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Bankruptcy/Debt Relief Commonly Asked Questions

This page addresses different questions many people have about bankruptcy. Before deciding on a course of action for your particular case, consultation with an experienced bankruptcy attorney is the best first step toward resolving your financial difficulties.
Q. What Can I Do About A Utility Shutoff?
A. If you cannot work out payments terms with the utility company, your only option is to file a bankruptcy to avoid a shutoff or restore service. Filing a Chapter 128 will no longer stop a shutoff. In an emergency, a bankruptcy petition could be filed within a day's time to avoid a shutoff.
Q. Can I Keep My Home Or Car In A Chapter 7?
A. If you are current on your payments, you can reaffirm your debt with your car lender or mortgage company and keep your car and home. In some Chapter 7 cases, there are options available to you that will allow you to pay off only the value of your car if it is worth less than what you owe.
Q. What Can I Do About A Garnishment?
A. Filing either a bankruptcy or a Chapter 128 will stop a wage garnishment. Filing a bankruptcy may allow you to recover and keep the amount that was garnished in the 90 days before you filed.
Q. Do I Have To Pay The Second Mortgage On My Home?
A. In some cases in a Chapter 13, you are able to cancel the second mortgage if your home is worth less than you owe on the first mortgage. In the current economy and real estate market, many homes are worth much less than they were just several years ago.
Q. How Long Does A Bankruptcy Stay On My Credit Report?
A. A bankruptcy can stay on your report for 10 years. Other negative information (such as judgments, charged-off debts, etc.) can stay on your report for seven years.
Q. How Will Filing For Bankruptcy Affect My Credit Score?
A. While every case is different, filing a bankruptcy will likely not have as bad an effect as you may think. Getting rid of debt and cleaning up your credit report allows you to get a fresh start and rehabilitate your credit. It is very important for you to make timely payments on whatever obligations you have after filing bankruptcy, including utility bills, car loans or mortgage payments, etc.
Q. Does My Spouse Have To File If Most Of The Debts Are Mine?
A. This can be a complicated issue, but in some cases one spouse is able to file a bankruptcy and still protect his or her own assets or wages as well as the other spouse’s interest in marital property.
Q. Is My IRA Or 401(K) Protected If I File For Bankruptcy?
A. Yes, these types of assets are exempt and can be kept in either type of bankruptcy.
Q. Do I Have To Continue Making Car Payments Or Mortgage Payments After I File A Bankruptcy?
A. Yes, in Chapter 7, if you want to keep those assets. In some Chapter 7 cases, you may be able to alter the terms of payment or even refinance your car with a different lender. In Chapter 13, your repayment plan deals with any mortgage arrearage / delinquency that has built up before you file, as well as your car loan. Once you file your case, you are responsible for paying your monthly living expenses, including mortgage, utilities, etc., but your car loan is paid back through the plan.
Q. Will Creditor Calls, Collection Letters And Lawsuits Stop Once I File?
A. If you file a bankruptcy, yes, creditors are prohibited from taking any action against you or your property. However, in a Chapter 128, creditors are able to reduce their claims to a judgment, but are not able to garnish you. That is why a bankruptcy is oftentimes a better option for dealing with your debts, because it is a more comprehensive and complete solution to your financial difficulties.