|Copyright The Law Office of Eric L. Crump, PLLC, 2007, All rights reserved
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|THE LAW OFFICE OF
ERIC L. CRUMP, PLLC
ATTORNEY AND COUNSELOR AT LAW
QUESTIONS ON BANKRUPTCY
1. What is Bankruptcy?
Bankruptcy is a legal proceeding in which an individual
who cannot pay his or her bills can get a fresh financial
start. The right to file for bankruptcy is provided by
federal law, and all bankruptcy cases are handled in
federal court. Filing bankruptcy immediately stops all of
your creditors from seeking to collect debts from you, at
least until your debts are sorted out according to the law.
2. What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to:
a. Eliminate the legal obligation to pay most or all
of your debts. This is called a "discharge" of
debts. It is designed to give you a fresh financial
b. Stop foreclosure on your house or mobile home
and allow you an opportunity to catch up on
missed payments. (Bankruptcy does not,
however, automatically eliminate mortgages and
other liens on your property without payment.)
c. Prevent repossession of a car or other property,
or force the creditor to return property even
after it has been repossessed.
d. Stop wage garnishment, debt collection
harassment, and similar creditor actions to
collect a debt.
e. Restore or prevent termination of utility service.
f. Allow you to challenge the claims of creditors
who have committed fraud or who are otherwise
trying to collect more than you really owe.
3. What Doesn't Bankruptcy Do?
Bankruptcy cannot, however, cure every financial
problem. Nor is it the right step for every individual. In
bankruptcy, it is usually not possible to:
a. Eliminate certain rights of "secured" creditors. A
"secured" creditor has taken a mortgage or
other lien on property as collateral for the loan.
Common examples are car loans and home
mortgages. You can force secured creditors to
take payments over time in the bankruptcy
process and bankruptcy can eliminate your
obligation to pay any additional money if your
property is taken. Nevertheless, you generally
cannot keep the collateral unless you continue
to pay the debt
b. Discharge types of debts singled out by the
bankruptcy law for special treatment, such as
child support, alimony, certain other debts
related to divorce, some student loans, court
restitution orders, criminal fines, and some
taxes. (see Kentucky Non-Dischargeable Debts)
c. 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 arise after
bankruptcy has been filed.
4. How often can I file bankruptcy?
You can file for Chapter 7 bankruptcy again after six
years has passed from the date of your last filing. A
Chapter 13 bankruptcy can be filed at any time.
5. What Different Types of Bankruptcy Should I
There are four types of bankruptcy cases provided
under the law:
1. Chapter 7 is known as "straight" bankruptcy or
"liquidation." It requires a debtor to give up
property which exceeds certain limits called
"exemptions", so the property can be sold to
2. Chapter 11, known as "reorganization", is used
by businesses and a few individual debtors
whose debts are very large
3. Chapter 12 is reserved for family farmers.
4. Chapter 13 is called "debt adjustment". It
requires a debtor to file a plan to pay debts (or
parts of debts) from current income.
Most people filing bankruptcy will want to file under
either chapter 7 or chapter 13. Either type of case may
be filed individually or by a married couple filing jointly.
(see Oregon Bankruptcy Law's Chapter 7 or 13?)
6. Is the Chapter 7 (Straight Bankruptcy)
Bankruptcy Right for Me?
In a bankruptcy case under chapter 7, you file a petition
asking the court to discharge your debts. The basic idea
in a chapter 7 bankruptcy is to wipe out (discharge) your
debts in exchange for your giving up property, except for
"exempt" property which the law allows you to keep.
(according to federal and state exemptions) In most
cases, all of your property will be exempt. But property
which is not exempt is sold, with the money distributed to
creditors. If you want to keep property like a home or a
car and are behind on the payments on a mortgage or
car loan, a chapter 7 case probably will not be the right
choice for you. That is because chapter 7 bankruptcy
does not eliminate the right of mortgage holders or car
loan creditors to take your property to cover your debt.
7. Is Chapter 13 bankruptcy (Reorganization) Right
In a chapter 13 case you file a "plan" showing how you
will pay off some of your past-due and current debts
over three to five years. The most important thing about
a chapter 13 case is that it will allow you to keep
valuable property--especially your home and car--which
might otherwise be lost, if you can make the payments
which the bankruptcy law requires to be made to your
creditors. In most cases, these payments will be at least
as much as your regular monthly payments on your
mortgage or car loan, with some extra payment to get
caught up on the amount you have fallen behind. You
should consider filing a chapter 13 plan if you:
(1) own your home and are in danger of losing it
because of money problems; (2) are behind on debt
payments, but can catch up if given some time; (3) have
valuable property which is not exempt, but you can
afford to pay creditors from your income over time.
You will need to have enough income in chapter 13 to
pay for your necessities and to keep up with the
required payments as they come due.
8. In Kentucky, What Property Can I Keep?
In a chapter 7 case, you can keep all property which the
law says is "exempt" from the claims of creditors.
Kentucky statutes provide list of the exemptions
available for Kentucky. In determining whether property
is exempt, you must keep a few things in mind. The
value of property is not the amount you paid for it, but
what it is worth now. Especially for furniture and cars,
this may be a lot less than what you paid or what it would
cost to buy a replacement. You also only need to look
at your equity in property. This means that you count
your exemptions against the full value minus any money
that you owe on mortgages or liens. For example, if you
own a $50,000 house with a $40,000 mortgage, you
count your exemptions against the $10,000 which is
your equity if you sell it. While your exemptions allow you
to keep property even in a chapter 7 case, your
exemptions do not make any difference to the right of a
mortgage holder or car loan creditor to take the property
to cover the debt if you are behind. In a chapter 13
case, you can keep all of your property if your plan
meets the requirements of the bankruptcy law. In most
cases you will have to pay the mortgages or liens as you
would if you didn't file bankruptcy.
9. What Will Happen to My Home and Car If I File
Bankruptcy in Kentucky?
In most cases you will not lose your home or car during
your bankruptcy case as long as your equity in the
property is fully exempt. Even if your property is not fully
exempt, you will be able to keep it, if you pay its
non-exempt value to creditors in chapter 13. However,
some of your creditors may have a "security interest" in
your home, automobile or other personal property. This
means that you gave that creditor a mortgage on the
home or put your other property up as collateral for the
debt. Bankruptcy does not make these security interests
go away. If you don't make your payments on that debt,
the creditor may be able to take and sell the home or
the property, during or after the bankruptcy case. There
are several ways that you can keep collateral or
mortgaged property after you file bankruptcy. You can
agree to keep making your payments on the debt until it
is paid in full. Or you can pay the creditor the amount
that the property you want to keep is worth. In some
cases involving fraud or other improper conduct by the
creditor, you may be able to challenge the debt. If you
put up your household goods as collateral for a loan
(other than a loan to purchase the goods), you can
usually keep your property without making any more
payments on that debt.
10. Can I Own Anything After Bankruptcy?
Yes. Many people believe they cannot own anything for
a period of time after filing for bankruptcy. This is not
true. You can 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 Oregon
bankruptcy exemptions through the bankruptcy.
11. Will Bankruptcy Wipe Out All My Debts?
Yes, with some exceptions. Bankruptcy will not normally
(1) money owed for child support or alimony, fines, and
some taxes;(2) debts not listed on your bankruptcy
petition;(3) loans you got by knowingly giving false
information to a creditor, who reasonably relied on it in
making you the loan;(4) debts resulting from "willful and
malicious" harm;(5) student loans owed to a school or
government body, except if:-- the court decides that
payment would be an undue hardship;(6) mortgages
and other liens which are not paid in the bankruptcy
case (but bankruptcy will wipe out your obligation to pay
any additional money if the property is sold by the
12. Will I Have to Go to Court?
In most bankruptcy cases, you only have to go to a
proceeding called the "meeting of creditors" to meet with
the bankruptcy trustee and any creditor who chooses to
come. Most of the time, this meeting will be a short and
simple procedure where you are asked a few questions
about your bankruptcy forms and your financial
situation. Occasionally, if complications arise, 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/or from your attorney.
13. Will Bankruptcy Affect My Credit?
There is no clear answer to this question. Unfortunately,
if you are behind on your bills, your credit may already
be bad. Bankruptcy will probably not make things any
worse. The fact that you've filed a bankruptcy can
appear on your credit record for ten years. But since
bankruptcy wipes out your old debts, you are likely to be
in a better position to pay your current bills, and you
may be able to get new credit.
14. Can I Get a Credit Card After Bankruptcy?
Yes, there are several options available. While
technically not a credit card you could use a bank or
debit card to perform activities for which you normally
would use a credit card. You also may be able to keep
the credit card you already have if the creditor grants
approval. If these options do not work you can get
secured credit card which is backed by your own bank
15. Are Utility Services Affected?
Public utilities, such as the electric company, cannot
refuse or cut off service because you have filed for
bankruptcy. However, the utility can require a deposit for
future service and you do have to pay bills which arise
after bankruptcy is filed.
16. Can I Be Discriminated Against For Filing
No. 11 U.S.C. Sec. 525 prohibits governmental units and
private employers from discriminating against you
because you filed a bankruptcy petition or because you
failed to pay a dischargeable debt.
17. Can Bankruptcy Help Get My Oregon Driver's
If you lost your license solely because you couldn't pay
court-ordered damages caused in an accident,
bankruptcy will allow you to get your license back.
18. What About Co-signers?
If someone has co-signed a loan with you and you file
for bankruptcy, the co-signer may have to pay your debt.
19. I'm Married, Can I File by Myself?
Yes, but your spouse will still be liable for any joint
debts. If you file together you will be able to double your
exemptions. In some cases where only one spouse has
debts, or one spouse has debts that are not
dischargeable then it might be advisable to have only
one spouse file. If the spouses have joint debts, the fact
that one spouse discharged the debt may show on the
other spouses credit report.
20. Can filing bankruptcy stop bill collectors from
Yes. The automatic stay prevents bill collectors from
taking any action to collect debts.
21. How long after filing will the creditors stop
Once a creditor or bill collector becomes aware of a
filing for bankruptcy protection, it 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. This usually takes a
couple of weeks. Creditors will also stop calling if you
inform them that you filed the bankruptcy petition, and
supply them with your case number. In some cases, you
or your attorney should contact the creditor immediately
upon filing the bankruptcy petition, especially if a law suit
is pending. If a creditor continues to use collection
tactics once informed of the bankruptcy they may be
liable for court sanctions and attorney fees for this
22. Can I erase my student loans by filing
Generally, student loans are not discharged in
bankruptcy. In 11 U.S.C. Sec. 523(a)(8) there are two
exceptions to this general rule:
The student loan may be discharged if it is neither -
Insured or guaranteed by a governmental unit, nor
- Made under any program funded in whole or in part by
a governmental unit or nonprofit institution.
The student loan may be discharged if paying the loan
will "impose an undue hardship on the debtor and the
Student loans more than 7 years old used to be
dischargeable under certain circumstances, but this
provision was removed by an appropriations bill passed
in October of 1998.
Whether an exception applies depends on the facts of
the particular case and may also depend on local court
decisions. Even if a student loan falls into one of the two
exceptions, discharge of the loan may not be automatic.
You may have to file an adversary proceeding in the
bankruptcy court to obtain a court order declaring the
23. Where do I file if I haven't lived in the same
state or district for the last six months?
Law code 28 USC Section 1408 states that the case
should be filed where the debtor has lived "for the one
hundred and eighty days immediately preceding such
commencement, or for a longer portion of such
one-hundred-and-eighty-day period." This means that
the case should be filed in the bankruptcy district in
which the debtor has lived for the greatest portion of the
last six months.
24. If I am going through a divorce how will my
ex-spouse filing bankruptcy affect our divorce
Alimony, maintenance, and/or support are protected
from discharge. Divorce decrees and separation
agreements are covered by 11 U.S.C. Section
523(a)(15). This section states that these debts are not
(A) the debtor does not have the ability to pay such debt
from income or property of the debtor not reasonably
necessary to be expended for the maintenance or
support of the debtor or a dependent of the debtor and,
if the debtor is engaged in a business, for the payment
of expenditures necessary for the continuation,
preservation, and operation of such business; or
(B) discharging such debt would result in a benefit to the
debtor that outweighs the detrimental consequences to
a spouse, former spouse, or child of the debtor.
|WE ARE A DEBT RELIEF AGENCY – WE HELP
PEOPLE FILE FOR BANKRUPTCY RELIEF UNDER
THE BANKRUPTCY CODE
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Phone: (502) 540-9958; Fax: (502) 540-9957