Bankruptcy FAQ's

The first concern for a Connecticut bankruptcy attorney should be any risk to your home. Careful preparation and analysis by an experienced bankruptcy attorney is critical and for many homeowners can put their concern of losing their home to rest. Whether bankruptcy might put your homestead at risk is determined by several factors:

• the current market value,
• the balance owed on mortgages, real estate taxes, and other liens
• the legal owner or owners shown on the deed, and
• the application of “exemptions,” which are provisions of federal bankruptcy law or state law that may exempt or protect a certain amount of the equity in your home from the bankruptcy estate.

Sometimes the state whose law applies, or whether federal exemptions can be used at all, changes if you have moved recently. If Connecticut exemptions can be used and will not risk other assets you don’t want to lose, a change in the law effective October 1, 2021 more than triples the amount of exempt equity that can be protected in your home.  Regardless of the exemptions, sometimes protection of your home can be put at greater risk if the title has been transferred in recent years. Choose an experienced Connecticut bankruptcy lawyer and be prepared to discuss each of these factors that will help your counsel determine any risk to your home.

Bankruptcy fees vary tremendously with the complexity of the case, the kind of bankruptcy that is best for you, and your lawyer’s level of experience. The more important issue is the quality of the preparation of your case and representation you receive. Still, when you are suffering financial stress the fees, and the costs, can seem like an impossible hurdle. 

Chapter 7 fees for quality representation usually are required to be paid in cleared funds before the case is filed. Responsible bankruptcy attorneys do not want to strap you with debt after you file a Chapter 7 case. In addition, an experienced attorney will recognize conflicts may arise when you owe legal fees to your bankruptcy attorney after filing. Sometimes fees can be paid from nonexempt savings, or liquidation of stock or other assets that would be taken from you by the Chapter 7 trustee anyway. Sometimes payment can be made over a month or two before you file from funds realized by stopping your payments to general creditors prior to bankruptcy once the bankruptcy decision is made.  An experienced attorney can often find strategies that will help for you pay the necessary fees and costs.

Fees for Chapter 13 can be significantly higher than Chapter 7, but since most Chapter 13 cases involve repayment plans over an extended time payment arrangements can often be made that eases the burden. In many Chapter 13 cases costs, plus some of the fee, can be paid up front and the balance of fees can be paid from funds you will pay into your Chapter 13 plan from future wages or other income.

A “short form” bankruptcy petition can be filed very quickly on an emergency basis when necessary, such as to stop repossession, litigation, and even the entry of a foreclosure judgment. But in the typical case careful preparation over at least two or three weeks may be advisable to gather information, analyze your situation, and determine the proper course. Sometimes timing is significant, and an experienced bankruptcy attorney will suggest further delay for strategic reasons such as taking advantage of an upcoming change in exemption laws, or to protect prior payments you have made on loans from relatives.

In Chapter 7 the bankruptcy court usually enters an order discharging your debts about 90 days after the petition is filed.  The vast majority of properly prepared bankruptcy proceedings are “no asset” cases where the trustee does not take anything away from you. These cases typically are closed shortly after the entry of the discharge order.

Basically, there are two types of proceedings in the bankruptcy court: a straight bankruptcy or a reorganization proceeding.  Individuals can file petitions under Chapter 7, Chapter11, Chapter 12 and Chapter 13 depending on circumstances. LLCs and corporations can file Chapter 7, Chapter 11 and Chapter 12. These are Chapters in Title 11 of the United States Code where the bankruptcy code is found. A reorganization proceeding usually results in a sale of assets or a repayment plan under Chapter 11, Chapter 12 or Chapter 13, A straight bankruptcy under Chapter 7, also referred to as a liquidation case, is the simpler kind of bankruptcy where individuals or couples permanently seek a discharge of their debt. The Chapter that is best in your case will depend on your assets and liabilities, the goals you would like to achieve from the proceeding, any previous bankruptcy petitions, and other factors that you should discuss fully with an experienced Connecticut bankruptcy counsel.

Normal disability payments or workers’ compensation can be protected by carefully choosing and applying laws that provide exemption for these types of assets from the bankruptcy estate. If properly handled even lump sum distributions usually will be secure from the bankruptcy trustee. Be sure to discuss these critical assets with your experienced Connecticut bankruptcy lawyer. Personal injury claims that sometimes can be associated with these assets are at risk in bankruptcy and exemptions may be limited.  Your bankruptcy attorney should discuss these limitations with you before you file your case and will want to discuss the matter with your personal injury attorney as well.

If your contributions have been within the annual tax code limits IRAs will be protected from the trustee up to a substantial sum. The Supreme Court has held that IRAs that have been inherited are not exempt under federal bankruptcy exemption laws. Whether your IRA is protected can be assessed by a Connecticut bankruptcy lawyer who is knowledgeable and experienced in the practice of bankruptcy law.

Proceeds of personal injury suits may be exempt from the bankruptcy estate, but only to a limited amount. The bankruptcy decision should be made only after your bankruptcy counsel considers the application of such exemptions to your situation and advises you about the possible risk to your claim or lawsuit. You must also consider the fact that you may lose the right to make independent decisions about settlement of the claim. Bankruptcy still may be the right decision for you, but you should be sure you have all the facts before you file. Discuss your situation with an experienced bankruptcy attorney. Your bankruptcy attorney may want to hear about the status of the case from your personal injury attorney as well.

Yes, the calls and lawsuits stop because of the automatic stay, an injunction that becomes effective immediately upon filing a petition in bankruptcy. If you have had a prior bankruptcy petition within a year, the relief can be temporary without a further order of the court that has to be requested very promptly. Be sure to discuss all prior bankruptcies with an attorney experienced in bankruptcy representation.

This depends on the timing and the availability of exemptions that could have protected the funds if you had held them in your account at the time of the bankruptcy petition. In many cases when the petition is filed within 90 days of the state marshal serving the papers on the bank, the funds can be recovered. Even if you have been disputing the garnishment of the bank account in state court, in Connecticut your bankruptcy may only allow you to seek return of the funds if you file your bankruptcy petition within a limited time period after the bank was served. Do not delay in seeking competent bankruptcy advice.

The first part of the question is easy, yes, in Connecticut the garnishment will stop. The second part is not as clear. Frequently a creditor will voluntarily release the money that it has taken from you within 90 days of the bankruptcy filing date. If the funds fit within your exemptions, the laws you may use to protect assets from the bankruptcy trustee, you may get them back. If you cannot exempt the funds, even if they are recovered they may go to your trustee.  However in Connecticut one bankruptcy court decision held that you can only get the money back if you file your bankruptcy within 90 days of when the legal papers were served on your employer.  Be sure to retain an experienced bankruptcy attorney who can explain the state of the law in terms that are clear to you.

Although the petition in bankruptcy and the automatic stay stop creditors from commencing or proceeding with foreclosure or automobile repossession, creditor’s attorneys may file motions asking the bankruptcy court to let the creditor foreclose or repossess the collateral for their loans where you have missed payments. In Chapter 7your ability to defend such a motion may be very limited, but in these situations Chapter 13 can provide rights that are not available to you in Chapter 7 The decision as to which type of bankruptcy is best for you and your circumstances should be discussed with an attorney well experienced in both 7s and 13s.

In Connecticut, mortgage foreclosures are always conducted in court. A petition in bankruptcy stops a foreclosure or other litigation from proceeding against you because of the automatic stay. However if a judgment of foreclosure has entered against you the protection may be very temporary. Do not delay in retaining an experienced Connecticut bankruptcy attorney when a foreclosure has been filed against you and your property. Discuss your options with an attorney experienced in both Chapter 7 and Chapter 13, as the Chapter 13 option may be much more effective in getting you caught up with your mortgage and protecting your home.

While bankruptcy is a public proceeding, and anyone can find out that you filed if they have reason to search for this information, in most Chapter 7 cases people, including your employer, will not know unless you tell them or they see your credit report. Where your paycheck is being garnished your employer will be notified. In Chapter 13 it is likely that the payments to the trustee will be handled by payroll deduction, and your employer will learn about it. Still, there is a provision in the Bankruptcy Code that bars discrimination against you as an employee, based solely on your petition in bankruptcy or your having discharged debt under the Bankruptcy Code.

That is very unlikely. If you are a public figure, your bankruptcy could be newsworthy, but such situations are unusual. In most cases, while a bankruptcy filing is a public proceeding, people usually have no reason to find out you filed a bankruptcy case unless you tell them.

Are all debts wiped out in bankruptcy?

There are some exceptions to the discharge of debt in bankruptcy. Some types of debts such as most student loans, recent income taxes, withholding and similar taxes owed by people who have been in business, and domestic support obligations generally are automatically not discharged.  Other types of debt, such as credit obtained by use of a false financial statement or by fraud, can be excepted from the discharge if the creditor commences an action against you in court (usually in the bankruptcy court) and obtains an order of the court finding that you should not be discharged due to such conduct.  Any such concerns should be thoroughly discussed with your bankruptcy counsel.

In many cases you can file again and still receive a discharge, but the timing is critical. There are different limits for waiting between Chapter 7 cases and other types of bankruptcy cases, and when a Chapter 13 follows a Chapter 7. In addition, these limits usually apply to your ability to get a new discharge. You may still be able to use Chapter 13 to catch up on a mortgage, or to repay debt. Always discuss prior bankruptcy cases with your attorney before filing.

Yes, a bankruptcy petition is an individual right; either spouse can file without the other. Even if you file without your spouse, your household income, including in most cases your non-filing spouse’s income, must be disclosed and will have bearing on whether you pass the means test.  This test may apply to determine whether you are eligible for a Chapter 7 bankruptcy. Where the non-filling spouse has much higher income, consulting a careful attorney experienced in bankruptcy is essential.

Unfortunately, you can only file a joint case if you are married. In such cases where you are not married, you would have to file two separate petitions, although they could be filed essentially at the same time so you would likely have the same assigned trustee and hearing date.

Absolutely. Of course bankruptcy affects your credit score, and will make a new mortgage very expensive for a time. After you have reestablished credit and a record of steady income you are likely to be able to obtain a new mortgage at a competitive interest rate and cost. For some federally backed mortgage programs you may have to wait a certain period of time after a discharge in bankruptcy before you can be considered for a mortgage, but after that the bankruptcy should have no bearing on your ability to qualify for such programs.

Such action by the trustee would be extremely unusual. Bankruptcy requires you to disclose assets in your schedules and in your testimony under penalty of perjury. While the trustee will require various documents to confirm the assets you own and their values, the trustees for the most part rely on your honesty in such disclosures and do not view your possessions at your home.

The Bankruptcy Code and procedures require you to disclose in your schedules everyone to whom you owe money. This disclosure means the court will mail notices of your case to them. You can voluntarily pay anyone on the list later without harming your discharge of other debt.

A bankruptcy discharge may eliminate your personal liability on older income taxes and related penalties and interest. Bankruptcy stops the IRS and other taxing authorities from taking actions against you and your assets, but for recent income taxes, withholding taxes owed by a debtor who has been in business, and some other taxes, the discharge you may receive of other debts has no effect. You may be able to pay such taxes over time in Chapter 13 or in Chapter 11 or, for farmers and fishermen, Chapter 12. In addition, if the trustee liquidates property in a Chapter 7 case the taxing authorities may have high priority claims with a right to be paid before other creditors. The intersection of bankruptcy and tax is a complicated area, and you should rely on experienced bankruptcy counsel to consider how the Bankruptcy Code may affect your tax liabilities.

Gambling debt can be dischargeable in bankruptcy, but it can also complicate your case. You should disclose all debt, including any gambling debt to your bankruptcy counsel.

The bankruptcy filing can be reported by the Credit Reporting Agencies for 10 years under the present law.

1. Open bank accounts
2. Get a safe deposit account
3. Pay back certain of my discharged debts without having to pay others.
4. Transfer property
5. Borrow money
6. Lend money
7. Move
8. Change jobs

You can do all these things after bankruptcy. Bankruptcy can of course hurt your credit score, and credit-based matters will be affected. For instance, your ability to borrow money at reasonable rates may be limited for a period of time, and some prospective landlords will refuse to rent an apartment to a person recently out of bankruptcy. While the case is pending, your legal right to transfer property is curtailed until the trustee takes certain steps, but after the case is over your bankruptcy filing should not interfere with most activities.

The Bankruptcy Code contains a specific provision respecting discrimination. The code bars a private employer from terminating an employee or discriminating with respect to employment against an individual who is or has been a debtor in bankruptcy solely because of the bankruptcy. At least one court, in another part of the country, has held that a private employer still can discriminate as to the hiring decision respecting a prospective employee. The code also bars a governmental employer from discriminating because of bankruptcy, and in even broader terms.

Reaffirmation is a formal process, requiring signed papers to be filed with the bankruptcy court in a timely way, which makes the debtor liable on the reaffirmed debt even though it would otherwise have been discharged in the bankruptcy. Generally, a debtor should avoid reaffirmation so to maximize the benefits of the discharge, but there are some instances where it might be appropriate.  In some cases reaffirmation can be part of an agreement to catch up on missed payments or to reduce interest rates. It also may allow the creditor to report future payments to credit reporting agencies which if paid on time can contribute to improving post-bankruptcy credit scores. Also some mortgage creditors will refuse to enter post-bankruptcy loan modification if a loan was not reaffirmed during the bankruptcy case. The state law in Connecticut however protects debtors in connections with car loans by declaring that discharging the personal liability in bankruptcy is not a default under the loan documents whether the debt is reaffirmed or not. All debtors with secured loans should discuss reaffirmation and other strategies with an experienced bankruptcy lawyer.

The decision to file bankruptcy is personal and cannot be determined without taking into consideration all relevant factors of the financial and other circumstances faced by the individual, his or her spouse, and household. You should only decide after your particular situation with your experienced bankruptcy counsel.

A debtor is certainly allowed to represent himself or herself in bankruptcy. However, bankruptcy is an intricate and difficult area of the law. The assistance that such counsel can provide is well worth the cost of an experienced attorney. Without experienced counsel in your corner, your bankruptcy needlessly may risk important assets or your ability to obtain a discharge of claims against you. Failure to take proper care in preparation of your case can have heavy cost for you and your family.

Two important sources are the websites of the United States Bankruptcy Court for the District of Connecticut and the website of the Office of the United States Trustee.

A bankruptcy filing effects an immediate and automatic stay of actions to take your property, although there are certain exceptions such as cases where you have filed a prior case within the past year. The stay can be removed, after at least the opportunity for a hearing, and the stay as to actions against the property will be removed when you are discharged or when the property is no longer property of the bankruptcy estate. Thus, the protection can be lost, and you should consult an experienced bankruptcy attorney respecting this important concern.

Most general debt is discharged, and being relieved of its burden can be a great feeling and truly change your life. Remember, however, that some debt is not discharged. A few of the more common and important exceptions are student loans, certain tax debt, and alimony and child support liabilities.

Some valuable assets can be protected such as most pensions, IRAs and retirement funds, workers’ compensation rights, and sometimes even fairly substantial value in equity in your home. Still, there are significant limits on protection of many categories of assets, and the extent that things can be protected from the bankruptcy trustee must be considered carefully with the advice and counsel of your attorney.

In some cases, the trustee has the right and obligation to sell assets. The money received after returning any exempt portion to you, and after payment of the trustee’s expenses and commissions will be used to pay creditors. Whether you are likely to lose any assets upon a bankruptcy filing should be carefully considered by your experienced bankruptcy counsel prior to filing.