What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is a legal process that can help certain individuals get a “fresh start” by eliminating some or all of their debt.
Under Chapter 7 bankruptcy, a court-appointed Trustee may sell or liquidate some of your assets or property in order to pay your creditors. The result of Chapter 7 bankruptcy is often a discharge of your debt, meaning you’re no longer legally liable.
Both Chapter 7 and Chapter 13 bankruptcy have serious negative ramifications for your credit reports and scores, and they involve court fees and potentially legal fees. An NFCC-certified credit counselor can help you understand the pros and cons of bankruptcy and other debt management options, and provide you with your court-ordered bankruptcy counseling.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is a legal process where an individual with regular income repays some or all of their debt over a three-to-five year period. Under Chapter 13, you’ll make monthly payments for an amount determined by the Bankruptcy Court. Your Chapter 13 Trustee will supervise the case and administer the payments to your creditors.
If you complete your payment plan as a greed, your remaining debt will be discharged, meaning you’re no longer legally liable to pay.
Like Chapter 7 bankruptcy, Chapter 13 can cause a significant drop in your credit scores, and you’ll have to pay court fees and potentially legal fees in order to file.
For help understanding the pros and cons of Chapter 13 bankruptcy, or to complete your court-ordered bankruptcy counseling, reach out to an NFCC-certified credit counselor.
What is bankruptcy counseling?
Bankruptcy counseling is counseling that you’re required to complete in order to file Chapter 7 or Chapter 13 bankruptcy. To fulfill this requirement, your bankruptcy counseling agency must be approved by the U.S. Trustee Program. (Agencies located in North Carolina or Alabama must be approved by the local Bankruptcy Administrator). Bankruptcy counseling consists of two separate sessions. You’ll receive your certificate of completion after attending both sessions:
- Pre-bankruptcy credit counseling
- Pre-discharge debtor education
NFCC member agencies provide bankruptcy counseling face-to-face, over the phone and online
How much does a Chapter 7 bankruptcy cost?
The fees required to file Chapter 7 bankruptcy currently add up to $338. They include:
- Case filing fee
- Miscellaneous administrative fees
- Trustee surcharge
You may be able to pay the fees in installments. However, if your income is below 150% of the poverty level, the court may waive the fees. Hiring a bankruptcy attorney also costs money, and the cost varies by state and by attorney. You’re not required to have an attorney in order to file Chapter 7 bankruptcy, but filing for yourself is difficult and hiring an attorney is highly recommended
.
How much does a Chapter 13 bankruptcy cost?
The fees required to file Chapter 13 bankruptcy currently add up to $313. This includes a case filing fee and a miscellaneous administrative fee. Chapter 13 court fees can be paid when you file or paid over four installments, which are spread out over a maximum of 120 days.
In addition to paying court fees, it’s highly recommended that you hire an attorney to guide you through the complicated process of filing bankruptcy. Attorney fees vary by state and by attorney.
How do I receive my payments from a reverse mortgage?
With a reverse mortgage, you choose how you want to receive your payments. You usually have these options:
- Lump sum
- Monthly payments
- Line of credit
- A combination of the above options
Do I need an attorney to file bankruptcy?
You can file bankruptcy without an attorney, also known as filing “pro se,” but it’s not recommended. Bankruptcy law is complex and filing has serious legal and financial ramifications. An attorney can help you achieve a better outcome in the following ways:
- Advise you which chapter to file
- Explain bankruptcy law and your rights
- Advise whether or not you can speed up your case with a fee waiver
- Assist you with filing forms
- Advise you whether or not to continue paying creditors
- Help you protect certain assets
Instead of filing bankruptcy on your own, try searching for a free or low cost attorney.
Can I keep my credit cards after filing bankruptcy?
It’s up to each credit-card issuer to decide if you can use your card after filing bankruptcy. For cards where you owe money, most creditors will cancel the account as soon as they receive notice that you’ve filed bankruptcy. If you want to keep the card open, you’ll face the following challenges:
- The balance owed on the card cannot be discharged
- You must prove to you can afford to continue payments
- You’ll need permission to make charges to the card in the future
For credit cards where you have a $0 balance, the creditor will likely leave the account open until they see the record of bankruptcy on your credit reports.
Can I be fired for declaring bankruptcy?
According to the federal Bankruptcy Code, you cannot be fired solely for filing bankruptcy, regardless of whether you work for a private or government employer. Additionally, declaring bankruptcy won’t automatically cause you to lose security clearance.
If you file Chapter 13 bankruptcy, your employer will receive notification that you filed, since your payments must be deducted from payroll. However, it’s illegal for your employer to penalize you with a pay decrease, a demotion or termination, strictly as a penalty for filing bankruptcy.
Are there affordable bankruptcy attorneys?
Bankruptcy attorney fees vary by state and by attorney. You might be able to find a low-cost or pro bono (free) bankruptcy attorney by using one of these resources:
- A local legal aid organization or legal clinic
- The American Bar Association
- The American Bankruptcy Institute’s Pro Bono locator