FAQs

Commonly Asked Questions Regarding Bankruptcy

Q. Will I lose my house in bankruptcy?
A. Normally not. You may exempt equity in your house. Equity is the difference between what the home is worth and what the mortgages or lines of credit are against it. The law allows each owner to exempt approximately $20,200 under Federal law and up to $31,900 under State law. You are still required to pay your regular mortgage payments to keep the house.

Q. Will I lose my car?
A. To keep your car, you must be able to make payments upon any debts owed upon it. If there is any equity, you can exempt approximately $3,225 under Federal law.

Q. Will a bankruptcy stop a foreclosure?
A. Yes it can. In Michigan, the bankruptcy proceeding must be filed prior to the foreclosure sale; otherwise, it is too late to stop the foreclosure process and the running of the redemption period. If a foreclosure sale has not occurred, a restraining order, called an "automatic stay," generally prevents a creditor from taking steps to collect a debt, and restructuring of the debt can be accomplished in a Chapter 13 bankruptcy plan.

Q. Can I stop repossession by filing bankruptcy?
A. Yes, you can. The automatic stay, which stops a foreclosure sale, can also stop a repossession. In a Chapter 7, the relief is temporary in nature. In a Chapter 13, the Debtor can propose to address the obligation and pay the debt in a manner allowed under the law.

Q. Can I get credit after bankruptcy?
A. The stigma of bankruptcy has been reduced over the last three decades. Credit is available after bankruptcy, sometimes even for a mortgage. The interest rate is usually higher than current market rates to reflect the increased risk to the lender. Generally, by four years post-bankruptcy, you can obtain market mortgage rates, if you otherwise qualify for a standard loan. Auto loans are available for used vehicles, however, the price and interest rates may be higher. You should consider not obtaining any credit immediately after bankruptcy. You should try to live on your earnings.

Q. How long does a bankruptcy notation stay on my credit report?
A. A bankruptcy notation can stay on your credit report for up to ten years. Federal law requires that the bankruptcy notation be removed after the tenth year.