Q— I think I need to seek bankruptcy relief, but I am afraid of losing my home and my car. Can I file and still protect my home and vehicle?

A— This is the question most often asked when a client comes in for a consultation. While debts are usually discharged in a bankruptcy, the lien on your car or mortgage interest in your home is not. Ordinarily, so long as you keep current with your home mortgage payment or car loan payment, you will be able to keep your house and car. The lien or mortgage instrument will control, as if the bankruptcy filing had never occurred. If you are not current with your home and vehicle obligations, a Chapter 13 reorganization may be your best option. As for exemptions, most Vermonters do not have excess equity in their homes or cars to the extent that the assets would be sold to satisfy debts to their creditors. With an average amount of available equity and continued regular monthly payments, the answer is yes, you can seek a bankruptcy discharge of your unsecured debts while keeping your car or house.

Q— I have debts that are out of control and I need bankruptcy protection, but I don't want to file on the debts to my local store and to my relatives. Can I pick and choose who I 'file bankruptcy on'?

A— Many clients come in with the misperception that they can pick and choose who they file 'on.' The mistake may come from the fact that the client has heard that bankruptcy can be filed without the loss of the car or house. As explained in the answer to the previous question, secured debts, such as on your home or car, are special in nature. The lien survives, but the client must still list the debt on their bankruptcy petition. All outstanding debts of any kind or nature must be listed on the bankruptcy petition. It is important that the petition constitutes a full disclosure of the client's debts and assets, income and expenses or you may be denied a discharge. After you receive your discharge, while you are no longer obligated to pay the discharged debts, you may choose to voluntarily make payments to some or all of your creditors.

Q— Someone who owes me money just filed for bankruptcy-what can I do?

A— First and foremost, what to do depends upon which chapter that person or entity filed. If a Chapter 7 petition was filed, 99% of the time, the answer is nothing. Most Chapter 7 cases become no asset cases, meaning that the person's assets fit within the available exemptions and no distribution is made to creditors. If the case becomes an “asset case, and you received notification of the filing itself, you will receive a notice to file a claim to participate in any distribution. Objections to discharge may be filed in instances of fraud or misrepresentation or for debts that are not dischargeable such as child support.

If a Chapter 13 or Chapter 11 petition is filed, you will most likely need to seek legal consultation. In these reorganization chapters, the debtor is entitled to put together a repayment plan, unique to the filer's circumstance. You may need to object to the confirmation of the debtor's plan based upon improper treatment or you may attempt seek an increased dividend after further discovery regarding the debtor's financial condition.

Q— I had debts before I got married. Does my new spouse become responsible or can I just file for bankruptcy relief by myself?

A— If your spouse did not use the credit cards in question or sign an application for the cards or debts, then the spouse is most likely not responsible for any of your debt. One spouse can file for bankruptcy without including the other spouse on the petition. More importantly, in Vermont, assets that are owned jointly by both husband and wife, cannot be liquidated to pay the debts of just one spouse. Therefore, with some exceptions, your joint assets would not be subject to the possibility of liquidation by the bankruptcy trustee to satisfy your sole debts.

Q— I just lost a high paying job and don't think I can keep up with my credit card payments. Is now a good time to file?

A— We try to insure that when a bankruptcy is filed, the discharge provides a fresh start to the client. In doing so, we inquire whether the client will have sufficient income going forward to support himself or herself without resorting to credit cards for basic necessities. As is often the case, much of the reasonable credit will be unavailable immediately after receiving a discharge and the client will be unable to continue buying groceries, for example, on credit. We hope to file a client after a new job is obtained or other circumstances begin to look up so that the discharge is really beneficial to that person. In most cases, the client has time to examine his or her options before rushing into a bankruptcy filing.