Answers to Bankruptcy Questions
May 22, 2013


Answers to Common Bankruptcy Questions For Individuals Considering Filing for Bankruptcy

(1) Q. Will I lose my house?

A. Generally speaking, no. Most bankruptcies involve the use of substantial exemptions provided by State and Federal law, so it is unlikely that you will lose your house, unless you do so voluntarily. For instance, you may wish to surrender your house because you can no longer afford to make the payments. But, as a general rule, if you are able to afford your mortgage you most likely will retain your property.

(2) Q. Will I lose my car?

A. Again, this question is very similar to the issue relating to your house. The maintenance of payments on secured items determines whether or not you keep secured personal property. In other words, if you can afford to make your vehicle payments, you most likely will keep your car. However, if you cannot afford your car, or, you decide that you wish to surrender the car because it is a “lemon” you may do so voluntarily.

(3) Q. Will my name be in the newspaper?

A. Usually, only business bankruptcies are printed in newspapers. Additionally, because many newspapers are going to a limited publication, the chance of public notice is even less. However, bankruptcies, like any other public record, are available for public inspection in the Federal Courthouse, and certain creditors may have access to PACER which is a subscription to access Federal records.

(4) Q. Will my boss find out about my bankruptcy?

A. The answer is similar to number three. While the bankruptcy filing is a public record, it is unlikely that your employer will be aware of your bankruptcy unless you choose to pay your Chapter 13 Plan payments through wage attachment. In other words, you can make payments with voluntary wage attachment to ensure payment in your Chapter 13. A Court Order will be necessary to make these deductions and will be sent to your payroll department. However, your employer cannot discriminate against you because you filed bankruptcy, so the voluntary wage attachment process should not have any impact on your employment.

(5) Q. Will I have to go to court?

A. Yes, you will attend a Creditors’ Meeting regardless of which Chapter of Bankruptcy that you file, Chapter 7, 13 or 11. However, the Creditors’ Meeting is an informal process presided over by a Bankruptcy Trustee, not a Bankruptcy Judge. Most of the people in attendance are also bankruptcy debtors, and your privacy will be respected.

There are occasionally creditors that attend these meetings, but they are seeking information about your case that is provided in the bankruptcy petition and schedules, so attendance from creditors is fairly limited.

(6) Q. Will I have to pay taxes on the debts that are discharged in my bankruptcy?

A. No. The good news is that debts discharged or forgiven in a bankruptcy are not subject to Federal taxation for “loan forgiveness”. This is subject to Section 108 of the Internal Revenue Code. This is one advantage that bankruptcy has over credit counseling, since debt forgiveness usually does incur tax liability.

(7) Q. Will I lose my retirement account?

A. No. The happy news is that your retirement account, whether in the form of an Individual Retirement Account, or, a 401(k) Plan or traditional pension are excluded from your bankruptcy estate. This means that you do not use bankruptcy exemptions to shelter these assets. Rather, they are not considered assets of the bankruptcy estate. This is a
good public policy, because it permits you to discharge your debt while maintaining retirement assets.

Hopefully, these answers to the FAQ’s are helpful to you. If you want more specific information, please contact my office for a free consultation.