FAQ Bankruptcy

1 Is there such a thing as a Medical bankruptcy?

2 What is the difference between a Chapter 7 and a Chapter 13 bankruptcy?

3 Who can file a Chapter 7 bankruptcy?

4 What debts discharge in bankruptcy?

5 How much does it cost to file bankruptcy?

6 How long does it take to complete a bankruptcy?

7 How long will a bankruptcy stay on my record?

8 How will it effect my credit and the ability to buy a car or a home in the future?   

1. Is there such a thing as a Medical bankruptcy?
   There is no medical bankruptcy. There are two forms of bankruptcy for individuals and families, Chapter 7 or Chapter 13.  
2. What is the difference between a Chapter 7 and a Chapter 13 bankruptcy?
   In a Chapter 7 bankruptcy, the bankruptcy trustee takes any non-exempt (unprotected) property you have and gives it to your creditors. All of your dischargeable debt goes away when the Court enters your discharge order. Your attorney can tell you before you file a Chapter 7 if you have any non-exempt property; if all your property is exempt, the Trustee will not take anything from you and you will still receive a bankruptcy discharge.
    A Chapter 13 bankruptcy includes a plan in which you make monthly payments to the Trustee, who distributes this money to your creditors. People file a Chapter 13 when they make too much money to file a Chapter 7, or if they are late on payments on secured debt (like a car or house) but want to keep the property, or have a type of debt which will discharge in a Chapter 13 but not a Chapter 7. You must have a regular monthly income, with some money left at the end of the month to make your plan payments, to be a Chapter 13 debtor. You must make monthly plan payments for at least three years. 
3. Who can file a Chapter 7 bankruptcy?
   Any individual who has completed an approved credit counseling class within the last six months, and whose income is not enough to partially repay creditors in a Chapter 13.
   If your income is below the median income for the State of Nebraska, and you are otherwise eligible, you can file a Chapter 7 bankruptcy. As of April 1, 2007, the median income for a one person household in Nebraska is $37,305 a year.
   If your income is above the median income, you may still be able to file a Chapter 7 bankruptcy, but you will have to show the Court why you don’t have enough money to repay your creditors even though you earn more than many other people in Nebraska.
   There was widespread confusion in the media after Bankruptcy law changes in 2005 about who could file bankruptcy; many people got the mistaken impression that they could no longer file a Chapter 7. You should consult with an attorney to see if you are eligible to file bankruptcy.
4. What debts discharge in bankruptcy?
   It depends on which Chapter bankruptcy you file. In a Chapter 7, unsecured debts like medical bills and credit card charges discharge. There are a few types of debt which you cannot discharge in a Chapter 7, like: secured debt (like a car loan or mortgage), child support or other domestic support obligations, most delinquent taxes, or debt your creditors prove to the Bankruptcy court you obtained due to fraud. These are just a few examples of non-dischargeable debt.
   In a Chapter 13, any debt which remains to unsecured creditors after you complete your plan payments will discharge, along with some types of tax debt, and a property settlement debt ordered in a divorce decree. You should make sure you understand what debt will discharge, and what will not, before filing any type of bankruptcy.
5. How much does it cost to file bankruptcy?
   The filing fee for a Chapter 7 is $299. You can ask the Court to waive the filing fee if you cannot afford it at all. The Court may also allow you to pay the fee in installments so you do not have to pay it in a lump sum.
   A Chapter 13 costs $274.  The filing fee is due when you file your Bankruptcy petition. You will not get a fee waiver since part of a Chapter 13 involves showing the Court that you have some money left at the end of each month to distribute to your creditors.
6. How long does it take to complete a bankruptcy?
   The typical Chapter 7 bankruptcy takes about 4 months from filing to receive your discharge order, which is what gets rid of your dischargeable debt.
   A Chapter 13 bankruptcy lasts from three to five years.
7. How long will a bankruptcy stay on my record?
   It is reported by the credit reporting agencies for about 10 Years.  But when you fill out a credit application there may be a question like “ Have you ever filed for bankruptcy in the past? If so when? “.  In which case, because you are required by law to honestly answer questions on a credit application,  you may be reporting it for more than 10 years.
8. How will bankruptcy effect my credit and the ability to buy a car or a home in the future?    Some people have been able to purchase homes and cars within several years of doing a bankruptcy. Others have been denied credit, for many years because of the bankruptcy. It is fair to say that a bankruptcy  will have a dramatic negative affect on your credit rating and your ability to get credit for a long time. How creditors will view the bankruptcy on your record will depend on the creditor and the type of credit you are applying for .