Here are some of the most common bankruptcy questions and answers in the US.

What is bankruptcy?

A business or individual who is unable to pay his debt obligations in full may be declared by a court of law to be bankrupt. Bankruptcy is the federal law proceeding in which the debtor, in many cases, can obtain permanent relief from debts and financial obligations.


What are the types of bankruptcy in the US?

Bankruptcy comes under chapter 7, 9, 11, 12, and 13 of bankruptcy code, covered by uniform federal laws. The most common forms are:

Chapter 7 - which applies to the debtors having no assets to pay off.
Chapter 13 - which applies to employed persons, the self employed and paid individuals or family.

Other forms are:

Chapter 9 - which applies government municipalities.
Chapter 11 - which applies to proprietor or investor of companies.
Chapter 12 - which applies to farmers and fishermen.

Bankruptcy Questions

What is the cost of bankruptcy?

Chapter 7 - $299
Chapter 13 - $274 (could be waived depending on your income)

Chapter 7 single filing $500.00 to 1,000.00 ($1,000.00 to 2,000.00 for joint filing).
Chapter 13 - $3000 to $5000 (estimate)

When will I be discharged if I file for bankruptcy?

The average time for bankruptcy discharge is 3 to 5 months after it is filed. About 99% of all the bankrupts are discharged, having his or her debts erased (with some exceptions, see below).

What type of debts can be eliminated with bankruptcy?

Most unsecured debt are erased in bankruptcy except for:

  • Income tax debt
  • Child support and alimony
  • Student Loans
  • Debts for personal injury or death caused by drunk driving

I have filed for bankruptcy before, how long until I can file again?

Chapter 7
A debtor can file Chapter 7 again if it has been more than 8 years since he/she filed the previous Chapter 7 bankruptcy.

Chapter 11
The debtor received a discharge under Chapter 7, 11 or 12 more than 4 years ago. TWO years if the discharge was under Chapter 13.

To keep the cost low, can I file for bankruptcy by myself?

It is possible for an individual to file for bankruptcy by himself/herself. However, it is an extremely stressful process due to a mountain of paperwork, and if you don't know what you are doing it can lead to errors, delays and dismissal. Hiring competent help at affordable price is the best way to go.

Will I lose my credit cards?

Cards that have negative balance and have been discharged during a bankruptcy, will get canceled.

It is up to the credit card company to decide whether you can keep credit cards without negative balance. Give them a call if you wish to keep the card.

If I lose my cards, can I get new ones?

Yes, with time you will be able to get new cards. But first you may apply for secured cards by depositing a small amount on the account, which will serve as security. As your credit score slowly rises, you can apply for regular credit cards.

Can a person go to jail for filing bankruptcy or for not paying his/her debts?

No. There are no prison for debtors in America.

How long will bankruptcy stay on my record?

It stays on your credit report for TEN years. A bankruptcy on your record could lead many lenders to consider it as a red flag and turn you down for loans or mortgage for years to come.

Can I be fired from my job for filing?

No. U.S.C. Sec. 525, prohibits employers from discriminating against you for filing bankruptcy.

Will creditors stop calling after filing?

Yes. The automatic stay will prevent creditors and collection agencies from taking actions to collect the debts. Creditors will receive notice by the court after you have filed for bankruptcy protection informing them to stop collection proceedings immediately.

What are the bankruptcy alternatives?

A Credit Counseling Service Company could also help you eliminate your debt. Be aware though, there's a lot of unscrupulous firms in the credit counseling industry. Do a careful research before hiring this type of financial services.

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