What is Bankruptcy?
- “Bankruptcy” refers to a federal code of laws and set of rules that are designed to help a debtor, whether an individual or a business, who is facing more debt than he, she, or it can afford to pay, achieve a fresh start. Bankruptcy permits the debtor to work out a plan to repay some or all of the debt, or to have the debt forgiven.
What is Chapter 7?
- Under a Chapter 7 Bankruptcy, you ask the Bankruptcy court to wipe out (discharge) the debts you owe. Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
What is Chapter 13?
- Chapter 13 is the debt repayment chapter for individuals who have regular income, whose secured debts do not exceed $871,550 and whose unsecured debts do not exceed $290,525. (Note that these debt limitations change from time to time.) Chapter 13 is not available to corporations or partnerships. Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future disposable income. The Chapter 13 debtor proposes a repayment plan which must be approved by the Bankruptcy Court. The debtor pays the amounts set forth in the plan to the chapter 13 trustee, who distributes the funds to creditors in return for a small fee. The Chapter 13 debtor receives a discharge of most debts after the debtor completes the payments required under the plan.
How Often Can I File for Bankruptcy?
- You can file a Chapter 7 Bankruptcy again after 6 years has passed from the date of your last filing.
- You can File a Chapter 13 Bankruptcy again at any time.
Can a Married Debtor File for Bankruptcy Without Their Spouse?
- Yes, a married debtor can file individually without their husband or wife. The debtor should be aware that the spouse will be liable for any debts that are joint debts. Filing individually makes the most sense when the debt is mostly owned by one person, rather than by the couple. If one files without their spouse, the spouse’s credit will not be affected.
Will Bankruptcy Affect My Credit?
- When you are behind on your bills chances are your credit may already be bad. The fact that you have filed a bankruptcy will appear on your credit report for ten years but since bankruptcy wipes out your old debts, you may be in a better position to pay your current bills. How quickly you can rebuild your credit will depend on how aggressively you seek to rebuild it.
Are All Debts Erased in Bankruptcy?
No. The following two categories of debts will not be discharged in Bankruptcy.
- Secured Debts: Loans that are secured by collateral such as a mortgage or a car note are not dischargeable in a bankruptcy.
- Nondischargeable Debts: There are several types of debts that will not be discharged by a Bankruptcy. The most common are:
- Alimony, child support and fees associated with the collection of these support obligations
- Many tax debts
- Student loans unless repayment would cause undue hardship
- Debts arising from fraud or false representations
Can I Get Rid of Tax Debts in a Bankruptcy?
In general, tax debts are subject to discharge only if you file personal bankruptcy more than three years after you file a timely, truthful tax return. If your return is filed late, the taxes are generally discharged only if you file bankruptcy more than two years after filing a truthful tax return.
Should I Exclude Some Debts from the Bankruptcy?
- No. All debts should be included in the Bankruptcy filing.
Can I Get a Credit Card After Filing Bankruptcy?
- It is not easy to obtain credit after filing; however, you can start by obtaining a secured credit card which is backed by your own bank account.
How Can I Stop Creditors From Contacting Me?
- Filing Bankruptcy imposes an “Automatic Stay” on creditors, which makes it illegal for creditors to contact you in attempt to collect on debts.