WHAT IS BANKRUPTCY??
Bankruptcy is a legal procedure under Federal Law - Federal Bankruptcy Code, which basically allows debtors who owe more money than they can pay to either eliminate their debts, liquidate their debts, or work out a payment plan to pay a portion of their debts over time.
Bankruptcy gives the "honest but unfortunate debtor" a new opportunity in life, and a new beginning, unhampered by the pressure of pre-existing debt.
We are going through an unprecedented time, not only in America, but also around the world. Years of consumers over-extending their finances, combined with job loss, small business failures, and a global credit crunch, have resulted in increasing numbers of people who are unable to pay their rising bills. Declaring bankruptcy, whether it be personal bankruptcy or business bankruptcy, can provide a legal way to get a fresh start and a new beginning with your finances. You should not feel guilty for having to declare bankruptcy. In an age where even global corporations are receiving multibillion dollar bailouts from the government, you should not feel badly about seeking assistance for your own debts.
The following are answers to frequently asked questions regarding bankruptcy:
- Will Filing for bankruptcy stop the harassing phone calls and mail from bill collectors?
- Will Filing for bankruptcy Stop a Wage Garnishment resulting from a lawsuit over an unsecured debt?
- Will Filing for bankruptcy affect my credit report?
- What is the difference between a secured and unsecured debt?
- Can I be held responsible for a debt where I acted as a co-signer?
- What is a bankruptcy discharge?
- Can all of my debts be discharged by filing bankruptcy?
- Will I lose or have to surrender all of my personal property if I file for bankruptcy?
- Can I exclude or be selective with the debts I include in my bankruptcy filing?
- How long does it take to complete the bankruptcy process and obtain the discharge?
- Are there alternatives to bankruptcy?
Q: Will Filing for bankruptcy stop the harassing phone calls and mail from bill collectors?
A: Yes. Once your bankruptcy petition is filed, you are immediately entitled to an Automatic Stay. This will stop the creditor harassment, because creditors will no longer be allowed to call your home or mail you bills and notices.
Q: Will Filing for bankruptcy Stop a Wage Garnishment resulting from a lawsuit over an unsecured debt?
A: Yes. The Automatic Stay issued when you file bankruptcy will stop the wage garnishment from a lawsuit over unsecured debts.
Q: Will Filing for bankruptcy affect my credit report?
A: Yes. The bankruptcy will appear on your credit report as a matter of public record and will stay on your record for at least seven, and up to ten, years.
Q: What is the difference between a secured and unsecured debt?
A: A secured debt has collateral; this means you have pledged some asset that the creditor can collect if you default on the loan. Collateral can be your house, other property, or a car. Creditors of an unsecured debt have no claim to your assets, real estate, or home. Examples of unsecured debt include credit cards and personal bank loans.
Q: Can I be held responsible for a debt where I acted as a co-signer?
A: Yes, you can and will be held responsible for any debt that you signed or co-signed. By agreeing to be a co-signer, you have agreed that you will repay the debt in the event that someone else fails to make the payments.
Q: What is a bankruptcy discharge?
A: Under bankruptcy law, when you file bankruptcy, you are released from personal liability for certain types of debts. The discharge is a permanent order that prohibits creditors from attempting to collect on the debt. Essentially, the debts you owe are dissolved during the bankruptcy process.
Q: Can all of my debts be discharged by filing bankruptcy?
A: Under bankruptcy law, only certain debts are dischargeable. Certain debts, such as back taxes, government loans, student loans, child support, and spousal support, have priority and are therefore not dischargeable. Although these debts remain with you even after you declare bankruptcy, you may negotiate a repayment plan you can better afford.
Q: Will I lose or have to surrender all of my personal property if I file for bankruptcy?
A: Both federal and state laws provide for certain exemptions that allow you to keep certain personal property. You may be able to keep your home, vehicles, and retirement accounts. An experienced bankruptcy attorney can examine your situation and assets and advise you of your allowable exemptions.
Q: Can I exclude or be selective with the debts I include in my bankruptcy filing?
A: No. You must be truthful and must disclose all your property, assets, and debts to the Bankruptcy Court by listing them on your petition and informing the Bankruptcy Trustee.
Q: How long does it take to complete the bankruptcy process and obtain the discharge?
A: The length of time will vary on the complexity of your situation and the court's schedule. However, most bankruptcy cases are resolved and discharged within four to six months of filing the bankruptcy petition.
Q: Are there alternatives to bankruptcy?
A: Yes, there are alternatives to bankruptcy, especially if you have a steady flow of income. Primarily, an experienced bankruptcy and loan modification attorney can negotiate on your behalf with lenders, explore short sale possibilities for your home, and explore other loan modification methods. In fact, bankruptcy is the most drastic solution and should only be used as a last resort.
Chapter 7 Bankruptcy: Total Liquidation Consumer Bankruptcy
Under a Chapter 7 Bankruptcy, an individual, partnership, corporation, or other business entity with primarily consumer debts can ask the Bankruptcy court for relief in the form of total liquidation. You, the consumer, will never need to pay the debts discharged back, they are completely forgiven!
Qualification for Chapter 7 Liquidation is subject to a "Means Test." The Means Test is a complex formula set by the Bankruptcy Code, which varies from state to state and county to county.
Even if an individual or business does not pass the Means Test, other forms of help from the Bankruptcy Court are available, like Chapter 11 or 13 below!
Continue for more information regarding Chapter 7 Bankruptcy.
Chapter 11 Bankruptcy: Business Reorganization
Under a Chapter 11 Bankruptcy, individuals engaged in business, partnerships, corporations, or other business entities may file for Bankruptcy and propose a plan to reorganize their finances to keep their business afloat and repay their creditors.
Generally, the business will need to file the Bankruptcy Petition with a Disclosure Statement detailing all finances and a Plan of Reorganization proposing how the business will be restructured and the debts repaid. This allows the business to restructure debts on a 3-5 year plan while staying operational.
Continue for more information regarding Chapter 11 Bankruptcy.
Chapter 13 Bankruptcy: Individual Debt Adjustment
Under a Chapter 13 Bankruptcy, an individual can ask the Bankruptcy Court for relief in the form of a restructuring of their debts. This form of Bankruptcy allows an individual to devise a plan to repay his or her creditors over a span of 3-5 years.
This Chapter of Bankruptcy is particularly useful for homeowners struggling to stop foreclosure and keep their home! By filing under Chapter 13, individuals can stop foreclosure proceedings and even cure delinquent mortgage payments over time, while continuing to make all mortgage payments coming due under the plan.
Continue for more information regarding Chapter 13 Bankruptcy.
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