Will I lose my 401(K) or pension?

Most retirement accounts are safe-guarded from liquidation in bankruptcy if they are ERISA qualified i.e. IRA, Roth IRA, 401(k), 403(b) and PERA. Retirement accounts that operate as money market accounts or brokerage accounts are not exempt in bankruptcy. Stocks, bonds, debentures, self-settled trusts, and whole-life insurance policies are subject to liquidation in bankruptcy. Thus, it is important to discuss with your attorney any and all ownership of financial instruments whether they pertain to your retirement or not.

What does “reaffirm a debt” mean?

Reaffirming a debt means that you agree to be liable for a debt that could be discharged in your bankruptcy case. You may sign a reaffirmation agreement and the agreement will be filed with the bankruptcy clerk. If you break the agreement in the future you will still be responsible for the outstanding debt.

What is a bankruptcy discharge?

The bankruptcy discharge is a court order stating that all debts eligible for discharge under the law have been discharged in the bankruptcy. The discharge order does not name which creditors have been discharged and which have not. Thus, it may be necessary to discuss the effects of discharge on your debts with your bankruptcy attorney. Certain unsecured debts, including student loans, taxes in the three years prior to the bankruptcy, domestic support obligations, and/or court ordered restitution cannot be discharged.

Can a creditor avoid the automatic stay?

In cases where a loan is secured by a tangible asset like a home or a vehicle, the creditor could seek relief from the stay should you fail to pay the loan payments. In those cases, the Court will grant relief from the automatic stay and allow the creditor to repossess or foreclose on its collateral.

What is the automatic stay and when does it take effect?

The automatic stay takes effect as soon as the bankruptcy case is filed. The automatic stay prohibits or stays creditors from any further collection actions, including all written and verbal communication regarding debts owed to them. The automatic stay expires at the time the Court issues the final discharge order. Given that creditors are prohibited from communicating, it is often necessary to create an exception to the stay when seeking to make ongoing auto or mortgage payments.

When will bankruptcy provide me relief and protection from my creditors?

Upon filing of your bankruptcy case, your creditors will receive notice from the Bankruptcy Court requiring all collection efforts to cease, including any communication. In some cases, creditors may take some time to process the bankruptcy notice which could lead to communication even after the bankruptcy filing. If so, please let creditors know of the bankruptcy filing and provide them with the case number.

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Chapter 7 Q & A