Bankruptcy
Consumer credit is at an all time high. Due to changes in our economy, many people cannot pay all of their debt. Credit card collectors and collection lawyers are busy making the lives of ordinary consumers a living hell. Loan debts, tax trouble or tax debt, credit card debt, even trust fund tax (from employment tax withholding) can be managed with a Chapter 13 Bankruptcy Plan.
Bankruptcy is the legal method for a debtor to discharge or relieve debt. Bankruptcy is a way for people or businesses owing more money than they can pay to either work out a plan to repay the money over time or to have their debt wiped out. While no debtor is guaranteed a total discharge, most debtors who file for bankruptcy are given such relief. One of the primary purposes of the bankruptcy act is to relieve the honest debtor from the weight of oppressive indebtedness and to provide the debtor with a fresh start.
If the debtor initiates the bankruptcy it is called a voluntary bankruptcy. If the creditor initiates the bankruptcy it is called an involuntary bankruptcy. In an involuntary bankruptcy, the debtor has the opportunity to contest the petition. While the debtor is either working out a plan or the trustee is gathering the available assets to sell, the Bankruptcy Code provides that creditors must stop all collection efforts against the debtor.
Who can file for bankruptcy?
Any person, partnership, corporation or business trust may file bankruptcy. United States citizenship is not a requirement for filing bankruptcy.
Do I need an attorney to file bankruptcy?
Federal law does not require you to have an attorney. However, without an attorney, it may be difficult to get maximum benefit from the process. Hiring a competent attorney is highly recommended. Anderson’s experienced team can help.
What if I am married?
If you are married, you may file a joint petition. A joint petition is the filing of a single petition by an individual and the individual’s spouse. In order to qualify for a joint petition, you must be married on the date that the joint petition is filed. Unmarried persons, corporations and partnerships must each file a separate case. If you are an individual and have a business, you may not file a single petition for yourself and your business; each must be a separate bankruptcy case.
Will I lose my house, car, and other personal property?
Not necessarily, each state has laws that determine which items or property are exempt from being taken away. For example, many states exempt personal items such as furniture and clothing. In addition, other kinds of property are exempt up to a limit. These exemption limits mean that equity you have in the property above the limit is not exempt. The Bankruptcy Court can take the property and sell it, pay off any creditors, give to you the exemption amount, and keep the rest for other creditors.
Does my divorce decree protect me if my ex-spouse has filed for bankruptcy and she has listed me as a co-signer on a Schedule D?
If you are contractually bound with your ex-spouse on a debt, the creditor can require the entire payment of that debt from you even if the divorce decree assigns the debt to your ex-spouse. Depending on the terms of your divorce decree, you may be able to have certain support obligations under it determined to be non-dischargeable by the bankruptcy court or in state court. If you find out that your ex-spouse has filed for bankruptcy, you should seek legal advice to find out your possible obligations.
Will filing bankruptcy impact my credit rating?
Unfortunately, it will. However, most individuals are able to rebuild their credit within a few years. A discharge of your current debt may provide the opportunity to rebuild your credit with steady, regular payments on a new account. In some circumstances, bankruptcy can improve your access to credit by reducing your overall debt, releasing more of your income to make payments.
What chapter should I file under?
Your particular circumstances will determine the best time for filing and the best type of bankruptcy proceeding for you. Choosing the appropriate bankruptcy chapter is very important. The decision whether to file a bankruptcy and under what chapter is an extremely important decision and should be made only with competent legal advice from an experienced bankruptcy attorney after a review of all of the relevant facts concerning your case.
What is a Chapter 11 bankruptcy?
Chapter 11 is the reorganization chapter available to businesses and individuals that have substantial assets and/or income to restructure and repay their debts. Creditors vote on whether to accept or reject a plan of reorganization that must be approved by the court.
Chapter 11 allows flexibility in structuring the reorganization. Some plans may even release a debtor from ongoing contracts such as a commercial lease or service contract. Because of the flexibility, if you think that you are nearing financial trouble, you should consult with an attorney before you reach a financial crisis. There is no debt limit under Chapter 11.
What is a Chapter 13 bankruptcy?
Chapter 13 is the debt repayment chapter for individuals with regular income whose debts do not exceed $1,230,650 ($307,675 in unsecured debts and $922,975 in secured debts) for bankruptcies filed after April 1, 2004, including individuals who operate businesses as sole proprietorships. These numbers are indexed by the Consumer Price Index every three years. It is not available to corporations or partnerships. Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future income.
What is a Chapter 7 bankruptcy?
Chapter 7 is the liquidation chapter of the Bankruptcy Code. Chapter 7 cases are commonly referred to as straight bankruptcy or liquidation cases, and may be filed by an individual, corporation, or a partnership. Under Chapter 7, a trustee is appointed to collect and sell all property that is not exempt and to use any proceeds to pay creditors. In the case of an individual, the debtor is allowed to claim certain property exempt.
In exchange for this, the debtor gets a discharge, which means that the debtor does not have to pay certain types of debts. Corporations and partnerships do not receive discharges. Consequently, any individuals legally liable for the partnership’s or corporation’s debts will remain liable. Therefore, individual bankruptcies may be required as well as the corporation or partnership bankruptcy.
What is a Chapter 12 bankruptcy?
Chapter 12 offers bankruptcy relief to those who qualify as family farmers. There are debt limitations for chapter 12, and a certain portion of the debtor’s income must come from the operation of a farming business. Family farmers must propose a plan to repay their creditors over a period of time from future income and the court must approve it. Plan payments are made through a chapter 12 trustee who also monitors the debtor’s farming operations while the case is pending.
What is a Chapter 9 bankruptcy?
Chapter 9 is only for municipalities and governmental units, such as schools, water districts, some utility companies and other similar organizations.
What is a discharge?
The discharge order is issued by the court and permanently prohibits creditors from taking action to collect dischargeable debts against the debtor personally; this does not prevent secured creditors from seizing collateral if payments are not kept up, or other creditors from pursuing property of the estate. Some debts are not dischargeable, and others may be found to be non-dischargeable depending on particular circumstances.
Anderson can help.
The Bankruptcy Court and the automatic stay from filing a bankruptcy petition can protect you from a wage garnishment or tax levy. A judgment creditor can be stopped from executing or foreclosing a lien against your home. A trustee foreclosure sale or mortgage foreclosure can be stopped at the last minute. You can get relief from your creditors. Even an IRS collection officer can be stopped by the automatic stay or bankruptcy discharge injunction.
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