Frequently Asked Questions about Bankruptcy

What are the different types of bankruptcy?

There are several different Chapters of the United States code that allow individuals or businesses to file bankruptcy.

Chapter 7 is a liquidation bankruptcy and can be filed by an individual or a business.  This is the most commonly used type of bankruptcy.  The debtor surrenders any non-exempt assets to the control of the Court.  The assets are liquidated and the funds distributed to the creditors in the case.

Chapter 11 is a reorganization bankruptcy mainly used by businesses in order to obtain relief from debt burdens while still allowing the business to operate under the supervision of the Court.  Chapter 11 is also used by individual debtors who have debts that exceed the debt limits outlined in the Bankruptcy Code.

Chapter 12 is a reorganization bankruptcy mainly used by family farmers and is similar to Chapter 11 and Chapter 13.

Chapter 13 is a reorganization bankruptcy used by individuals who do not qualify for Chapter 7 because their income exceeds the median income or who wish to protect assets that would be surrendered under a Chapter 7 proceeding. Chapter 13 bankruptcies are for individuals who are wage earners or have a reliable source of income allowing them to fund a repayment plan.  A Chapter 13 plan allows for repayment terms of 3 to 5 years.

How often can I file bankruptcy?

If you file a Chapter 7 case and receive a discharge, you have to wait 8 years from the filing date of the first case to file another Chapter 7 bankruptcy

If you file a Chapter 13 case and receive a discharge, you have to wait 2 to 6 years from the filing date of the first case to receive a discharge in the second filing.

If you file a bankruptcy case and the case was dismissed you may be eligible to refile immediately.

How long will a bankruptcy stay on my credit report?

A chapter 7 bankruptcy remains on your credit report for 10 years.

A Chapter 13 bankruptcy remains on your credit report for 7 years.

How will a bankruptcy affect my credit score?

A bankruptcy filing will cause an immediate decline in the credit score.  However, a bankruptcy’s effect on your credit score diminishes over time.  Most people are generally able to rebuild their credit within a few years.

What types of debt are discharged in bankruptcy?

The most commonly discharged debts include credit cards, medical debts, certain tax debts and personal loans.

What types of debt are not discharged in bankruptcy?

Debts that are considered non-dischargeable are domestic support obligations such as child support; student loans and recently assessed tax debts.

If I am married does my spouse have to file?

A married person may file individually.  However, it may be beneficial for a married couple to file a joint petition if they are both responsible for the debt.  Under the bankruptcy law, the non-filing spouse’s income will be required to be included in the bankruptcy petition filed with the Court.

Is bankruptcy different from state to state?

No, bankruptcy cases are handled by the United States Bankruptcy Court and are considered federal proceedings.  However, exemptions against real and personal property can vary in different states.

How long will my bankruptcy take?

When a Chapter 7 is filed with the Court, a hearing called a Meeting of Creditors is scheduled.  These hearings are usually held approximately a month from the filing date.  A 60-day deadline from the Meeting of Creditors is set for creditors to object to the debtor’s discharge or the dischargeability of their debt.  Most Chapter 7 cases are only open for three to four months.

A Chapter 13 case remains open for the length of the repayment plan which is usually five years.

Are there tax implications for filing bankruptcy?

No.  A creditor cannot file a 1099 for forgiven debt if the debt was discharged by the Bankruptcy Court.

(Back to Bankruptcy Resources)