Call Giacoletto Law Office for any questions you may have about Bankruptcy.
Bankruptcy is a proceeding in which a court administers the property and assets of a debtor for the benefit of creditors.
There is no magic formula for deciding when bankruptcy is the right choice. It is an option you might consider if you:
- Are paying only minimum amounts on your bills
- Cannot budget yourself out of debt within five years
- Are getting notices that your mortgage or loans are being foreclosed
- Have had a severe financial setback, such as losing your job or a major client, a divorce or a costly illness
A debtor may not be fired from a job because of filing for bankruptcy. However, creditors may take a past bankruptcy into consideration when deciding whether to extend credit. Many creditors regard a person who has filed for bankruptcy to be a higher credit risk and may either refuse to extend credit or only extend credit on less favorable terms. In general, a bankruptcy will stay on one's credit report for 10 years.
Chapter 7 and Chapter 13 are the two bankruptcy chapters most often used by individuals. These two chapters are described in more detail below.
Chapter 7, also known as straight bankruptcy, allows individuals or businesses to give up nonexempt assets and walk away from most debts. Chapter 7 offers an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor's estate, reduces them to cash and makes distributions to creditors, subject to the debtor's right to retain certain exempt property. In most Chapter 7 cases, the debtor receives a discharge that releases him or her from personal liability for certain dischargeable debts within a few months after the petition is filed.
Chapter 13 is designed for an individual debtor who has a regular source of income and permits the payment of debts pursuant to a repayment plan. Chapter 13 allows a person to keep and use all property, whether exempt or not, and to pay some or all debts according to a plan approved by the court. Unlike Chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received.
If the debtor fails to keep up payments on the plan, creditors may apply to the Bankruptcy Court to terminate the Chapter 13 proceeding by dismissing the proceeding entirely. If the proceeding is dismissed in its entirety, collection efforts against the debtor's assets may resume as before.
Bankruptcy does not get rid of all debts. Among those excluded are:
- Alimony
- Child support
- Recent back taxes
- Student loans
- Recent large purchases
- Fines or penalties of government agencies
- Fraudulent debts
An Automatic Stay, which is gained instantaneously in most cases upon the filing of a bankruptcy petition, may be one of the most valuable features of a bankruptcy because it forces an abrupt halt to creditor actions against the debtor, including most repossessions, garnishments or attachments, utility shut-offs, foreclosures and evictions. The stay is also an effective way to end creditor collection efforts.
A bankruptcy starts with the filing of the official Petition, schedules and Statement of Financial Affairs with the bankruptcy court. In order to complete the Bankruptcy Forms, you must provide a list of all of your creditors and the amount and type of their claim; the source, amount, and the frequency of your income; a list of all of your property; and a detailed list of your monthly living expenses.
Usually between 20 and 40 days after you file your petition, the trustee will hold the "first meeting of creditors" (also called a 341 Meeting.) You must be present for that meeting. The trustee can ask you questions under oath about your property and debts. Creditors can also question you on those subjects, but seldom do. Generally, the only responsibilities you have with respect to the bankruptcy after the 341 meeting is to cooperate with the trustee in providing any requested information.
Creditors may also approach you about what's called Reaffirmation of debts. Reaffirmation is an agreement between you and a creditor that you will remain liable on a debt and will pay the remaining portion of the amount owed in order to keep certain property, such as an automobile, even though the debt could be discharged.
If creditors haven't filed a suit to stop you from getting out from under your debts within 60 days of the 341 Meeting, the court will enter an order granting the Discharge of all dischargeable debts that existed on the date the case was filed. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters and personal contacts.
We are a Debt Relief Agency. We help people file for bankruptcy under the federal Bankruptcy Code.
