Bankruptcy in Nebraska: Frequently Asked Questions
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What is bankruptcy?
Bankruptcy is a procedure authorized by federal law to assist individuals, partnerships, or corporations in dealing with their debts and in most cases allows them to obtain a "fresh financial start."
Who can file bankruptcy?
Almost any individual, partnership or corporation may file a bankruptcy petition if he or she reside, has a domicile, a place of business or property in the United States.
If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, or if you were granted or denied a Chapter 7 discharge in a prior case within the last 6 years, or completed a Chapter 13 plan in a prior case within the last 3 years, you might not be entitled to receive a discharge in bankruptcy. You should consult with an attorney to determine how these circumstances might effect your specific ability to obtain a discharge.
What types of bankruptcies are available to individuals?
There are two types of bankruptcies available to individuals; Chapter 7 and Chapter 13.
Chapter 7 is commonly known as a liquidation bankruptcy. You must list all of your assets and all of your creditors in documents that are filed with the Court. A trustee, who is assigned to your case, will determine if you have assets in excess of the amount of property that you can protect from your creditors under Federal and Nebraska law. If you have assets in excess of what you can protect, those assets will be sold and the proceeds will be used to pay your creditors. Approximately 4 to 5 months after filing the Chapter 7 bankruptcy you will receive a release from dischargeable debts, whether or not you had assets that could be claimed by the Trustee.
Chapter 13 is commonly known as a wage earner or payment plan bankruptcy. The Chapter 13 Trustee does not sell any of your assets but collects monthly payments from you and pays this money out to your creditors according to a "Chapter 13 Plan" which you have filed and which has been approved by the Court. The payments in a Chapter 13 Plan must continue for at least 3 years in most cases.
What are the most common reasons for an individual to file bankruptcy?
Individuals file bankruptcy primarily because they have been extended too much credit, have large medical expenses, or have too much credit card debt. These problems become most apparent following a period of unemployment, a period of illness preventing an individual from working or from marital problems resulting in separation or divorce.
How long will it take after I file my bankruptcy petition before I obtain relief from my creditors?
The moment you file your bankruptcy petition a wall goes up protecting you from all of your creditors. The only way through that wall is for the creditor to go through the judge and your attorney. Once a creditor becomes aware that you have filed a bankruptcy petition it must immediately stop all collection efforts. The Court mails a notice to all creditors listed in your bankruptcy schedules approximately ten (10) days after you file your petition. If you get a call before that time you may simply tell the creditor that you have filed the bankruptcy petition and inform them of the case number assigned by the bankruptcy court. If, after receiving that information, a creditor continues to contact you, you should report this immediately to your attorney so that appropriate action can be taken. When your petition is filed all creditor lawsuits, wage garnishments and other collection activities must be stopped. Even State Tax Authorities and the Internal Revenue Service cannot bother you without first going through your attorney and the Court.
Can I be fired because I filed bankruptcy?
No. Federal law prohibits employers from discriminating against you because you filed for bankruptcy protection.
If I already have a judgment against me and my wages are being garnished will bankruptcy help me?
Yes, the garnishment will be stopped within a short time after your petition has been filed.
Is it difficult to find a competent lawyer to handle a bankruptcy case?
In most areas there are usually some attorneys who concentrate on handling Chapter 7 and Chapter 13 cases. It is worthwhile to find someone who is familiar with the complex workings of the bankruptcy code.
If I file a Chapter 7 bankruptcy can I ever file a Chapter 7 again?
Yes, but must wait six (6) years after you filed the initial Chapter 7 bankruptcy proceeding to refile a Chapter 7, however it is usually possible to file a Chapter 13 without waiting six years.
What are some good sources of information about bankruptcy?
You are already using the Internet and it can be a very useful source for learning additional information about bankruptcy. There a re a number of online bankruptcy guides including one at Cornell School of Law. A good book to obtain a basic understanding of bankruptcy is written by Michael Herbert. It's title is "Understanding Bankruptcy" published by Matthew Bender in 1994.
What debts are forgiven or canceled if I file bankruptcy?
The purpose of bankruptcy is to provide the honest debtor who does not have an ability to repay his debt a fresh financial start through discharge of his debts.
However some debts must still be paid. In general the following debts cannot be discharges: taxes; spousal and child support; liability for death or injury from driving while intoxicated; non-dischargeable debts from a prior bankruptcy; debts arising out of willful misconduct and/or malicious misconduct by the debtor; student loans; criminal fines and penalties and forfeitures.
Secured debts may also be discharged. However, in most instances the creditor will take the necessary steps to recover the secured property unless you can reach an agreement with the creditor for repaying the debt.
How does bankruptcy effect the debt for which I am a co-signer?
If the debt is dischargeable you do not have to pay it. However, your co-signer will still remain responsible for the debt. If you file Chapter 13 those who co-signed for you on various loans or purchases will not be affected by your Chapter 13 Plan as long as you pay them 100% of the debt they have co-signed including interest.
What property can be protected from creditors in a bankruptcy proceeding?
Some of the property which can be protected from creditors pursuant to Nebraska law includes:
- Up to $12,500.00 in equity in the Debtors house provided it qualifies as a homestead.
- Each individual debtor may also select $2,500.00 of personal property to be protected from creditors. This property can include cash and balances in checking account.
- Each individual debtor can protect up to $1,500.00 in household furnishings, household goods, household computers, appliances, and musical instruments, which are held for personal, family or household use.
- Each individual debtor can protect up to $2,400.00 in implements, tools of trade or a vehicle that is used in transporting the debtor to and from his place of employment.
- All necessary wearing apparel of the Debtors and their family.
- Each individual debtor may protect up to $10,000.00 of cash value in an annuity contract or life insurance policy.
Are 401K Plans and other pension plans protected from my creditors?
Yes. The United States Supreme Court has held that pension plans, 401K plans and other "ERISA" qualified plans are generally excluded from the bankruptcy estate and cannot be reached by creditors.
How will my bankruptcy effect my future credit rating?
Generally your bankruptcy will appear on your credit report for up to ten (10) years after you have filed for bankruptcy protection. However, the decision to extend you credit belongs to each particular lender. Often the fact that you filed bankruptcy, if properly explained to the prospective lender, is less damaging than a history of unpaid accounts.
How can I reestablish my credit after I file bankruptcy?
When you file a bankruptcy it becomes a negative entry on your credit report. Whether or not you can get new credit following your bankruptcy depends on several factors. The first being the length of time since filing. As a general rule it is difficult to get new credit within two years of filing a bankruptcy. Thereafter, the degree of difficulty drops off significantly. Also you may be able to maintain good credit standing with those creditors to whom you continue to make your required payments, such as your car and your mortgage lender. You also may be able to obtain a secured credit card, where the credit limit is based upon the amount of security given or obtain credit using a co-signer.
Will I go to jail if I don't pay my debts or I file for bankruptcy?
No. In the United States it is not possible to put someone in jail for simply failing to pay a debt.
After I file for bankruptcy do I have to go to Court?
Approximately 4 or 5 weeks after you file a bankruptcy petition you will attend a hearing called the First Meeting of Creditors. You have approximately 3 weeks notice of the date of this hearing so that you can arrange to be present. At that hearing you will be asked questions by a bankruptcy trustee. The trustee is not a judge but an attorney appointed by the United States Trustee to oversee your bankruptcy case. The trustee will ask you questions under oath regarding your assets, debts and other matters. Creditors are also permitted to asked questions but in most cases Creditors do not attend the meeting. If a creditor files a motion or adversarial proceeding you will have to go to Court at a later date. Your attorney will accompany you to that Court appearance.
© 1999 Johnson & Welch, P.C.