Q: Will my employer or landlord find out if I file a bankruptcy?
Filing a bankruptcy is public knowledge. However, you do not need to worry about your employer or your landlord becoming aware of your bankruptcy filing unless your employer or your landlord is also a creditor of yours. Only creditors need to be put on notice that you filed a bankruptcy.

Q: How will seeking a loan modification on my mortgage affect my bankruptcy, or vice versa?
It is almost commonplace to see a scenario where a potential debtor is filing bankruptcy while concurrently attempting to pursue a loan modification on their home. Filing a bankruptcy, or attempting to pursue a loan modification will not affect the other. That is you can do either or both at the same time, and one will have no impact on the other. However, one drawback is if you are currently attempting to modify your loan and then you file a bankruptcy, you may be forced to start the loan modification process over. The lender will consider the filing of the bankruptcy as a terminating event for your loan modification. You will then need to start the process all over again, and most likely resubmit any and all financial documents to the lender. But, this is not altogether a negative scenario, as it may afford you more time in your home without making a mortgage payment, or not making the original, and higher, mortgage payment.

Q: What other options does one have than filing for bankruptcy?
Some individuals do not absolutely and unequivocally need to file a bankruptcy. While a bankruptcy affords you the right to either rid yourself of your debts completely without having to repay a penny towards your debt (Chapter 7 Bankruptcy) or structurally and orderly pay back a portion of your debt, while in most cases not having to incur additional late fees/penalties and extremely high interest (Chapter 13 Bankruptcy), some individuals still may not find a benefit by filing a bankruptcy.

There are several available alternatives to filing a bankruptcy, but are unique to each and every individual situation:

• Your only debt is your mortgage: Under this scenario, an individual should exhaust all loan modification attempts before considering filing a bankruptcy. However, if you are facing an imminent foreclosure sale date, and assuming you still want to keep the home, then filing a bankruptcy will stay any foreclosure proceeding and will afford you more time to work on a loan modification or other ways to keep your home.
• You have significant debt, but you have too many non-exempt assets: Under this scenario, you may be forced to surrender or turn over your non-exempt assets to your bankruptcy trustee. If you do not wish to surrender some of your hard earned assets, you may consider other alternatives (Please check your state’s exemption statutes as to what property you may be able to protect or keep in a bankruptcy because each state is different.)
• You have significant non-dischargeable tax debt to the IRS: Under this scenario you may potentially be better off considering an offer-in-compromise with the IRS to settle. Otherwise, you can always file a Ch. 13 bankruptcy and pay your tax debt through your bankruptcy plan.

Q: Can I keep my car?
Not only will you likely be able to keep your car, but if you owe more than it is worth there are ways to pay the value of the car, regardless of what you actually owe.  If you are current on your car you will likely be able to keep your car through chapter 7 bankruptcy.  If you are not current on your car and able to make payments to catch up, you will likely be able to keep your car through chapter 13 bankruptcy.

If you have had your car over 30 months and you owe more than it is worth, you will be able to pay the amount that it is worth through a chapter 13 plan and the rest of the debt will be discharged.  If you owe more than the car is worth and want to keep it in a chapter 7 bankruptcy you will be able to do a “Redemption” where you finance the amount the car is worth and discharge the rest of the debt.

The better question is if the equity in your car is over the exemption limit.  An exemption is something you get to keep through the bankruptcy process.  It is exempt from execution in bankruptcy.  Each adult gets a car exemption of $5000 in Arizona.  Therefore, each spouse gets his/her own exemption.  Equity is the amount your car is worth less what you owe.  For example, if you owe $10,000 and your car is worth $15,000 you have $5000 in equity.  There should not be a problem keeping your car if you want to continue to make the payments.  If you have more than $5000 in equity and a spouse, you can double up the exemptions and use your spouse’s exemption to cover up to $10,000 in equity.  You cannot, however, split exemptions.  For example, if you have three cars, each with $1000 in equity, you can only use the exemption on one car.  That does not mean it will be worth the trustee’s time to take the other two, it just means you will not be able to use your exemption status on them.

Redemptions, cram downs, and exemptions can be confusing.  Unless you thoroughly understand these issues, you should seek legal counsel before contemplating a bankruptcy.  The cost is small compared to the potential loss.

Q: I know I am filing a bankruptcy, but how do I stop all of the creditor harassment in the meantime?
The first step in alleviating the burdens of your heavy debt is to begin the process of filing a bankruptcy. But simply retaining an attorney for the preparation and eventual filing of your bankruptcy will not stop creditors from attempting to collect the debt you owe. However, by simply retaining my law office, for as little as $100, you can start referring any and all creditors’ calls/harassment to my office. Let my office field these calls on your behalf and allow you some breathing room. Filing a bankruptcy is a major event in one’s life. Why should you also have to deal with constant harassment on top of it?