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What Happens After Declaring Bankruptcy?

Finding out what happens after you declare bankruptcy is just as important as knowing what to expect during bankruptcy. Read the follow FAQs about what to expect after filing and how to get your credit back on track.

Below are the general FAQs that we receive from many of our New London clients and if there are questions you have that aren’t answered here, please feel free to contact us so we can answer them for you.

How will bankruptcy affect my credit report?

After your bankruptcy discharge, your credit report should list your debts as “included in bankruptcy” with a “zero balance.”

There should be no activity on these accounts after the date you filed your case, including delinquencies, repossessions, or new collection reports. In essence at this point, with respect to those points, you’re in the clear.

Will bankruptcy ruin my credit forever?

No! Bankruptcy is a financial “fresh start.” Your bankruptcy discharges unsecured debts that you cannot pay and stops all of the negative information from showing up on your credit report.

Because bankruptcy immediately stops negative reporting, some debtors report that their scores actually improve quite soon after filing bankruptcy. This is always good news!

How soon can I apply for credit after bankruptcy?

A Chapter 13 bankruptcy debtor is expressly forbidden from using credit during the case without the permission of the bankruptcy trustee.

Chapter 7 debtors should not use credit until after the bankruptcy is discharged.

How soon can I buy a house after bankruptcy?

There is no absolute waiting period and you must qualify for the home loan just like other consumers.

There are waiting periods to qualify for certain government-backed loans (generally two years) but in general your options for waiting are like any other home buyer.

How soon can get a car loan after bankruptcy?

There is no absolute waiting period and you must qualify for the auto loan just like other consumers.

Can I be fired or denied employment because of bankruptcy?

Government and private employers may not fire you because you file bankruptcy. A government employer may not refuse to hire you because of your bankruptcy. This is the law and the bottom line so have absolutely no worries about this at all.

Will my bankruptcy affect renting an apartment?

This depends. A landlord can refuse to rent to a person because of bad credit, including a prior bankruptcy. However, as a bankruptcy lawyer in Connecticut now for quite some time, I must say, I’ve rarely heard of a landlord doing this. Most landlords do not discriminate especially if you can prove you have current and steady employment income.

Offering to pay several months in advance or provide a larger deposit is a good idea to try and help overcome the landlord’s concerns.

Can I be denied emergency medical treatment if I file bankruptcy?

The Emergency Medical Treatment and Active Labor Act requires hospitals and ambulance services to provide emergency healthcare to a person regardless of ability to pay. This federal law requires appropriate medical screening, necessary stabilization, and transfer to an appropriate facility for treatment of an emergency condition.

The long story short, whether you’ve gone through bankruptcy or not, or whether you are able to pay, emergency medical treatment cannot be denied to you.

Can my doctor refuse to treat me if I file bankruptcy?

Yes. Most physicians will continue to provide service if you pay their bill. If you have discharged a doctor bill, your physician may refuse to treat you and unless you have a very good relationship with your doctor.

Can I open a checking account after bankruptcy?

Yes. However, it will be more difficult if you have discharged a bank account debt. Most banks use Chexsystems which is a consumer reporting agency that provides information regarding accounts at banking institutions.

A bank may refuse to open an account if you have a derogatory history on your Chexsystems report. Negative information may remain on your Chexsystems file for five years. To view your Chexsystems report for free, you can simply visit this link at the Chexsystems website.

Can a creditor reopen my bankruptcy case?

A creditor or the U.S. Trustee may petition the court to reopen your case to revoke your discharge if your discharge was obtained by fraud. There is a one year clock that either starts from the date of the discharge order or the date the case was closed.

It is possible for creditors to reopen a bankruptcy case to seek “recovery from a previously undisclosed asset of the debtor,” even after the time for revoking the discharge has passed.

Additionally, assets that are acquired within 180 days after the case is filed may come under the jurisdiction of the bankruptcy court. These interests include inheritances, divorce property settlement agreements, and life insurance benefits, and may allow a creditor or the trustee to reopen your bankruptcy case.

What if I forgot a creditor during my bankruptcy?

This would be a very important matter and you must call your attorney immediately!

How an omitted debt is handled depends on the court and the circumstances. In most no-asset Chapter 7 cases the bankruptcy discharge took care of the debt even though it wasn’t listed in the schedules. However, there are some cases where it is prudent to ask the bankruptcy court to reopen the bankruptcy case and discharge the debt.

In other cases the debt cannot be discharged and the debtor is simply stuck with the debt.

Are my discharged debts taxed?

Debts that are discharged in bankruptcy are not taxed as income. Occasionally a discharged debtor will receive an IRS 1099-C form in the mail from a discharged creditor. All you need to do is simply tell the IRS that you have discharged the debt in bankruptcy by filing an IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, with your income tax form.

Can I still pay a discharged creditor after bankruptcy?

Yes! The Bankruptcy Code requires you to list all debts, including those you would like to pay. Also, the bankruptcy court’s discharge injunction prohibits the discharged creditor from contacting you or attempting to collect on the debt, but nothing prohibits you from paying a discharged debt.

Paying on a discharged debt does not void the discharge injunction or revive the debt but if you can afford it at the time it is a great gesture.

What if a discharged creditor or collector contacts me after bankruptcy?

Sometimes a creditor or collection agency will unknowingly contact a discharged debtor. The simple way to deal with this situation is to refer the creditor to your attorney. The creditor needs your bankruptcy case number, the chapter you filed under, and the date of the discharge. If you have this information on hand you can also simply provide it for them.

Knowing or repeated contacts by a creditor violate the court’s order. If this happens, you should contact your attorney immediately because it contacting you after a bankruptcy discharge is against the law.

What if I win the lottery or inherit money after my bankruptcy case is closed?

Property that could become your property before your filing, and actually does become your property within 180 days of your bankruptcy filing is part of your bankruptcy estate.

That includes inheritances, insurance money, and could include a winning lottery ticket that was purchased before you filed your bankruptcy case.

What can I do about taxes that were not discharged?

The IRS has several repayment programs to repay taxes. You may also discuss the option of an offer in compromise with a tax professional.

How soon do I start repaying my student loans after bankruptcy?

The student loan lender or servicer is prohibited from attempting to collect from you during your bankruptcy case. After your case closes, any loan that was not in default status prior to your bankruptcy will be “reset,” meaning your loan is considered current.

Generally, the student loan provider will contact you within three months of your case being closed.

How can I remove a bankruptcy from my credit report?

Your bankruptcy is a public record that can stay on your credit report for up to ten (10) years from the date you filed your case (not the discharge date).

Some credit bureaus will voluntarily remove information of a Chapter 13 bankruptcy after eight years from the date of filing. Companies or individuals that promise to remove bankruptcy information from your credit report are scams (and potentially illegal).

These scams are a true indicator as to why it’s important to speak with a bankruptcy attorney before speaking with any company that claims to do the job faster or in no time.

What if I need to file bankruptcy again?

After you receive a discharge in a previous Chapter 7 bankruptcy case, you have to wait 8 years before you can receive another Chapter 7 discharge; and 6 years to receive a Chapter 13 discharge.

If you received a discharge in a previous Chapter 13 bankruptcy case, you have to wait 4 years before you can receive a Chapter 7 discharge; and 2 years to receive another Chapter 13 discharge.

The time periods are measured from the date the previous case was filed. In cases when a discharge is not needed, the debtor can another bankruptcy immediately.

We hope this information was most helpful to you and if you have any more questions feel free to contact us as we’d be more than obliged to assist you.