Bankruptcy FAQ's

Frequently Asked Questions about Chapter 7

Q: How does a Chapter 7 liquidation work?

A: In a Chapter 7 case, the debtor must turn his or her nonexempt property over to a bankruptcy trustee, who then converts the property into cash by selling it and pays the debtor's creditors from the sale proceeds. In return, the debtor receives a Chapter 7 discharge if he or she pays the filing fee, is eligible for such a discharge, and obeys the court's directives.

Q: Who is ineligible for a Chapter 7 discharge?

A: A person may not be eligible for a discharge under Chapter 7 if he or she has been granted a discharge in a Chapter 7 case filed within the last eight years or in a Chapter 13 case filed within the last four years; if he or she engages in certain fraudulent conduct related to the bankruptcy or his or her financial situation; or if he or she refuses to answer questions or obey orders of the bankruptcy court; or if he or she fails to qualify under the financial means test.

Q: May a husband and wife file jointly under Chapter 7?

A: Yes. A husband and wife may file a joint petition under Chapter 7. If a joint petition is filed, only one set of bankruptcy forms is needed and only one filing fee is charged.

Q: Does my spouse have to file bankruptcy if I do?

A: No. However the spouse that does not file will not receive the benefits of bankruptcy. In other words, if the non-filing spouse is jointly liable on certain debts, he or she will remain liable for those debts even if the filing spouse filed for a Chapter 7 bankruptcy. On the other hand, the non-filing spouse will not have bankruptcy noted on his or her credit report.

Q: Can my domestic partner and I file a bankruptcy together?

A: No. If you are living with a significant other but are not legally married, you cannot file a bankruptcy together, even if all bills are in both of your names. In such cases, each one of you would have to file a separate bankruptcy petition.

Q: May employers discriminate against me based on my bankruptcy filing?

A: No. It is illegal for both private and governmental employers to discriminate against a person as to employment because that person has filed bankruptcy under Chapter 7. Your employer cannot fire you if you file bankruptcy.

Q: Will bankruptcy stop a wage garnishment?

A: Yes. Some of the money garnished from your paycheck may even be returned to you, depending on how much was garnished and when it was garnished. If your wages are currently subject to garnishment, a Notification of Stay must be mailed to the creditor and your employer in order to stop the garnishment after your bankruptcy petition is filed.

Q: Will filing bankruptcy help me get rid of debts owed for back taxes?

A: Most tax debts are not discharged in a bankruptcy. Business tax debts, like sales taxes and employee-withholding obligations, can never be discharged. Income and self-employment taxes, however, may under certain circumstances be discharged or reduced if they are at least three years old and the tax returns have been on file for at least two years.

Q: Will creditors stop harassing me if I file bankruptcy?

A: Yes. When you file bankruptcy, the bankruptcy court will issue an "automatic stay," which will immediately stop all of your creditors from calling you.

Q: Do I need an attorney to file bankruptcy?

A: Although you do not legally need an attorney to file bankruptcy, the bankruptcy laws are so complex and differ slightly from state to state, so professional help is strongly advised. Competent legal representation can prevent you from experiencing even further financial disaster, such as the loss of your home and other valuable property, as well as set your finances straight for the future.

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