Chapter 7

Do I Get To Keep My Assets In Chapter 7?

Maybe. The good news is that in bankruptcy, we have exemption laws. Exemption laws help you protect and retain your property. Exemptions are available for homes, cars, pensions, retirement accounts, and much more. Most Chapter 7 cases are “no-asset” cases because most debtors are able to use the exemption laws to fully protect their money and property.

Can I Keep My Car If I Owe On My Auto Loan?

Yes! If you are current on your auto loan and want to keep your car, you can reaffirm the obligation in Chapter 7 and still eliminate credit card, medical and other debt. Reaffirmation is the process of agreeing to “restate” the loan despite your bankruptcy filing for the right to keep the collateral.

What If I Am Behind On My Auto Loan?

In Chapter 7, if you are not current on your auto loan, the creditor can request “relief from stay” to repossess the collateral unless you bring the loan current. Alternatively, you can file a Chapter 13 to bring current payments, modify the loan or interest rates. Another process, “Redemption” can also be exercised to retain the car and pay market value for car, but requires a new loan.

Does Bankruptcy Stop Repossessions, Judgments, And Garnishments?

Yes. A bankruptcy filing stops all garnishments, repossessions, foreclosures, lawsuits and other collection actions. If a creditor fails to stop a garnishment after a bankruptcy is filed, they can be held in contempt for violating the court's order and will be liable for damages they caused you. Money taken from your wages or bank accounts after a bankruptcy is filed might also be recovered.

Will Filing A Bankruptcy Stop A Foreclosure?

Chapter 7 bankruptcy will stop a foreclosure, but only temporarily. Lenders can request “relief from stay” which if granted, allows them to continue with the foreclosure outside of bankruptcy. A Chapter 7 may buy just enough time to relocate, propose a short sale, or enter into a loan modification to resolve past due mortgage payments.

Do I Have To Go To Court?

Yes. Everyone who files for bankruptcy has to attend a brief, informal meeting held in a hearing room, not a courtroom. Our Portland bankruptcy attorneys will attend the meeting with you. The meetings are run by the bankruptcy trustee and there is no judge present. 

I owe the IRS for back taxes. Can I get rid of them in Chapter 7?

Possibly. If the returns were filed timely and are three years old or older, they may be dischargeable. This is a complicated area requiring review of tax transcripts by a skilled bankruptcy attorney, knowledgeable about bankruptcy laws.

I don't owe on one credit card. Can I keep this credit card open after filing for bankruptcy?

Maybe. Most credit card agreements contain small print which gives card issuers the right to cancel credit accounts when a customer files for bankruptcy. This rule applies even if you owe them no money at the time of filing. It is up to the lender's discretion. You don't have to be without a card though – applications for secured credit cards are available following a bankruptcy.

I am married but my spouse doesn't want to file bankruptcy. Does he/she have to?

No. Married parties may file individually. However, joint debt may be one good reason to file together. If one party files and eliminates their responsibility for the joint obligation, in non-community property states the creditor can still collect from the non-filing spouse. It is also less expensive to file bankruptcy together (one attorney fee, one filing fee).

What is a reaffirmation agreement?

If you have an auto loan, the lender will often have a security interest in the automobile.  The security interest protects the creditor if you cannot repay on the loan, giving them the right to repossess.  Bankruptcy does not make these security interests go away.  In a bankruptcy filing, if you wish to keep the car, you may enter into a reaffirmation agreement. The agreement obligates you to continue making payments despite the bankruptcy filing. These agreements are strictly voluntary. Before choosing to reaffirm, the loan should be discussed with an attorney to determine if it is in your best interests to enter into the agreement.