Frequently Asked Questions Regarding Bankruptcy

 Who can file for bankruptcy?

Any person, partnership, corporation, business trust, charitable or social organization can file for bankruptcy. You do not have to be a United States citizen to file for bankruptcy.

How often can a person file for bankruptcy?

Certainly repeat filings are discouraged by the bankruptcy court and will be more strictly scrutinized under the new bankruptcy law. Presently, Chapter 7 bankruptcies may be filed every 6 years. After October 17, 2005, Chapter 7 bankruptcies may only be filed every eight years. There is no time limitation in Chapter 13 filings at the present time.

Do I have to file with my spouse?

You have to be married to file a joint petition. However if you are married you may file jointly or individually.

What is the difference in a Chapter 7 and Chapter 13 bankruptcy?

A Chapter 7 bankruptcy, sometimes called Liquidation or “Straight Bankruptcy,” allows most debt to be eliminated in approximately a four-to-five-month period. Some debts cannot be discharged in a Chapter 7 bankruptcy, however. Some examples of debts that cannot be discharged under a Chapter 7 bankruptcy are alimony, child support, student loans and tax debts. A Chapter 13 bankruptcy involves a repayment of some or all of your debt through the office of a bankruptcy trustee over a period up to five years. All types of debts may be paid in a Chapter 13 bankruptcy.

Is my income and my property considered when determining which bankruptcy chapter should be filed?

Schedules of your income, expenses and all of your property are required as a part of your bankruptcy petition. If you have excess income or property over your allowed exemptions you are often required to file a Chapter 13 rather than a Chapter 7.

Will I lose property if I file a bankruptcy?

Not necessarily. The State of Alabama allows you to exempt presently up to $5,000 in real property and $3,000 in personal property in addition to other basic items like clothing and family photographs. However, if you have property over and above your exemptions, the bankruptcy court can take the property, sell it, pay off your creditors, give you your exemption back and keep the rest for other creditors. Usually paying the value of said property over and above the exemptions into a Chapter 13 plan will prevent you from losing the property.

What is a secured debt?

A secured debt is a debt backed up by property. A home mortgage and debt for an automobile would be a secured debt. An unsecured debt would be any debt not backed by property like credit card debt, a personal loan or a medical bill.

Is child support dischargeable under a Chapter 7 bankruptcy?

No. Any debt “in the nature of support” arising from a divorce or child support case would not be dischargeable in a Chapter 7.

Does my divorce decree protect me if my ex-spouse files a bankruptcy on joint debt we held during our marriage?

No. Your divorce decree does not bind your creditors. If your ex-spouse files a bankruptcy you should seek legal advice.

Are income taxes dischargeable in a Chapter 7 bankruptcy?

Recent taxes are not dischargeable in a Chapter 7 bankruptcy. However some old tax debts as well as interest and penalties may be dischargeable. Taxes may be paid as a priority debt in a Chapter 13.

Will filing bankruptcy affect my credit rating?

Absolutely. However, most debtors are able to rebuild their credit within a few years with on-time payments to the creditors that remain after the discharge.

How long will a bankruptcy show on my credit reports?

The Bankruptcy Court has no jurisdiction over credit reporting agencies. Bankruptcy filings usually remain on credit reports from 7 to 10 years.

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