Frequently Asked Bankruptcy Questions

Should I file for bankruptcy?

You should file for bankruptcy if you do not believe that you can pay off your debts in a reasonable amount of time. You should seriously consider filing bankruptcy if after paying your bills, you are unable to pay for the basic necessities in life such as food, shelter, clothing and health insurance. You should not injure your and your family’s health by paying debts instead of paying for the things that you absolutely need. Learn More

What are the benefits of filing for bankruptcy?

The biggest benefit of filing for bankruptcy is receiving a fresh start under the Bankruptcy Code. People filing for bankruptcy are able to walk away from their debts, such as credit card debt and medical bills, and start out new. Learn More

What is the downside to filing bankruptcy?

The downside to filing bankruptcy is that it will be on your credit report for 10 years. There are some loan programs for which you will not be able to qualify. Some landlords will be reluctant to rent to you if you have a bankruptcy on your record. If you go to purchase a car or a home and you want to obtain financing, you will pay more in interest as a result of having filed a bankruptcy. Over time the effects of your bankruptcy will diminish as you develop a new credit history. 

But initially, the largest issue with bankruptcy is the negative effect it has on your credit report.

Some people believe that the emotional effect of filing bankruptcy is a downside. The thinking is that you will feel like a failure once you have filed bankruptcy. This could not be further from the truth. We have never had anyone regret filing bankruptcy. Typically what happens is that folks wish that they had filed for bankruptcy sooner and that the relief they feel having filed for bankruptcy is so great that they can't imagine life without having filed bankruptcy. Learn More

What will happen to my credit score if I file bankruptcy?

It's not really clear exactly how much of an effect bankruptcy has on your credit. The reason for this is that the credit reporting agencies do not share their formula for obtaining scores with the rest of us. You can assume that your credit will drop 100 to 200 points as a result of filing bankruptcy depending on what else is going on with your credit report. You will work hard to rebuild your credit and the negative impact will gradually diminish. It is possible to have a very good credit score after a few years even with a bankruptcy on your record.  Learn More

How long will bankruptcy stay on my record?

A bankruptcy will stay on your record for 10 years.

How much does it cost to file bankruptcy?

A bankruptcy filed with our firm will cost around $2,000.

Can I buy a house if I file bankruptcy?

Bankruptcy can actually INCREASE your credit score! You can absolutely buy a house if you file bankruptcy. Initially, you will pay more in interest if you have filed a bankruptcy because the bankruptcy will have a negative impact on your credit score. Sometimes, bankruptcy has the effect of clearing out your other debts and making it so that you have a demonstrably better ability to pay on a loan as a result of having filed bankruptcy. Once you have established additional credit and you have eliminated your past debts, the bankruptcy itself can have a positive effect on your credit score and can actually help you buy a house. Learn More

Will I lose my house if I file bankruptcy?

In the state of Washington, people filing bankruptcy are entitled to have up to $125,000 in equity in their home. If you have $125,000 or less in equity in your home, you do not need to worry about losing your house after filing bankruptcy. If you have more than $125,000 in equity, you still have options but they're a bit more complicated and you definitely need to discuss them with an attorney. One option with which we can help is to file a Chapter 13 instead of Chapter 7 and make payments over time in the amount by which the equity in your house exceeds $125,000.

What are the different kinds of bankruptcy?

The different kinds of bankruptcy are Chapter 7, Chapter 13, and Chapter 11: 

• A Chapter 7 bankruptcy is the simplest form of bankruptcy in which a business or individual files Chapter 7 and in the case of an individual, that individual receives a discharge of their debts. 

• A Chapter 13 is a bankruptcy filed by an individual and is typically filed if either that individual has income over a certain level (depending on where you live and household size) or assets that are not exempt from creditors. If the debtor has assets not exempt from creditors, a Chapter 13 bankruptcy is the way that you keep those assets, as your Chapter 13 plan will allow you to pay out the value of those assets in payments over three to five years. 

• The last type of bankruptcy is a Chapter 11 bankruptcy. Chapter 11 is for businesses that wish to reorganize and pay their debts over time among other things. Chapter 11 is also for individuals with high income who need to make payments over time for various reasons. Discussion of Chapter 11 is really beyond the scope of these questions.  Learn More

Can I buy a car after I file bankruptcy?

Ironically after you file bankruptcy you will be inundated with offers to buy cars at a higher rate of interest from people who are excited to lend you money because you have filed bankruptcy and cannot do it again for eight years.  Learn More

I heard there’s a means test to qualify for bankruptcy? What is the means test?

The means test refers to a test of your income, first your gross income and then, if necessary, your net income after allowed expenses. Congress decided that if you have primarily consumer debt and have income over the median income for a household of your size in your area, you have to file a chapter 13 instead of a chapter 7, unless, after deducting allowed expenses, your remaining disposable income does not allow for a meaningful payment to creditors. The calculations around what expenses get deducted and how much is a meaningful left over amount are not intuitive and if you have questions please contact us..

How can I rebuild my credit score after bankruptcy?

We will provide you with a complementary course, worth $1,000 called 7 Steps to 720 Credit Score that you can follow in weekly 7 to 12 minute sessions that gives you the tools to rebuild your credit score.

How do I prepare for bankruptcy?

If you’re staying up at night worrying about your debt payments, having at least a consultation about whether bankruptcy is an option you should seriously consider. There are four ways to know if it’s time for you to talk to a bankruptcy attorney. Learn More