Bankruptcy

Bankruptcy is a legal proceeding in which a person who cannot pay their bills gets a new financial start.  The right to file bankruptcy is provided by federal law.  Filing bankruptcy immediately stops your creditors from seeking to collect debts from you.  A completed bankruptcy discharges (“eliminates”) your debts.

What can Bankruptcy Do for Me?

Filing Bankruptcy:

  • Stops wage or bank garnishments, debt collection harassment and similar creditor actions to collect a debt.
  • Stops foreclosure on your home and allows you an opportunity to catch up on missed payments. (Bankruptcy, does not, however, automatically eliminate mortgages and other liens on your property without payment.)
  • Eliminates the legal obligation to pay most or all of your debts.  This is called a “discharge” of debts.  It is designed to give you a fresh financial start.
  • Prevents repossession of your car or other property.

Certain Debts Are Not Eliminated By a Bankruptcy:

Bankruptcy cannot, however, cure every financial problem.  Nor is it the right step for every individual. Bankruptcy will not:

  • Eliminate the rights of “secured” creditors. A “secured” creditor has taken a mortgage or other lien on property to secure the payment of the loan.  Common examples are car loans and home mortgages.  You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay additional money if your property is taken.  Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
  • Eliminate debts such as child support, alimony (maintenance), certain other debts related to divorce, guaranteed student loans, court restitution orders, criminal fines and most taxes.
  • Protect cosigners on your debts.  When a relative or friend has co-signed a loan, the cosigner will have to repay the loan.
  • Eliminate debts that arise after bankruptcy has been filed.

What Different Types of Bankruptcy Cases Should I Consider?

There are two types of bankruptcy that most consumers file:

  • Chapter 7 is known as a “straight” bankruptcy or “liquidation”.  It requires a debtor to give up property which exceeds certain limits called “exemptions,” so the property can be sold to pay creditors.
  • Chapter 13 is called “debt adjustment.”  It requires a debtor to file a plan to pay a portion of their debts from current income. The consumer must repay a portion of their debt for a period of three to five years.

Either type of case may be filed individually or by a married couple filing jointly.  The vast majority of debtors who file bankruptcy are entitled to keep all of their assets under the law.

We are a debt relief agency.  We help people file for bankruptcy relief under the Bankruptcy Code.