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Should I File for Bankruptcy?
by: Southeast Louisiana Legal Services (New Orleans office)
Q.	I can't pay my debts. Do I need to file for bankruptcy?

A.	Maybe, but maybe not. Filing for bankruptcy isn't easy or free, and you may not need it. A bankruptcy stays on your credit report for 10 years. If you need to save your home from foreclosure, you may have to file for bankruptcy. Whether you need a bankruptcy depends on what kind of debts, property and income you have, as well as other things. Bankruptcy issues are complicated. Try to get a lawyer to help you if you are thinking about filing for bankruptcy.

Q.	Don't I need to file for bankruptcy to keep my creditors from suing me?

A.	Not always. You may have a good reason why you shouldn't pay the debt. If a creditor sues, you can explain to the judge why you can't or shouldn't pay. But even if a judge orders you to pay, your basic needs are protected: your home, your household goods, and a vehicle.

Q.	I'm going to file for bankruptcy and I've heard there are different kinds. What kind of bankruptcy should I get?

A.	That depends. There are 6 different kinds of bankruptcy. For individuals, the 2 most common kinds of bankruptcy are: "Chapter 7" - This is called "liquidation" because your unprotected (non-exempt) property is all sold ("liquidated") and the money used to pay off your creditors. You would only have to sell your car or your home if they were secured to pay debts. Your debts are discharged in Chapter 7 bankruptcy and you don't have to pay anymore on them. There is a lot more to know about getting a Chapter 7 bankruptcy. To learn more, click here. "Chapter 13" - This kind of bankruptcy is for people with steady income who want to adjust their debts. You have to agree to a repayment plan. Chapter 13 is better than 7 because you can save your home from foreclosure. To get a Chapter 13 bankruptcy, you'll need to show that you: 1) have a steady income; 2) can pay your unsecured creditors more than they would get under a Chapter 7 bankruptcy; and 3) can meet all your living expenses and still have enough money to pay the bankruptcy court and the back payments owed to your secured creditors. But there's a lot more to a Chapter 13 bankruptcy. To learn more about it, click here. Businesses that want to keep operating would normally file a Chapter 11 (reorganization) bankruptcy. For more information about that, click here. Family farmers and family fishermen may need to get a Chapter 12 bankruptcy. Click here to get more details about Chapter 12 bankruptcies. Municipalities (cities, town, villages, school districts, and so on) get what's called a Chapter 9 bankruptcy. For more information about that, click here. When laws of another country also apply to debtors or property, a Chapter 15 bankruptcy may be needed. Click here for more information about that.

Q.	You're talking about "secured" and "unsecured" debts - what does that mean?

A.	Your debts are either "secured" or "unsecured." It's important to know the difference if you're thinking about bankruptcy. A secured debt is tied to a specific piece of property (for example, your car or your house). If you don't pay a secured debt, you can lose that piece of property. The creditor will also report you to the credit bureaus and hurt your credit rating. Unsecured debt is all other debt. Most credit card accounts are unsecured. If you can't pay unsecured debt, your creditor may be able to hurt your credit rating, but he can't take any property from you. To learn the meaning of other words that creditors, lawyers and courts use when talking about debt or bankruptcy, click here.

Q.	I have a lot of credit card debt, but I'm not behind on my house payment. Should I file for Chapter 13 bankruptcy?

A.	Since most of your debt is unsecured and the mortgage company hasn't sent you a default notice, a Chapter 13 bankruptcy may not be your best choice. But, it's always best to talk to a lawyer who can go over your whole situation.

Q.	I have property I want to keep. What kind of bankruptcy should I get?

A.	It depends. You may be able to keep property with either a Chapter 7 or a Chapter 13 bankruptcy. In either kind of bankruptcy, if you want to keep property that is secured for a debt, you'd have to be able to pay the secured creditor and continue the payment contract. Also, the creditor would have to agree to accept the money, or a judge would have to order the creditor to accept it.

Q.	Do I need a lawyer to file for bankruptcy?

A.	Try to get legal help if you are thinking of filing for bankruptcy. There are programs that offer free legal help to qualified people. See the Legal Program Directory tab on the top of every page of this site, where you can look for programs that serve your parish. You may be able to find a free private lawyer through a pro bono program. You may be able to find a private lawyer (not a free lawyer) through a bar association's lawyer referral service. If you find a lawyer to help you, ask about his or her experience. It's better to use a lawyer who has handled a lot of bankruptcies.

Q.	What should I take to the lawyer? What kind of information will she need?

A.	Have ready a list of your debts, your property, your income, and your family obligations. You can find a form on this website that will help you organize your information. You can find a bankruptcy "questionnaire" in the Self-Help section on this website. Click here to go right to it. Fill out the questionnaire before you see a lawyer and you'll have most information ready that the lawyer will need.

Q.	I'm in the military. Do I get any special help in bankruptcy because I'm a servicemember?

A.	There is a federal law called the Servicemember's Civil Relief Act. This law keeps creditors who sue you from getting a default judgment against you. It also can give you extra time in lawsuits. The law applies to all civil (non-criminal) cases, including bankruptcy cases. For more information about this law, click here.

Q.	If I get a discharge in bankruptcy, what does that mean? Does it stay on my record? How long? What else happens?

A.	With a bankruptcy discharge, you won't have to personally pay certain kinds of debts. But, you may still lose property secured as collateral by the creditor. The full effect of a bankruptcy discharge depends on the kind of bankruptcy. For more information about discharge, click here.

Q.	What about this new bankruptcy law I heard about that went into effect on October 17, 2005?

A.	The law covers different things. But the main difference between the old and new law is that if you are at or above Louisiana's median income level (about $31,000 in 2005), you may have to meet what is called a "means test" which would force you to re-pay some of your unsecured, non-priority, debts such as credit card bills, signature loans, or medical bills.


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	Last Reviewed On: 11/04/11

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This web site has been prepared for general information purposes only. The information on this web site is not legal advice. Legal advice depends on the specific facts of each situation. Some information in this web site may not be correct for where you are. The information in this web site is not guaranteed to be up-to-date. The information in this web site cannot replace the advice of competent legal counsel licensed in your state.

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