Frequently Asked Questions About Bankruptcy
If I file bankruptcy, can I keep my house and car?
Yes, in most cases, bankruptcy filers don’t have enough equity in any asset, not just houses and cars, for a trustee to take them and sell, or liquidate, them. Having equity means that the asset is worth more than you owe on it. Most people have significant mortgages and car loans on their assets, and so they do not lose them in a bankruptcy.
How will bankruptcy affect my credit?
It may seem counter-intuitive, but sometimes filing a bankruptcy actually increases a person’s credit score. This is because, after the debt is eliminated, there is a flip of the debt-to-income ratio, and so someone’s credit score will increase after filing. Also, the further in time from the date of filing of the bankruptcy case, and as you make payments on secured debts, your score will increase. Many people experience significant increases in their credit scores within the year after filing. We strongly encourage our bankruptcy clients to keep a careful watch on their credit scores after filing, and make your payments on time for debts that you’ve kept. Federal law requires the credit reporting bureaus to give you one free copy of your credit report a year, and they can be obtained at www.annualcreditreport.com. There are also a variety of online credit score trackers available.
Will bankruptcy stop collectors from harassing me?
The short answer here is yes. Upon notification of the filing of a bankruptcy, all creditors must stop their collection efforts – whether that’s a foreclosure lawsuit in state court, a repossession order from a car creditor, or a garnishment against your paycheck or bank account. They cannot contact you about the debts anymore, by phone or letter.
What debts will a bankruptcy eliminate?
Chapter 7 and most Chapter 13s eliminate general, unsecured debts, such as credit cards, personal loans, and medical bills. It can also eliminate older tax debts, and in rare instances, student loans. Bankruptcy will not eliminate child support or alimony, new tax debts, or criminal fines or restitution.
Yes, in most cases, bankruptcy filers don’t have enough equity in any asset, not just houses and cars, for a trustee to take them and sell, or liquidate, them. Having equity means that the asset is worth more than you owe on it. Most people have significant mortgages and car loans on their assets, and so they do not lose them in a bankruptcy.
How will bankruptcy affect my credit?
It may seem counter-intuitive, but sometimes filing a bankruptcy actually increases a person’s credit score. This is because, after the debt is eliminated, there is a flip of the debt-to-income ratio, and so someone’s credit score will increase after filing. Also, the further in time from the date of filing of the bankruptcy case, and as you make payments on secured debts, your score will increase. Many people experience significant increases in their credit scores within the year after filing. We strongly encourage our bankruptcy clients to keep a careful watch on their credit scores after filing, and make your payments on time for debts that you’ve kept. Federal law requires the credit reporting bureaus to give you one free copy of your credit report a year, and they can be obtained at www.annualcreditreport.com. There are also a variety of online credit score trackers available.
Will bankruptcy stop collectors from harassing me?
The short answer here is yes. Upon notification of the filing of a bankruptcy, all creditors must stop their collection efforts – whether that’s a foreclosure lawsuit in state court, a repossession order from a car creditor, or a garnishment against your paycheck or bank account. They cannot contact you about the debts anymore, by phone or letter.
What debts will a bankruptcy eliminate?
Chapter 7 and most Chapter 13s eliminate general, unsecured debts, such as credit cards, personal loans, and medical bills. It can also eliminate older tax debts, and in rare instances, student loans. Bankruptcy will not eliminate child support or alimony, new tax debts, or criminal fines or restitution.