Frequently Asked Questions About Bankruptcy
Bankruptcy can feel overwhelming, but you are not alone. We’ve grouped the most common questions into easy-to-follow sections so you can quickly find the information you need. Whether you’re filing as an individual or for your business, this page will help you take the next step with clarity.
Understanding Bankruptcy Basics
Bankruptcy is a legal process designed to help individuals and businesses eliminate or restructure debt under the protection of federal law.
Unsecured debts like credit cards, medical bills, payday loans, and some personal loans can often be wiped out. Certain debts like student loans, recent taxes, and child support usually cannot.
The automatic stay is a court order that stops all collections, lawsuits, foreclosures, and wage garnishments as soon as you file.
Not necessarily. Many people keep their home, car, and personal property through legal exemptions.
Chapter 7 Bankruptcy
Chapter 7 allows you to eliminate most unsecured debts through liquidation, often in just a few months.
Eligibility is based on income and household size using the means test. We can evaluate this during your consultation.
In most cases, no. Many assets are protected by exemptions under New Jersey or federal law.
Chapter 13 Bankruptcy
Chapter 13 allows individuals with regular income to restructure and repay their debt over three to five years while keeping their assets.
Yes. It can stop foreclosure and allow you to catch up on missed mortgage payments over time.
If you miss payments, your case may be dismissed. We work closely with you to help stay on track.
Chapter 13 involves repayment; Chapter 7 is typically faster and discharges debts without repayment. We’ll help you choose the right option.
Chapter 11 & Business Bankruptcy
Chapter 11 is a reorganization bankruptcy used by businesses and high-debt individuals. It allows operations to continue while debts are restructured.
Yes. Small businesses can file under Chapter 11, and many qualify for the streamlined Subchapter V option.
Chapter 7 closes and liquidates a business. Chapter 11 keeps it open under court supervision while restructuring debt.
Chapter 11 Subchapter V Bankruptcy
Businesses and Business owners with debts under a certain limit (aggregate debt of $3,424,000 as of April 1, 2025) and that are actively engaged in commercial activity may qualify.
It offers faster timelines, reduced costs, no creditors’ committee, and allows owners to retain control of their business during the reorganization process.
The court’s filing fee is about $1,738, and attorney fees vary depending on the complexity of your case. Overall, Subchapter V cases tend to cost less than traditional Chapter 11 filings because the process is more streamlined and efficient. We provide free consultations to discuss your situation and provide a cost estimate before filing.
Most Subchapter V cases are completed in about three to six months, though timing can vary depending on the details of your plan and court schedule.
Yes. One of the main advantages of Subchapter V is that it allows you to continue operating your business while restructuring your debt.
Both options help businesses reorganize and stay open. Chapter 11 is often used by larger companies with more complex finances, while Subchapter V is a simplified version designed for small businesses. It’s generally faster, less expensive, and helps owners confirm a repayment plan more easily.
Life After Bankruptcy
No. Bankruptcy affects your credit, but many people begin rebuilding within months. You can qualify for new credit, a car loan, or even a mortgage over time.
Chapter 7 stays for 10 years. Chapter 13 stays for 7 years from the filing date.
Yes, typically within 2 to 4 years depending on the loan type and your financial recovery.
Legal Process & Filing Help
Bankruptcy law is complex. An attorney ensures your case is filed correctly and your rights are protected.
You’ll need tax returns for the last two years, all income for the last six months, a list of debts and assets, and other financial records. We’ll guide you through every step.
This is a brief meeting with a bankruptcy trustee, where they review your case and ask basic questions. It is not a court hearing.
At our firm, we believe in clear, upfront pricing — no hidden fees or surprises.
Common Concerns Before You File
Not necessarily. In most cases, you can keep your car if you’re current on payments or include it in a repayment plan under Chapter 13.
If the equity is protected by exemptions, you can likely keep the vehicle. If not, you may need to pay that equity back through a Chapter 13 plan or buy it back from the trustee in Chapter 7. We’ll help you assess your options.
In many cases, no. If you are current or can catch up on payments through Chapter 13, you may keep your home. New Jersey also offers homestead exemptions that protect some equity in your property.
No. Most people keep all or most of their belongings. Bankruptcy laws allow you to exempt personal items, household goods, and retirement funds. Each case is unique, and we’ll help ensure your property is protected.
No. You must list all your debts and creditors. You cannot selectively omit credit cards, even if you want to keep one. Once your case is discharged, you can begin rebuilding new credit.
No. Making large withdrawals or transfers before filing can raise red flags or even result in your case being delayed. Always speak with your attorney before moving money or assets.
No. Transferring assets before filing can be considered fraud and may jeopardize your bankruptcy. We’ll review your financial picture and legally protect what we can.
Possibly. Certain federal income taxes may be dischargeable if they meet strict timing and filing criteria. We will evaluate your tax situation during your consultation.
Will I lose my retirement accounts if I file?
Bankruptcy is public record, but it is not publicly advertised. Unless someone searches for it or checks your credit report, they are unlikely to find out. Employers or friends typically won’t be notified.
Yes. Many clients qualify for financing within one to three years of their discharge, especially if they rebuild their credit responsibly.
Yes. Filing triggers an automatic stay that halts lawsuits, garnishments, and most collection activity. Let us know if you’ve been sued so we can include that in your filing.
No. One spouse can file individually. However, if you share joint debts, the non-filing spouse may still be responsible. We can guide you on the best approach for your household.
Yes. Filing for bankruptcy immediately stops wage garnishments as soon as the bankruptcy is filed. In many cases, your attorney can even recover money that was garnished shortly before the filing date.
Yes — you can include past-due utility bills in your bankruptcy just like any other debt. When you file, the bankruptcy stops the utility company from cutting off your service because of old balances. Those unpaid bills are discharged at the end of your case. As long as you pay your new bills on time after filing, your lights, gas, and water will stay on.
Yes — you can include unpaid tolls and E-ZPass balances in your bankruptcy just like any other debt. If you owe money for missed tolls, administrative fees, or penalties, those are treated as unsecured debts and can be wiped out. However, Fines or penalties owed to a government agency (for example, civil penalties or tickets issued by the state) may not be dischargeable
No. Today, most bankruptcy cases are handled virtually. You won’t appear in front of a judge or go to a courthouse. Instead, you’ll attend a short meeting with the bankruptcy trustee — called the “341 meeting” — which is typically held by Zoom. It’s a simple verification meeting that usually lasts about 10 minutes, where the trustee asks a few questions to confirm your paperwork.
If your spouse doesn’t file with you, your bankruptcy will not appear on their credit report. Your bankruptcy only affects your spouse’s credit if they share responsibility for the same debts
Yes — medical bills are fully dischargeable in bankruptcy. That means you can wipe out debts from hospital visits, doctor’s offices, emergency rooms, lab tests, surgeries, or collections from medical providers
LET’S TALK
A bankruptcy is not the end, it’s a new beginning.
Whether you’re ready to file or just exploring your options, we’re here to help. Schedule a confidential consultation with attorney Carlos D. Martinez and get clear answers about your next steps.
