Stuart B. Handelman, Chicagoland Bankruptcy Attorney

Bankruptcy Questions (FAQs)

A list of frequently asked questions about bankruptcy.

Do you have to have a certain amount of debt to file for bankruptcy?

No. However, there are some situations that may not warrant filing for bankruptcy. If your undesirable financial situation is temporary, you may consider making arrangements with individual creditors for a change in payment amounts or a reduction in the total amount due. If an individual has little in the way of property, money or assets, filing bankruptcy may not be necessary, as the creditor may not be able to collect the debt.

What's the difference between secured and unsecured debt?

Secured debt is a creditor's claim that is secured by a lien of some type in your property, such as your agreement or with a court judgment or taxes. A creditor can generally claim the property that secures the debt in the event of bankruptcy. Unsecured debt is not tied to any type of property, which leaves the creditor without any claim to property.

Is everyone eligible to file for bankruptcy?

With a few small exclusions, any person or business owing money to a creditor can file for bankruptcy.

How often can you file for bankruptcy?

Chapter 7 bankruptcy can be filed every eight years from a previous Chapter 7 filing or 6 years from a prior Chapter 13 filing. Chapter 13 bankruptcy can be filed four years from a prior Chapter 7 filing or two years from a prior Chapter 13 filing. Filing bankruptcy can adversely affect your ability to obtain future credit, rent housing and negatively impact a job application, so any decision to file must be carefully considered.

What happens if one spouse files for bankruptcy and not the other?

If one spouse files for bankruptcy and the other spouse does not, the one who does not file could possibly be responsible for the debts. Talk to a bankruptcy lawyer before filing.

Can all types of debt be discharged?

No. The debts that cannot be discharged vary slightly between the different chapters of bankruptcy. Generally, the following cannot be discharged:

Debts for taxes owed to local, state or federal agencies
Debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently
Debts which were neither listed nor scheduled or which the debtor waived discharge
Debts which are owed to a spouse, former spouse, or child of the debtor, for alimony, maintenance, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record
Debts owed for willful and malicious injury by the debtor to another person or property owned by another.
Debts for government-sponsored educational loans, unless it can be shown that repayment will cause an undue hardship
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
Debts incurred after a bankruptcy was filed

Do I have to file bankruptcy on all of the accounts I owe, or can I keep some?

You must include all the debts you owe in your petition and schedules. You may opt to keep some debts by reaffirming the specific debt.

How is an inheritance treated in a bankruptcy case?

How an inheritance is treated in bankruptcy depends on when you become entitled to receive it, and what type of bankruptcy relief you're seeking. If you've filed for Chapter 7 bankruptcy, and 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, typically on the date of a person's death. You might not receive property or money from someone's estate for several months.

If you've filed a Chapter 13 bankruptcy case, your inheritance can be used in determining how much you have available to pay creditors under your repayment plan, and the 180-day limit doesn't apply. In either type of bankruptcy, you must inform the bankruptcy trustee about the inheritance. If you're thinking about filing for bankruptcy, consult a bankruptcy lawyer on how an expected inheritance might factor into your plans.

What is a reaffirmation agreement?

A reaffirmation agreement legally obligates the debtor to pay all or a portion of an otherwise dischargeable debt. These are voluntary agreements not required by bankruptcy codes. You may voluntarily repay any debt instead of signing a reaffirmation agreement, but there may be valid legal reasons for wanting to reaffirm a specific debt, such as a vehicle loan.

What happens at a creditors meeting?

The debtor must attend the creditors' meeting scheduled for their bankruptcy petition. The trustee conducts the meeting. The debtor must answer questions concerning how the situation evolved, any actions taken with the property and if the debts that are listed in the petition or any other financial information requested by the trustee. Failure to respond or not respond truthfully can result in the petition being dismissed or, in extreme cases, a charge of perjury. Creditors have been notified that they may attend and question the debtor about the assets of the debtor or any other matter relevant to the bankruptcy. A creditor doesn't waive any rights by not attending the creditors meeting.