Information about Bankruptcy
The following information is intended to provide you with general information
about bankruptcy, but is not a substitute for seeking the advice of an attorney
practicing in the area of Bankruptcy law. Therefore, we strongly urge that
anyone who reads the following obtain an opinion from an attorney before taking
any action with regards to a bankruptcy, and not to rely upon the following as
anything more than general information, versus legal advice.
Frequently Asked Questions (FAQ's)
1. What is bankruptcy? Bankruptcy is a Federal Court supervised procedure
to provide relief from debts. It is intended to relieve an individual from the
burden of having more debt than that individual can realistically pay back. It
also allows an individual to keep a certain assets, by exempting them from being
reachable by creditors of the bankrupt individual. Any assets which are not
exempt, however, may be sold and/or distributed to a debtor's creditors.
2. Who can file Bankruptcy? Anyone who has not filed a bankruptcy within
the preceding 6 years, or had filed a bankruptcy within the prior 180 days that
was dismissed by the Court, or in some cases, where the case was voluntarily
dismissed. Also, relief may be denied in cases where the US Trustee determines
that the filing of the bankruptcy was an abuse of the bankruptcy code (such as
in cases where the person appears to have the ability to pay back the debts, and
may be filing simply to stall or hamper collection efforts by creditors).
3. What is the difference between a Chapter 7 and a Chapter 13 Bankruptcy?
A Chapter 7 Bankruptcy is a “liquidation” proceeding, where a debtor does not
have sufficient income, on a monthly basis, to pay back any of their creditors
in any significant amount. In a Chapter 7, unsecured debts are discharged
completely in most cases. A Chapter 13 or “wage-earner” bankruptcy, is a
reorganization and repayment plan bankruptcy, where the debtor can generally
afford to pay some of their debts, such as their secured debts, like mortgages,
car and/or appliance loans, but does not have sufficient income to pay all their
secured and unsecured debts in full. In a Chapter 13, the debtor proposes a plan
running usually between 36 and 60 months, during which the debtor will catch up
debts that are in arrears, pay back some creditors partially, and discharge some
debts completely. As a rule of thumb, a debtor who cannot pay all their
creditor bills each month, but can pay 30 to 40 percent (or more) of their
outstanding debts over a three year period, may be forced into a Chapter 13
repayment plan instead of a Chapter 7 liquidation - the "Fresh Start"
bankruptcy.
4. What kind of debts are dischargeable?
General unsecured debts, such as credit card debts, medical bills, utility
bills, etc. are dischargeable in a Chapter 7 bankruptcy, if there is
insufficient income available for a debtor to pay such debts after paying his or
her necessary monthly expenses, such as the mortgage or rent, food, clothing,
taxes, insurance, and utilities. Non-dischargeable debts include child
support payments, taxes, student loans, other government loans, or
government-guaranteed loans such as SBA loans, court fines, and damages owed to
victims of accidents caused by the debtor while under the influence of alcohol
or drugs.
Also, debts incurred within 90 days of filing a bankruptcy, or incurred by a debtor who doesn't intend to pay the debts back, can be non-dischargeable, as can debts incurred through fraud or misrepresentation, theft, intentional or malicious injury to another, or debts which have been reduced to a court judgment (making them "secured" debts against a debtor's property).
Finally, car loans and similar "secured" loans can be discharged in a bankruptcy, but will also require forfeiture of the property subject to the loan, unless the debtor renews their obligation to pay for the property, through the "Reaffirmation" process, whereby a debtor "Reaffirms" their obligation to pay the remainder of the debt after their discharge date.
5. What kind of property can a person keep?
Both the State and Federal government have exemption schedules, prescribing the
value of property a debtor is allowed to keep ("exempt") from the
bankruptcy estate. The schedule one chooses will depend upon the
particular property, and amount of property owned by the debtor, or in which the
debtor has some equity. In general, a debtor can keep their household
items, such as furniture and appliances, and other personal property, as long as
those items are not worth more than the exemption schedules provide.
6. Can I be fired if my employer learns that I file
bankruptcy? No. The U.S. Bankruptcy Code prohibits an employer from
terminating or discriminating against a debtor, or persons associated with a
debtor, because of the debtor's bankruptcy.
7. What happens to the creditors that are hounding me for payment?
As soon as the bankruptcy petition is filed, an automatic stay goes into effect,
prohibiting the creditors from any further collection activity against the
debtor, without first obtaining the Court's permission. Once the creditors
receive notice of the bankruptcy, they must leave the debtor alone.
Creditors who continue to contact a debtor or harass them for payment after a
bankruptcy filing, violate the automatic stay can can be fined and punished by
the Court for doing so.
THE ABOVE INFORMATION IS GENERAL IN NATURE AND IS NOT INTENDED TO BE RELIED UPON BY ANYONE. THIS INFORMATION IS NOT A SUBSTITUTE FOR THE SERVICES OF A QUALIFIED BANKRUPTCY ATTORNEY AND SHOULD NOT BE TAKEN AS ADVICE BY ANYONE WHO READS IT. DO NOT RELY UPON THIS INFORMATION WITHOUT FIRST DISCUSSING YOUR CASE WITH AN ATTORNEY OR OTHER QUALIFIED INDIVIDUAL. MANLEY & ASSOCIATES, PLLC DOES NOT CONSIDER ANYONE WHO READS THIS MATERIAL TO BE A CLIENT OF THE LAW FIRM UNLESS OR UNTIL THE INDIVIDUAL CONTRACTS FOR THE SERVICES OF MANLEY & ASSOCIATES, PS, Inc.
Last changed:
11/01/2007 03:06:23 PM -0700