RI BANKRUPTCY QUESTIONS & ANSWERS

What Is Bankruptcy?
Bankruptcy is a legal method of eliminating debt and providing a method for debt-oppressed people to obtain a "fresh start." In many cases, bankruptcy means the elimination of the debt that you owe to your creditors. There are two primary forms of Personal Bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy.

How Do I Know If It's Time For Me To File Bankruptcy?
If your creditors are attacking your assets and income and you are in debt way over your head, consider the "fresh start" filing bankruptcy may provide. It seems the stigma attached to filing bankruptcy has greatly diminished over the last decade as many people in the U.S. file every year.

What Is Chapter 7 Bankruptcy?
This is often referred to as "straight bankruptcy" and is the most commonly filed form. In most cases, people filing for Chapter 7 bankruptcy do not have to repay any of their debts.

What Is Chapter 13 Bankruptcy?
A person filing under Chapter 13 bankruptcy proposes a 3 to 5 year repayment plan to creditors, offering to pay off all or part of the debts from future income. The amount to be repaid is determined by several factors, including the person’s disposable income. To file under Chapter 13, you must have a "regular source of income" and have some disposable income.

How Do I Know Whether To File Chapter 13 Or Chapter 7?
There are several situations where Chapter 13 is preferable to Chapter 7. A Chapter 13 bankruptcy is generally for people who have too much income to file a Chapter 7 bankruptcy. People also file Chapter 13 because they are behind on their mortgage payments and are trying to avoid foreclosure. A Chapter 13 bankruptcy allows people to make up their overdue payments over time. In addition, under a Chapter 13 filing, a second mortgage can be removed from a person’s house and the amount owed on multi-family homes, investment houses and car loans can be reduced. This cannot be done under a Chapter 7 bankruptcy.

Do I Have To List All Of My Assets On My Petition?
Yes. Knowingly and fraudulently concealing your assets from the bankruptcy court is a felony and the court has the power to fine you and deny you a discharge. However, federal and state laws protect most people’s assets. It is best to discuss the specifics of your situation with your attorney.

Will I Lose My Car And My House?
As long as you continue to keep up to date on your payments on the loan that secures the property, there should be no problem keeping your house or car, even after the bankruptcy proceeding concludes.

Will I Have To Give Up Any Of My Other Property To Creditors?
The vast majority of filers get all or most of their debts discharged (wiped out) without giving up any of their own property. This is because federal and state laws provide protections for your property. Examples of protected property that you may keep regardless of your bankruptcy include household goods, jewelry, clothing, real estate, money in the bank, retirement plans and much more.

Will Everyone Find Out About My Filing?
Not unless you tell them, or they go out of their way to check the public records. Bankruptcy filings are usually not published in newspapers; therefore the only people who typically find out are your creditors whose debts you listed on the petition.

Will Filing Bankruptcy Stop Bill Collectors From Taking Action?
Yes. When you file bankruptcy, federal law imposes an "automatic stay" which precludes your creditors from taking any action to collect debts against you, including court judgments and tax debts, while your bankruptcy is pending. For example, if you were served by one of your creditors to appear in court over a debt, the bankruptcy filing will stop this lawsuit. Any wage garnishments or repossession efforts are also halted.

How Quickly Will My Creditors Get Notice Of My Bankruptcy?
Within a couple of weeks after the filing of your bankruptcy petition, the Bankruptcy Court Clerk mails to your creditors a notice of the filing and the imposition of the automatic stay. Until your creditors receive notification, you may need to supply the creditor with the docket number and date of your bankruptcy. Once they have been given notice, they must stop collection efforts against you or be liable for court sanctions. The vast majority of people no longer hear from unsecured creditors once their bankruptcy petition is filed.

Do I Have To Pay My Bills During The Bankruptcy Proceeding?
For the most part, the answer is no. For specific property (usually secured), such as your car loan or your house mortgage that you plan on keeping, you should continue to make payments. You should also continue to make payments on day to day expenses, like rent and utilities. You should stop making payments on other old debts incurred prior to the bankruptcy, such as credit card debts, and stop paying the mortgage for a home you no longer wish to keep. You should also stop payments on car loans for vehicles you wish to return to the lender.

Will Bankruptcy Harm My Credit Rating?
Although the record of filing bankruptcy may stay on your credit for up to 10 years, you can regain a positive credit rating within a few years of your discharge by making payments on time following your bankruptcy. Ironically, in many cases filing bankruptcy may actually help your credit rating because discharging your debts greatly improves your debt to income ratio. This is a major criteria that creditors use in judging your "creditworthiness." In fact, many people report a flood of pre-approved credit cards within weeks of a bankruptcy discharge.

Can I Keep Any Of My Existing Credit Card Accounts?
Once a bankruptcy case is filed, most credit card accounts are closed, even if the balance is zero at the time of filing or you remained up-to-date on payments. It is against the law to leave a debt out of your bankruptcy case.

Can I Run Up My Credit Cards Right Before I File Bankruptcy?
No. Running up your credit cards on the eve of bankruptcy in anticipation of filing may cause your debt to be non-dischargeable on the grounds of fraud. You should get legal advice concerning large amounts of credit card debt incurred for "luxury goods" right before your bankruptcy.

What Happens After I File Bankruptcy?
About 30 to 40 days after filing the petition, you are required to attend the "Meeting of Creditors" or "Section 341(a) Examination." There is no judge for this hearing, just the bankruptcy trustee in charge of your case. At this meeting, creditors have the opportunity to ask you questions. However, in most cases, creditors rarely attend this hearing. Normally there is a room full of other people who filed bankruptcy, so the questioning by the Trustee is very limited due to time constraints. Most hearings last about 4 minutes. In most cases, the key to the success of your case lies in your bankruptcy petition.

How Long Does A Bankruptcy Take?
For a typical Chapter 7 bankruptcy case, the discharge of your debts usually takes approximately 3 to 4 months. A Chapter 13 bankruptcy discharge takes anywhere from 3 to 5 years.

Should I Feel Ashamed To File Bankruptcy?
There is a great deal to consider before filing bankruptcy, however feeling ashamed should not be one of them. The history of bankruptcy in the United States dates back to the founding of our nation. The early English practice of debtor's prison was so abhorred by our founding fathers that they expressly outlawed it and instituted forgiving bankruptcy laws early on in our nation's history. Over the years, some of our nation's most revered companies and people have turned to the bankruptcy system for help. President Thomas Jefferson, one of this country's founding fathers, filed for bankruptcy protection not just once, but several times, to eliminate the accumulation of his huge debt. President Abraham Lincoln filed for bankruptcy not just once, but twice in his lifetime as well. Seeking a fresh start by filing bankruptcy is better put into perspective when you know that men of the intellect and accomplishments of two of our U.S. presidents repeatedly found themselves needing help with their financial situations.

Why Is It Legal To "Wipe Out" Our Debts?
More so than in any other time in our country's history, our economy is based on consumer debt. In fact, in this age of multi-billion dollar corporate bailouts, easy credit and relentless bombarding of seductive messages cajoling us to "charge, consume, buy" it is not surprising that so many people are drowning in debt.

For many of us, this debt is insurmountable and is causing family problems and feelings of hopelessness and even suicide. With credit card interest rates of 21%-39%, many feel like modern day indentured servants. Many times, the debt is occasioned by unforeseen events such as loss of a job, medical bill, marriage separation, or divorce.

Nevertheless, in instituting our bankruptcy laws, Congress recognized that responsible, well-intentioned people could from time to time run into financial problems. By allowing you to recover from your unrelenting burden of debt, you will be able to start afresh, look to the future and become a more productive member of society. This is good for you and for the good of society as a whole.