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The
chief purpose
of Bankruptcy is to give a
person hopelessly burdened with debt a fresh
start
by wiping out his or her debts.
Chapter 7 Bankruptcy
A
Chapter 7 bankruptcy proceeding wipes out all of a person's eligible
debts.
Chapter
7 is a "liquidation" proceeding. In theory, the debtor turns over all
non-exempt property to the bankruptcy trustee who then converts it to
cash and distributes the proceeds to the creditors.
In
the vast majority
of cases, however, the debtor is able to claim an exemption to most or
all his or her assets, and never actually gives
up any property. The
debtor receives a "discharge" from the court, eliminating his or
her liability to repay those debts. From
start to finish, most Chapter 7
bankruptcies
are concluded in about four or five months, and
never require an appearance in court,
so
Chapter 7 gives a debtor a relatively quick and easy "fresh start."
Chapter
13 Bankruptcy
Chapter 13 bankruptcy
is a repayment plan for consumers who want
to pay off some or all of their debts over a period of time,
usually three to five years. It is also an option
for those who are not eligible for Chapter 7. This type of bankruptcy also appeals
to
individuals who have non-exempt property that they want to keep, or
have debts which are non-dischargeable in Chapter 7 and must continue
to pay and want to create a manageable payment plan. It
is only an option for individuals who have predictable regular
income and whose income is sufficient to pay their reasonable expenses
with some amount left over each month to pay off some portion of their
debts. Chapter 13 plans are not always required to repay 100%
of the debt. Click
here for more information on
Chapter 13.
Bankruptcy Exemptions - Assets you get to
keep.
Relief from Debts
Bankruptcy provides two main forms of relief from your debts
and protection from your creditors, in addition to other powerful
remedies:
Automatic
Stay.
Immediately upon the filing of a bankruputcy petition, a
federal court injunction is automatically issued preventing
your creditors from making any further attempts to collect.
Creditor phone calls, letters, calls to your workplace, and
bills all stop. Even foreclosures and repossessions are
stopped and state court appearances are canceled until your bankruptcy
case is administered. Foreclosures and repossessions cannot
always be stopped forever, and sometimes creditors can obtain
permission from the Bankrruptcy Court to resume, but the Automatic Stay
gives you time to plan, explore and exercise all your options, and
sometimes work out a solution.
Discharge.
At the conclusion of your bankruptcy case, you are granted a
Discharge from the court. This is an order legally dissolving
your obligation from your debts. Creditors can thereafter
never take any action to collect those debts. Not all debts
are dischargeable, however, the vast majority of ordinary consumer
debts are dischargeable. Some examples of debts
which may not be discharged are child support, alimony, recent taxes,
student loans, criminal fines, and debts incurred by fraud, criminal
activity, or by willful or malicious conduct.
The New Bankruptcy Laws
There has been much written about the recent amendments to
the bankruptcy laws, especially that it is more difficult to
file Chapter 7 bankruptcy. It's true that there are tougher
requirements under the new laws, and it's also true that
many people are required to file under Chapter 13
instead of Chapter 7. However,
for most filers, Chapter 7 is still available.
There
are two
main requirements of the new law: (1) Means Testing; and (2) Credit
Counseling.
Means Testing.
Means Testing is a procedure that
determines whether you have "disposable
income." In
general, if your income is below the state median average for
your household size, you are eligible to file Chapter 7. If
your income is above the state average, but you have
little disposable income, you may still be eligible to file
Chapter 7. Only if your income is above the state median
average and you have sufficient disposable income are you required to
file Chapter 13. Click
here to see the current state median income.
Even
if your income is above the state median income and you have some
disposable income each month, there are many factors
that are considered, and you may still be able to file under
Chapter 7, especially if you have unique circumtances.
Credit
Counseling.
Before you file for Bankruptcy, you must complete an approved
Credit Counseling briefing. Click
here to find an approved course in your area.
You
can usually complete the briefing online, but there are also
agencies which provide live courses in the area, and you can take the
course in Spanish, Portugugese and other languages. And, if
you don't have access to a computer, you can take the briefing over the
phone. There is a fee from $19 to $50 for these briefings,
depending on how and where you take it. After your bankruptcy
is filed, you must also complete a second course, called the Financial
Management Course. Most of the same vendors provide this
second course also.
Attorney
Tremblay recommends Cricket Debt
Counseling (www.CricketDebt.com).
If
you enter Attorney Code #469711, Attorney Tremblay will receive
confirmation of your completion of the course and your certificate for
filing with the Bankruptcy Court will be transmitted automatically.
The cost is $36.
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Here
are some helpful
videos
if you are considering bankruptcy:
Part
1: Basics
Part
2: Types of Bankruptcy
Part
3: Limits of Bankruptcy
Part 4: Filing for
Bankruptcy
Part 5: Creditor's
Meeting
Part 6: Bankruptcy
Crime
Part 7: Court
Hearings
Part
8: The Discharge
Part
9: Legal Assistance
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