Bankruptcy
What Is Bankruptcy?
Bankruptcy is a legal proceeding in which a person who can not pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.
What Type of Bankruptcy Should You File?
Most consumer debtors filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.
· Chapter 7 - is known as “straight” bankruptcy or “liquidation.” It requires an individual to give up property which is not “exempt” under the law, so the property can be sold to pay creditors. Generally, those who file chapter 7 keep all of their property except property which is very valuable or which is subject to a lien which they can not avoid or afford to pay. If you want to keep property like a home or a car and are behind on the mortgage or car loan payments, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.
· Chapter 13- is a type of “reorganization” used by individuals to pay all or a portion of their debts over a period of years using their current income. The most important thing about a chapter 13 case is that it will allow you to keep valuable property--especially your home and car--which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors.
What Can Bankruptcy Do For You?
Bankruptcy may make it possible for you to:
· Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.
· Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment. However, unsecured 2nd mortgages may be "stripped" in Ch. 13.
· Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
· Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
· Restore or prevent termination of utility service.
· Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
Bankruptcy will not normally wipe out:
· Money owed for child support or alimony;
· Most fines and penalties owed to government agencies;
· Most taxes and debts incurred to pay taxes which can not be discharged;
· Student loans, unless you can prove to the court that repaying them will be an “undue hardship”;
· Debts not listed on your bankruptcy petition;
· Loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
· Debts resulting from “willful and malicious” harm;
· Debts incurred by driving while intoxicated;
· Mortgages and other liens which are not paid in the bankruptcy case. But bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor (ex. You surrender property to creditor).
Remember: The law often changes, and each case is different. The above is meant to give you general information, and not to give you specific legal advice.
You should contact an attorney familiar with bankruptcy to obtain answers regarding your specific situation.
Of counsel to Cassidy, Romano, & Love, P.C.