What’s the difference between Secured and Unsecured debt?
Secured debt is essentially an extension of credit (e.g., a loan) that is secured by your property, typically through an agreement. Your property serves as collateral to secure the debt you owe to your creditor. Upon default, a secured creditor generally retains the right to seize that property to satisfy the debt. Unsecured debt, on the other hand, is not tied to any property. The extension of credit is based purely upon the creditor’s evaluation of your ability to pay them back. Mortgages and auto loans are among the more common examples of a secured debt. Credit cards, unsecured personal loans, and medical bills are the most common examples of unsecured debt.
What happens at a Creditors’ Meeting?
Once your bankruptcy petition is filed with the Court, you will receive a notice of a scheduled creditors’ meeting, also known as a “341 Meeting of Creditors.” The creditors’ meeting is a short hearing conducted by the bankruptcy Trustee appointed to your case. Of course, an experienced bankruptcy attorney will prepare and accompany you at the hearing. At the hearing, you must answer the Trustee’s questions regarding your financial/debt situation (e.g., how you accumulated your debts, any actions you may have taken with your property, and general questions regarding the financial information you provided in your petition). Your creditors may attend the meeting and ask questions as well. Failure to answer truthfully can result in the petition being dismissed or, in extreme cases, a charge of perjury.
Can all types of debt be discharged through Bankruptcy?
No. The debts that cannot be discharged vary slightly between the different chapters of bankruptcy. Generally, the following types of debt cannot be discharged:
- Debts for taxes owed to local, state, or federal agencies
- Debts for money, property, services, or an extension, renewal, or refinancing of credit, which were obtained fraudulently
- Debts that were not in the initial list of debts or that the debtor waived being cancelled
- Debts owed for alimony, maintenance, or child support
- Debts owed for injury to another person or their property (as in a court judgment)
- Debts for student loans
- Debts for death or personal injury caused by drunk driving or from driving while under the influence of drugs or other substances
- Debts incurred after the bankruptcy is filed
- Any type of legal judgment
What property can I keep if I file for Bankruptcy?
“Exemptions” allow an individual to keep certain kinds of property in bankruptcy. Federal and State laws define what assets are considered “Exempt,” but, typically, exempt property includes:
- Home furnishings and clothing
- Vehicles up to a certain amount
- Equity in a home up to a certain amount
- “Tools of the trade” (i.e., tools and equipment necessary for you to continue working
- Social Security and certain retirement benefits
For specific information regarding YOUR property, call The Law Offices of Robert S. Gitmeid & Assoc., PLLC for a free consultation with an experienced bankruptcy attorney!
When do I have to stop using my credit cards if I’m planning on filing for Bankruptcy?
As soon as you anticipate filing for bankruptcy, STOP USING YOUR CREDIT CARDS! Generally speaking, you may not use your credit cards to purchase “luxury” items within 3 months prior to filing for Chapter 7 Bankruptcy. However, trustees are thorough and the law allows the review of questionable purchases for potential fraud. Though certain non-luxury purchases may be allowed, a prudent attorney should advise you to completely refrain from using all credit cards within 3 months prior to filing.
Can a creditor continue to contact me after I’ve filed for Bankruptcy?
Once your attorney files your bankruptcy petition, the Bankruptcy Court issues an “Automatic Stay” which immediately protects you from your creditors. CREDITORS ARE REQUIRED BY LAW TO STOP ALL COLLECTION EFFORTS AGAINST YOU. If a creditor attempts to collect your debt after the Automatic Stay has been issued, your attorney should immediately notify the creditor in writing that you have filed for bankruptcy and that they must stop any further collection attempts. In addition, that creditor may now be in violation of the Fair Debt Collection Practices Act (FDCPA).
How often can you file for Chapter 7 Bankruptcy?
- Chapter 7: Can be filed every 8 years from a previous Chapter 7 filing, or 6 years from a prior Chapter 13 filing.
- Chapter 13: Can be filed 4 years from a prior Chapter 7 filing, or 2 years from a prior Chapter 13 filing.
Do I have to file Bankruptcy on all the debts that I owe, or can I keep some?
You must include all the debts you owe in your petition and schedules. However, you may opt to keep some debts by “reaffirming” the specific debt in a separate Reaffirmation Agreement.
Will I lose my home if I file for Bankruptcy?
Possibly. The factors that impact your ability to keep your home are:
- The state you’re in and the exemptions allowed
- The status of your loan (current or in foreclosure)
- The amount of equity you currently have in your home
An experienced attorney will be able to advise you as to how YOUR home would be affected in bankruptcy. Call The Law Offices of Robert S. Gitmeid & Assoc., PLLC for a free consultation today!
How long will a Bankruptcy stay on my credit report?
Generally, a bankruptcy remains on your credit report for 10 years.
When can I apply for credit again after Bankruptcy?
The decision whether to grant you credit in the future is strictly up to the creditor. There’s no law that prevents anyone from extending credit to you immediately after your bankruptcy. Many debtors receive extensions of credit immediately after their unsecured debts are discharged through bankruptcy. The reality is that bankruptcy can give you a fresh start to begin rebuilding your credit score right away.