What People Ask...

If you are considering bankruptcy, you probably have many questions about how filing mightaffect your daily life. This post discusses the top 10 questions people ask me duringbankruptcy consultations.

The answers below are very general. You would need to discuss your specific situation with an attorney to determine what would happen in your particular case.

Q: I heard it is very difficult to qualify for bankruptcy relief nowadays. Is that true?

A: While the bankruptcy laws did change in 2005, most people still qualify for bankruptcy relief.

Q: I make more than the median income for the state of Michigan. This means I can't file a Chapter 7, right?

A: This is a very common misconception. If you make more than the median income for a household your size, you are not automatically disqualified from filing chapter 7. It just means you must take the full means test to determine if you are eligible.

Q: I am being sued on old credit card debt. Can bankruptcy stop the lawsuit? Should I file bankruptcy before or after there is a judgment against me?

A: A bankruptcy filing will suspend the debt lawsuit. If you complete the bankruptcy successfully, the debt lawsuit will be terminated. If you do not successfully complete the bankruptcy, the case can be reactivated.

For many reasons, it is much better to file the bankruptcy before there is a judgment against you. But, even if there is already a judgment against you, a bankruptcy may still be able to discharge your personal liability for paying the judgment.

Q: My mortgage lender has started foreclosure proceedings. Can bankruptcy help me save my house?

A: Chapter 13 bankruptcy can stop a foreclosure. After filing, you would need to be able to resume regular monthly mortgage payments. You would also need to be able to pay a fixed portion of the past due mortgage payments each month while your case is ongoing (36 to 60 months). The amount you must pay each month is determined by the bankruptcy court.

Q: Can the bankruptcy court force my mortgage lender to modify my mortgage terms?

A: The bankruptcy court usually cannot force a mortgage lender to modify a residential mortgage in a Chapter 7 or Chapter 13 case.

However, you can try to negotiate a mortgage modification with your lender while you are in bankruptcy. Some mortgage experts think a bankruptcy filing gives mortgage lenders additional incentive to modify a homeowner's mortgage. However, this is a rapidly changing area of the law and every mortgage lender seems to have their own policy when it comes to dealing with homeowners in bankruptcy.

Q: Can a bankruptcy stop a wage garnishment? Can I get some of my previously garnished wages back if I file bankruptcy?

A: A bankruptcy filing generally stops wages garnishments, with a few exceptions. It is possible to recover previously garnished amounts if several criteria are met.

Q: I own my car outright. Can I keep it if I file bankruptcy?

A: Often you can. You will need to be able to protect it using your exemptions.

Q: I am still making car payments. Can I keep my car if I file bankruptcy?

A: As long as your car payment is reasonable, you can afford the car payment after discharging your other debts, and the car is a necessity, you are likely to be able to keep the car if you file bankruptcy.

Q: I have some accounts I want to keep out of the bankruptcy. Can I do that?

A: No. All accounts must be included in the bankruptcy. Usually people ask this question when they want to continue making payments on a house or car. While these accounts must be included in the bankruptcy, you may be able to keep the house or car and continue making payments even after filing bankruptcy.

Q: How does the court know about my assets?

A: When you file, you will give the court a list of everything you own. Your bankruptcy paperwork is filed under oath, and you can be prosecuted for perjury if you try to conceal assets from the court. The bankruptcy trustees have quite a few research tools at their disposal; they are very good at locating undisclosed assets.