Frequently Asked Questions

1. What is a Chapter 7 bankruptcy? 

It is a 90-day process that legally writes off all or most of your debts, with certain exceptions. You are allowed to keep all of your assets as long as they fit within permitted “exemptions.” Most Chapter 7 filers’ assets are exempt. Generally, you must continue paying for secured debt, such as vehicle loans and home mortgages, if you want to keep them.

2. What is a Chapter 13 bankruptcy? 

This process takes three to five years, and is more flexible than Chapter 7 bankruptcy, but also more complex. You propose a payment plan that the bankruptcy court must approve. This interest free payment plan significantly reduces what you pay back to your creditors. This protects you from creditors and applies to unpaid debt on a home and child support, and taxes.

3. What’s the effect of a bankruptcy on my credit rating? 

It’s important to be very practical and honest when thinking about your credit record. Think about the effect of filing bankruptcy compared to a poor credit record if you do not file, which could include late payments, court judgments, and foreclosures. A bankruptcy is reported to credit reporting agencies and remains on your credit report for up to 10 years after the filing of the case. However, if your debt payments are crushing you, bankruptcy will give you a much-needed fresh start.

4. How quickly can I stop the creditors from calling me? 

Filing bankruptcy legally stops the creditors from calling you. The minute your petition is filed, debt collectors can no longer legally call you. However, it could take a few days for them to receive notice of the filing.

5. Will my creditors stop harassing me after I file? 

As soon as your petition is filed with the bankruptcy court under either Chapter 7 or Chapter 13, a “stay” of almost all forms of debt collection automatically protects you, including creditor calls, letters, lawsuits, garnishments, repossessions and foreclosures. However, the automatic stay does not cover certain legal actions, such as collection of current domestic support obligations or determination of child custody.

6. Can I keep my vehicle if I’m currently making payments on the loan? 

Yes, most likely. In a Chapter 7 case, you need to keep making payments, likely enter into a “reaffirmation agreement” with the creditor exempting that vehicle loan from the discharge of your debts, and you will own the vehicle once you’ve paid it off. In a Chapter 13 case, you may have additional options such as paying less and keeping the vehicle, depending on the value of the vehicle compared to the amount of the debt and the age of the loan.

7. Can I keep my vehicle if I’ve fallen behind on loan payments? 

If you have just missed one or two payments and repay those debts within the three months that a Chapter 7 takes to process, then a Chapter 7 case would likely be the simplest option to keep the vehicle. If you are further behind, or can’t repay the debt during that short time, Chapter 13 gives you more time. Chapter 13 also protects your vehicle if you have more equity in it than the available exemption amount. And it may allow you to keep the vehicle and pay less than the balance for the title.

8. What kind of bankruptcy stops a foreclosure if I want to keep my house? 

Both a Chapter 7 and Chapter 13 will temporarily stop a foreclosure, but a Chapter 7 usually won’t buy you enough time. A Chapter 13 will stretch your repayments out over three to five years. A non-bankruptcy mortgage modification can be done in collaboration with either kind of bankruptcy.

9. Can I reduce the balance on my first mortgage? 

Not directly. Usually there is no “cramdown” on the principal of a first mortgage in Chapter 13, and all interest and other fees have to be paid through “cure payments” through your Plan, unless the mortgage is not on your “principal residence” but rather on a rental or other commercial property. A non-bankruptcy mortgage modification might reduce the balance (not likely), and a bankruptcy can sometimes help a modification be approved.

10. Can I avoid paying second or third mortgages? 

In a Chapter 13 case, yes, but NOT in a Chapter 7 case. IF there is NO equity whatsoever securing a junior mortgage, that mortgage can be “stripped off.” Under those circumstances, that lien against the title to your home would be erased, effectively turning your debt on that mortgage into an unsecured one. You may have to pay a small percent of the debt through your Chapter 13 plan, but at the end of your case you would owe nothing and the lien would disappear forever.

11. Can I erase judgment liens from the title of my home? 

Possibly. In either a Chapter 7 or 13 case, you can “void” a judgment lien from a lawsuit by an otherwise ordinary creditor (NOT child/spousal support liens, for example), ONLY IF that lien is on your “homestead” (the house you’re actually living in) AND that lien “impairs your homestead exemption.” In other words, you can get rid of the lien( in full or in part) if it reduces your right to your homestead exemption.

12. How does the homestead exemption work in Oregon? 

In a bankruptcy you can protect equity in the home you actually live in, or from the one you have temporarily left with the intention of returning to, up to the amount of $40,000, or up to $50,000 for a husband and wife who jointly own the home.

13. Must a married couple file bankruptcy together? 

No. In some situations having only one person file is the best choice. In other situations, filing a joint bankruptcy together is wiser. It depends on what debts each person owes, separately or jointly, and what assets each own, separately or jointly. This decision should be made with the advice of an attorney.

14. How does bankruptcy stop a garnishment of my wages or checking account? 

The “automatic stay” is a federal bankruptcy court injunction against all collection activity by your creditors and begins the moment your bankruptcy case is filed. A bankruptcy filing will stop pending garnishments. But timing is important, and may get complicated when garnishment is delivered to your employer before your bankruptcy is filed. Generally the sooner a bankruptcy is filed, the more likely a garnishment will be “stayed.”

15. Can I stop garnishments for back child or spousal support with a bankruptcy? 

Not with a Chapter 7 bankruptcy case. But a Chapter 13 case will stop garnishment and other collection activity for back support as long as your plan proposes to pay the back support in full, you comply with all the terms of that plan, AND you make the ongoing monthly support payments on time. Collection of court-approved regular monthly support payments is not stopped by either kind of bankruptcy case.

16. What debts CANNOT be written off?

a. Child and spousal support—either the ongoing monthly obligation or accrued arrearage.
b. Income taxes from the recent tax year or recently filed, or anything involving tax evasion.
c. Criminal fines, restitution.
d. Most student loans.
f. Most liabilities incurred driving while intoxicated.
g. Most liabilities related to fraudulent behavior, including misrepresentations about your financial condition, embezzlement, or larceny.
h. Liabilities arising out of your “willful and malicious injury” to someone or to their property.
i. Debts that you fail to list on time.
j. Divorce debts other than support—so-called “property settlement” debts, although these CAN be written-off in a Chapter 13 case.

17. Will I lose my assets when I file? 

State and/or federal exemption laws protect many assets. Exemptions are laws that protect the value of assets from creditors. Exemptions vary widely if you have lived in other states three years before filing your case. To know whether or not any of your property will be at risk upon filing, it is important that you consult with an attorney.

18. What assets can I protect in a bankruptcy? 

If you have lived in Oregon for 2 full years before filing the bankruptcy, you can use the schedule of exemptions contained in Oregon law. Otherwise, you must use the exemptions of the state where you were living during the 180 days before that two-year period. Assuming the Oregon exemptions apply, they protect:

Description Statute Individual Joint
Aid to Blind Persons ORS 412.115
Aid to Disabled Persons ORS 412.610
Alimony, Child Support ORS 18.345(1)(i)
Annuity Policy Benefits ORS 743.049
Benefits to Injured Trainess & Inmates ORS 655.530
Bodily Injury Payments ORS 18.345(1)(k) $10,000.00 $15,000.00
Books, Pictures & Musical Instuments ORS 18.345 (1)(a) $600.00 $1,200.00
Burial Lots ORS 65.870
Civil Defense & disaster Relief Benefits ORS 401.405
Crime victims Reparation Awards ORS 18.345(1)(j)
Disposable Earnings ORS 18.385 75% 75%
Domestic Animals & Poultry ORS 18.345(1) $1,000.00 $1,000.00
Earned Income Credit ORS 19.345(1)(n)
Earnings & Benefits Exempt When in Bank ORS 18.348(2) $7,500.00 $7,500.00
Fraternal Benefit Society Benefits ORS 748.207
Future Earnings Compensation ORS 18.345(1)(L)
Health & Disability Benefits ORS 743.050
Health Aids ORS 18.345(1)(h)
Homestead ORS 18.395(1) $40,000.00 $50,000.00
Household Furnishings ORS 18.345(1)(f) $3,000.00 $3,000.00
Life Insurance Proceeds ORS 743.046
Life Insurance Proceeds-Group ORS 743.047
Liquor Licenses ORS 471.292(1)(i)
Mobile Home & Land ORS 18.428(1) $23,000.00 $30,000.00
Mobile Home w/o Land ORS 18.428(5) $20,000.00 $27,000.00
Motor Vehicle ORS 18.345(1)(d) $3,000.00 $6,000.00
Old Age Assistance Payments ORS 413.130
Pension Benefits ORS 18.358
Provisions & Fuel for 60 Days ORS 18.345(1)(f)
Public Assistance Grants ORS 411.760, 414.095
Public Employees Retirement ORS 237.980,238.445
Rifle or Shotgun & 1 Pistol ORS 18.362 $1,000.00 $2,000.00
Specific Partnership Property ORS 68.420
Tools of Trade – Tolls, Implements ORS-19.345(1)(c) $3,000.00 $6,000.00
Unemployment Compensation Benefits ORS 657.855
Veteran’s Benefits and Loans ORS 18.345(1)(m)
Veteran’s State Loan Funds ORS 407.595
Vocational Rehabilitation Payments ORS 344.580
Wages Held – Bond Savings Account ORS 292.070
Wearing Apparel, Jewelry & Personal Items ORS 18.345(1)(b) $1,800.00 $3,600.00
Wildcard – Any Personal Property ORS 19.345(1)(o) $400.00 $800.00
Workers Benefits, Emergency Service ORS 401.405
Workmen’s Compensation Benefits ORS 656.234
~75% of Unpaid Wages U.S.C. 15 § 1673 75% 75%
~CIA Employees U.S.C. 50 § 403
~Civil Service Employees U.S.C. 5 § 8346
~Foreign Service Employees U.S.C. 22 § 4060
~Government Employees U.S.C. 5 § 8130
~Insurance – Military Group U.S.C. 38 § 770(g)
~Insurance Unemployment Railroad Workers U.S.C. 45 § 352(e)
~Judges, U.S. Court Directors, Etc. U.S.C 28 § 376(n)
~Klamath Indians Tribe – Oregon U.S.C. 25 § 543, 25 § 545
~Lighthouse Workers U.S.C. 33 § 775
~Longshoremen & Harbor Workers U.S.C. 33 § 916
~Military Deposits in Savings Accounts Outside the US U.S.C. 10 § 1035
~Military Service U.S.C. 10 § 1450
~Military Service Employees U.S.C. 10 § 1440
~Pensions – Military Honor Roll U.S.C. 38 § 1562(c)
~Railroad Workers U.S.C. 45 § 231m
~Seamen’s Clothing U.S.C. 46 § 11110
~Seamen’s Wages (At Sea) U.S.C. 46 § 11109(a)
~Social Security U.S.C. 42 § 407
~Tenants by the Entirety 11 U.S.C. § 522(b)(3)(B)
~Veteran’s Benefits U.S.C. 38 § 5301(a)
~Veteran’s Medal of Honor Benefits U.S.C. 38 § 1562(c)
~War Compensation – Hazard, Death, Injury U.S.C. 42 § 1717

19. Can a creditor challenge the write-off of a debt?

Creditors have limited conditions in which they can challenge your right to a “discharge” (legal write-off) a debt. These conditions almost always involve serious misrepresentation or fraud on your part, such as running up a credit card without intent of paying it, writing bad checks, or embezzling money from an employer or business partner. Plus, assuming the creditor is appropriately informed about your bankruptcy case, the creditor has a very limited amount of time to raise such issues. It must be done within 3 months after your bankruptcy is filed.

20. Must I include all my creditors in a bankruptcy? 

You must list all of your creditors in your schedule of creditors. But in many cases you can treat them differently. The rules for how creditors are treated before, during, and after a bankruptcy case are complicated and dangerous, so carefully discuss this with your attorney before you start favoring one creditor over another.

21. Do I have to go to court if I file bankruptcy? 

You very seldom have to go to court. Usually, you just need to attend a meeting of creditors, which is a 5 to 10 minute meeting with the bankruptcy trustee and your attorney. In a Chapter 7 case, you would only go to a bankruptcy court hearing in the unusual event that someone challenged the discharge of one of your debts, or if you were accused of lying in the bankruptcy documents. In a Chapter 13 case there is at least one court hearing for the court approval of your plan, but you rarely need to personally attend court.

22. Can I write off taxes with a bankruptcy? 

Yes, some of them. There is a lengthy series of rules and conditions under which income taxes can be discharged. The general principles include: the date of the tax year, the date the tax return was actually filed, and if there are any arguments of tax evasion.  Ask your attorney for additional information.

23. Why are some Chapter 13 cases 3 years long and others 5 years long? 

The length of Chapter 13 depends on two factors: your income and tactical considerations. If your income is too high your plan MUST run for 5 years. You may also want to stretch your case out longer. The primary reason for making your case longer is to lower your Chapter 13 plan payments to make payments more reasonable.

24. What’s the “means test” for qualifying to file bankruptcy? 

It is a multi-part formula intended to determine whether or not you have the “means” to pay a meaningful amount to your creditors. This test fixates on your precise income during the six full calendar months before you file your bankruptcy case, and compares that to your state’s published median income for a family of your size. If your income is over the median, then we apply a complicated set of rules to deduct your allowed expenses to see if you are left with sufficient “disposable income” to require you to file a Chapter 13.

25. Do I need to have an attorney to file bankruptcy? 

No, it is possible to file by yourself. But every case has very important legal judgments to be made. For instance, it is important to discuss whether or not bankruptcy is truly the best choice and, if so, what are the advantages and disadvantages of each bankruptcy option? Representing yourself is extremely risky. There is a lot at stake, and there are many opportunities to make serious mistakes. It makes sense to put energy into finding an attorney you feel very comfortable with, and who will help you figure out a practical way of paying for the legal services.

26. How can I pay attorney fees if I can’t pay my creditors? 

You can work with your attorney to find a way to pay for the attorney fee. Often some money becomes available once your stop paying some or all of your creditors. Sometimes a portion of the fees can be paid after the case is filed. In Chapter 13 cases a substantial amount of the fees can be paid through the plan, which means the fee comes out of the single monthly payment made to the trustee towards all the creditors.

27. If I filed a bankruptcy before, when can I file again? 

Here’s how long you have to wait between bankruptcy filing dates (meaning from the start of the prior case to the start of the new one), assuming that the prior case resulted in the successful discharge of your debts:

Filing Chapter 7 after previous Chapter 7 – Eight (8) years from the prior case’s filing date.

Filing Chapter 7 after previous Chapter 13 – Six (6) years from the prior case’s filing date.

Filing Chapter 13 after previous Chapter 7 – Four (4) years from prior case’s filing date. Note that you CAN file the new Chapter 13 case before that, but not receive a discharge in that new case. It may be worth filing to get other valuable benefits of a Chapter 13 case.

Filing Chapter 13 after previous Chapter 13 – Two (2) years. This is seldom a problem because Chapter 13 cases in which you get a discharge very seldom last less than 2 years, so in almost all situations, a person could file a new Chapter 13 case immediately after finishing a prior one.

There are other potential effects from filing multiple bankruptcy cases, so be sure to tell your attorney about them at the beginning of your first meeting.


Rennie Law, LLC is a federal Debt Relief Agency, helping people file for relief under the U.S. Bankruptcy Code.