Bankruptcy FAQ

This page goes over some of the most common questions we receive from potential clients. We are happy to go over these by phone during your free initial consultation. Likewise, we encourage you to read through these questions to help prepare you for your consultation and to let us more accurately address your specific situation.

Common Questions About Bankruptcy

Credit Cards

Can I keep one or more of my credit cards that I like? Generally no, as soon as you file they usually will close them down, even if you owe them nothing. However, you can go back to a creditor and potentially reopen an account with them if you did not discharge any debts owed to them.
When can I get credit cards after I file? Some high interest cards will contact you right away. Generally after your discharge. The rates will not be great an the balance low to start. However, you will get many, many offers.

Credit Report & Credit Availability After Filing

How long does it take my credit report to repair after filing? Usually 12-24 months if you get 3-5 cards or installment contracts and make all payments timely. For most clients, it takes a year to hit the 600’s and two years to hit 700’s.
How much will my credit drop after filing? It depends on where you start. If you are in the 700-800’s, it will probably drop by 200 points. If you are lower to start then it is a lower drop. If you are in the 400’s, it barely drops at all.
What if a creditor doesn’t update my credit report after I file? Use an FCRA dispute letter after you get your discharge. If they do not correct your report, call us to resolve.
When can I buy a house after a bankruptcy? Generally two years after your discharge, conventional lending will be available.

Debts that are non-dischargeable?

Debts listed under 11 USC 523(a) or that were not disclosed, fraudulently transferred, or incurred via fraudulent circumstances are generally non-dischargeable
The most common debts that are deemed non-dischargeable include:
- Debt or Fines owed to the goverment via 11 USC 523(a)(7)
- Family law debts such as alimony, maintenance, and support (11 USC 101(14a)) via 11 USC 523(a)(5),(15)
- Fraud, willful injury, embezzlement via 11 USC 523(a)(2),(4),(6)
- Personal injury with a vehicle if drugs, alcohol, or impairment involved via 11 USC 523(a)(9)
- Student loans if there is no hardship argument and from a qualified institution via 11 USC 523(a)(8)

Exemptions

What is an exemption? An exempted asset is an asset you get to keep no matter how much you owe your creditors.
What type of exemptions are available in Washington? Federal and State are both available and you can choose which one you prefer. State exemptions are generally best when you have a large homestead. Federal exemptions are generally best in all other scenarios.

How Often Can I File?

Between chapter 7’s, 8 years
Between chapter 13’s, 2 years
From chapter 7 to chapter 13, 4 years
From chapter 13 to chapter 7, 6 years
Technically, you can file a chapter 13 right after a chapter 7 or chapter 13 but you will not receive a discharge. This technique is used on non-dischargeable debts like student loans, restitution, or similar debts

Houses, Homesteads, and Saving Your House

Can I keep my house in a bankruptcy? Yes, generally, if you have no equity or your equity is less than $125,000.00 plus cost of sale.
Can I homestead a property I don’t live in? Yes, but it requires you to meet certain requirements under RCW 6.13. Generally you will need to put in a declaration of homestead and of non-abandonment of homestead and cannot be renting or intending to sell.
Can I homestead a property in another state? No, under current laws it must be in Washington state.
When can I qualify for a home loan after I file bankruptcy? Generally two years after the date of discharge.
Can I sell my house inside the bankruptcy? Yes, though it is not the same process as a normal sale. We can explain more about this if you are considering this as an option.
Can I keep more than one house? It depends on the equity. If you own three houses all with negative equity, then the court would have no power to sell any of them. Generally, you can only protect one house with equity and if you have multiple properties with equity you will likely lose the other houses.

Military Questions

Can I file while enlisted or commissioned? Yes, though it might impact your security clearance. Unlike twenty years ago where a bankruptcy automatically downgraded your clearance and may have resulted in involuntary separation, bankruptcy is now a common scenario that usually does not impact your clearance or your career. Our best practice is to discuss the requirements under DDoD 5220.6 and approach your security clearance manager after speaking with us.
Can I file while I am deployed? Yes you can. It depends upon your home of record and if we can get a clear phone connection. If you are downrange but have access to a phone, generally we can work something out with the court. The court is generally very supportive of military personnel and sensitive to deployment issues.

Vehicles

Can I get rid of a car I don’t want? Yes, you can surrender the vehicle and avoid all liability in a chapter 7 and likely most or all liability in a chapter 13.
Can I keep a car through a bankruptcy? Yes, you can sign a reaffirmation agreement so the car rides through the bankruptcy as if it you never filed. You may have to pay a small legal fee but otherwise you continue making regular payments.
What is a redemption? Redemption is when you buy a vehicle out of the bankruptcy. So if a car has a note value of 20k and the blue book says it is worth 10k, if you can pay 10k then you can just buy it out free and clear. There are companies that will give you redemption loans if you lack the funds to buy it out.
I filed a bankruptcy and just got into an auto accident before my case closes, what does that mean? If you are in a chapter 13, you may have some options ranging from dismissal and refiling to dismissing and refiling as a chapter 7. In a chapter 7 scenario, you likely cannot freely dismiss and may be liable.