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Answers to 10 tough bankruptcy questions

Justin Harelik
Justin Harelik

Bankruptcy can be a bewildering process. Here are some of the most common questions sent to Bankrate about Chapter 7 and Chapter 13 bankruptcy.

Is credit counseling as damaging as bankruptcy?

A Chapter 7 bankruptcy eliminates many existing debts, but remains on your credit report for the next 10 years and can make it harder for you to get a new job or credit. With credit counseling, you consolidate your bills into one monthly payment for a period that lasts usually three to five years, but it often doesn't work and most lenders will not lend to you until your counseling period ends and you have re-established some credit. Read more

If I don't pay the balloon payments on two HELOCs, which were included but not reaffirmed in a Chapter 7 bankruptcy, will the lenders foreclose?

You are so far upside down that the HELOC lenders are likely going to charge off the loan. Once you stop paying, the lenders are likely to claim the loans uncollectible rather than foreclosing. Read more

Is it legal for my credit card issuer to levy my bank account for a debt that was "charged off" years ago?

Unfortunately, at this time, all your assets are at risk once the creditor has a judgment against you. The creditor can levy your bank account down to the last dime, up to the amount you owe. Read more

Should I file for bankruptcy or try to force my ex-husband, who filed for bankruptcy after our divorce, to pay a large debt in both our names?

There is a reason why the bankruptcy firm advised you to consult a divorce attorney to file for contempt and the divorce attorney told you to file for bankruptcy. The divorce attorney probably thinks it is too expensive for you to go after your ex-husband, and the bankruptcy attorney told you the bankruptcy will negatively impact your credit. Read more

Can one spouse file for bankruptcy?

It is possible for only one household member to file for bankruptcy, keeping the other spouse out. However, you need to explore both options before making the decision to file for Chapter 13. Read more

What is the best way to start to rebuild your credit after a bankruptcy?

Although there are a few options, the easiest way to start re-establishing credit is with a secured credit card with a local credit union or bank. Some institutions will want to see at least 12 to 24 months of good payment history before offering you an unsecured card. Read more

Will I ever recover my 750 credit score if I file for bankruptcy?

You could have a credit score above 750 within a few years after your bankruptcy case has been discharged. After you receive your "Discharge of Debtor" notification from the court that all debts have been discharged, take the next step of making sure your credit report is as clean as possible before you apply for new credit. Read more

Can we refinance a mortgage in Chapter 13 bankruptcy?

Refinancing a mortgage in Chapter 13 bankruptcy is an uphill battle, especially if you are underwater, meaning you owe more than the home is worth. Your best bet may be to either continue making payments on your present mortgage under Chapter 13 bankruptcy or seek a loan modification. Read more

Will business bankruptcy hurt my credit score?

In the vast majority of cases, small-business owners are personally liable on some or all of the debt incurred while operating a business. If you used your Social Security number to apply for a credit card for the business or personally guaranteed debts to a vendor, those debts will follow you even after the business is closed. Read more

If I declare Chapter 7 bankruptcy, will my HELOC be dismissed?

You cannot eliminate a home equity line of credit, or HELOC, that is secured by your home in a Chapter 7 bankruptcy while keeping the house. That line of credit must be paid in order to keep your property. Read more

Ask the adviser

To ask a question of the Bankruptcy Adviser, go to the "Ask the Experts" page and select "Bankruptcy" as the topic. Read more Bankruptcy Adviser columns and more stories about debt management.

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