A Personalized, Sensitive
Approach To Bankruptcy
If you’re worried about your financial situation, this Bankruptcy Basics page will provide answers about bankruptcy options.
Bankruptcy is a federal law that allows individuals, families and businesses to eliminate most old debts and receive an order of discharge to get a fresh start on life.
The Bankruptcy Code was amended (bankruptcy law changes) in 2005, but it does not mean that bankruptcy relief is no longer available, there are different rules now applied to new cases before they can be filed. It is a good idea to talk to a bankruptcy lawyer before filing any chapter of bankruptcy on your own.
Legal Options: Chapters For Filing Bankruptcy
You may be considering filing for bankruptcy, but may feel uncertain about what the process will be like for you or your business. There are some commonly used words and phrases in bankruptcy that I will help define and explain here, to provide a better understanding of bankruptcy basics.
- Chapter 7 bankruptcy is the liquidation chapter of bankruptcy. This chapter is generally appropriate when a small business or individual has more expenses than income.
- Chapter 13 bankruptcy is generally used when the individual filing has monthly disposable income. It is also used when people have nonexempt assets, need to stop foreclosure or must pay off large tax balances. Chapter 13 is a good strategy to help stop foreclosure.
Difficult Decisions …
You may be wondering, “Should I file bankruptcy?”
This decision is always difficult. It is usually based on the value of your belongings (assets) versus your total debts (liabilities). If your paycheck or bank account is being garnished for any reason other than paying child or spousal support, it may be a good time to talk to an attorney about bankruptcy basics.
When you cannot make your regular monthly payments on medical bills, credit cards, cars, trucks or mortgage payments, then it may also be a good time to talk to a bankruptcy lawyer to get more information on your rights under the Bankruptcy Code.
Alternatives To Declaring Bankruptcy
There may be bankruptcy alternatives you should first consider. Debt consolidation plans or mortgage refinance or home loan modifications can often help. When these programs are not enough to help you pay your bills, you should consider bankruptcy debt relief and a bankruptcy discharge.
Beyond The Bankruptcy Basics … Filing Procedures
To file a bankruptcy case, a petition is prepared (using the mandatory bankruptcy court forms) and filed with the federal Bankruptcy Court. An automatic stay goes into effect at filing. This means that all creditors must stop calling, writing, suing or garnishing you. You are still responsible for paying secured debts (such as autos and house payments).
In a bankruptcy case, you must disclose your current income and income for the two years prior to filing. This will be used to determine which chapter you file and what your projected budget is for the future.
A prebankruptcy credit counseling certificate is required to file any bankruptcy case and a post-bankruptcy financial management certificate is required to receive a bankruptcy order of discharge.
Filing for personal bankruptcy and a small business bankruptcy are similar. Both groups of debtors often file for Chapter 7 and Chapter 13 bankruptcy relief.