Bankruptcy Resources

Bankruptcy Resources and Frequently Asked Questions

The Law Office of Larry Lofgren is a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code. The following are bankruptcy resources and answers to frequently asked bankruptcy questions.

Am I going to get into trouble for filing bankruptcy?

When you have been struggling to pay your debt for a long time, the idea of just not paying it is frightening. Many people feel like they will somehow get in trouble if they file bankruptcy. The purpose of bankruptcy is to give an honest, unfortunate debtor a financial fresh start, not get him into more trouble. Bankruptcy offers an orderly, legal way to get out of financial trouble.

In bankruptcy, a debtor has to pay what bankruptcy laws say they are able to pay, if they pay anything. In a Chapter 7, this means some property could be taken to pay part of the debt. The biggest way a person filing bankruptcy can get into trouble is to hide property, income or financial dealings from the court. If you are honest, you will not get into trouble though the question of whether you have to pay creditors and how much may eventually be made by a bankruptcy judge. A good bankruptcy attorney is able to minimize this uncertainty.

Many people wonder whether their employer will find out about the bankruptcy and fire them. Federal law prohibits employment discrimination based on filing bankruptcy. A bankruptcy is a public record but it is unlikely that your employer will find out that you filed. Most employers do not look through court records to see if their employees have filed bankruptcy. Common sense should tell them that you will be a more productive employee once you eliminated financial worry from your life.

What do I bring to my first appointment with my lawyer?

Your lawyer will need to see your last six months of pay stubs (or proof of other income such as a social security award letter), you last six monthly bank statements for all of your accounts and your last two filed tax returns. You may want to get legal advice before you can collect all these documents but your attorney will need to see them before you file your case.

You can probably go over much of what you need to discuss with your attorney from memory. Your attorney will need to get a basic idea of what your monthly expenses are. You should also be aware of any money or property transferred to insiders, such as close relatives, in the last two years. If you do not know how much your car or house is worth and what the balance of any loans is, you should get that information before you meet with your attorney. You can use on line valuations such as Kelly’s Blue Book or Zillow as a starting point.

You should think of any unique property you might own – a fraction of land inherited in another state, a personal injury law suit, inventory in a business, money people might owe you and tax refunds are good examples. Your attorney will lead you through the process of identifying things that count as property in a bankruptcy that you might not think of.

If you are worried about something and cannot find all your documentation, it is better to see an attorney before you find all the documents. As long as you have a general idea of your finances, the attorney can give you some basic advice and let you know what information is needed for a final answer. If you wait to see an attorney, you could end up making an avoidable mistake.

How long will my credit be affected if I file for bankruptcy?

Many people who file bankruptcy have a good credit rating because they have a long history of making payments on debt. However, this good credit rating does not mean much if you are not making progress on the debt you have. If you are giving up necessities like health care, saving for retirement and taking care of your kids to pay your debt and you find that you are unable to make reasonable progress paying the debt down, you will almost certainly end up with bad credit eventually.

A Chapter 7 bankruptcy stays on your credit report for ten years. A Chapter 13 bankruptcy stays on your report for seven years. That does not mean you cannot rebuild your credit while the bankruptcy still appears on your credit report. When your bankruptcy is over, you should make sure you do not allow any small bills, like parking tickets, to remain unpaid. You should take out a manageable loan, such as a secured credit card, to show you can make payments on time. It is very important that you stay current on these payments. You should not borrow a lot of money soon anyway. You will find that once your cash flow is back on track after a bankruptcy, you will not need to borrow much money right away. As you enjoy your fresh start and get back on track, you will find that your credit score go up as the bankruptcy remains on your credit report.

Marriage and bankruptcy

Only married couples can file for bankruptcy together. Otherwise, consumer (non-business) bankruptcy must be filed by only one person.

A married person can file by themselves but in community property states such as Washington, a spouse who files alone should be careful. In a community property state, all property acquired during the marriage is automatically considered to be the property of both parties. If a spouse files alone, he or she must list the other spouse’s property on the bankruptcy and protect them with an exemption to keep it safe from creditors.

Debts taken out during marriage are also considered to belong to both spouses regardless of who signed the loan, as long as the debt was used to support the couple during marriage. If a debt is in only one spouses name and that spouse files bankruptcy, the other spouse is still at risk from debt collection, though often the creditor does not figure out that there is a spouse who could be liable.

If a married couple is getting divorced, sometimes it would make sense to file a bankruptcy together before the divorce. That would eliminate a big issue in the divorce – who pays the debt. However, if a divorce decree is entered before the bankruptcy is filed, the spouse who is ordered to pay any marital debt still has to pay it. The original creditor can still collect from the spouse who did not file bankruptcy and that spouse can go back to divorce court to enforce the payments.