FAQ

A creditor is an individual who is owed money, such as a credit card company, mortgage lender, auto lender, rent-to-own company, etc. Think Bank of America, American Express, Barclays, Aaron’s, Wells Fargo, etc. They are all creditors.

No creditors should call you once you file for bankruptcy. When a bankruptcy is filed, an injunction called an automatic stay goes into effect, which prohibits creditors from foreclosing, repossessing automobiles, making collection calls, sending collection letters, or taking any other action to collect a debt. After a bankruptcy is filed, the court will send a notice to all of a debtor’s creditors by mail.

The creditor is prohibited from taking any collection action against a debtor once the creditor is notified of a bankruptcy filing. After you file bankruptcy, you will no longer be harassed by creditors—all of the collection calls will stop and you will stop receiving the annoying past-due bills in the mail. It does not matter if you file a Chapter 7 or Chapter 13 bankruptcy. Either way, the automatic stay prohibits creditors from harassing you.

When a debtor files for Chapter 7 bankruptcy, he or she asks the court to discharge (eliminate) their personal liability so that he or she no longer owes a creditor. The discharge applies to secured creditors, such as an auto lender or mortgage, but the lien survives discharge. Once the discharge is entered, secured creditors can no longer report missed payments, a foreclosure, or a repossession on a debtor’s credit report. Remember that a debtor must still make the monthly payments if they want to keep the item(s) secured by the creditor’s lien.

Before 2005, debtors in Chapter 7 bankruptcy would typically propose a ride-through, meaning that the debtor would keep the payments current and the debtor would get to keep the creditor’s collateral. However, in 2005, Congress amended the bankruptcy code to allow secured creditors with liens on personal property (automobiles and rent-to-own furniture are the two most common examples) to repossess their collateral unless a reaffirmation agreement is signed.

A reaffirmation agreement is a new contract in which the debtor agrees to remain personally liable for the debt. If a reaffirmation agreement is signed, then the secured creditor can report late payments on the debtor’s credit report, report repossessions, or report foreclosure. Strict deadlines must be filed or a secured creditor may repossess their collateral. It is always best to obtain the guidance of an experienced bankruptcy attorney when filing for Chapter 7 bankruptcy to ensure that your rights are protected.

In most cases, debtors can re-file a new bankruptcy case even if the old case was dismissed. Generally, the court may look to see if the debtor’s financial circumstances have changed, such as obtaining a new job, a raise, or even deciding to let something go that the debtor was previously trying to keep in the old bankruptcy case. Most judges understand that people hit hard times—everyone does at some point in their lives. Remember that judges are people too. It is important to remember that if a debtor has filed more than two cases in one year or less, then a creditor may ask the court for permission to proceed with foreclosure or repossession. Generally, mortgage and auto lenders are the most likely to seek this extraordinary type of relief, but now it is very dependent upon the attorney representing the creditor.

Generally, a Chapter 13 bankruptcy can be filed to save a home from foreclosure. In North Carolina, foreclosure is started by the filing of a notice of hearing. The creditor must provide at least 20 days’ notice of the foreclosure hearing. At the foreclosure hearing, the clerk of the court determines whether certain requirements have been satisfied. If the clerk determines that all of the requirements are satisfied, then the clerk will enter an order allowing the foreclosure sale to proceed. The creditor will also file a notice of sale that must provide at least 20 days’ notice of the foreclosure sale.

After the foreclosure sale is held, there is also a 10-day redemption period or upset bid period. If the Chapter 13 bankruptcy is filed during any point of the foreclosure process, then it will stop the foreclosure and give you time to bring your mortgage payments current through the bankruptcy case. It is important to keep in mind that during the foreclosure process, the mortgage lender or HOA is incurring attorney fees that may have to be paid back during the case. To keep the payments affordable, it is usually better to file for Chapter 13 bankruptcy sooner rather than later.

While it is possible to file for bankruptcy on your own, having an attorney to guide you through the process can help you avoid common pitfalls and obstacles. An attorney receives extensive training in bankruptcy laws and has gone through the process many times. Your attorney can handle all the paperwork for you and recommend the best possible plan of action based on your unique circumstances. There is simply no substitute for the experience, knowledge, and insight of a trained and skilled legal professional.

Bankruptcy allows debtors to discharge all or nearly all of their unsecured debt, depending on the type of chapter they file. Chapter 7 will generally wipe out most debt after nonexempt assets are liquidated, while Chapter 13 will require repayment plans to pay back a portion of the debt.

In Chapter 13, nearly all debtors are able to keep their homes and cars. In Chapter 7, you can keep your home and car if your equity does not exceed the exemption limits and you are able to maintain the payments. An attorney can review your unique scenario and give you a better idea of what you can expect to keep.

Unsecured debt such as credit card bills, medical bills, and personal debt can be discharged through bankruptcy. It will either be discharged completely or you may need to repay a portion of the debt.

Many people are afraid that filing for bankruptcy can ruin their credit scores. While bankruptcy will lower your score and stay on your report for several years, most people who are in debt already have low scores due to the outstanding debt. Doing nothing about the debt will only make your credit score worse.

Bankruptcy can resolve your debt and provide you with a fresh start to begin rebuilding your credit score. My law firm can provide you with tips on how to manage post-bankruptcy life and ways to restore your credit score. Call the Law Office of Kimberly A. Sheek at (704) 842-9776 today.