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Whether or not to file for bankruptcy is an important decision. Bankruptcy can offer you a fresh start if you find yourself overwhelmed by debt. But bankruptcy has many possible consequences for your property and assets, for your future ability to get credit, and for the people to whom you owe money.
Getting relief from the burden of some or all of your debts by having them canceled is one of the important benefits of bankruptcy. The cancellation of you debt is called a discharge.
Another important benefit of a bankruptcy is its automatic stay provision. The automatic stay prevents creditors from taking any action against you. Examples of the actions it prohibits are garnishments of your wages, shutting off your utilities, foreclosures, repossessing of your property, judgments, lawsuits and small claims actions. Creditors are also prevented from telephoning you and sending the nagging letters.
Though there are five types of bankruptcies, there are two bankruptcies generally filed by consumer debtors. The bankruptcies are those that fall under chapter 7 and 13 of the bankruptcy code. "Chapter" refers to the section of the bankruptcy code that the law can be found.
There are certain debts that are not generally discharged. These include federal taxes less than 2 years old, school loans, child support, maintenance and traffic fines. But there are some rare exceptions in these cases. Also, there are certain debts that are discharged in a Chapter 13 but not in Chapter 7.
Under chapter 7 of the bankruptcy code, the debtor is seeking to obtain a discharge of outstanding debt. The debtor is able to retain all property classified as exempt by the bankruptcy laws. The trustee takes possession of the debtor's non-exempt property and may liquidate (sale) it to pay certain creditors who are eligible under the law.
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In the typical case, the debtor loses little or no property or assets through his/her bankruptcy. This is because most of the debtor's property is either exempted or secured, so little, or sometimes nothing is left to pay creditors.
Under chapter 13 of the bankruptcy code, the debtor is seeking debt reorganization. This bankruptcy is also known as a wage earner's or repayment bankruptcy. The chapter 13 procedure allows the debtor to pay some or all of his/her debts over a 36 to 60 month period of time.
As part of a chapter 13 bankruptcy filing, the debtor prepares a budget and plan. The budget lists all the debtor's necessary living expenses. The plan is the debtor's repayment schedule to pay some or all of the debtor's creditors. Once the debtor's necessary expenses have been paid, the debtor pays the balance of his net income to the chapter 13 trustee. The money received by the trustee is paid to the debtor's creditors pursuant to the debtor's plan.
Debtors typically file for chapter 13 bankruptcy protection to stop a foreclosure of their home or repossession of their automobile. Chapter 13 protection allows the debtor to pay their arrearages over a 36 to 60 month period of time. Additionally, debtors file for chapter 13 bankruptcy protections to get the benefit of a bankruptcy discharge and the ability to keep their non-exempt property which could be sold by the trustee in chapter 7 bankruptcies.
If the general information provided above is insufficient for you and you would like to set an appointment to discuss your specific legal issues, print and complete the questionnaire below (requires Adobe Acrobat Reader) provide as much detail as possible to the questions and bring the completed questionnaire to your appointment.
To obtain a bankruptcy questionnaire, click on the link below and print.
Questionnaire Link
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