1. Chapter 7 Bankruptcy is still an option for most people, even after the bankruptcy laws changed in 2005. Many people believed (because creditors wanted us to believe) that it is very hard for someone to file Chapter 7 Bankruptcy after the 2005 bankruptcy amendments (BAPCPA). The 2005 bankruptcy laws increased the amount of paperwork and the costs of filing, but most people who could file under the “old law” are still eligible to file under the “new law”.
2. 99% of people who file Chapter 7 bankruptcy do not lose any of their property. One of the biggest fears for people considering bankruptcy is how much of their stuff will they lose; will they lose their house or car? Most debtors don’t lose anything, because most debtors don’t have any property the bankruptcy trustee wants. Also, bankruptcy exemptions allow people to keep most, if not all, of their possessions. Whether you get to keep your house, car or other property will depend on how much property you have and on your state law exemptions. Your bankruptcy lawyer can explain exemptions to you in detail.
3. Your “credit” will NOT be ruined forever, if you file bankruptcy. This is another myth creditors like to perpetuate to the public. Yes, a bankruptcy filing can be reported on your credit report for up to ten years, but that does not mean you won’t be able to get credit for ten years. Many of my clients have had better credit scores one year after bankruptcy than they had when they filed. I’m not encouraging anyone to file bankruptcy for a better credit score. In my opinion, the decision to file bankruptcy has nothing to do with your credit report; you either need to file bankruptcy or you don’t.
4. Credit Counseling is required before you can file bankruptcy, and completion of a financial management course is required before you are eligible for your discharge. You MUST complete a credit counseling course before you file bankruptcy, but it also must be pre-approved by the bankruptcy court. Talk to your bankruptcy attorney about how to fulfill this requirement. Don’t waste your money on credit-counseling that does not meet the bankruptcy court’s requirements. After you file bankruptcy, but before you get your discharge (your case is over), you MUST complete a financial management court. The course must be approved by the bankruptcy court. Talk to your bankruptcy attorney on how to best fulfill this requirement. WARNING!!! Some people who file bankruptcy fail to complete the financial management course before they receive their discharge; this is VERY BAD! Be sure to complete your financial management course before the bankruptcy court enters a discharge. Talk to your bankruptcy lawyer about doing this; this is very important!
5. The Chapter 7 Bankrutpcy “Means Test” does NOT apply to everyone. Most people who file bankruptcy will not be effected by the “Means Test” because their income is not high enough, but an increasing number of higher income debtors are filing bankruptcy, and the “Means Test” can be an enormous hurdle to higher income debtors. The “Means Test” basically says this: if you make over a certain amount of income, we’re going to really scrutinize your financial situation before we allow you to file bankruptcy. Obviously, it get more complicated than that, but that’s the basic gist.
6. You can only file Chapter 7 Bankruptcy every eight (8) years. So make it count!
7. Most people only have to go to one court hearing. The first, and probably only, court hearing you will attend is about 30 days after the bankruptcy case is filed; it’s commonly called the “Meeting of Creditors” or “341 Hearing”. Most people who file Chapter 7 Bankruptcy will never see a bankruptcy judge; they will only see the bankruptcy trustee. For most people, the hearing will be quick and painless, so don’t fret over it.
8. The goal of filing Chapter 7 Bankruptcy is to get a “Discharge”. A discharge, or “discharge order” is what is entered by the bankruptcy judge at the end of your case. This means that all debts that are eligible to be discharged, are indeed discharged (erased). Therefore, just filing a bankruptcy case is not the end of the story; be sure to work with your bankruptcy lawyer to make sure you accomplish your final goal…discharge.
9. Taxes, Student Loans and Child-Support obligations are usually NOT discharged (erased) in a Chapter 7 Bankrutpcy. Most of the time, taxes, student loans and child support obligations are NOT discharged in bankruptcy. In some cases, taxes are dischargeable. In rare cases, student loans are dischargeable. Child support obligations are pretty much never dischargeable.
10. If you want to keep your house or car, after filing bankruptcy, you must continue to make your payments to the creditor. Normally, you have two choices when it comes to property (house, car, etc…) that you are still making payments to a creditor at the time you file your bankruptcy case: (1) you can let the creditor take the property back; if you give the property back, you don’t have to pay for it any more, or (2) you can keep the property, but if you keep the property, usually you still have to keep making your payments to the creditor.
