Bankruptcy FAQs

Yes. Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with the docket number for your case. In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a lawsuit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy, they may be liable for court sanctions and attorney fees for this conduct.

• First, you should consult with an attorney. An attorney can help you plan for the bankruptcy, decide when to file a bankruptcy petition, or even avoid filing for bankruptcy.
• If you intend to file bankruptcy, you should stop using your credit cards immediately.
• Do not transfer your assets to friends, family and business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge.
• Do not destroy any business or financial records.
• Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away. Your attorney should advise you on what debts should and should not be paid while you prepare to file a bankruptcy petition.

Sometimes payment plans can be negotiated with creditors. Obtaining loan extensions, compromises and workout agreements require negotiation skills and the experience of an attorney. It is in your best interest to contact an attorney. These alternatives may alert your creditors to the existence of nonexempt property that the creditor could reach and can involve considerable expense. You also have the option of doing nothing. In any event, you should seek professional advice in dealing with most of these alternatives.

About 30 to 40 days after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but an individual appointed by the United States Trustee to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask you questions, although in the majority of cases creditors do not ask questions at the First Meeting of Creditors. After the initial meeting, you normally do not need to return to court. However, if a creditor or the trustee files a motion or an adversary action you may have to appear in court with your attorney.

Once the bankruptcy is filed, all of your property at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate. This means that the bankruptcy trustee may take control of this property to satisfy your creditors. You are required to file a schedule with the court describing all of your assets. Certain property is either “excluded” from the bankruptcy estate or “exempt,” and you will be able to keep that property. Often, all of your assets can be protected. An experienced attorney will review your bankruptcy case along with your property and assets to determine what will happen during the bankruptcy proceeding.

Individuals may file a bankruptcy petition without an attorney. This is called appearing “pro-se.” However, the bankruptcy code is very complex and filing a bankruptcy petition requires a thorough knowledge of both the bankruptcy code and other Federal and State laws. In addition, bankruptcy practice differs from court to court. Experienced bankruptcy attorneys are familiar with the local rules, both written and unwritten, so it is in your best interest to consult an attorney.

The bankruptcy is treated as a judgment and will be listed in credit reports for a period of up to 10 years. However, the fact that you filed bankruptcy, if properly explained, is less damaging than a history of unpaid accounts.

The best way is to obtain new credit and make the payments on time. Sometimes an existing creditor may continue to grant you credit based upon a reaffirmation agreement made during the bankruptcy. You may also be able to obtain a secured credit card, where the credit limit is based upon the amount of security given, or obtain credit using a co-signer.