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FREQUENTLY ASKED QUESTIONS ABOUT BANKRUPTCY

Are bankruptcies on the increase?

From 2012 until the present time, there has been a decline in the number of Americans seeking relief from debt. The number of bankruptcy petitions filed in America has been as follows: 2012 1.3 million people decided to declare bankrupty; 2013 there were 1.1 million; in 2014 there were 1 million; in 2015 there were 879,736 filed and in 2016 there were 819,159 bankruptcies filed. By the end of June, 2016, there were 6,058 bankruptcy petitions filed in Connecticut. Bankruptcy filings by County in Connecticut were as follows: Hartford, 1,419; Litchfield, 353; Middlesex, 277; New Haven, 2806; New London, 371; Tolland, 188; and Windham, 199. You can find this information at the US Courts for the Connecticut Statistics.

What is bankruptcy?

Bankruptcy is a Federal Law and it’s found in the United States Code 11 U.S.C 101, et seq. The law of bankruptcy since 1897 has allowed honest debtors a ‘fresh financial start’ by cancelling and discharging debts. The authority for the US Code is derived from the U.S. Constitution, Article 1, Section 8, Clause 4 which authorizes Congress to enact “uniform Laws on the subject of Bankruptcies throughout the United States”. Bankruptcy restarts your financial engine. It’s a ‘safety relief valve’ for a ‘boiler’ or ‘control, alt, delete’ when re-booting your computer. It lets off pressure and lets you start again under the theory that everyone is entitled to a ‘fresh start’ because this is America where citizens have the right to be ‘free’ from debt.

Will creditors appear in Court and try to embarrass me?

In my 35 years of practicing law, I can tell you that it is rare for a creditor to go to the initial bankruptcy hearing (which for New London County is in the Hartford Federal Court Building). And when a creditor does appear, the Trustee in bankruptcy insists that everyone conduct themselves with great civility. But many people worry that someone from a horror movie will appear in black robes and in a deep voice, point at them and say, “You haven’t paid your debts!”. and that they'll slide under their chair. This only reflects peoples’ subconscious fears. It has never happened. None of my clients has ever been made to feel embarrassed at the 341 Hearing.

Are gambling debts dischargeable in bankruptcy?

Gambling debts are dischargeable in bankruptcy. Gambling debts are usually unsecured debt and are, therefore, dischargeable in bankruptcy. However, if the debt was incurred through fraudulent conduct, then the debt would be non-dischargeable. See: 11 U.S.C. 523(a) (2). I have handled many gambling cases and in each case, all the gambling debt was discharged in Chapter 7. However, gambling debts are luxury expenditures. Gambling, of course, is not a basic necessity like food, shelter, etc. And the Court gives extra-scrutiny when a petitioner has indulged in ‘luxury expenditures’ like purchasing jewelry, fancy vacations or gambling. One major objection to a gambling debt is that a creditor can object to the discharge of the debt on the grounds you had no intention of repaying the debt.

Can I go to jail if I declare bankruptcy?

No, you don’t go to jail if you file for bankruptcy. Debtors’ Prison has long since been abolished. However, we have to be careful because there are ‘bankruptcy crimes’ for which you can go to jail. Bankruptcy crimes can be found in 18 U.S.C. § 157. At your bankruptcy hearing you will be asked the following: ’did you read the petition before you signed it? Did you realize when you signed it, you were signing under oath? Did you list all your assets in your petition? Did you list all your debts in your petition?’ When you answer these questions you will be under oath and the proceeding will be tape recorded. Failure to be truthful when answering any of these questions can result in you being charged with a bankruptcy crime which is punishable by imprisonment. In my 5,500+ cases, this has never happened.

Will bankruptcy stop harassing phone calls?

Yes, the filing of a bankruptcy petition stops harassing phone calls. Under 11 U.S.C. §362, the ‘Automatic Stay’ of the Bankruptcy Code, any attempt to collect a debt becomes illegal and subject to being held in Contempt of the Bankruptcy Court. After you have filed a bankruptcy petition, any communication via letter, fax, email, phone, cell phone, lawsuit, etc. from a creditor or bill collector is illegal. The violation is subject to the contempt powers of the Court. And even if you haven’t filed for bankruptcy, there are two Federal Laws which provide protection from harassing phone calls, namely, the Fair Debt Collection Practices Act, (FDCPA) found at 15 U.S.C. § 1692 and the Telephone Consumer Protection Act, (TCPA) found at 47 U.S.C. §227. Under the TCPA, if someone calls you on your cell phone without permission to collect a debt, this is a per se violation of the law and you are entitled to damages of $500-$1,500 per phone call! Our office handles many of these cases and this is prior to filing for any bankruptcy.

Will my name appear in the local newspaper?

No, your name will not appear in the local newspaper. I have told clients that at one time local divorces were printed in the newspaper. Since I have started practicing law in 1982, not one divorce and not one bankruptcy filing has been reported in the local newspaper. Now I must make a qualification: there was a divorce where the husband threatened to kill his wife during a divorce which was reported in the local newspaper. And there was a bankruptcy of an oil company which took money from people and then filed for bankruptcy which was reported in the local newspaper. But I can safely state that the average divorce and the average bankruptcy are not reported in the local newspaper. Could they report all bankruptcies in the local newspaper? The answer is, ‘Yes’. And even though any divorce and any bankruptcy is public information, it has not been reported in the local newspaper which I believe is a policy of those newspapers. To access the Bankruptcy Court’s website, you have to pay and it’s a complicated process in obtaining access.

Will I be able to rent or buy a house after I declare bankruptcy?

Yes, you will be able to rent an apartment or buy a house after filing for bankruptcy. As far as renting, the biggest issue will be ‘pets’. Having ‘pets’ is more of a problem for most landlords than someone who's filed for bankruptcy. If you apply to rent to a large apartment complex, first ask them their rules for accepting a tenant who has filed for bankruptcy. You should be upfront with them because they do a background check and if you have mitigating circumstances which caused you to file for bankruptcy, this can overcome an objection. Also, do you have a good track record in renting? Bring proof of all timely payments for rent and proof of income such as pay-stubs and bank statements. Private landlords versus corporate landlords are usually more flexible. However some landlords require paying the first month’s rent, the last month’s rent and a security deposit as extra security. But most of the time this doesn’t happen. As far as buying a home, bankruptcy doesn’t prevent someone from buying a home. I have had hundreds of clients purchase a home within 1 or 2 years post-bankruptcy. It depends on your credit score, your income and, of course, a down payment. I have a whole program called, www.pennywatchers.org to help clients dramatically improve their credit score within 12 months of filing bankruptcy with an eye toward purchasing a home or buying a car.

I haven’t paid on my mortgage in 5 months, can I keep my home?

Yes, you can keep your home if you qualify for Chapter 13 (11 U.S.C. § 1301, et seq). Chapter 13 allows you to take the arrearage and repay it over a 3-5 year period. But, you also, have to pay your regular mortgage payment every month as it becomes due and payable. And if you can’t make these payments, then if you are in foreclosure, you can apply to the Connecticut Court for mediation and possibly get a reduction in your monthly payment. Connecticut has a very strong mortgage mediation program.

I haven’t paid on my car loan in 2 months, can I keep my car?

1. You should know that if you are current on your car payments and want to keep your car, you simply stay current with your car payment, and you will keep your car.
2. If you are behind on your payments, can you quickly get caught up? If so, you’ll keep your car.
3. If you are behind on your car payments, call the finance company and ask if they’ll give you extra time to get caught-up or let you skip a payment.
4. You can possibly refinance your car and reduce your monthly payment while in bankruptcy under a ‘Redemption’ procedure found in 11 U.S.C.§722. This procedure is not common and very few qualify. But it is a valid option. I have used this procedure a number of times.
5. You can possibly use a Chapter 13 petition to keep your car. But first the car loan has to be 910 days old under 11 U.S.C. §1325(a)(9) and many times, it is easier to try to buy another car than use a Chapter 13 to keep your car because a Chapter 13 runs for 3-5 years. Many people have to purchase a car from a place that ‘sells here, pay here’ establishment with a high interest rate.
6. If you know you can’t afford the car and/or make the payments, then remove your personal property from the car. Remove the license plate and put it in the rear window. Every time you leave the car, take the plat or plates with you. The repo people swoop down and take your car wherever they can find it. Many times, the car is taken to Massachusetts for sale. When you go to get another car, you have to turn-in your license plates and your plates could be in Massachusetts.