These are common questions that many people have about bankruptcy. In an effort to provide you with information we have provided these frequent questions. However, it is important to realize that each state has different rules and these answers are not meant to be legal advice. Contact a bankruptcy attorney to learn more.
Now I know most people will look at this question like, “why in the world would I want to keep my cards if I’m eliminating my debt?!” But occasionally, you will have one company in which you are still in good standing and will want to keep that card in hopes of somewhat holding on to what bit of credit that you have left. It’s just not as simple as that.
Have you ever been in a wreck? The next few days following the wreck, you will be bombarded with advertisements from attorneys claiming that they can help you in whatever service you may need from being in the accident. Many wonder how they even knew about the wreck in the first place! Well filing bankruptcy is a similar situation, once you file it is public knowledge and your creditors, whether they were included in the bankruptcy or not, will likely find out about the bankruptcy and will cut the usage of your account off. Most creditors’ fear violating the bankruptcy’s automatic stay so they will discontinue usage of the credit card. So in the situation of a credit card in which you wish to keep, you may have never missed a payment and have been in good standing and they will still cut the usage of the card off, which is why we recommend that you list ALL of your debts.
Should you wish to try to keep a credit card out of the bankruptcy and wish to continue making the payment, then you need to contact that credit card company and give them a heads up on what your intentions are and ask for permission to have that card be kept out of the bankruptcy filing. It will be completely and solely the discretion of the company whether or not they allow you to keep the card out of the bankruptcy and continue to make the payments, and report the standing to the credit reporting agencies.
If you don’t list down a credit card, with the hopes of keeping it, and then after filing the bankruptcy they shut it down anyways, you are still responsible for the debt. For example, if you have a Visa credit card with Wal-Mart and you talk with Visa and explain you are filing bankruptcy and they say they will allow you to keep the card but, after filing, they still shut it down, you are responsible for any remaining balance on the card. You may still be able to go back and amend the bankruptcy after the credit card company refuses to allow you to keep the card but there will be court costs involved in amending the bankruptcy.
Again, we always encourage our clients to list down all of their debts. You can rebuild your credit after bankruptcy and in order to get your fresh financial start it usually means wiping out all of your debts.
You must disclose all of your assets when you file bankruptcy, regardless of whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy. If you do not disclose all of your assets, they cannot be protected from the bankruptcy court and your creditors.
Let us begin by giving a brief over view of the term cash advance. Many of us have heard the term but don’t know exactly what it means. A cash advance is often referred to as a payday loan. A cash advance can be obtained through a credit card or charge card issuer. It is seemingly a loan taken out against a credit card that you already have. Those with a credit card and cash advance service are able to receive cash from an ATM, bank, or some other financial institution. This really depends on the type of credit card and whether their cash advance services are available. Many people often confuse the advance as free money, but it is certainly not. This has to be paid back to the creditor and one of the biggest challenges is the high interest. The interest on a cash advance tends to be much higher when obtaining it through a credit card. You are not able to take out a cash advance for the full available balance on the credit card. However, this doesn’t mean that you aren’t going to be charged high amounts of interest on the loan. This will cause the monthly payments on the credit card to eventually increase.
Generally speaking, cash advances made within 90 days of filing bankruptcy are not going to be wiped out. Cash advances within 90 days of filing not only pose a problem with court, but also the creditor, who could potentially seek an adversary proceeding.
Keep in mind, the Chapter 13 bankruptcy is also recognized as a repayment plan. In a Chapter 13 bankruptcy it isn’t likely that a creditor will file an adversary proceeding against you because of a cash advance. However, this doesn’t mean that a creditor can’t file an adversary proceeding if they choose to. The creditor may also have the option of objecting to confirmation of your Chapter 13 Plan, if your Plan does not to propose to repay the amount of the advance back to the creditor with whom you took the cash advance. This is obviously up to the creditor who the cash advance was taken out with. The most important thing to remember is generally speaking, cash advances within 90 days of filing may pose a problem with the bankruptcy court. For example, if you decide to file a Chapter 13 bankruptcy and have taken out a cash advance within 90 days preceding the filing, the court is going to look for any fraudulent behavior. If you took out a cash advance knowing that you were going to file bankruptcy, then you are going to have a tough time arguing that it was not fraudulent behavior. If it’s possible to wait, then the longer you wait after having taken out a cash advance to file, the better. Many people facing tough financial situations are already feeling stressed, there is no need to add something else to the mix.
Since a Chapter 7 bankruptcy is different than a Chapter 13, and not a repayment plan, we will focus on a couple of different points. If the cash advance was made within 90 days of filing, the debt is most likely not going to be wiped out in a Chapter 7 bankruptcy. First of all, it looks suspicious to the courts when a recent cash advance was made before the filing. This may also pose a problem with the creditor who may decide to pursue an adversary proceeding for a cash advance that was made around the same time as the filing of the bankruptcy. An adversary proceeding is also known as a lawsuit in bankruptcy court. If the cash advance was made well past the 90 days, then there is a possibility of the debt being wiped out. This would depend on a couple of things, timing and amount. A large cash advance taken out shortly before filing bankruptcy is obviously going to look suspicious. The courts are not only going to look at the amount, but also the timing between the actual withdrawal and filing of the bankruptcy. As mentioned above, the longer you are able to wait to file the bankruptcy, the better.
If you have any questions about any cash advances you have taken out in the last year, you should speak with your bankruptcy attorney. If you are contemplating filing bankruptcy, it is best not to take out any cash advances.
If you purchased your car more than 910 days (2 ½ years) prior to the date you filed Chapter 13 bankruptcy, you may be able to reduce that amount owed on the car to the value of the car based on National Automobile Dealers Association (NADA), plus a portion of the amount owed greater than the value. This is known as a cramdown. Use this time duration calculator to see if you have had your vehicle more than 910 days.
In a Chapter 7 bankruptcy and a Chapter 13 bankruptcy, the court will send a Notice of Meeting of Creditors within a few days of your filing. This is the official notification to your creditors of your bankruptcy filing and it provides them with the date of the creditors meeting. It also creates the automatic stay which keeps your creditors from taking legal action against you.If you discover that you failed to list a creditor you owed when your Chapter 7 bankruptcy was filed, you may be able to add the creditor to your bankruptcy prior to your discharge. It is important for you to contact your bankruptcy attorney immediately to see if you can add the creditor to your bankruptcy. If you have not received a discharge, you may be able to add the creditor and still have the debt discharged in the Chapter 7 bankruptcy. Once the discharge has been entered, you may not add any additional creditors without reopening your bankruptcy.
If you filed a Chapter 13 bankruptcy and discover that you failed to list a creditor that you owed when your bankruptcy was filed, you should also contact your attorney. Depending on whether your Chapter 13 bankruptcy has been confirmed by the Court will depend on what actions are needed. If your case has not been confirmed, you may be able to simply add the creditor with the bankruptcy court. If your case has been confirmed, it may be necessary for you, through your attorney, to file a motion to modify your bankruptcy and add the creditor.
The bankruptcy code allows for only once spouse to file for bankruptcy. However, at times, it may be wise for both spouses to file to ensure that your assets are completely protected and to make sure that as much debt is wiped out so you can create your fresh financial start for your family.
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Person Filing Surrenders Property
First of all, keep in mind in order to file a Chapter 7 bankruptcy you must be current on everything unless you are willing to surrender the property. Let’s consider the following example: you owe on a debt such as a car loan, but are behind on the payments. You come in for a free consultation, learn that you may be eligible to file a Chapter 7 bankruptcy, and decide you are going to surrender the property to the creditor since you are behind on payments. However, someone has cosigned on the debt with you, and you are wondering what that is going to mean for the other person. He or she (the cosigner) would still be responsible for the full amount that is owed to the creditor. The creditor will typically sell the property an auction and the cosigner will be responsible for the deficiency balance.
If the debt is an unsecured debt (no property as collateral) then the creditor can go after the cosigner for the full amount owed on the debt.
Person Filing Keeps Making Payments
Person Filing Surrenders Property
If you are filing Chapter 13 bankruptcy and have decided to surrender property, the cosigner will be affected in regards to the debt. Typically speaking, the creditor will still seek the amount owed from the cosigner and hold them responsible for the debt amount after it has been sold at an auction. It’s up to the person filing whether or not to let the cosigner know that they are going to be surrendering the property. However, it’s important to know the cosigner will be responsible for paying back the deficiency balance on the debt.
Person Filing Does Not Surrender Property
In a Chapter 13 bankruptcy, if the person keeps making payments on the property and decides not to surrender it, the cosigner will not be affected most of the time. Chapter 13 bankruptcy is a repayment plan but as long as the person filing is making payments on the debt, the cosigner should not be impacted. However, there have been rare situations where we have seen someone who has cosigned on a debt with a person who filed a Chapter 13 bankruptcy and on the cosigner’s credit it shows they are one month behind on payments despite the fact that it is being paid within the Chapter 13 bankruptcy plan. Since the Chapter 13 bankruptcy Trustee does not make the full payment each month (they typically pay 1/60th of the amount owed over the course of 60 months) the creditor may report that the cosigner is behind a portion of a payment. This doesn’t happen often but we have seen it before so we wanted to be sure to make you aware of it.
Bankruptcy usually includes all debts that are accumulated before the bankruptcy petition is filed with the court. If there are new debts that are incurred after you file for a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, these are known as post-petition debts and cannot be included in your current bankruptcy.
However, if you were to file another bankruptcy later, the new debts could be included in that petition. There are ways that you can amend your petition to add a creditor after the petition has been filed, but you must be able to prove that this debt was accumulated before the petition was filed.
While in a Chapter 13 bankruptcy, you must get permission from the court in order to incur new debt. This is done through a Motion to Incur Debt. You would need to file the motion to incur debt for anything from obtaining a new credit card to buying a new house. Say you were to get a new credit card while in a Chapter 13 and not tell the Trustee about it. The bankruptcy Trustee could find out and you obtaining debt without the court’s permission could cause problems. This could even possibly cause your bankruptcy to be dismissed! If your bankruptcy is kicked out or dismissed you would be responsible for that new debt as well for the debt that was originally included in the bankruptcy. So, be smart and make sure to ask your attorney what you need to do if you believe you left someone off of your bankruptcy.
The bottom line is you typically will not be able to include post-petition debts (debts incurred after your bankruptcy has been filed) in your bankruptcy.
If you lose your job while in an active Chapter 7 bankruptcy or Chapter 13 bankruptcy, it may impact bankruptcy filing. If you are able to obtain unemployment benefits, you may be able to continue to meet your financial obligations. However, the impact of the loss of employment on each type of bankruptcy will vary.
If you are in a Chapter 7 bankruptcy, the loss of a job may impact your ability to pay for a home, an automobile, or other assets. If you are concerned about your ability to continue to pay these debts, you should speak with your attorney about options available to you including surrendering or giving up the assets in your bankruptcy. The last thing you want to happen after completing a Chapter 7 bankruptcy is to have a repossession of an auto or the foreclosure of your home listed on your credit. Often, the auto finance company and the mortgage company will look for you to pay any deficiency balance, the difference between what you owe on the asset and what they sell it for at auction, after the sale of the auto or home. Again, the purpose of the Chapter 7 was to eliminate your debts and give you a fresh start, so a foreclosure or repossession and a deficiency balance is the last thing you need.
If you are in a Chapter 13 bankruptcy, the loss of a job will most likely impact your ability to make payments to the Chapter 13 Trustee. As a result, you should contact your attorney to see if a modification of the Chapter 13 is possible. In some cases, the amount paid to unsecured creditors, including credit cards, medical bills, personal loans, etc., can be reduced. However, this is not always possible. In that case, you may need to consider whether it is in your best interest to surrender or give up an asset in the Chapter 13 bankruptcy. For example, some clients choose to surrender a car in their bankruptcy in order to afford the Chapter 13 payments and retain their home. In other cases, the Chapter 13, regardless of the modifications, is no longer feasible. In that situation, you should speak with your attorney to determine if converting to a Chapter 7 bankruptcy is an option for you. By converting to a Chapter 7 bankruptcy, you would be able to eliminate your responsibility for the majority of your debts. Again, you should speak with your attorney to determine the best option for your situation.
