bankruptcy is a public proceeding, but that doesn’t mean the public at large knows who has filed or the outcome of each case. You will have to reveal your filing if asked to do so in the future – such as on a loan application, etc. But that is a far cry from “everyone” knowing. Your filing is still your business.

Are all debts wiped out in bankruptcy?

Certain debts such as taxes, child support, alimony, and student loans, are considered too important to discharge (wipe out) in bankruptcy. Still other kinds of debt are not eliminated by bankruptcy because they arise from fraud or misrepresentation. In general however, bankruptcy eliminates consumer debts like credit cards, doctor’s bills, rent obligations, etc. Otherwise, what’s the point, right?

Will I give up all my possessions in a bankruptcy?

The bankruptcy process is actually about taking away what you don’t need and letting you keep what you do. What do you ‘need’ to get back on your feet? In general the answers are: a place to live, a way to get to work, clothes, household goods, retirement savings, and some walking around money. While the details vary, most debtors can find a way to maintain these basic necessities even after filing.

Will bankruptcy ruin my credit for life?

In most cases credit scores improve within a year of filing bankruptcy for 2 reasons. First, you may give up certain assets in a bankruptcy but you shed much, much more in liabilities. Second, you cannot be “late” or “in default” if your obligations have been legally wiped out. The result: a higher FICO score.

Will I ever get another loan?

Not only will you be able to get a loan after filing bankruptcy, you will actually look much better to credit card issuers, financing companies, and others. But remember, you will pay much more for those loans through higher interest rates and fees.

Do I have to involve my spouse?

Unless your spouse is a co-debtor, your debts are your own. The same goes for assets. If you file for bankruptcy your spouse’s contribution to household income will be taken into account, but that is all. They do not have to file or give up any assets titled in their name.

Isn’t bankruptcy complicated?

Remember what happened when you tried to perform open-heart surgery on yourself? Bankruptcy is complex enough, and the 2005 change in the law only made it more complicated. It also loaded the process with pitfalls and technicalities. My advice: don’t file without the aid of a competent Attorney.

Is bankruptcy just for deadbeats?

The bankruptcy system was created to help honest individuals who experienced a life-changing reversal such as divorce, job-loss, chronic illness, business loss, etc. At some point you need to read the writing on the wall and stop throwing good money after bad. Bankruptcy offers that fresh start.

Can I ever pay my creditors back?

By law you must list all creditors in your bankruptcy filing; but nothing in the Bankruptcy Code prevents you from paying a creditor back voluntarily. Once you file bankruptcy you are no longer obligated to repay creditors, so if you do the creditor that gets paid should thank you for it.

Can I keep the goodies and short the creditors?

In bankruptcy the debtor needs to move beyond his current situation, so naturally many creditors will not be paid. But if you load up on the goodies before filing and plan to stick the creditor with the bill, you can be denied a discharge and even be investigated by the FBI. Cash advances and luxury purchases just before filing are common signs that a debtor is trying to scam the system. Don’t try it.