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Bankruptcy is a legal action for debtors to deal with insolvency. Most debtors are given relief even if there is not a complete discharge of debts.
Title 11 of the U.S. Code establishes and sets the guidelines for bankruptcy procedure. There are various types of bankruptcy outlined in Title 11, and debtors are eligible for certain forms of bankruptcy based on their financial situation, their type of business (in the case of a business bankruptcy) and other factors. The court appoints a trustee who oversees the bankruptcy proceedings.
A bankruptcy may be voluntary or involuntary. A voluntary bankruptcy is one the debtor initiates; an involuntary bankruptcy is one the creditors initiate. In an involuntary bankruptcy, the debtor may contest the bankruptcy petition.
Bankruptcy prevents creditors from pursuing collection actions against the debtor while either the debtor is either working out a payment plan or the trustee is dealing with asset liquidation. The Bankruptcy Code determines all aspects of the bankruptcy, including the chapter of bankruptcy that applies, which bills are eliminated and the time period for payment.
As soon as you file a bankruptcy petition, the court issues an automatic stay, which is a legal action that prevents creditors from pursuing collection activities or legal actions against you in an effort to collect debt. If the creditor has seized funds after the petition was filed, in many cases, those funds must be returned. Your bankruptcy attorney will explain legal actions that will be taken to recover these funds.
Repeat bankruptcy filers are subjected to different rules under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2006. Consult a bankruptcy attorney regarding how the automatic stay may be handled under the new rules if you previously had a dismissed bankruptcy.
If you filed a Chapter 7 bankruptcy and received a discharge, you must wait eight years before filing another Chapter 7.
You cannot receive a discharge in a Chapter 13 case if you received either:
However, a Chapter 20 filing may be available to you under the above rules. A Chapter 20 filing is a Chapter 7 case to eliminate unsecured debt followed by a Chapter 13 case to allow mortgage arrearages to be remedied, etc. The reason it may be available under the above rules is the goal of the Chapter 13 follow-up case is usually to repay a mortgage debt and not to get a discharge from that debt.
Yes. A creditor is any company or person, even a family member or friend, to whom you owe money.
You usually don’t have to worry about your employer finding out about your bankruptcy unless your employer is one of your creditors or your wages are no longer being garnished, in which case your employer may follow up to learn why the garnishment ceased.
No. You are protected against discrimination based on bankruptcy laws that prohibit job termination because of filing for bankruptcy.
Chapter 7 bankruptcy remains on your credit report for 10 years, and Chapter 13 remains for seven years. You may start qualifying for loans as early as one year after filing bankruptcy if you meet the income requirements. However, the lender will likely charge you higher-than-normal interest rates. It may take five to seven years before you are offered normal interest rates again.
Under Section 524(f) of Title 11, you are authorized to repay any creditor you choose.
There are circumstances that discharge tax debt. For Chapter 7, if you filed your tax return for the year, your debt will be discharged under these circumstances:
There are other taxes your attorney can review with you, such as trust fund taxes, tax liens and taxes not covered by the Two- and Three-Year rules. Because these tax areas can be complicated, an experienced bankruptcy attorney can be invaluable in helping you sort out what taxes are discharged and what taxes you still owe.
With a Chapter 7 bankruptcy, you usually have to attend one meeting of creditors before your bankruptcy trustee, which takes place 20–40 days after filing your bankruptcy petition. For a Chapter 13 bankruptcy, you will have go to court for two appearances before your trustee — for the meeting of creditors and the confirmation hearing.
If you are seeking extra relief, other court appearances may be required. Your discharge is entered after all required plan payments have been made and your certificate evidencing completion of the Instructional Course in Personal Financial Management has been filed.
You can re-establish your credit by getting a co-signer on a loan and also by getting a secured credit card. With a secured credit card, your credit limit is based on the sum of money you gave the creditor as security for your card.
Yes. If the credit card was not adversely affected by your insolvency, most credit card companies will continue to do business with you after filing for bankruptcy.
While creditors are supposed to notify credit-reporting agencies when debts are discharged, they do not always do so. As a result, you may have discharged debts still appearing on your credit report. You should send copies of the following documents to the three credit reporting agencies to ensure your credit report accurately reflects your discharges:
Experian
PO Box 2104
Allen, TX 75013
Equifax Information Services
PO Box 105873
Atlanta, GA 30348
TransUnion
PO Box 1000
Chester, PA 19022
Unless you specifically hire your attorney to do so, it is not his or her job to clear up any errors on your credit report once your debts are discharged. You can easily take the above steps yourself and save the expense of additional attorneys’ fees.
