Frequently Asked Questions about Bankruptcy

Q: Will anyone find out about my bankruptcy? Will the Court notify my employer?

A: Bankruptcy is a public record. If someone wants to look that information up, they can do so by calling the Bankruptcy Court in Denver. However, it is not published in any newspapers of note (other than legal newspapers, which, if your friends read, you should find new friends). The Court also will not call your employer to inform them you have filed bankruptcy. 

Q: I have already filed for Chapter 7 bankruptcy, am I eligible to file again?

A: You can file for Chapter 7 once every 8 years after filing for a previous Chapter 7. If your previous filing was less than 8 years ago, Chapter 13 may offer the relief that you need. 

Q: One of my creditors obtained a judgment against me, can this be included in a bankruptcy?

A: Yes, a judgment can still be included in a bankruptcy. However, if you own your home, the judgment creditor may have a lien against that home. An extra step is required in the bankruptcy process to remove the lien. It’s very important that you tell us about any lawsuits that have been brought against you so we can verify whether a lien has been filed against your home, otherwise the lien may survive the bankruptcy (even though the debt itself has been discharged).

Q: Will I have to go to court after my bankruptcy filing?

A: Yes, you will be required to attend the “341 meeting,” named after the section of the bankruptcy code for which it’s known. At this meeting, a bankruptcy trustee appointed to your case will ask you a series of questions. Most of these questions will be pertaining to a) you verifying that all the information in your bankruptcy paperwork is accurate to the best of your knowledge, and b) that you understand the bankruptcy process that you are going through. Creditors are permitted to attend this meeting, but it’s quite rare that anyone shows up. 

Q: Will filing bankruptcy affect my security clearance?

A: Our experience suggests that the government is simply concerned with you getting your debt resolved. By filing for bankruptcy, you are doing that. If there is no debt, you are not susceptible to giving away information, and thus, not a security risk. There is no guarantee that your clearance won’t be revoked, but we have filed for hundreds of service members, and so far our clients have maintained their clearances.

Q: I want to pay back my dentist – do I have to list her debt in my bankruptcy?

A: Yes, the bankruptcy code requires you to list all of your debt (even loans from mom & dad). You are certainly free to pay back whatever debts you wish to repay, but the bankruptcy will simply mean the creditor can no longer demand that you do so, or sue you for failure to repay.

Q: Do I have to disclose all my assets – how will the Court/bankruptcy trustee ever find out?

A: Yes, you must list everything you own. When you sign your bankruptcy paperwork, you are doing so under penalty of perjury. The system takes this very seriously. So much so that you could face fines in the neighborhood of $250,000 or up to 5 years in jail. If you don’t tell us about everything, we can’t advise you how to best protect your property. Which usually leads to the next question……….

Q: Will anyone come and search my home when I file for bankruptcy?

A: You have a Fourth Amendment right to be free from unreasonable search and seizures. Unless the trustee has a reason to believe you are being less than truthful in your paperwork (which, again, you signed under penalty of perjury), they do not have the right to enter your home.

Q: All debts are in my name, does my spouse have to file bankruptcy with me?

A: No, spouses are not required to file a bankruptcy together. If the debts are only in one spouse’s name, it’s probably best that only one spouse files. However, even the non-filing spouse’s income is used to calculate whether you are eligible to file (put link to page about eligibility).

Q: My parents co-signed my car loan, if I file bankruptcy, will their credit be affected?

A: The short answer is no, but they will still be liable on the debt, whereas you will not because the loan is in your bankruptcy. However (the long answer), lenders will often erroneously report the loan as being in bankruptcy status on your parents credit report as well. It’s a pain, but your parents would need to dispute this entry on their report, and point out that you filed for bankruptcy, not them. 

Q: Will I have to pay taxes on any of the debt that’s discharged in my bankruptcy?

A: No. Unlike debt negotiation, where any forgiven debt is considered income, discharged debt does not have to be reported as income. Creditors may send you a 1099, but you can fill out IRS Form 982 to counter the 1099. 

Contact Berken Cloyes today by calling 303-623-4357 for a consultation.