What Is Bankruptcy?
Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you.
What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts through a "discharge" of debts.
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments.
- Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
- Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
- Restore or prevent termination of utility service.
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
What Bankruptcy Cannot Do?
Bankruptcy cannot, however, cure every financial problem.In bankruptcy, it is usually not possible to:
- Eliminate certain rights of "secured" creditors.A "secured" creditor has taken a mortgage or other lien on property as collateral for 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 any additional money if your property is taken.
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.
- Protect cosigners on your debts.
What Different Types of Bankruptcy Cases Should I Consider?
There are four types of bankruptcy cases provided under the law, but the two used by consumer debtors are:
Chapter 7 is known as "straight" bankruptcy or "liquidation."
Chapter 13 is called "debt adjustment".It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
What Must I Do Before Filing Bankruptcy?
You must receive budget and credit counseling from an approved credit counseling agency within 180 days before your bankruptcy case is filed, or your bankruptcy will be dismissed.This can be accomplished in about one hour online.
What Will Happen to My Home and Car If I File Bankruptcy?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt and you continue to make payments on any secured debt. Even if your property is not fully exempt, you will be able to keep it if you pay its non-exempt value to creditors in chapter 13.
There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full.Or you can pay the creditor the amount that the property you want to keep is worth.
Can I Own Anything After Bankruptcy?
Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true.You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
Will Bankruptcy Wipe Out All My Debts?
Yes, with some exceptions.Bankruptcy will not normally wipe out:
- money owed for child support or alimony as well as debts established by a divorce order not solely in the nature of support, fines, and some taxes;
- debts not listed on your bankruptcy petition;
- loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
- debts resulting from "willful and malicious" harm;
- student loans owed to a school or government body, except if:‑‑the court decides that payment would be an undue hardship, but it is very difficult, expensive and rare to successfully establish such an undue hardship;
- mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).
What Else Must I Do to Complete My Case?
After your case is filed, you must complete an approved course in personal finances.
Will Bankruptcy Affect My Credit?
There is no clear answer to this question.Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things much worse.
The fact that you've filed a Chapter 7 bankruptcy can appear on your credit record for ten years.But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit. Most folks who file bankruptcy are able to obtain a mortgage, at competitive market rates, two to four years after receiving a discharge.
How Do I Select a Bankruptcy Attorney?
As with any area of the law, it is important to carefully select an attorney who will respond to your personal situation. The attorney should not be too busy to meet you individually and to answer questions as necessary.
You should carefully read retainers and other documents the attorney asks you to sign.
In bankruptcy, as in all areas of life, remember that the person advertising the cheapest rate is not necessarily the best.
William P. Turner, Attorney at Law
601 N. Mur-Len, Suite 5
Olathe, KS 66062