(1)Can
I keep any of my property if I file bankruptcy?
Yes. Most people who file bankruptcy keep all
of their property. This is because most people who
file bankruptcy do not have much property.
If you file a Chapter
13 Bankruptcy, you will not lose any property provided
you successfully complete your repayment Plan.
If you file a Chapter
7 Bankruptcy, the law allows you to keep certain types
of property up to a certain value for each type. For
example, federal bankruptcy law allows you to keep a car
with a net worth (difference between value and loan
amount) of up to $3,225. The amount you can keep of
each kind of property is called an exemption.
The exemptions are doubled for a husband and wife who file
bankruptcy together.
Federal law and Connecticut law have different rules for
the property that you can keep. Most people use the
Federal rules. If you own a home with a lot of equity
(the difference between the value of the home and the
total mortgage debt), you probably will want to use the
Connecticut rules because the federal homestead exemption
per person is $20,200 while the Connecticut homestead
exemption per person is $75,000. Whether to use the
Federal or Connecticut rules for exemptions is a decision
that you should make with the advice of an experienced
bankruptcy lawyer.
The following are the main
exemptions allowed by federal bankruptcy law as of April
2007: §522(d)
Federal
Bankruptcy Exemptions
Type of
Property
Amount
Homestead
$20,200
Motor vehicle
$3,225
Household
Goods (limit of $475 per item)
Per
Item $525
Total
$10,775
Jewelry
$1,350
Tools
of the Trade
$2,025
Personal
Injury Proceeds
$18,450
Social
Security Benefits, Unemployment Compensation,
Public Assistance, Disability Benefits.
Unlimited
Alimony,
Support, Separate Maintenance.
Amount
reasonably necessary to support debtor and debtors
dependents.
Stock
Bonus, Pension, Profit Sharing, Annuity, or
Similar Plan or Contract on Account of Illness,
Disability, Death, Age, or Length of Service,
(Some
Restrictions Apply)
Amount reasonably necessary to
support debtor and debtors dependents.
Wrongful
Death Proceeds
Amount reasonably necessary to
support debtor and debtors dependents.
Accrued
Dividend or Interest or Loan Value of any
Unmatured Life Insurance Policy
$10,775
Life
Insurance Proceeds
Amount reasonably necessary to
support debtor and debtors dependents.
Tax
Exempt Retirement Accounts, IRAs, Roth IRAs.
(If
Nontaxable Under Certain IRS Rules)
$1,095,000
Any
Property Chosen by Debtor
$1,075
Plus up to $10,125 of any unused part
of the homestead exemption.
The exemption for any property chosen by
the debtor can be used in in combination with other
exemptions. For example, you could protect a car
worth $4000 by using $3225 of the motor vehicle exemption
and $775 of the "any property" exemption.
Items that cannot be protected
under the exemption rules must be turned over to the
bankruptcy trustee. An arrangement can
usually be made to pay the trustee the value of a
non-protected item (instead of the item itself) if you
want to keep that particular item.
(2)Can
I save my home through bankruptcy if the bank has
filed for foreclosure?
Maybe.Chapter 13 Bankruptcy can be used to
stop a foreclosure, as long the foreclosure
has not reached the point where title to your home has
passed over to the bank (the Law Days
have passed) or there has been a foreclosure sale and the
Connecticut Superior Court has confirmed the sale.
Under Chapter 13, a homeowner puts together a repayment Plan
to get caught up on the overdue mortgage amount by making
monthly payments. For more information, see our web
page on stopping
foreclosure.
(3)Can
I file bankruptcy and keep my car even though I have a
car loan?
You
will continue to make monthly payments on the loan.
The
amount and number of your monthly payments may be
adjusted for you to get caught up with the amount that
you are behind on the loan.
The
loan amount may be adjusted to reflect the present
value of the car if your loan is more than 2½ years
old.
You
will still owe the loan company the amount of the loan
despite having filed bankruptcy.
You
are taking a risk because if your car should be
totalled or stolen in the future, you will still have
to finish making the loan payments if you owe more
than the salvage value of the car.
You can also keep the car by paying the
amount you owe (called redeeming).
You may be able to take out a new loan to
pay off your existing loan.
If you have had your car loan for more
than 910 days (2 ½ years) old, you may only have
to pay the value of the car rather than the full
amount of the loan.
You may be able to keep your car, without
reaffirming or redeeming, just by continuing to make
your payments on time. However, this has not
been settled under the new bankruptcy law.
If you are behind with your car payments, you
can choose to file a Chapter 13 Bankruptcy to get
caught up.
If you are up to date with your payments,
you can reaffirm the car loan and keep
the car.
You can also keep the car by paying the
amount you owe (called redeeming).
You may even be able to take out a
new loan to pay off your existing loan.
If you have had your car loan for
more than 910 days (2 ½ years) old, you may
only have to pay the value of the car rather
than the full amount of the loan.
You may be able to keep your car, without
reaffirming or redeeming, just by continuing to
make your payments on time. However, this
has not been settled under the new bankruptcy law.
If you file under Chapter 7, you must be able to protect
the net worth (difference between value and loan amount)
of your car under the exemption rules to keep your car.
If are behind with your loan payments and you file a Chapter 13
Bankruptcy, you can get caught up with your car loan
as part of your repayment Plan.
(4)If I file for bankruptcy, does my spouse also have to
file?
No. If most of your debts are joint
debts, then it would probably make sense for the two of
you to file bankruptcy. However, if most of the debt
is in the name of just one spouse, then only the spouse
with the debts would need to file. As other
considerations may apply, a married couple should speak
with an experienced bankruptcy lawyer before either or
both of them file bankruptcy.
Even if only one spouse files, the total household income
and expenses are used for certain purposes, including the Means
Test under the 2005 Bankruptcy Reform Act and the
income and expense calculations for any Chapter 13 Plan.
§707(b)
(5)Can I file for bankruptcy if I filed
before?
Maybe. Whether
you can file again or get a discharge in a second case
depends on a number of things, including how much time has
gone by, whether the cases are Chapter 7 or Chapter 13,
whether a discharge entered in the first case or whether
the case was dismissed. The following table explains
the rules for filing bankruptcy again. §727(a); §1328(f);
§109(g)
Bankruptcy
Refiling Rules
First Case
New Case
Rules
Chapter 7
Discharge
Entered
Chapter 7
You
must wait 8 years after you filed your first case
before you can get a discharge in a second case.
Chapter 7
Discharge
Entered
Chapter
13
You can
file at any time but a discharge cannot enter
until 4 years after the discharge in the first
case.
Chapter 13
Discharge
Entered
Chapter
7
You can
file at any time and get a discharge if in the
first case (1) you paid all your unsecured debt or
(2) you made your best effort and paid at
least 70% of your unsecured debt.
Otherwise, you must wait 6 years after you filed
your first case before you can get a discharge in
a second case.
Chapter 13
Discharge
Entered
Chapter
13
You can
file at any time but a discharge cannot enter
until 2 years after the discharge in the first
case. (At least one federal appellate court has held that a
discharge cannot enter until 2 years after the
date you filed the 1st case, not the date you got
the discharge.)
Chapter 7 or
Chapter 13
Case Dismissed
Chapter 7 or
Chapter 13
You must wait 180 days if the case was dismissed
for willful failure to obey court orders or to
prosecute the case.
You must wait 180 days if you asked for the case
to be dismissed after a creditor had moved for relief from stay.
Otherwise you can refile at any time. But if
the first case was pending (still going on) at any
time during the last year, to keep the automatic
stay in place you must have a hearing within
30 days and you must show that your second filing
is in good faith.
(6)Can
I get rid of back taxes by filing bankruptcy?
Maybe. It depends on the type of
tax and how old the taxes are. §507(a)(8);
§523(a)(1)
You can discharge income taxes (and any associated
penalties) if the following 4 things are all true:
(1)
You did not commit tax fraud or willfully attempt
to evade paying taxes.
(2)Your tax return was due at least 3 years
before you file for bankruptcy. If you
obtained a extension to file, the extension date
was at least 3 years before you file for
bankruptcy.
(3) If you filed the tax
return late (after its due date and any
extensions), you filed the return at least 2 years
before you file for bankruptcy.
(4) Any assessment by the
government was made at least 240 days (8 months)
before you file for bankruptcy.
You can never discharge the following
types of taxes:
Payroll withholding taxes. This
would apply if you were an employer and withheld
taxes from your employees but did not send the
money you withheld to the government. §507(a)(8)(C)
Sales taxes. This would apply if
you had a retail business and collected sales
taxes but did not send the money you withheld to
the government. §507(a)(8)(C)
If the IRS has placed a
lien against any of your property, the IRS can still
go after that property even if your personal
responsibility for the taxes has been discharged.
You cannot discharge debts
from money you borrowed to pay taxes that could not be
discharged. §523(a)(14)
Whether taxes are dischargeable can be
a complicated area of law. You should talk to an
experienced bankruptcy lawyer if you owe taxes and are
considering filing a bankruptcy.
(7)Will
I ever be able to get a loan in the future if I file
bankruptcy?
Yes.
There is no law that says you cannot get a loan
after you file bankruptcy.
The
following are some things you can do to rebuild your
credit:
Get a
job, even
a part time job, to show a steady work record.
Keep
track of any money payments that you regularly
make on time, such as rent, utility payments and
mortgage payments.
Get a
credit card with a modest limit, use it and make
your payments on time.
Open a
savings account and make regular deposits to it
from your paycheck, even if the deposits are
small.
Open
and use a checking account and be careful not to
bounce any checks.
Get a small loan from a bank or credit
union and make your payments on time.
In some ways, you become a better credit risk after filing
bankruptcy because lenders know that you will not be able
to file again
for some time.
We have had clients who have bought real estate three or
four years after filing bankruptcy. They have had to
pay higher interest rates and more points but they still
were able to get a mortgage.
