Common Bankruptcy Questions

Most people experience financial worries at some point during their life. According to a recent survey cited by CNBC, 77 percent of Americans report that they feel “anxious” about their financial situation. Even more alarming, nearly 40 percent of adults nationwide have dealt with serious financial struggles in recent months.

For families with deep (unsustainable) debt, bankruptcy may provide a path forward. We want to make sure that you have the knowledge and tools you need to navigate the bankruptcy process. Here, our West Virginia bankruptcy lawyer answers eight of the most frequently asked questions about bankruptcy law and the bankruptcy process.

1. What is Bankruptcy?
Bankruptcy is a tool to help people fix their financial problems. As simply described by the United States Courts, the process “helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan.” Neither debt (nor bankruptcy) should be viewed as a source of shame or personal failing. Ultimately, debt is a problem that needs to be solved and bankruptcy is a legal process that offers a potential solution.

2. What are the Different Types of Personal Bankruptcy?
There are two main types of bankruptcy protection for consumers. Chapter 7 bankruptcy protection is also called a liquidation bankruptcy. Through a Chapter 7 bankruptcy filing, a consumer can eliminate much (or all) of their outstanding debt. Through a Chapter 13 bankruptcy filing, a consumer can get onto a sustainable repayment plan—resolving their debts over a period of several years. While more people file for Chapter 7 bankruptcy than Chapter 13 bankruptcy, not everyone is eligible for a liquidation. There are annual income limits. The amount of money that you can make while still qualifying to file for Chapter 7 bankruptcy will depend on your state and the size of your household. To learn more, contact a Chapter 7 bankruptcy attorney.

3. Will the Debt Collectors Stop Calling If I File for Bankruptcy?
Yes—or at least they are required to under the law. A bankruptcy filing initiates an automatic stay. Creditors and debt collectors must cease all collection action, including calls. One of the benefits of bankruptcy protection is that it gives you some immediate breathing room to figure out the best solution for your situation. If you are dealing with problems with debt collector harassment in general, contact an attorney. Your rights may have been violated.

4. Does Chapter 7 Bankruptcy Always Eliminate Every Debt?
No. Certain debts and financial obligations are not dischargeable in bankruptcy. You can use Chapter 7 to eliminate a wide range of unsustainable, unsecured debts—credit cards, personal loans, medical bills, etc.—but some things cannot be discharged in bankruptcy. For example, the Chapter 7 bankruptcy process cannot be used to discharge delinquent child support. Other types of debts that cannot be discharged through bankruptcy are some types of federal student loans and state/federal tax liabilities. If you have any questions about what debts can and cannot be discharged in bankruptcy, an experienced attorney can help.

5. Can Bankruptcy Help to Save My Home From Foreclosure?
It depends on your specific circumstances. That being said, a bankruptcy filing will put a pause on the mortgage foreclosure process. Under U.S. bankruptcy law, you are entitled to an automatic stay once you file for bankruptcy. Among other things, this means that all creditors, including mortgage companies, must halt collection activities. It puts a pause on the foreclosure process. Whether a bankruptcy filing will stop a foreclosure for good depends on many different factors, including the extent of missed payments, value of your home and how much you owe on your mortgage.

6. Does Filing for Bankruptcy Hurt Your Credit Score?
A bankruptcy filing is adverse information on your credit history. For this reason, it will hurt your credit score in the short-term. However, over the long run, bankruptcy can actually help your credit rating—at least assuming that you are able to find a true solution to your financial problems. This is why the cost of bankruptcy is often less than doing nothing. A Chapter 7 filing will stay on your report for 10 years. A Chapter 13 bankruptcy will stay on your report for 7 years. Each year that goes by, the bankruptcy will have less effect. Further, an experienced Martinsburg bankruptcy lawyer can help you repair and rebuild your credit along the way.

7. How Do I Know If Bankruptcy is the Right Option?
Bankruptcy is a tool for people dealing with serious financial distress. If you are struggling to pay your bills and falling further into debt, it might be the right option. During a comprehensive, confidential initial consultation, an experienced bankruptcy attorney can review your finances and help you better understand the advantages and disadvantages. In some cases, non-bankruptcy debt relief alternatives may be a better option. If so, a lawyer will let you know. Otherwise, your attorney can help you navigate the paperwork and other complexities of the bankruptcy process.

8. Are You Required to Hire an Attorney to File for Bankruptcy?
No. You are allowed to file a bankruptcy petition without retaining professional legal representation. However, it may be a risk to do so. The bankruptcy process is notoriously complex. There are many potential pitfalls. Even if you are dealing with serious financial difficulties, an experienced bankruptcy lawyer is an important investment in your future. An attorney will help you navigate the process and ensure you are in the best position to move forward with your life.

Schedule a Confidential Consultation With a Bankruptcy Attorney
At Hinkle Law, PLLC, our bankruptcy attorney has the professional skills and legal expertise that you can trust. If you have any specific questions about the bankruptcy process, we are available to help. Call us now, send us a text message, or connect with us directly online to arrange your free, no obligation initial consultation. From our law office in Martinsburg, we provide bankruptcy law representation throughout the region, including in West Virginia and Western Maryland.