Appendix 1

• Jurisdiction: United States

Appendix 1

Frequently Asked Questions

For more FAQs, information and archival material, please visit www. bankruptcyresources. org.

Question 1: The debtor is having trouble keeping up with bills and is constantly contacted on the telephone by collection agents. Is bankruptcy the debtor's only choice?

No. There are alternatives to bankruptcy. Consumers can either (1) work directly with the creditors to get extended and reduced repayment terms, or (2) use a credit counseling service to assist with negotiations with creditors. While creditors are not required to discount debts or work with credit counselors, they often find those efforts on the part of the debtor to be preferable to a debtor's resorting to bankruptcy.

Question 2: What are the types of bankruptcy available to the consumer debtor?

The two chapters used by the average consumer are chapter 7, where the debtor's nonexempt assets are liquidated and distributed to creditors, and chapter 13, in which debtors make payments to creditors over a period of time and may retain their nonexempt assets. Although available to consumer debtors, chapter 11 is reserved for consumers with very high debts.

Question 3: How does the debtor decide which chapter is best?

Three inquiries may assist debtors in answering this question: (1) In a chapter 7, will application of the means test apply, and if so, will a presumption of abuse be triggered?; (2) in a chapter 7, will the debtor lose nonexempt property that the debtor wishes to retain?; and (3) does the debtor wish to retain secured property, such as a car or a home, on which the debtor is delinquent on payments?

Question 4: Can others find out about a bankruptcy?

Yes. However, while bankruptcy filings are matters of public record, few garner much attention.

Question 5: What happens if the debtor's employer, landlord or the utility company finds out that the debtor filed bankruptcy?

Generally, nothing. 11 U.S.C. § 525 protects a debtor from discriminatory or adverse employment treatment as a result of a bankruptcy filing. Section 366 provides analogous protections in utility services. Although there is no "special" protection in the law to prevent an eviction because of bankruptcy, if a debtor is paying rent as it becomes due, a landlord will not have much incentive to evict the debtor.

Question 6: Can a prospective employer consider my bankruptcy in a hiring decision?

The courts have held that while government employers may not deny employment to those who file for bankruptcy, and while private employers cannot terminate an employee because of a bankruptcy, a private employer can refuse to hire a person on account of a bankruptcy filing.⁵⁹⁴

Question 7: May a debtor file for bankruptcy for just some of his or her debts?

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