Bankruptcy FAQs

There are many myths and misconceptions about bankruptcy.

Geranios Law, PLLC
understand that hiring an attorney is a serious matter and that you may have important questions about your potential case. I also know that your time is valuable. Therefore, I provide answers to a number of commonly asked questions. Because these answers are general in nature, I strongly recommend that you consult an attorney prior to acting on any of the information listed below. Remember, every case is different and it is imperative that a trained legal professional evaluate your case and advise you on your best course of action. Contact me at 406-541-3565 today to set up a free, personal consultation to discuss your case.

Commons Worries about Filing Bankruptcy

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“I'll never ever get credit again.”

In fact, you'll be offered new credit (on not very good terms) just as soon as you get a bankruptcy discharge, if not before. People in bankruptcy can get car loans. The situation improves year by year.

“I incurred these debts and I should pay them.”

Repayment is certainly the better approach if it's truly an option, but ask yourself, 1) is it possible to repay on the present terms; and 2) at what risk to your future and that of your family?

Most people who struggle to repay debt go without health care or health insurance; emergency savings; or anything set aside for retirement. They gamble their future health and security to repay debt that is frequently far in excess of what they can realistically pay.

“I'm ashamed.”

Most people who file bankruptcy have suffered job loss; divorce; or ill health. A much smaller group got there via poor choices or over optimism about their ability to bounce back from adversity, or a combination. The bankruptcy system doesn't condition relief on an assessment of whether you “merit” a discharge. No one sits in judgment about how you got in debt. Generally the only people at bankruptcy hearings are others who are in the same boat (and their lawyers). The system treats honest debtors with respect.

While it may be emotionally difficult to admit you are financially stuck, the result of filing a bankruptcy is both psychologically and financially liberating. Remaining in hopeless debt saps energy and efficiency.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 bankruptcy & Chapter 13 bankruptcy both provide the same result – relief from your debts. Yet, while they serve the same goal, each Chapter's approach in achieving this goal is vastly different.

The biggest difference between Chapters 7 & 13 bankruptcies is the repayment of your debt. Chapter 13 bankruptcy involves a court-ordered repayment plan where a portion of your debt is repaid to your creditors. In a Chapter 7 bankruptcy, there is no repayment plan and certain debts can simply be eliminated.

The second major difference between the two chapters is the time it takes to complete each chapter's filing process. While a Chapter 7 bankruptcy filing usually only takes 4-6 months to complete, a Chapter 13 bankruptcy is a much longer procedure and usually lasts 3-5 years.

Your assets are protected in a Chapter 13 bankruptcy and the bankruptcy can even help you save assets that are facing foreclosure or repossession — such as a house or car. Since a Chapter 13 bankruptcy in not a liquidation bankruptcy, you are able to keep your assets even if Montana bankruptcy exemptions do not completely protect them. In a Chapter 7 bankruptcy, although it rarely happens, the Bankruptcy Court can liquidate your assets if they are not protected by your state's bankruptcy exemptions.
In a Chapter 13 bankruptcy, do I have to repay all of my debts?

A Chapter 13 bankruptcy requires you to pay a monthly payment to the Chapter 13 Bankruptcy Trustee. A common misunderstanding about Chapter 13 bankruptcy is that you must repay all of your debt. You are not required to pay back all of your debt. The bankruptcy laws control the amount you must repay, but you may still discharge or eliminate portions of your outstanding debt. Your monthly payment is calculated based upon your monthly income and expenses. However, your future goals regarding secured property (i.e. vehicles, homestead, and other real property) may also have an effect on how your monthly payment is calculated. If you have fallen behind in payments or are experiencing a financial hardship with your home or any other secured properties, Chapter 13 bankruptcy may offer you the opportunity save, or keep these properties.

If I have filed bankruptcy before, can I file again?

You may file for a second Chapter 7 eight years after filing the first. You may file a Chapter 13 bankruptcy four years after filing a Chapter 7.

How can I get my creditors to stop calling me?

Creditors are not permitted to call individuals who are represented by legal counsel. Once you have retained Geranios Law, PLLC to represent you, creditors are required to communicate with us, not you. Harassing phone calls must cease when you tell your creditors you have retained an attorney. If they do not stop, we will contact them to stop the calls. Once you file your bankruptcy petition, the court will issue an automatic stay, putting an immediate halt to all debt collection efforts, including lawsuits and garnishments.

What happens if I get sued?

You should seek legal advice immediately. A bankruptcy will stop a lawsuit and prevent the creditor from getting a judgment against you. If the creditor gets a judgment, collection efforts must stop when the bankruptcy is filed. Until the bankruptcy is filed, however, the creditor may be able to garnish your wages or bank accounts. A judgment also creates a lien on any real estate you own. It may or may not be possible to eliminate the lien in bankruptcy.
Do I have to include all my debts when I file for bankruptcy?

The bankruptcy code does allow you to retain certain secured property (i.e. vehicles, homestead, and other real property). Your unsecured debts (i.e. credit cards, personal loans, etc.) must be included in the bankruptcy and are subject to discharge. There may be special exceptions to this requirement, but by and large, you will not be permitted to pick and choose between unsecured debts.

Will I have to appear in court?

It is rare for people who file Chapter 7 or 13 to go to court or see a judge. A “Meeting of Creditors” at which a bankruptcy trustee presides is usually the only required appearance. Creditors rarely appear, and for most bankruptcy filers the meeting consists of 10 to 15 minutes of questioning by the trustee regarding your assets. You do not have to explain why you cannot pay your bills.

Can I keep my car? My home?

If you file Chapter 7, you may be able to exempt a certain amount of equity in your home or car; depending upon your equity and the value of these assets, they may be safe from the bankruptcy trustee. Also, there are other actions you can take to retain certain property. If you file Chapter 13, your assets will not be taken or sold in bankruptcy, and you can even save your home from foreclosure if you are in default. At Geranios Law, PLLC we understand how important it is to protect your assets, which is why we do more than just file your bankruptcy, but also advise you on how to manage your property prior to filing.

Who will know about my bankruptcy?

When the case is filed in Bankruptcy Court, notifications are sent by the court to all creditors, co-debtors, your case trustee, the United States Trustee, the Internal Revenue Service, and the Montana Department of Revenue. The case is a matter of public record and anyone who wants to look at the court record may do so. The Meeting of Creditors (your meeting with your case trustee) is open to the public but creditors rarely attend and there is press coverage only in the most unusual and high profile cases. There is no requirement that notice of your bankruptcy be published in a newspaper. If, however, a newspaper chooses to print bankruptcy notices, you cannot stop it from doing so.
Are all debts dischargeable in bankruptcy?

No. Domestic support obligations are never dischargeable. Most tax debt is not dischargeable. Income tax debt may be dischargeable depending on how old the debt is and when you filed your return. Student loan debt is rarely dischargeable. You must prevail in a lawsuit in the Bankruptcy Court (separate from your bankruptcy), and the legal standards are very difficult to meet. Certain other debts (such as debts arising from fraud or malicious injury to another) are not dischargeable if successfully challenged by the creditor. Some Marital property settlements are dischargeable in Chapter 13 bankruptcy but not in Chapter 7.

I own a business and it is suffering financial hardship; should I file a business bankruptcy?

Business entities can file for bankruptcy under either Chapter 7 or Chapter 11. In determining under which bankruptcy Chapter your business should file, your goals concerning the business's future must be taken into consideration. As a practical matter, if you plan on closing your business or if your business is already closed, a Chapter 7 liquidation bankruptcy would be appropriate. Upon filing, assets which are owned by the business, will be subject to liquidation by a Trustee assigned by the Bankruptcy Court in order to distribute any proceeds to your business' creditors. At the time of filing, all business operations must cease, and doors must close. On the other hand, if your business is having trouble paying all of it's present debt, but the business does earn a monthly income, a Chapter 11 bankruptcy may be the better fit. A Chapter 11 bankruptcy is similar to a personal Chapter 13 bankruptcy in that the Chapter 11 acts as a reorganization bankruptcy for the business. At the time of filing, the business does not have to cease operations, and may be able to successfully remain open and operating in the future. If your business is suffering financial hardship, it is important to obtain the legal advice of a knowledgeable bankruptcy attorney as soon as possible in order to explore your options and to determine your best course of action.

I personally guaranteed my business debt; should I file a personal bankruptcy?

Often times, business owners are required to personally guarantee business debt. If you have personally guaranteed a loan or other debt for you business, and that debt is about to or has become in default, you will be personally liable for the loan. Personally guaranteed business debt is dischargeable, but only in a personal bankruptcy filed by you. If you file a business bankruptcy, although your business may no longer be liable for its debts, the creditor holding your personal guarantee will continue to retain a legal basis to sue you personally in your capacity as the personal guarantor. On the other hand, if you file a personal bankruptcy, your personal liability can be discharged, and the creditor will no longer have a legal right to attempt to collect against you.

Can I put my assets in someone else's name before filing?

No. Such transfers are not effective to put your assets beyond the reach of creditors and bankruptcy trustees. Worse, such action may lead to the denial of your discharge (11 U.S.C. 727).

A bankruptcy trustee can recover assets transferred within one year of the bankruptcy filing where the debtor did not get reasonably equivalent value for the asset, or where the transfer was made with intent to hinder creditors.

The “look back” period may be even longer under Montana law, giving the trustee that same state law look back period in which to recover assets.

Does my spouse have to file bankruptcy if I file?
No. You can file alone. Keep in mind that your spouse will remain liable for the debt on any joint accounts.

What effect will my bankruptcy have on a co-signer, such as the person who co-signed my truck loan?

In Chapter 7 the creditor can pursue the co-signer if payments are not being made. In Chapter 13 it is sometimes possible to protect the co-signer by paying the debt through the Chapter 13 plan. Your bankruptcy cannot be reported on your co-signer's credit reports, although delinquencies can be reported. If payments are being made by either you or the co-signer, there will be no adverse consequences.

Will I Lose My Tax Refund If I File Bankruptcy?

First, when you file a bankruptcy case you should know that everything you own is property of the bankruptcy estate that the trustee can use to pay your creditors. Even if you file in the middle of the year and are not yet owed a tax refund, a bankruptcy trustee can claim a percentage of the refund you receive the next year for the tax year in which you file. As an example, if you file bankruptcy in September and then file your tax return the following April, claiming a refund of $5,000, the trustee could claim 75% of the refund (9 months out of 12). If it turns out that you cannot afford to have any portion of your tax refund taken, and you can wait to file bankruptcy, you may need to file your tax returns, receive your tax refund first, and spend the refund on necessary items before filing the bankruptcy. We can help you determine how much if any of your tax refund might be claimed by the trustee if you file bankruptcy.

What will happen to my credit score?

This is a universal question that does not have a universal answer. Certainly filing a bankruptcy has an initial affect your credit score. However, the type of bankruptcy, whether Chapter 7, 11 or 13, will affect an individual's credit differently. If you are in need of a bankruptcy, the initial affect to your credit score should not necessarily guide you in your decision on whether or not to file. Often, those in need of a fresh start who choose not to file for bankruptcy will have a harder time rehabilitating their credit in the future. Those who are unable to pay their debt today, and choose to file bankruptcy, are ultimately afforded the opportunity in the future to obtain credit cards, purchase vehicles, and qualify for mortgage loans. While these things may not happen overnight, you may be surprised as to the actual positive effects your bankruptcy will have on your life. Bankruptcies remain on your credit report for ten years after discharge. During that time, your credit score will be negatively impacted by the bankruptcy. However, that does not mean that you cannot obtain credit. In fact, there are steps you can take immediately after – or even during – a bankruptcy to begin rebuilding credit and obtaining loans.

Elder Law FAQs

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What is elder law? Elder law is a legal practice area devoted to several areas of law, including guardianships, long-term care planning, advance health care directives, powers of attorney, estate planning, special needs trusts, and elder abuse.

What is the difference between a guardianship and a conservatorship?

Guardians and conservators may have different roles. Guardians' duties involve making decisions to protect the physical and mental health of a ward; conservators make financial decisions for the ward. Regardless of the term used, if the judge determines the ward is incapacitated, the judge also must determine the duties of the guardian or conservator including making physical, medical or financial decisions for the ward, and other matters.

A guardianship is a situation where one person, the guardian, has the ability to make decisions for someone else who cannot make decisions himself or herself. Guardianships are typically necessary with:

Why might I need to seek an Elder Law attorney?

Elderly family members who are incapacitated and have difficulty with tasks such as managing their own finances or health care. The need may arise because of memory loss.

Elderly family members are often the victims of elder abuse. In this situation, an emergency guardianship can be immediately granted, and a follow-up hearing will occur after the family member is out of danger.
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