Bankruptcy is a federally protected legal proceeding that provides a financial “fresh start” to a debtor who cannot pay their bills. Federal law provides you with the right to file bankruptcy. Most, if not all of your debts, can be eliminated, or “discharged” through this proceeding, depending on the type of debt you have, and the type of Bankruptcy you file. Most consumers either file under Chapter 7 (a liquidation of any assets you are not allowed to keep, if any) or Chapter 13 (a repayment plan drafted by you or your attorney, and approved by the trustee) under the US Bankruptcy Code.

A Chapter 7 bankruptcy is the most frequently filed bankruptcy in the United States. Chapter 7 bankruptcy centers around helping those with debt who have little to no income to pay back to their creditors. Individuals who are unable to pay their bills can file and essentially walk away from their debts to receive a fresh start.

A Chapter 7 bankruptcy is a basic liquidation of an individual’s property for the purpose of repaying creditors and disposing of any remaining debts. Many debtors think all of their assets will be taken, but that is not true. Wyoming has a list of exemptions, meaning a debtor can keep certain property up to a certain value. You may keep property that is valued beyond the exemption amount if you want to pay to keep it.

In order to qualify to file a Chapter 7 bankruptcy, you typically must have a household income at or below the median income for your household size or have extraordinary bills that are ongoing and cannot be discharged in bankruptcy, such as day care or on-going out of pocket medical expenses. Click here for more information about Chapter 7 Bankruptcy.

Chapter 13 Bankruptcy is best suited for individuals who have a steady income and property that they may want to keep. Under a Chapter 13 bankruptcy, you will be able to keep your property, but will have to prepare a payment plan to repay all or some of your debts within a 3 to 5 year period. Essentially, you will be reorganizing your debt into debts that will be paid and debts that will be discharged. In exchange for paying some of your debts, there are some important benefits the Bankruptcy Code provides to you, which makes this a very important bankruptcy.

A Chapter 13 can sometimes allow you to reduce what you pay for your car, reduce your interest rates on your car, reduce some tax liabilities, including tax penalties, and at times it will allow you to remove a second mortgage from your residence. Click here for more information about Chapter 13 Bankruptcy.

Each case is specific. There is no ‘typical’ case, as much as there is no ‘typical’ person. However, the following issues, if they apply to you, would indicate that you should at least talk to a bankruptcy professional: (a) you fear the ringing of the phone and get nervous when getting the mail; (b) most of your credit cards are maxed out; (c) you can only afford to pay minimum payments on your bills; (d) the credit card consolidation payments aren’t working, or you’re too broke to pay them; (e) debt consolidation companies don’t want to work with you; (f) you are using retirement funds to pay your bills; (g) you have increased stress with your family because of financial and debt issues; (h) you look outside your window wondering when the repo man or process server is coming; (i) or your paycheck and/or bank accounts are getting garnished. Contact a bankruptcy professional if any of that seems familiar to you.

When you file for bankruptcy, the law immediately begins protecting you from creditors by imposing an "automatic stay." The stay orders creditors to stop any and all collection activities going on against you. Garnishment, thus, is ceased upon filing. If you really need the garnishment to stop right away, you may even want to consider an emergency filing. This may cost a little more, but it lets you get the stay in effect much faster and then gives you an extra 2 weeks after the emergency filing to get all of the somewhat complicated bankruptcy paperwork in order.

You can stop the creditors once your petition is filed with the US Bankruptcy Court. Once you file for Bankruptcy protection, an immediate freeze on all collection activities, also known as the “automatic stay”, prevents your creditors from collecting money from you. Creditors must cease contact with you, and cannot start or continue any of the following against you: lawsuits, garnishments, bank account “freezes”, or any other actions that try to collect money from you. Filing a bankruptcy also stops creditors from repossessing your vehicle or foreclosing on your home.

There is a filing fee that must be paid to the court upon filing of your petition. For a chapter 7, that fee is $338.00, and for a chapter 13, the fee is $313.00. In limited instances, you can file a motion to waive the filing fee, or at least to make monthly payments of the filing fee, in 3 or 4 equal installments. You must also pay for the pre- and post- filing credit counseling courses. Of course, if you hire an attorney to represent you, you will have to pay their fee.

You must supply paystubs for the 6 months preceding the month in which you file. You must also submit the last 2 years’ tax returns, the paystub that covers the day you file the bankruptcy, bank statements, car titles, and any bills of sale of property sold in the last 12 months. The trustee has the right to ask for further documentation, such as more paystubs, more tax returns, and other documents. The trustee has a right to conduct an asset search, if he/she believes there may be assets that you did not disclose.

The meeting of creditors is often referred to as a 341 meeting because it is required by section 341 of the Bankruptcy Code. You are required to attend this meeting. You will have to show your social security card and a photo ID. Typically, the creditors do not appear at this meeting, although they may if they wish. They would appear in order to show the court that the debt you owe them is not dischargeable. The trustee will ask you questions about your petition, to ensure that you listed all your debts and assets, and that you did not leave anything out.

Click here to watch a typical creditor's meeting.

To find other videos, try searching in YouTube using the terms “341 meeting bankruptcy” and “chapter 7” or “chapter 13”.

Commencement of a bankruptcy case creates an “estate.” The estate technically becomes the temporary legal owner of all the debtor’s property. A trustee will be assigned to your case immediately upon the filing of your petition. It is the job of the trustee to administer your estate, which means he or she will determine if there are any non-exempt assets, and if so, the trustee will liquidate the assets and distribute the money to the creditors. If all of your assets are non-exempt, the trustee will issue a “no-asset report” to the creditors, to advise them there is nothing in the estate to liquidate. If there are non-exempt assets, the creditors will be notified, and then they must file a proof of claim with the bankruptcy estate, in order to recover some of the debt.

You may not transfer property to another for the purpose of hiding your assets. There is a look back period of 12 months prior to the filing of your petition. You will have to disclose any payments made or assets sold in the last 12 months. Don’t make this mistake. It is never worth it to be dishonest with the Bankruptcy Court. Full disclosure of your situation is required. “Exemption planning” and timing considerations can provide you a legal way to increase the amount of your post-bankruptcy assets.

Filing a chapter 7 bankruptcy will not stop a foreclosure on your house, and may in fact, speed up the process. However, often a chapter 13 is filed for the purpose of stopping a foreclosure. The arrears owed on the mortgage will be put into the bankruptcy, and you will start making timely payments to the lender when you file the chapter 13.

You may not discharge child support payments (current or arrears) in a bankruptcy, and you cannot discharge federally backed student loans.

This is not true. Credit card debt is unsecured debt, and thus can usually be discharged in bankruptcy.

First, you need to decide if you should keep the car. If you owe more than it is worth, or if it is a lemon, you might want to let the car go. Letting the car go in a bankruptcy is called “Surrendering” the vehicle. If you do want to keep the car, you can either “Reaffirm” the loan on the car, which means that you would be creating a new, post-petition debt on the car; or you can “Ride-through”, meaning that you do not reaffirm the debt, but you do continue to make the payments on the vehicle. As long as you make timely payments, the lender typically will allow you to keep the car.

No, a spouse filing bankruptcy does not affect the other’s credit. However, any joint debts must continue to be paid, or the non-filing spouse’s credit would be hurt.

Yes. Typically, your credit score will take a hit when you file bankruptcy, but then it will go back up gradually, with the discharge of the debts. You may obtain a free credit report once per year per credit reporting agency at annualcreditreport.com.

It depends on three things: (a) what chapter you are filing in the new case; (b) what chapter you filed before; and (c) whether you were discharged in the prior filing. You must wait eight (8) years between Chapter 7 filings. It is possible to file a Chapter 13 within eight (8) years of filing a Chapter 7, but several other considerations must be made before doing so.

Yes. You must disclose all assets, both jointly owned and solely owned.

You must take a Consumer Credit Counseling course (typically online) prior to filing bankruptcy. You will have to file the certificate of completion with your bankruptcy petition. This class typically takes one hour. After you file your bankruptcy, and prior to obtaining a discharge, you have to take a second class, called a Debtor Education Course. You must file the certificate of completion of this course with the bankruptcy court. This class typically takes 1.5 to 2 hours.

Those considering bankruptcy are usually beyond any hope of rebuilding credit unless their income improves dramatically in a short period of time. Can you still get credit, a car loan or a mortgage to buy a house after you file bankruptcy? Probably, and in fact, your chances of obtaining new credit are actually improved in many cases after filing bankruptcy. Your creditors know that you can’t refile a Chapter 7 for eight years, and most of your debts after filing are eliminated (or liquidated.) The result is that your debt-to-income ratio actually improves, and in some cases, your ability to obtain credit can rise dramatically. Don’t be surprised if some creditors actively pursue you after filing bankruptcy, but please be wary of any company that demands you pay a ‘deposit fee’ to obtain credit. To obtain a mortgage loan after bankruptcy, it is typically required of you to establish a positive credit history. In a post-bankruptcy world, that means you should pay your bills on time, spend within your means, and avoid high interest debt. You will receive counseling by a third party during the bankruptcy process that provides advice on how best to rebuild your credit.

The Bankruptcy Code, 11 U.S.C. sec. 525(b) states that “No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt.” So, if your employer does fire you because of bankruptcy, they are violating federal law.

You do not have to have a lawyer to file for bankruptcy. However, it can be a complicated process, especially if you have significant assets. Click here for help finding a lawyer. You can also learn more about filing without a lawyer on the Wyoming Bankruptcy Court's website.