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Q: What does the term
"bankrupt or discharge a debt" mean?
A: "Bankrupting
the debt" is incorrect terminology, the correct term is
to "discharge a debt". When a person who was earlier
successful but due to some reason is no longer able to
pay off his/her debt then the person is free to file for
bankruptcy or discharge a debt. This means that though
the debt is not really removed but the person who has
filed the case has no obligation to pay the debts that
are discharged by the court.
Q: Can I file for bankruptcy
if I am already sued or have a judgment against
me?
A: Bankruptcy is a dischargeable debt which means
that it is not like a scam or a household maintenance
compulsion, therefore one can file for bankruptcy at any
time. The benefits of filing for a bankruptcy are that
you can escape from the debt even if the creditor has
filed for a lawsuit against you or has a judgment. If
the creditor has a lien against your property still you
can escape from the debt but the lien will stay on your
property unless one can do something during the process
of bankruptcy.
Q: Where do I file my
bankruptcy case?
A: You have to file your case in the
District where you have your domicile or have resided
for at least180 days or more before the date of filing
of your case.
Q: Can a student be denied
education loan for reasons that the student's parents or
the student filed for bankruptcy?
A: Section 525 of
Bankruptcy code clearly emphasizes non-discriminatory
behavior by loan agencies providing student loans
regarding bankruptcy filing reasons. In other words, a
loan agency for education can not prohibit a student
from getting loan just because the student or an
acquaintance of the student filed for bankruptcy.
Q: What is the meaning of
automatic stay?
A: Automatic stay is an order which
comes into effect automatically when somebody files for
a bankruptcy. Automatic stay bans the continuation of
debt recovery from filer by creditor, for an amount,
which was taken before filing bankruptcy. This order
comprises of several actions such as enforcement of
decision, creating liens etc. Automatic stay does not
cover child support or maintenance.
Q: Under which circumstances
does the automatic stay come into effect and for how
long does it stay?
A: By and large, as soon as the
bankruptcy filer files the case, the automatic stay
comes into action and remains into effect till the filer
receives discharge from the bankruptcy court. Duration
of legal shield or automatic stay against filer's
property may vary depending on outcome of the case. It
worthy of noting that bankruptcy cases filed after 17th
October 2005 have new length limits for automatic stay.
First point - automatic stay ends after 30 days from the
date of filing new bankruptcy case if the filer had a
bankruptcy case dismissed within one year from the date
of filing the new case. However, the filer can obtain a
court order to extend the automatic stay duration beyond
30 days citing relevant reasons and stating reasonably
why the prior bankruptcy case was dismissed. Second
point - if the filer had two bankruptcy cases dismissed
within a year of filing this new bankruptcy case then
there is no automatic stay at all. However, bankruptcy
court can bring the automatic stay into existence after
a noticed hearing of the case.
For finer aspects of
automatic stay duration, please consult an experienced
bankruptcy attorney.
Q: What do you mean by
exemptions?
A: Bankruptcy entities can exempt a
portion of the actual value of their assets from their
creditors. From state to state, not only do the assets
entitled for exemption differ but also the protected
amount on same asset differs. As an example, homestead
exemption exempts the bankruptcy filer from total
liquidation payment to creditor for home asset. Only an
experienced and seasoned bankruptcy attorney can
completely and accurately explain the various exemptions
that a bankruptcy filer is entitled to. Based on ones
domicile for the previous 2 years from the date of
filing the bankruptcy case, the appropriate state law
will apply.
Q: Is it entirely up to me to
decide the list of creditors whom I would mention on my
case for bankruptcy?
A: This is the most common myth
that people contemplating bankruptcy have. As a legal
procedure, the filer has to make sure that all creditors
are listed with the correct details about the
outstanding amount and the transaction. Similarly, you
have to mention all your own assets. Once the bankruptcy
case gets over, the bankruptcy filer may or may not
repay the debts that are discharged or bankrupted, but
the debts which are not discharged the bankruptcy filer
needs to repay. However, in short, while filing the
case, the filer needs to list all the creditors.
Q: Before filing bankruptcy,
can the filer transfer his or her assets to someone
else?
A: Transferring an asset prior to filing
bankruptcy is often with the intent of saving the
complete value of asset so that it is not used to repay
to creditors. This is clearly not reasonable and is
therefore illegal. A filer can however sell the asset
for a "fair price" and inform about the transaction. A
transfer in any other form is deemed illegal and fraud.
Q: As a bankruptcy filer,
will I be discharged or relieved from all debts that I
owe to my creditors?
A: Only the debts that Congress
has included in the exclude list are discharged from
repay. Any debt that has not been exempted by the
Congress has to be repaid by the bankruptcy
filer.
Q: Someone else has put lien
against my property? How can I remove it?
A: Lien is
the legal hold on borrower's asset or property and is
often the collateral used against the money borrowed by
the borrower. Once the bankruptcy case has started, and
only under certain pre-defined cases, can a special
motion be filed to remove lien on certain type of
assets. At a high level, if an exemption to which the
filer is entitled under State law gets weakened due to
the asset-value, senior liens and other burdens on it,
then the legal liens may be removed. Only a bankruptcy
court can remove the lien.
Q: Can an employer, who is
contemplating filing for bankruptcy, fire an
employee?
A: As a matter of fact, an employer -
irrespective of whether contemplating bankruptcy or not
- can always find reason to fire an employee. However,
as a matter of law, the reason can never be bankruptcy.
Section 525 of bankruptcy protocol states this very
explicitly.
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