Is Bankruptcy the Right Step?

  • What will bankruptcy do for me?
  • What does “Automatic Stay” mean?
  • Does the Automatic Stay apply in every situation?
  • Will my credit score decrease after filing?
  • If I file but my spouse does not, what happens to my spouse? What about someone who co-signs on my debt?

Q: What will bankruptcy do for me?

A: Bankruptcy has different benefits for different people.  People file bankruptcy to stop creditors, foreclosures, repossessions, wage garnishments, lawsuits, and judgments.

Q: What Does “Automatic Stay” Mean?

A: In bankruptcy parlance, “stay” means to stop and prevent your creditors from taking any collection action.  The Automatic Stay goes into effect the moment you file.  This means your creditors cannot proceed with foreclosure, repossession or any other legal actions against you unless they obtain permission from the bankruptcy court.  For example, in Maryland the Automatic Stay prevents the Comptroller from holding up the renewal of your driver’s license or car registration.  The Automatic Stay will not stop child support and alimony payments.

Q: Does the Automatic Stay apply in every situation?

A: No.  The Bankruptcy Code limits the Automatic Stay from applying in certain situations.  Here are some of the more common ones:

  • Criminal actions or proceedings
  • Modifying child support and alimony
  • Collection of and withholding of income for child support and alimony
  • Tax refunds
  • Certain repeat filers

Q: Will my credit score decrease after filing?

A:  In many cases, credit scores go up about two years after filing.  Although bankruptcy stays on your credit report for 10 years, debtors who have wiped out their debt and put in the effort to pay their bills regularly after getting a discharge will see their credit score go up.  The reason is simple.  Before the discharge, a person faces many debts and creditors ready to pounce and collect what is owed.  After the discharge, however, the person is debt free, with certain exceptions, and cannot obtain another Chapter 7 discharge for eight years.  So long as the person has a regular income and shows he can pay his bills regularly, lenders often see the post-Discharge borrower as a much better credit risk.

Q: If I file but my spouse does not, what happens to my spouse?  What about someone who co-signs on my debt?

A: If you and your spouse owe jointly on a debt, your spouse will still be responsible for the debt.  Your bankruptcy filing will not discharge your spouse’s liabilities.  For example, if you both signed for your house or car loan, your spouse will still have to deal with these debts even though you receive a Discharge.  The same answer applies to someone who co-signed on your debt.  You will be discharged, but the will still have to pay.

To speak with an experienced, effective, and affordable bankruptcy lawyer, contact us and call today for a free consultation at 443-472-4101.