Bankruptcy Law
Is Bankrupcty the Right Way to Go?
This page will provide the person, thinking about filing bankruptcy, the bankruptcy information he or she needs
to make an informed decision. After reading the following information you will have a good understanding of what
the law allows when you meet with your Bankruptcy Lawyer or Attorney. If your questions are still not answered
after reading the following information please contact us to discuss any matters
further.
WHAT IS CHAPTER 7 BANKRUPTCY?
Chapter 7 bankruptcy, sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over
all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors.
The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of
cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh
start".
One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start
by wiping out his or her debts.
WHAT IS CHAPTER 13 BANKRUPTCY?
Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter13 bankruptcy is filed by individuals
who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to
individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have
predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to
pay off their debts.
HOW DIFFICULT WILL IT BE TO FILE CHAPTER 7 UNDER THE NEW BANKRUPTCY LAWS?
There has been much doom and gloom written about the bankruptcy means test under the new laws and how much more
difficult it's going to be to file Chapter 7. It's true that there are more hoops to jump through under the new
laws and it's true that the bankruptcy means test will result in some people having to file chapter 13 instead of
Chapter 7. However, for the vast majority of filers Chapter 7 is still available with very little extra
effort!
WILL MY CREDITORS STOP HARASSING ME?
Yes, they will! By law, all actions against a debtor must cease once the documents are filed.
Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments.
Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make
payments.
WILL MY SPOUSE BE AFFECTED?
Your wife or husband will not be affected by your bankruptcy if they
are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental
credit card they are probably responsible for that debt. However, In community property states, either spouse
can contract for a debt without the other spouse's signature on anything, and still obligate the marital
community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few
exceptions do require both spouse's signatures on contracts. But the day to day debts, such as credit cards, do
NOT require both spouses to have signed.
Community property states are: Arizona, California, Idaho, Louisiana,
Nevada, New Mexico, Texas, Washington and Wisconsin.
Your lawyer will be able to guide you in this regard.
WHO WILL KNOW?
Bankruptcy filings are public records. However, under normal circumstances, no one will know you
went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10
years.
WHAT ARE THE MOST COMMON REASONS FOR A CHAPTER 7 BANKRUPTCY?
The most common reasons for filing bankruptcy are:
Unemployment: Large medical expenses; Seriously overextended credit; Marital problems, and;
Other large unexpected expenses.
A Harvard Study reported that half of US bankruptcies were caused by medical Bills (MSNBC). The study was published online in February of 2005 by
Health Affairs. The Harvard
study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies
in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually - counting
debtors and their dependents, including about 700,000 children.
WHAT DON'T I KEEP?
In a bankruptcy, assets in excess of your allowed personal exemption, or non exempt assets such as,
real estate, automobiles and boats will be liquidated by the trustee.
I WAS BANKRUPT BEFORE. WHEN CAN I FILE AGAIN?
A person can file Chapter 7 again if it has been more than 8 years since he or
she filed the previous Chapter 7 bankruptcy.
CAN I KEEP ANY CREDIT CARDS?
Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are
discharging a credit card they will cancel the card unless you reaffirm the debt. Even if you have a zero balance
the credit card company might cancel the card.
WHEN WILL I BE DISCHARGED FROM BANKRUPTCY?
One of the major purposes of bankruptcy legislation is to afford the opportunity to a
person hopelessly burdened with debt to erase his or her debt and thereby get a fresh financial start. A bankrupt's
debt is erased when he or she is discharged.
The debtor is discharged 3 - 5 months after bankruptcy is filed. At that
time all debts (with some exceptions) are written off.
IF I USE A CREDIT COUNSELOR WON'T I GET A BETTER CREDIT RATING THAN IF I GO
BANKRUPT?
No, you will not. It will cost you less money and you will rebuild your credit rating faster if you file
Chapter 7 or Chapter 13. Be cautious if your are considering using a credit counselor. Also read about the problems
of unscruplous companies in the credit counselling industry and the action the IRS has taken against "non-profit"
credit counseling groups following widespread abuse.
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