FAQs on Bankruptcy

You have questions. Attorney Rehan N. Khawaja has the answers.

• How do I know when I should file for bankruptcy?
• What is chapter 7?
• What is chapter 11?
• What is chapter 13?
• Does filing for bankruptcy get rid of all my debts?
• Will I lose everything I own?

How do I know when I should file for bankruptcy?

While there is no hard and fast rule for deciding when to file for bankruptcy, it is an option to examine if you:

• Cannot budget yourself out of debt within five years
• Have received foreclosure notices
• Can only pay the minimum amounts of your bills
• Have had a severe financial setback, such as losing your job

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What is chapter 7?

Chapter 7 bankruptcy is the most common form of bankruptcy in the United States.  Corporations, partnerships, married couples, and individuals can file a chapter 7 bankruptcy petition.   After a petition is filed, a court-appointed trustee helps gather and sell non-exempt property.

It is extremely important to plan chapter 7 bankruptcy proceedings carefully.  Before filing, you must take the means test—a test that examines your income and expenses— to determine whether or not you are eligible to file.  Between 20 and 40 days after you file your petition, you attend a 341 hearing, where a trustee questions you about your assets and debts under oath.

Those not eligible for chapter 7 bankruptcy often file a petition for chapter 13 bankruptcy.

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What is chapter 11?

Chapter 11 bankruptcy, most commonly filed by businesses, gives debtors time to propose a payment plan and pay debts to creditors.  It is more complicated than chapters 7 or 13 and tends to be more expensive to file.  Though complex, chapter 11 bankruptcy allows businesses to stay open while a bankruptcy court oversees the reorganization of contractual obligations and debts.

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What is chapter 13?

Chapter 13 bankruptcy allows individuals and sole proprietors to pay off debt over the course of three to five years.   Eligibility for chapter 13 bankruptcy depends on whether or not you have a stable income with disposable funds.

After a chapter 13 bankruptcy petition has been filed, the court examines your standard of living and expenses to determine how much money you should have available to set aside for paying debts.   A trustee reviews a payment plan that addresses all priority claims, including taxes, and secondary claims, like credit card bills.   If approved, you are allowed to keep your assets and pay the bankruptcy trustee a set amount of money each month. The trustee then distributes the funds to creditors.

Filing for chapter 13 bankruptcy is useful if you own items you do not want to relinquish.  Chapter 13 bankruptcy can assist you in saving your house if you are behind in your mortgage payments.  It can also help save your car if you are past due on automobile payments.  To protect your house or automobile, however, the bankruptcy petition must be filed before your house is auctioned in a foreclosure sale or your automobile is repossessed by the lien holder.

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Does filing for bankruptcy get rid of all my debts?

No.  Federal law says you are still responsible for:

• Alimony
• Child support
• Student loans
• Fraudulent debts
• Certain back taxes
• Fines or penalties of government agencies
• Cash advances and certain credit card purchases made during recent months

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Will I lose everything I own?

Not necessarily.  The law allows you to keep many things depending on the type of bankruptcy petition you file.  As such items can vary greatly depending on a variety of factors, it is important to consult an experienced bankruptcy attorney to find out exactly qualifies for exemption under your state's law.  

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Come to Rehan N. Khawaja for help

Contact The Law Offices of Rehan N. Khawaja for a free bankruptcy consultation from a qualified bankruptcy lawyer. We provide free initial consultations and have flexible office hours to suit your needs.  Conveniently located in downtown Jacksonville, The Law Offices of Rehan N. Khawaja has free parking available for all its clients.