Here are the most commonly asked questions that usually come up during the Bankruptcy process.
Frequently Asked Questions
- Will Bankruptcy stop a Foreclosure?
- Will Bankruptcy stop a pending or potential lawsuit?
- Will Bankruptcy stop a garnishment?
- Can I discharge back taxes in Bankruptcy?
MAYBE. It depends on your particular situation. Please contact our office to arrange a consultation.
- Must my spouse also file Bankruptcy if I do?
NO. You may file separately if you desire.
- Can I keep my home after filing Bankruptcy?
YES. In most situations, you can keep your primary residence in a Chapter 7 Bankruptcy if you desire. You will have to be current on your payments if you want to keep your home if you file a Chapter 7 Bankruptcy. If you file a Chapter 13 Bankruptcy, the past due payments may be built in to your payment plan. You can also give the home back to the lender and include the debt / deficiency with your Bankruptcy.
- Can I keep my car after filing Bankruptcy?
YES. For each person filing Bankruptcy in Nevada, you can keep one car with less than $15,000 in equity. You will have to get current on your payments if you want to keep your car if you file a Chapter 7 Bankruptcy. If you file a Chapter 13 Bankruptcy, the past due payments may be built in to your payment plan. However, if you owe more than the car is worth, or if you do not want to keep the car, you can also give the car back to the lender and include the debt with your Bankruptcy.
- What assets may I keep after filing Chapter 7 Bankruptcy?
For those filing Nevada Bankruptcy, its quite common that they will be able to keep all their property (including your house and vehicle as long as you are current with your payments and able to continue to make these payments). You can keep all property which the law says is ''exempt'' from creditors. For a Bankruptcy in Nevada, the list of exempt property includes, among other things, a decent portion of equity in your home, up to $500,000 in qualified retirement accounts, $15,000 in equity in your car, all Social Security benefits, and many other assets.
- What assets may I keep after filing Chapter 13 Bankruptcy?
You may be able to keep all of your assets, provided you are able to afford paying for them under your Chapter 13 payment plan.
- Will I still receive telephone calls from my creditors and collections?
The telephone calls from the bill collectors should stop once your creditors and collection companies learn of the Bankruptcy filing of if they are contacted by your Bankruptcy Attorney. They should instead contact the Bankruptcy Trustee or your Bankruptcy Lawyer to discuss the debt. If they continue, the creditor / collection agent may be subject to penalties.
- Do I have to list all of my creditors with my Bankruptcy filing?
YES. All of your creditors have to be listed on your filing. However, you may elect to repay or reaffirm any debt after you receive your discharge.
- What happens with bank and investment accounts?
Generally, in your Bankruptcy Petition you must list every bank account and investment account you have in your name which includes, but is not limited to: checking accounts, savings accounts, CD's, stock accounts, money market accounts, retirement accounts, 401k accounts, IRA, and SEP accounts.
There is no particular exemption (or means to preserve in bankruptcy) for most types of bank and investment accounts, unless it is a "qualified" retirement account such as 401k’s, IRA’s, SEP’s and pension accounts.
As such, we generally recommend that clients keep a minimum amount deposited in these accounts, particularly on the day of filing for a Chapter 7 or 13 Bankruptcy. Since there is not a particular exemption to protect these assets, you may be only be able to rely on a “wild card” exemption. This exemption allows each debtor to protect up to $1,000 of assets ($2,000 for a couple) that are not otherwise exempted and we often use this "wildcard" for bank accounts or tax refunds.
- Do I qualify for Chapter 7?
The gross annual income is a primary factor in determining whether you may qualify for a Chapter 7 Bankruptcy. For these purposes, the gross annual income is not the actual income earned over the past year, but rather the average monthly gross income earned for the six months prior to filing bankruptcy multiplied by 12.
Generally, in order to qualify for Chapter 7 Bankruptcy relief, the maximum gross annual income is as follows: $42,346 for a single person, $56,612 for a couple, $59,8002 for a three person family and $69,371 for a family of four.* With each additional person exceeding a family of four, the maximum gross annual income increases by approximately $7,500. In addition, if you earn more than the gross maximum income you may still be able to otherwise qualify for Chapter 7 Bankruptcy relief. Please consult Christopher Legal Group for an appointment and a personalized analysis of your particular situation to see if you qualify for Chapter 7.
*This information is effective as of Feburary 1, 2013, and will periodically change.
- Home Owners Association Issues
The recurring HOA debt is not dischargeable in bankruptcy, but if the HOA may be limited to pu pursuing any claims it may have against the real property. It is generally advised that those filing bankruptcy keep paying their HOA dues until the house is foreclosed upon. If you do not want to wait for the foreclosure,then you may want to consider short selling the property.
- Retirement accounts (Pension, 401K, IRA)
“Qualified” retirement accounts are fully exempted in bankruptcy up to $500,000 per person. This means that if you file for Bankruptcy, you can keep all amounts in these accounts up to $500,000 per person. “Qualified” retirement accounts are defined in the Internal Revenue Code and include most IRA’s, 401k’s, SEP’s, and pensions. In addition, Social Security and retirement payments are also exempt and fully protected.
- Income tax returns and refunds
There is no specific protection for tax refunds in bankruptcy. As such, the “wild card” exemption* is used to try to protect these funds as much as possible. Further, any portion of your tax refund that pertains to the “earned income credit” is also fully protect and yours to keep.
In a Chapter 7 Bankruptcy, you may lose all or part of your tax refund due for the tax year in which you filed your bankruptcy. For example, if you file for bankruptcy in 2009, your Trustee may be entitled to all or part of your 2009 refund, which is due from the tax return that you will be file in 2010.
If you file for bankruptcy today, you must provide copies of your tax returns for the years 2008, 2007, 2006, 2005, and you may have to provide a copy of your 2009 tax return when it is filed, to the Trustee. In a Chapter 13 Bankruptcy, you must also provide copies of your tax returns to your Trustee during the term of your Chapter 13 Bankruptcy. You will generally lose tax refunds during the entire term of your Chapter 13, not including any amount that can be protected by the “wild card”.
------- * The wildcard exemption is $1,000 per person. It allows you to retain up to $1,000 of assets (cash, accounts, property …) that is not otherwise protected when you file for bankruptcy.
- When do I move out?
There is no definitive answer to when you should leave your house if you plan on relinquishing it to your lender. There are, however, some general timelines that you can use to guide you with this issue.
Generally, you can miss six months or more before your house will be foreclosed upon by the bank.
After approximately two or three months of missed payments, you will receive a notice of intent to accelerate from your mortgage company. This notice basically means that you must get current on your payments. The next step is a notice of default which typically occurs when you are three months or more late on your mortgage payments. The notice of default is recorded at the county recorder and should be sent via certified mail. The date that the notice of default triggers a 90 day period before the bank can prepare and record the notice of sale date. This sets the date for foreclosure.
Regardless of whether or not you accept the certified mailing of the notice of default, the timeframe for the foreclosure remains the same. Some people believe that if they do not sign for the notice, they can stall a foreclosure, however, that is not true. After the 90 day time period passes, the bank must provide at least a 20 day period before the sale date. Thus, the foreclosure process is, at minimum, 110 days from the recording date of notice of default before there can be a foreclosure sale.
Filing for Bankruptcy before the foreclosure sale will temporarily delay the foreclosure process. Once you file for Bankruptcy, the bank will have to file a motion for relief from the automatic stay which will allow them to continue with the foreclosure.
The process described above describes the minimum time frames to be expected. In some rare instances, as long as a year and a half has passed without a homeowner making a mortgage payment. Please be advised that this is not to be expected for every foreclosure.
In summary, the key factor to determine when you should leave your house, namely how quickly the lender acts, is also the one which is somewhat unpredictable. The minimum time you have is 110 days from the recording of the notice of default. The maximum time you might have is not predicable, and depends upon how quickly a lender pushes through the foreclosure process.