FINDING A BANKRUPTCY LAWYER
What Is Bankruptcy Law?
Bankruptcy is a legal status of a person or entity (such as a business) that cannot repay debts to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.
This legal procedure is initiated by an individual or a business that cannot pay their debts and who seeks their debts discharged or reorganized by the courts. The three most common types of bankruptcy proceedings are Chapter 7 individual petitions, Chapter 11 business reorganization and rehabilitation petitions, and Chapter 13 wage earner plans.
Congress has enacted statutes governing bankruptcy, primarily in the form of the Bankruptcy Code, located at Title 11 of the United States Code. Bankruptcy cases almost exclusively fall under federal law. Generally, any bankruptcy-related claim must be filed with the U.S. Bankruptcy Court.
If you are considering bankruptcy you are likely dealing with some substantial financial issues. Bankruptcy is one of those issues where you will want to seek legal advice before deciding on a course of action.
FREQUENTLY ASKED QUESTIONS
Determine what options you have. There are different types of bankruptcy, as mentioned above. You may well want to do this in consultation with an attorney. Chapter 7 bankruptcy can wipe out many of your debts in a three to six-month period. But you may lose some of your personal property. In Chapter 13 bankruptcy, you will be required to make a repayment plan based on your income, and pay off your debts in a three to five-year period.
You must be eligible for the type of bankruptcy you want to file. This may be determined by your income level, which will affect the court’s judgment of your capacity to pay off your debts.
Be aware of what debts will and won’t be forgiven. There are certain types of debts, such as child support, alimony and tax debts, which cannot be “discharged,” or wiped out, through bankruptcy.
Determine what will happen to your home, your car and other personal property if you file for bankruptcy. Certain property exemption laws are available to you, and how they apply depends on the type of bankruptcy action you file. In Chapter 7 bankruptcy, some of your personal property may be taken and sold to pay off your debts. Also, in a Chapter 13 bankruptcy, you may have to ask permission to spend your own money for the next three to five years.
Make sure that your pension plans are safe. Most pension plans and life insurance policies are usually protected by state laws in a bankruptcy proceeding. Before filing, it would be important to find out whether your pension plan and/or life insurance policies will continue to be protected.
Know that your personal life and privacy will be invaded. You will have to show the bankruptcy court every aspect of your financial life. In addition, others may find out about your bankruptcy. Bankruptcy filings are public records, so anyone who wants to look up your financial information can do so. Plus, the names of everyone in bankruptcy court are published in local newspapers and online, searchable records.
Per Wikipedia, there are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code:
- Chapter 7: Basic liquidation for individuals and businesses. Also known as straight bankruptcy, it is the simplest and quickest form of bankruptcy available.
- Chapter 9: Municipal bankruptcy. Federal mechanism for the resolution of municipal debts.
- Chapter 11: Rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets. Known as corporate bankruptcy, it is a form of corporate financial reorganization which typically allows companies to continue to function while they follow debt repayment plans.
- Chapter 12: Rehabilitation for family farmers and fishermen.
- Chapter 13: Rehabilitation with a payment plan for individuals with a regular source of income. It enables individuals with regular income to develop a plan to repay all or part of their debts. Also known as Wage Earner Bankruptcy.
- Chapter 15: Ancillary and other international cases. It provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.
An important feature applicable to all types of bankruptcy filings is the automatic stay. The automatic stay means that the mere request for bankruptcy protection automatically halts most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection activity.
Here are some additional choices to consider instead of filing for bankruptcy, or if you have debt that can’t be wiped out.
Credit counseling involves working with a professional credit counselor or financial coach who can help you analyze and develop tactics to deal with your debt situation. This process usually includes financial education, budgeting tools, and other goal tracking tips for reducing your debts, modifying your spending habits, and eliminating future debt problems.
Loan refinancing or loan modification is a process by which you negotiate a change to one or more of the terms in the loan, such as a lower interest rate or more affordable monthly payments.
Credit card consolidation combines multiple debts into a single loan with a single monthly payment. Instead of having multiple creditors and corresponding payments each month, you consolidate them into a single monthly payment. This also reduces the risk of missed payments. You can do this with the assistance of a debt consolidation or management company, a credit counselor, or on your own.
Bankruptcy will affect your credit. Once you declare bankruptcy, your past good history of credit will be wiped out. What’s more, it can stay on your credit report as a negative mark for up to 10 years, and the adverse effects stay with you even longer.
You are also required to declare your bankruptcy filing to future employers, on medical forms, and other state or government official reports. So even if it’s been decades since you filed for bankruptcy, you will still have to disclose this fact on many official forms and applications. In other words, bankruptcy follows you around for the rest of your life, so you want to make sure this is your last option.
Some debts can’t be discharged. Bankruptcy is not necessarily a cure-all to all financial problems. Not all debts are eligible to be discharged during this bankruptcy. If you owe back taxes or child support, bankruptcy will likely not help you. Likewise, before taking on the task of filing for bankruptcy, you want to exhaust all your options.
The discharge of your debts is bankruptcy is personal, meaning it applies only to you. It does not eliminate the debt itself. So, if a friend or relative has been a co-signer on a home or property loan and you file for bankruptcy, the debt is not wiped out. The lender can still seek to collect the debt from the other co-signer. This is important to keep in mind if you have family members or friends who are a co-signer on your loan: they may be targets for recovery of your debt.
Filing for bankruptcy is not cheap. Filing can cost a significant amount of money. The amount varies upon if you hire an attorney. Retaining a bankruptcy attorney may cost from hundreds to thousands of dollars. Even if you prepare and file your own bankruptcy case, the filing fees alone are substantial. Destitute debtors may find relief from filing fees by petitioning the bankruptcy court for a fee waiver. The court will base its waiver decision on your income.
Quotes of Wisdom
“Laws are the very bulwarks of liberty; they define every man’s rights, and defend the individual liberties of all men.”
– J.G. Holland
“For there is but one essential justice which cements society, and one law which establishes this justice. This law is right reason, which is the true rule of all commandments and prohibitions. Whoever neglects this law, whether written or unwritten, is necessarily unjust and wicked.”
― Marcus Tullius Cicero, On the Laws
“It may be true that the law cannot make a man love me, but it can stop him from lynching me, and I think that’s pretty important.”
― Martin Luther King Jr.
“The glory of justice and the majesty of law are created not just by the Constitution – nor by the courts – nor by the officers of the law – nor by the lawyers – but by the men and women who constitute our society – who are the protectors of the law as they are themselves protected by the law.”
“Law is nothing other than a certain ordinance of reason for the common good, promulgated by the person who has the care of the community.”