Bankruptcy FAQs
Frequently Asked Questions About Bankruptcy
Bankruptcy is a federal court process that can wipe out some debts or reorganize them under a plan. Consumer cases are usually Chapter 7 (wipe out qualifying unsecured debt) or Chapter 13 (a three-to-five-year payment plan).
Costs typically include a court filing fee and attorney fees. The total depends on your situation and whether you file Chapter 7 or Chapter 13. Call or request a free consultation so we can go over your options. You are under no obligation.
If a creditor obtains the judgment and other legal authority required by applicable law, wages may be subject to garnishment within state and federal limits. Filing bankruptcy generally triggers the automatic stay and can pause many ordinary prepetition garnishments. Domestic-support withholding and other statutory exceptions require separate analysis.
Filing usually starts the automatic stay, which can stop many collection calls, lawsuits, and garnishments. The law lists exceptions, and a creditor may ask the court to lift the stay. The Fair Debt Collection Practices Act can also limit third-party collectors before you file.
For many people, the stay and a later discharge reduce collection pressure on qualifying debts. Bankruptcy does not stop every action or wipe out every debt. What you keep, which chapter you file, and which debts survive still matter. Call or request a free consultation.
Bankruptcy does not create a permanent ban on vehicle financing. After Chapter 7, individual lenders decide whether and on what terms they will extend new credit. During Chapter 13, taking on significant new debt such as a vehicle loan generally requires compliance with the trustee’s and court’s applicable procedures. Approval and financing terms are not guaranteed.
No. You can be gainfully employed and file for bankruptcy.
No. Married spouses are not required to file a joint bankruptcy case. Whether one spouse or both should file depends on the debts, income, property ownership, joint obligations, and financial goals involved. A bankruptcy filed by one spouse does not automatically place the other spouse into bankruptcy.
Not necessarily. Many people keep a vehicle if payments, equity, and exemptions work. Chapter 13 may let you catch up a car loan through the plan. Filing generally stays a repossession, with statutory exceptions. Equity above the available exemption can still be an issue in Chapter 7.
No. There is no minimum debt amount to be eligible to file for bankruptcy.
No. Unsecured creditors sometimes receive only a portion of what they are owed. What they receive depends on disposable income, assets, and priority claims. Completing a confirmed plan can lead to a discharge of remaining qualifying unsecured balances; some debts are excepted by statute.
Often, tax-qualified retirement accounts receive strong federal protection. Not every account is treated the same. Inherited IRAs and some non-qualified plans can be different. Review the specific account with counsel.
Bankruptcy court filings are generally public records. There is no routine public announcement to friends, neighbors, or an employer simply because a consumer filed bankruptcy, but someone who searches the federal court records may be able to find the case.
Bankruptcy information can remain on a credit report for years. Chapter 7 bankruptcy is commonly reported for up to 10 years, while Chapter 13 is commonly reported for up to seven years. Credit-reporting practices and the Fair Credit Reporting Act determine how long particular information may appear.
Usually not. Exemption laws can protect qualifying property or equity, and the exemption law that applies can depend on domicile history. Any nonexempt equity, liens, ownership interests, and the bankruptcy chapter must also be considered. Chapter 7 and Chapter 13 can affect property differently.
Yes, obtaining credit after bankruptcy is possible, but timing, approval, interest rates, and other terms depend on the lender and the person’s credit and financial circumstances. Rebuilding credit generally involves accurate credit reporting, paying continuing obligations on time, keeping balances manageable, and using new credit carefully.
Some tax debts can be discharged or paid through a Chapter 13 plan. Recent income taxes, trust-fund taxes, and other categories are often excepted. Timing and the type of tax control the answer.
Most student loans covered by § 523(a)(8) are not discharged simply by completing Chapter 7 or Chapter 13. Discharge generally requires a separate adversary proceeding and a court determination of undue hardship. The Department of Justice and Department of Education use a standardized process for many federal-loan discharge cases, but the bankruptcy judge makes the ultimate determination. In Chapter 13, the automatic stay generally limits ordinary collection while it remains in effect, but how student loans are paid during the case depends on the confirmed plan and applicable procedures.
Bankruptcy does not automatically prevent someone from renting a home or apartment. Landlords and property managers set their own screening standards and may consider income, rental history, credit information, deposits, and other factors. Approval is not guaranteed.
Bankruptcy resources
Discharge and the automatic stay have statutory exceptions. Exemptions depend on the state whose law applies. See the Knowledge Center for sourced explanations.
- Bankruptcy Knowledge Center — Bankruptcy Knowledge Center
Helpful guides to Chapter 7, Chapter 13, and state law.
- Bankruptcy tools — Bankruptcy tools
Income screening, garnishment estimators, and a process timeline.
- Automatic stay — Automatic stay
What filing generally stops — and the statutory exceptions.
- Bankruptcy discharge — Bankruptcy discharge
Which debts may be wiped out, and which often are not.
- 341 meeting — 341 meeting
The meeting of creditors after a case is filed.
Ready to talk about your options?
When you want answers about your situation, call or request a free consultation. Our Alabama offices and Columbus, Georgia team handle consumer bankruptcy.
This page is general educational information about bankruptcy as of the date shown. It is not legal advice, does not create an attorney-client relationship, and does not guarantee results. Outcomes depend on individual facts and current federal and state law. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
