The practice of filing bankruptcy is quite common with hundreds of people filing for bankruptcy each day. The reasons for filing may vary widely, but there are basic principles that apply to all personal bankruptcy cases filed.
What is personal bankruptcy?
Bankruptcy is a legal process that allows consumers and businesses to repay none, some or all of their debts under the protection of federal bankruptcy court. Chapter 7, Chapter 13 and Chapter 11 bankruptcy are legal proceedings that are available to a person or business to cope up with financial crisis. Bankruptcy proceedings serve the purpose of affording a person who is hopelessly burdened with debt, an opportunity to free himself or herself of the debt and start fresh.
A personal bankruptcy refers to when an individual or a married couple file bankruptcy, as opposed to a business bankruptcy. Personal bankruptcy cases can be filed as a Chapter, 7, Chapter 13 or in rare circumstances as a Chapter 11.
What is the most common types of personal bankruptcy?
The most most common type of Bankruptcy is the “Chapter 7” bankruptcy. It is called Chapter 7 because the laws that guide this kind of bankruptcy are found in “Chapter 7” of bankruptcy code. The second most commonly filed cases are “Chapter 13” bankruptcy cases, which are more complex. Chapter 13 bankruptcy cases are described in “Chapter 13” of the bankruptcy code. Chapter 11 bankruptcy cases can be filed by individuals, but they are rare and have stringent requirements that must be met to be successful.
What is a discharge in personal bankruptcy?
Bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. According to the law, the debtor will nor be required to pay the debts that are discharged. Once a bankruptcy discharge is in effect, it operates as a final permanent order which is directed to debtor’s creditors that they continue to refrain from taking any sort of collection action on discharged debts, including any sort of legal action not limited to communications with the debtor. Even though the debtor is generally relieved from personal liability for all the debts which are discharged, a valid lien which is a charge upon specific property to secure payment of a debt) that is still enforced in the bankruptcy case. This lien remains after the bankruptcy case is over. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.
Exceptions where the Bankruptcy Discharge does not apply
- Child support, most tax debts, and student loans, as these debts that automatically survive bankruptcy.
- Debts that court considers non dischargeable such as debt incurred by fraud or malicious acts.
What is the automatic stay?
Under 11 U.S.C. § 362, when a bankruptcy petition is filed under chapter 7 or chapter 13, an automatic stay may go into effect, which immediately stops any lawsuit and most actions against the debtor’s property by a creditor, collection agency, or government entity. If you happen to be at risk of being evicted, or being foreclosed on, being found in contempt to pay child support, or your job, an automatic stay gives the debtor a strong reason to file for bankruptcy. This stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors cannot initiate or continue any lawsuits, wage garnishments, or even telephone calls demanding payments, Creditors normally receive notice of the filing of the petition from the clerk.
What are the main reasons to file for Chapter 7 or Chapter-13 bankruptcy?
The most common reasons for filing personal bankruptcy are:
- When you are unemployed/ or have a reduced income
- Child support and alimony,
- When you have overextended credit
- When you are having financial problems stemming from marital problems
- When you are having problems with a new or existing business which is owned by the debtor
- Other large unexpected expenses (i.e. medical bills).
Will my creditors stop harassing me?
Once the documents are filed, your creditors will not be interfering with your personal business and harassing will stop. Once the documents are filed, creditors are not likely to initiate or continue any lawsuits, wage garnishes, or even make telephone calls demanding payments. However, it is important to remember that a secured creditor such as a banks holding, for instance, a lien on the car may try to get the automatic stay lifted if you cannot timely make the payments.
Will I able to ever get credit again?
A year after the bankruptcy discharge goes into effect, as a debtor, you will be eligible to get automobile loans on the terms as good as those of others, with same financial standing who have not filed for bankruptcy. What will matter at this point is the size of your down payment and how stable your income is rather than the fact you had filed for bankruptcy in the past.
Two years after the bankruptcy discharge goes into effect, as a debtor you will be eligible for mortgage loans on terms as good as others, with same financial standing who have not filed for bankruptcy. The fact you filed bankruptcy becomes less significant the further in the past the bankruptcy is. The truth is, most banks will prob¬ably consider you a better credit risk after bankruptcy than before.
Will filing personal bankruptcy protect my property?
The automatic stay stops and prevents foreclosure, repossession, garnishments, collection calls, etc. Upon notice of the chapter 7 or chapter 13 case, creditors must cease attempting to collect from the debtor or the debtor’s property until further order from the bankruptcy court.
What is a Chapter 7 trustee?
Upon the filing of the Chapter 7 petition, an impartial case trustee is appointed by the United States trustee to administer the case and liquidate the debtor’s nonexempt assets. The Chapter 7 trustee will preside over the meeting of creditors and determine whether there are any nonexempt assets available to liquidate for the benefit of creditors.
Filing for Bankruptcy does not have to be cumbersome. Before filing for Bankruptcy under Chapter 7, you are advised to consult your local bankruptcy attorney today.
Our attorneys at Coleman Legal Group have helped hundreds of people to successfully file for bankruptcy. We can understand the stress that comes along with filing for bankruptcy, so call 770-609-1247 today to discuss your case with us.