utah estate planningBankruptcy FAQ: Frequently Asked Questions

Bankruptcy is a complicated process, and those facing financial woes likely have many questions about the process. Here are some of the most frequently asked questions  we receive about bankruptcy. For more information, or to find out if you qualify, speak to a bankruptcy attorney near you.

What is bankruptcy?

Bankruptcy is a legal process that allows individuals and companies the opportunity to eliminate accumulated debts. This process also helps to stop creditor harassment.

After I have filed for bankruptcy, can I apply for a new credit card?

Once you have filed for bankruptcy, you will be able to apply for a new credit card after the discharge. When applying for a new line of credit, however, the offers you receive will be different than the ones you received prior to the bankruptcy process. You may experience higher interest rates and/or fees. After a bankruptcy, you may also notice that you are offered limited lines of credit.

While filing for bankruptcy will not determine your inability to qualify for a line of credit, it can nonetheless be difficult to be approved. If this is the case for you, you may want to consider applying for a secured credit card. A secured credit card will require you to deposit money in the account in order to spend it. Having this type of credit card can help you re-establish your line of credit.

What happens to my property while being in the process of a bankruptcy plan?

The status of your property and other assets will depend on the form of bankruptcy you filed for. In a Chapter 7 bankruptcy, for example, you must list all of your assets. With this chapter of bankruptcy, there are limits to the amount of property and other assets you can keep while you follow the proceedings of eliminating your debt. Plus, there are exemptions to certain assets that make it acceptable to keep, such as your primary home and/or car. On the contrary, with a Chapter 13 bankruptcy, you may be able to keep the majority of your property.

Will my presence be required at a court hearing?

Court hearings will not always be required in order to file for bankruptcy. Unless you and your creditors cannot resolve issues or differences in the terms, there likely won’t be a court hearing required. You will need to attend a meeting. However, this meeting will not be in a court setting nor will a judge be present during the meeting. This meeting will usually take place between 20 to 40 days after you have filed for bankruptcy. In the event that you have filed for a Chapter 13 bankruptcy, an additional meeting will be required in order for you to demonstrate that you are fully aware of the terms and conditions of the repayment plan. This meeting will usually take 30 days after you have met with your creditors.

As a business owner, how do I not go into personal bankruptcy myself?

If you have not already done so, one of the most important steps you can take to prevent personal bankruptcy as a business owner is to incorporate your business. Having your business as a corporation will offer more protections compare a sole proprietorship. Creating a corporation generally means that your business is a separate entity from both yourself and your shareholders, if you have any. If you need guidance in incorporating your business, consult an experienced business attorney who can help you through the process.

What is a Chapter 7 bankruptcy?

Chapter 7 bankruptcy offers debtors the opportunity to eliminate most of his or her accumulated debt. A Chapter 7 bankruptcy is also known as a fresh start bankruptcy or a liquidation bankruptcy. The United States Title 11 – Bankruptcy Code outlines the Chapter 7 bankruptcy rules and regulations. If you would like to know if you would qualify for a Chapter 7 bankruptcy, you will need to take a qualification exam known as a bankruptcy means test.

Can I keep any of my credit cards once I have filed for bankruptcy?

It will be ultimately up to the credit card company to decide if you can keep your credit line after bankruptcy. If the credit line in question has a balance you are trying to eliminate through the bankruptcy process, the credit company will likely close your account. Even if you do not have an outstanding balance, the credit company can still close your account. Many people attempt to pay off a credit card to keep their account open after bankruptcy. Unfortunately, doing this can severely affect that person’s ability to qualify for a bankruptcy plan. Many creditors will challenge the person’s petition for bankruptcy by claiming that if that person had the ability to pay off that debt, why wouldn’t he or she be able to pay off their debt?

If I am in debt, do I have to file for bankruptcy?

You are never absolutely required to file for bankruptcy. Depending on your circumstance, filing for bankruptcy may or may not be in your best interests. Contact a bankruptcy lawyer near you who can explain to you what your options are. He or she will be able to recommend if filing for bankruptcy is right for you.