Bankruptcy Frequently Asked Questions Bankruptcy Lawyers for Over 40 Years
We have attempted to answer the most frequently asked questions about bankruptcy in Oklahoma that our clients have asked us before. We hope this will be helpful.
This is not intended as legal advice because bankruptcy is complicated and depends on the specific circumstances unique to every Debtor. If you are considering a bankruptcy, call us toll free at (877) 886-5955 for a free consultation so we can provide legal advice tailored to your specific unique situation. There is no obligation and the call is confidential.
Q: What is Bankruptcy? A: Bankruptcy a legal process authorized by federal law – the Bankruptcy Code – that allows individuals or businesses – called Debtors – who owe others – called Creditors – more money than they are able to pay to either (i) work out a Plan to repay the money they owe over time or (ii) completely eliminate most of their bills referred to as discharging or discharge.<<Go to Top>> Q: Who can file bankruptcy? A: With limited exceptions any person or business owing money to a Creditor can file bankruptcy. The distinction is in the type or Chapter of bankruptcy they can file. There are several different types of bankruptcy authorized under federal law described by the Chapter of the Bankruptcy Code authorizing each. This includes: (i) Chapter 7 universally available and also known as liquidation bankruptcy or straight bankruptcy; (ii) Chapter 9 for cities and other governmental entities; (iii) Chapter 11 generally for persons and entities with substantial debt; (iv) Chapter 12 for farmers, ranchers and fishermen; and Chapter 13 for individuals with regular income sometimes called a wage earner bankruptcy. All Chapters are discussed in more detail below.<<Go to Top>> Q: What is Chapter 7 Bankruptcy? A: Chapter 7 of the Bankruptcy Code governs liquidation bankruptcy but differs from Chapters 9, 11, 12 and 13 that govern the process of reorganization of a Debtor in bankruptcy. Chapter 7 is the most common form of bankruptcy in the United States. Chapter 7 does not involve filing a Plan of repayment as in Chapters 9, 11, 12 or 13. Instead, the Trustee gathers and sells the Debtor’s non-exempt assets and uses the proceeds to pay creditors as specified in the Bankruptcy Code. Part of the Debtor’s property may be subject to liens and mortgages that pledge the property to certain Creditors. In addition, the Debtor may keep certain exempt property or exempt assets; however, a Trustee will liquidate the Debtor’s remaining non-exempt assets. Accordingly, potential Debtors should realize that Chapter 7 may result in the loss of property. See our detailed discussion of Chapter 7 for more information.<<Go to Top>> Q: What is Chapter 9 Bankruptcy? A: Chapter 9 of the Bankruptcy Code, available exclusively to municipalities, assists them in restructuring their debts. Municipality a means political subdivision or public agency or instrumentality of a State. Chapter 9 provides a financially-distressed municipality protection from its Creditors while it develops and negotiates a Plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished by extending debt maturities, reducing the amount of principal or interest or refinancing the debt by obtaining a new loan.<<Go to Top>> Q: What is Chapter 11 Bankruptcy? A: Chapter 11 of the Bankruptcy Code permits reorganization of the Debtor’s debts and assets and is available to every business, whether organized as a corporation, partnership or sole proprietorship, and to individuals, although it is most often used by corporate entities. In contrast, Chapter 7 governs a liquidation bankruptcy although liquidation can occur under Chapter 11, while Chapter 13 provides a reorganization process for the majority of private individuals.<<Go to Top>> Q: What is Chapter 12 Bankruptcy? A: Chapter 12 of the Bankruptcy Code is similar to Chapter 13 in structure, but it offers additional benefits to farmers, ranchers and fishermen in certain circumstances, beyond those available to ordinary wage earners. Chapter 12 is applicable only to family farmers or family fishermen with regular annual income. Chapter 12 enables financially distressed family farmers and fishermen to propose and carry out a Plan to repay all or part of their debts. Under Chapter 12, Debtors propose a repayment Plan to make installments to Creditors over three to five years that the Judge may approve subject to a number of conditions like feasibility.<<Go to Top>> Q: What is Chapter 13 Bankruptcy? A: Chapter 13 of the Bankruptcy Code provides an individual the opportunity to propose a Plan of reorganization of their financial affairs. Chapter 13 enables an individual with a regular source of income to propose a Plan that provides for their creditors and assets. The Judge may approve a Plan without the approval of Creditors as long as it meets the statutory requirements. Plans are usually three to five years in length and may not exceed five years. Chapter 13 may be looked at as a form of debt consolidation, but a Chapter 13 allows a person to achieve much more than simply consolidating his unsecured debt such as credit cards and personal loans. Chapter 13 Plans are often used to cure arrearages on a mortgage, avoid underwater junior mortgages or other liens, pay back taxes over time or partially repay general unsecured debt. See our detailed discussion of Chapter 13 for more information.<<Go to Top>> Q: Is a lawyer necessary to file bankruptcy? A: No. However, bankruptcy is a complicated process involving a significant number of forms and legal hearings that a lawyer can assist you with. Since all of your property comes under the control of the bankruptcy Trustee, it is possible that you will lose some or all of your property if it is not properly scheduled and analyzed. Likewise, since the purpose of filing bankruptcy is to wipe out or discharge your debts, if this is not properly done, it is possible that some of your debts will not be discharged that could have been with proper legal advice and planning. A competent bankruptcy lawyer will quite often pay for himself or herself by legally ensuring that you maximize the property you keep and the debts that are discharged. An experienced lawyer will be able to jog your memory for property that you might have forgotten that you have – that will otherwise be lost to the Trustee. Moreover, an experienced lawyer can frequently legally advise you how to protect such assets so they will not be lost. For example, income tax returns are normally not exempt and something the Trustee can take away from you even if you have spent them. A good lawyer might advise you to delay filing so you can use those refunds to legitimately pay for something before you file – like your bankruptcy fees.<<Go to Top>> Q: If I file bankruptcy, what property can I keep? A: State law grants exemptions that allow an individual to exempt, or keep, certain kinds of property. Oklahoma law defines what assets are considered exempt, but typically include (i) your home; (ii) the contents of your home; (iii) one vehicle per person; (iv) guns, personal effects and jewelry; (v) tools of the trade; (vi) among other things but not in unlimited amounts. You must carefully consider what property is exempt – and what is not exempt – before you file. After you file, it is too late to legally plan or take action to protect non-exempt assets.<<Go to Top>> Q: What is a reaffirmation agreement? A: The process of renewing your obligation to pay a debt is called reaffirmation or reaffirming. Reaffirming a debt is voluntary and is not required by the law. You may voluntarily repay any debt instead of signing a reaffirmation agreement, but there may be other reasons that you will want to reaffirm a specific debt, such as a vehicle loan. For example if you owe money on your primary automobile but are delinquent and want to keep the automobile, you may want to reaffirm the debt to make the lender happy and allow you to retain the automobile provided you pay the debt.<<Go to Top>> Q: Is it possible to reopen a bankruptcy case after it is closed? A: Yes. Normally, a bankruptcy case can be reopened by the Trustee if questions come up about what property was included or omitted, or any other irregularities. On rare occasions the Debtor may want to reopen the case for certain good reasons.<<Go to Top>> Q: Can I stop creditors from contacting me after I file bankruptcy? A: After you file, you are immediately protected from your Creditors and they must stop all attempts to contact you or collect their debt. This is called an automatic stay. Thereafter, if a Creditor attempts to collect a debt, immediately notify the Creditor in writing that you have filed bankruptcy, and provide them with the case name, case number and filing date or provide a copy of the petition that shows it was filed. If the Creditor still continues to attempt to collect the debt, you may be entitled to take legal action against it. If you have a lawyer, the lawyer will typically handle this for you.<<Go to Top>> Q: Is it possible for my creditors to object to my bankruptcy filing or plan? A: Yes. Bankruptcy filings allow Creditors to object to how specific debts are paid in a Chapter 13 Plan or the repayment or cancellation in its entirety. In Chapter 7 Creditors normally have 60 days after the first meeting of creditors to object to the discharge of a specific debt. If no objections are filed, the court issues the discharge order, the Trustee collects and sells non-assets and then distributes the proceeds to the Creditors as prescribed by law. If there are objections, the bankruptcy proceedings, less the objected debt(s), continues. A trial may be required to determine the objectionable issues. In Chapter 13 Creditors can object to the Chapter 13 Plan for repayment and the court may take this into consideration. If there are no objections filed by Creditors or the Trustee, the Plan may be confirmed as filed.<<Go to Top>> Q: Do I lose my social security or retirement accounts if I file bankruptcy? A: Generally, no. Retirement accounts that are ERISA-qualified are not considered property of a bankruptcy estate, are not taken into consideration as non-assets or lost to the Trustee. Social Security benefits are protected from assignment, or garnishment for debts in bankruptcy. Once paid, the benefits continue to be protected only as long as they can be identified as Social Security benefits. For example, if all of the money in a bank account is deposits into the account are direct deposits of Social Security benefits are identifiable and generally protected. Conversely if social security benefits are mixed or commingled with other funds, they may be lost. Here, the expertise of an experienced bankruptcy attorney is invaluable.<<Go to Top>> Q: How do Secured and Unsecured Debt Differ? A: A secured debt is a claim that is secured by some type of property or collateral, either by an agreement or involuntarily with a court judgment or taxes. Creditors can generally eventually claim the property and foreclose or repossess it to pay the debt in the event of bankruptcy. If you have such a situation, you should consider a Chapter 13. Unsecured debt does not have collateral and a Creditor cannot claim it if you file for bankruptcy. For example, a mortgage is a secured debt on you property.<<Go to Top>> Q: Is there a minimum amount of amount of debt to file bankruptcy? A: No. Nevertheless, your situation may be one in which a bankruptcy in unwise. If your financial situation is temporary, you should consider contacting individual Creditors seeking a change in payment amounts or a reduction in the total amount due. If you do not have much property or money which you do have is exempt, a bankruptcy may be unwarranted, as there may be nothing the Creditor can do to collect the debt. Often the involvement of a good bankruptcy lawyer can be persuasive and dissuade the Creditor from acting.<<Go to Top>> Q: What does a bankruptcy trustee do? A: The exact duties of the Trustee depend on whether it is a Chapter 7, a Chapter 13 or another Chapter of bankruptcy. But generally the Trustee’s job is to (i) Administer the bankruptcy; (ii) Make sure creditors get as much money as possible; (iii) Run the first meeting of creditors often also called the 341 Hearing; (iv) Collect and sell non-exempt property in a Chapter 7 or collect and pay out money on a Chapter 13 Plan; and (v) Obtain information from you and documents related to your bankruptcy. United States Trustees are appointed by the bankruptcy court and are typically but not always lawyers. Their fees are covered by the bankruptcy filing fee or are a set percentage of the money distributed in the bankruptcy.<<Go to Top>> Q: Do I lose my home if I file bankruptcy? A: This depends on many factors, i.e., are you in foreclosure; did you file a Chapter 7 or a Chapter 13 among others. Typically if you are current on your mortgage and filed Chapter 7, you can keep your home if you continue to timely make mortgage payments. If you filed a Chapter 13 and can present a feasible Chapter 13 Plan that the Judge confirms, you can also keep your home.<<Go to Top>> Q: If a one files for bankruptcy, is a co-signor responsible for the debt? A: Yes. In Chapter 7 the Creditor can require the co-signor to make payments on a loan once the principal has filed bankruptcy – if payments are delinquent. This makes it extremely important when considering whether to co-sign a loan: Be ready, and able, to pay the loan in the event that the principal signor defaults. Conversely if a Chapter 13 is filed, the law imposes a co-debtor stay – much like the automatic stay – against actions to collect the debt from a co-signer until that co-debtor stay is lifted. Moreover, if the Debtor proposes a Chapter 13 Plan that pays the debt in full, that co-debtor stay will normally remain in place and the non-filing co-debtor not bothered.<<Go to Top>> Q: If my former spouse files bankruptcy, will my divorce decree help me? A: No. If you are a co-signor with your ex-spouse on a debt and the ex-spouse files bankruptcy, the Creditor can require the entire payment of that debt from you even though the divorce decree orders your ex-spouse to pay that debt. Your divorce decree may address the recourse you may have – if any – against your ex-spouse should he or she default on the loan obligations.<<Go to Top>> Q: What is necessary to file for bankruptcy? A: You must compile a list of past and present debts as well as a schedule, or list, or assets and liabilities. You will also need a statement of financial affairs to file with the bankruptcy court in addition to your filing fee. You must also complete an authorized course in credit counseling before you file and pay the fee of the agency providing the counseling. If you retain a bankruptcy lawyer to assist you, that lawyer will guide you through everything that is required.<<Go to Top>> Q: Must I discharge all of my debts or can I pay some and not others? A: You are legally obligated to list and include all the debts that you owe in your petition and schedules. You may opt to keep some debts by reaffirming one or more specific debts.<<Go to Top>> Q: How long after filing bankruptcy can I can apply for credit? A: The decision whether to grant you credit in the future is strictly up to the Creditor and varies with the Creditor. There is no law that requires or prevents anyone from extending credit to you immediately after you file bankruptcy. This is often one reason for a Debtor to reaffirm with one or more Creditors to retain their good will so a Creditor might continue to extend you credit.<<Go to Top>> Q: Can one spouse files for bankruptcy but not the other? A: Yes. If one spouse files and the other does not, the one who does not file may be responsible for the debts. This is something that requires careful thought and analysis. For example, if one spouse is only obligated on a small amount of debt, it may make sense for that spouse to not file for bankruptcy so that spouse might have better or even good credit regardless of what the filing spouse does.<<Go to Top>> Q: What if I forgot to list a creditor in my bankruptcy papers? A: After filing the petition, you may typically file an amendment to correct it what you filed in error if you discover that an entry is inaccurate or missing. The bankruptcy petition and schedules are filed under the penalty of perjury; consequently, it is extremely important to carefully review the initial filing for completeness and accuracy. Furthermore, any debt that is not listed is not discharged and you will be responsible for it.<<Go to Top>> Q: Is there anything I can do to delete bankruptcy from my credit report? A: No. However, you may want to file an explanation with the credit reporting agencies briefly describing the events resulting in your bankruptcy. If an account is inaccurately reported, you can request the record be updated to reflect the true facts.<<Go to Top>> Q: What happens at the first meeting of creditors or the 341 hearing? A: Once you declare bankruptcy you must attend the first meeting of creditors also called the 341 Hearing conducted by the Trustee in your case. You must appear and answer questions concerning any actions taken with the property and about debts listed in the petition or any other financial information requested by the Trustee Failure to truthfully answer may result in the petition being dismissed or, in extreme cases, a perjury charge. Creditors can attend and question you about your assets or any other matter relevant to your bankruptcy.<<Go to Top>> Q: Does a bankruptcy filing have any impact on an inheritance? A: How an inheritance is treated in bankruptcy depends on when you become entitled to receive it and what Chapter you filed. In Chapter 7 if you become entitled to an inheritance within 180 days of your filing date, the inheritance will be a part of your bankruptcy estate, and can be used to pay your debts. The important date is when your right to the inheritance is fixed, which is typically on the date of death of the person from whom you inherit. You might not receive property or money from someone’s estate for many months. In Chapter 13 your inheritance can be used in determining how much you have available to pay creditors under your repayment plan, and the 180-day limit does not apply. In either type of bankruptcy, you must inform the Trustee about the inheritance. If you are considering filing for bankruptcy, you should ask a bankruptcy lawyer how an expected inheritance might factor into your plans.<<Go to Top>> Q: Which type of bankruptcy is best for me? A: Consumers typically file Chapter 13 where repayment is made to creditors, or Chapter 7 where the debts are to be discharged. Each chapter of bankruptcy determines: (i) What bills can be eliminated; (ii) How long payments can be stretched out, (iii) What property you can keep among other thing. The type or Chapter you ought to file depends on your circumstances and if you have assets available to repay all or part of your debts. Bankruptcy laws are involved and complex; consequently, determining if, when and which type of bankruptcy must be made with careful thought or advice from a good bankruptcy lawyer.<<Go to Top>> Q: How are my creditors notified that I have filed for bankruptcy? A: Shortly after you file the bankruptcy court notifies, by mail, all creditors advising them of (i) the filing of the bankruptcy, (ii) the case number, (iii) the automatic stay, (iv) the name of the Trustee assigned to the case, (v) the date set for the first meeting of creditors, (vi) the deadline, if any, set for filing objections to the discharge of debts, and (vii) whether and where to file claims. The exact information in the notice may be slightly different depending on the Chapter filed or where the Debtor filed.<<Go to Top>> Q: Is all debt discharged by bankruptcy? A: No. Debts that cannot be discharged vary slightly between the different chapters of bankruptcy but typically the following cannot be discharged: (i) Debts for taxes owed to local, state or federal agencies; (ii) Debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently; (iii) Debts that were not in the initial list of debts; (iv) Debts owed to a spouse, former spouse, or child, for alimony, maintenance, or support of a spouse or child, with a separation agreement, divorce decree or other order of a court of record; (v) Debts owed for injury to another person or property owned by another like those granted by a court in a judgment; (vii) Debts for government-sponsored educational loans, unless it can be shown that repayment will cause an undue hardship; (viii) Debts for death or personal injury caused by the debtor’s drunk driving or from driving while under the influence of drugs or other substances such as in a judgment by a court; (ix) Debts incurred after a bankruptcy was filed; and (x) Any type of legal judgment.<<Go to Top>> Q: Can I avoid bankruptcy by using a “credit repair” agency? A: Generally consumers can be just as effective as a credit repair company in dealing with credit reporting agencies and improving their credit ratings but it takes time and patience. Although there are non-profit companies in each state that offer credit guidance for a small fee, credit repair companies offer very little when compared to the fees they charge. Worse yet some are counterproductive taking money from Debtors for their fees and doing nothing in return.<<Go to Top>> Q: Is it possible to convert to another Chapter? A: In most cases it is possible to convert a case one time to any other chapter for which you are eligible. The request to convert is very simple; however, there are possible pitfalls. To illustrate, if you move from Chapter 13 to a Chapter 7, some of your property may be part of the Chapter 7 estate and consequently taken and sold to pay your debts, even though they were protected from creditors under Chapter 13.<<Go to Top>> Q: Can you file for bankruptcy more than once? A: Filing bankruptcy can adversely affect your ability to obtain future credit, rent housing and even negatively impact a job application. Any decision to file must be carefully considered. Nevertheless, a Chapter 7 can be filed every eight years after a prior Chapter 7 filing, or six years after a previous Chapter 13 filing. Or a Chapter 13 can be filed four years following a previous Chapter 7 filing, or two years from a prior Chapter 13 filing.<<Go to Top>> Q: Does my bankruptcy filing remain on my credit record for long? A: Bankruptcies remain on credit reports anywhere from seven up to 10 years.<<Go to Top>> Q: What is a joint petition? A: A joint petition is when an individual and a spouse file a single petition. Unmarried partners must each file a separate case and this aspect of the law is in flux.<<Go to Top>> Q: If I plan to file bankruptcy, when should I stop using my credit cards? A: As soon as you anticipate filing bankruptcy, you should stop using your credit cards. Bankruptcy law scrutinizes questionable purchases for potential fraud. If purchases are made 40 days prior to filing or cash advances taken within 20 days of filing, the debt may possibly be excluded from the bankruptcy discharge.<<Go to Top>>