Before Filing Bankruptcy

Filing bankruptcy will stop bill collectors from taking any "further action".

Federal law will prohibit your creditors from taking any action to collect debts from you.

Filing bankruptcy will also stop the following:

 

Evictions

Bank Account Seizures

Liens

Foreclosures

Wage Garnishment

Utilities Being Turned Off

Repossession

Creditor Harassment

IMPORTANT - BANKRUPTCY LAW IS A FEDERAL LAW.  THIS GIVES YOU SOME GENERAL INFORMATION ABOUT WHAT HAPPENS IN A BANKRUPTCY CASE.  THE INFORMATION HERE IS NOT COMPLETE, NOR IS IT ADVICE.  YOU MAY NEED LEGAL ADVICE.

 

 

Frequently Asked Questions about Bankruptcy

 

Q. Will filing bankruptcy stop my wages from being garnished?

A. Yes, once you file bankruptcy, you are under protection of the court from most creditors. You should immediately notify the garnishing creditor and sheriff that you have filed a bankruptcy petition.

Q. Is my bankruptcy case public information?

A. Yes, bankruptcies are considered public record. Anyone may call the court and verify if you have filed bankruptcy or come into our offices and review the file.

Q. How long will my bankruptcy show on my credit record?

A. A completed bankruptcy may show on your record from 7 to 10 years depending on the reporting credit agency

Q. Should I file bankruptcy?

A. Whether or not you should file bankruptcy depends on your particular circumstances. It may be that after consultation with an accountant and attorney, you resolve your financial difficulties through other means. In some cases, declaring bankruptcy may be necessary. The decision to file for bankruptcy is a serious one.

 

 

WHEN YOU FILE BANKRUPTCY:

 

You can choose the kind of bankruptcy that best meets your needs:

 

 

            Chapter 7 - A trustee is appointed to take over your property.  Any property of 

            value will be sold or turned into money to pay your creditors.  You may be    

            able to keep some personal items and possibly real estate depending on the law

            of the state you live in.

 

Chapter 13 - You can usually keep your property, but you must earn wages or have some other      source of regular income and you must agree to pay part of your income to your creditors.  The Court must approve your repayment plan and your budget.  A trustee is appointed and will collect the payments from you, pay your creditors, and make sure you live up to the terms of your repayment plan.

 

 

            Chapter 12 - Like chapter 13, but it is only for family farmers.

 

 

Chapter 11 - This is used mostly by businesses.  In chapter 11, you may continue to operate your   business , but your creditors and the Court must approve a plan to repay your debts.  There is no trustee unless the Judge decides that one is necessary; if a trustee is appointed, the trustee takes control of your business and property.

 

 

 

If you have already filed bankruptcy under chapter 7, you may be able to change your case to another chapter.

 

Your bankruptcy may be reported on your credit record for as long as ten years.  It can affect your ability to receive credit in the future.

 

 

 

WHAT IS A BANKRUPTCY DISCHARGE AND HOW DOES IT OPERATE?  

 

One of the reasons people file bankruptcy is to get a “discharge.”  A discharge is a Court order which states that you do not have to pay most of your debts.  Some debts cannot be discharged. 

 

For example, you cannot discharge debts for–

 

• most taxes;

• child support;

• alimony;

• most student loans;

• Court fines and criminal restitution;

• personal injury caused by driving drunk or under the influence of drugs.

 

 

The discharge only applies to debts that arose before the date you filed.

 

Also, if the Judge finds that you received money or property by fraud, that debt may not be discharged.

 

It is important to list all your property and debts in your bankruptcy schedules.  If you do not list a debt, for example, it is possible the debt will not be discharged. 

 

The Judge can also deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, or lie, or if you disobey a Court order.

 

You can only receive a chapter 7 discharge once every six years.  No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay.  You do not have to sign a reaffirmation agreement or any other kind of document to do this.

 

Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car).  You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.

 

 

 

 

WHAT IS A REAFFIRMATION AGREEMENT?

 

 

Even if a debt can be discharged, you may have special reasons why you want to promise to pay it.  For example, you may want to work out a plan with the bank to keep your car.  To promise to pay that debt, you must sign and file a reaffirmation agreement with the Court.  Reaffirmation agreements are under special rules and are voluntary.  They are not required by bankruptcy law or by any other law. 

 

 

Reaffirmation agreements–

 

            must be voluntary;

            must not place too heavy a burden on you or your family;

            must be in your best interest; and can be canceled anytime before the              

            Court issues your discharge or within 60 days after the agreement is

            filed with the Court, whichever gives you the most time.

 

 

 

If you are an individual and you are not represented by an attorney, the Court must hold a hearing to decide whether to approve the reaffirmation agreement.  The agreement will not be legally binding until   the Court approves it.

 

If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy.  The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage.  The creditor can also take legal action to recover a judgment against you.

 

 

 

IF YOU WANT MORE INFORMATION OR HAVE QUESTIONS ABOUT HOW THE BANKRUPTCY LAWS AFFECT YOU, YOU MAY NEED LEGAL ADVICE. 

 

NEITHER THE CLERKS OFFICE NOR THE TRUSTEE IN YOUR CASE IS RESPONSIBLE FOR GIVING YOU LEGAL ADVICE.  

 

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Definitions

 

Bankruptcy - A legal proceeding in federal court in which a person or company can be released or "discharged" from all or most of their debts

Debtor - The person or company filing bankruptcy

Trustee - A person who administers a debtor's estate. A trustee is always appointed in a chapter 7, 13, or 12 bankruptcy. A trustee may be appointed in a chapter 11 case.

Creditor - The people or companies to whom the debtor owes money or property. Creditors hold "claims" against the debtor.

Proof of Claim - A proof of claim is a written statement describing the debt that a creditor claims the debtor may owe them.

 

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Bankruptcy Types

 

Before you file for bankruptcy, you should decide which type (or chapter) is the right one for you. Here is a brief description of each of the different types of bankruptcies:

 

 

Chapter 7 - Liquidations

• The purpose of a chapter 7 is to allow a person to obtain a fresh start, free from creditors and free from the pressures of over-whelming debt. Under this chapter, a trustee takes possession of your non-exempt property and assets; converts them to cash and distributes the funds to creditors. After filing for relief under chapter 7, an individual debtor may receive a discharge.
• A discharge permanently prohibits creditors from attempting to collect those debts listed in a bankruptcy. However, some debts are non-dischargeable. They include certain taxes, student loans, alimony and child support to name a few.
• A business that files a chapter 7 bankruptcy will not receive a discharge.
• If you receive a discharge under a chapter 7, you may not receive another discharge under this type of bankruptcy for the next 6 years.

 

 

Chapter 11 - Reorganizations

• The purpose of a chapter 11 bankruptcy is to allow a business a limited amount of time free from creditors collection efforts to restructure its finances so it may continue to operate in a normal fashion under a court approved "plan".  Creditors of a business filing a chapter 11 vote on the plan, and the plan must be approved by the court. A business may choose to liquidate under this type of bankruptcy also.
• If a business obtains approval from the court for its plan, all pre-bankruptcy debts will be discharged. A business will not receive a discharge if it simply liquidates its assets under a plan.
• Advantages of a chapter 11 is that the business may retain control of its property during the bankruptcy and can deal with all of the debts.
• Individual debtors may also choose to file a chapter 11; however, this type of bankruptcy is complicated and there may be advantages to filing under a different chapter. An individual should consult with an attorney before making the decision to file a chapter 11.
• Generally, you may file a chapter 11 petition anytime after a previous bankruptcy filing.

 

 

Chapter 12 - Family Farmer's Debt Adjustment

• The chapter 12 bankruptcy law was created to help family farmers who need to reorganize their debts, while keeping their land. This type of bankruptcy is meant to assist farmers who have potential to reorganize and to allow them relief from a heavy debt burden, and at the same time allow farmers to pay their creditors what is deemed reasonable.
• The rules of a chapter 12 bankruptcy are modeled closely after those of a chapter 13. A chapter 12 case may only be filed by certain family farmers and businesses. A trustee is appointed, but the farmer usually remains in possession of the farm while formulating a plan. A chapter 12 case normally proceeds more quickly than a chapter 11 and may be less expensive.

 

 

Chapter 13 - Individual Debt Adjustment

• The purpose of a chapter 13 bankruptcy is to let an individual debtor with a regular income pay back debts using their income and enabling a debtor to keep any assets they have. A person who operates a small business as a sole proprietor may also file under this chapter.
• Under a chapter 13 bankruptcy filing, a debtor must promptly file a repayment plan and get the court's approval of the plan. Any creditor may object to the plan. The debtor, along with the appointed trustee, must work out any objections to the plan before the court will approve it. The typical repayment time of chapter 13 plan is 3 to 5 years. The debtor makes regular payments to the trustee and the trustee then distributes these monies to creditors according to the terms of the plan.
• After completion of a plan, the debts listed in the bankruptcy are discharged (again with some exceptions) and the debtor is no longer obligated to pay them.
• Generally, a chapter 13 may be filed at any time, even if a debtor has filed before under a different chapter.

 

 

 

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