What is bankruptcy?

Bankruptcy is the legal method for a debtor to discharge or relieve debt. Bankruptcy is a way for people or a business who owe more money than they can pay to either work out a plan to repay the money over time or to have their debt wiped out. While no debtor is guaranteed a total discharge, most debtors who file for bankruptcy are given such relief. One of the primary purposes of the bankruptcy act is to relieve the honest debtor from the weight of oppressive indebtedness and to provide the debtor with a fresh start. Title 11 of the United States Code regulates the filing of a bankruptcy. If the debtor initiates the bankruptcy it is called a voluntary bankruptcy. If the creditor initiates the bankruptcy it is called an involuntary bankruptcy. In an involuntary bankruptcy the debtor has the opportunity to contest the petition. While the debtor is either working out a plan or the trustee is gathering the available assets to sell, the Bankruptcy Code provides that creditors must stop all collection efforts against the debtor. The Bankruptcy Code regulates what chapter you must file under, what bills can be eliminated, how long payments may be extended, what possessions you may keep, and all other details concerning the bankruptcy.

What is the Bankruptcy Code?

The Bankruptcy Code refers to Title 11 of the United States Code. (11 U.S.C. §§ 101-1330) Federal Law governs bankruptcy. The Bankruptcy Code includes most, but not all of the laws passed by congress that govern bankruptcy.

Where do I get a copy of my state’s local rules?

Copies can be obtained at the public service counters in the Clerk`s office of the Bankruptcy Court. In addition, many Bankruptcy Courts now publish their rules online. Each bankruptcy court district has its own special rules that apply to bankruptcy cases filed in that court. It is important to review the local bankruptcy rules and required local forms before filing a bankruptcy case.

Who can file for bankruptcy?

Any person, partnership, corporation or business trust may file bankruptcy. In addition, charitable or social organizations may also file for bankruptcy. United States citizenship is not a requirement for filing bankruptcy.

Do I need an attorney to file bankruptcy?

Federal law does not require you to have an attorney represent you when you file bankruptcy. In fact, congress requires anyone who advises on bankruptcy to tell you that a lawyer is not required.You are allowed to file pro se, that is, on your own without an attorney. However, without the assistance of an attorney, it is extremely difficult to do so successfully. Hiring a competent attorney is highly recommended. After all, you are allowed to take out your own appendix without a doctor if it gets infected.

What if I am married?

If you are married, you may file a joint petition for bankruptcy relief. A joint petition is the filing of a single petition jointly by an individual and that individual`s spouse. Federal law does not yet recognize same sex marriage. Consequently, your spouse for bankruptcy purposes must be of the opposite sex. In order to qualify for a joint petition, you must be married on the date that the joint petition is filed. Unmarried persons, corporations and partnerships must each file a separate case. If you are an individual and have a business that is a separate entity, you may not file a single petition for yourself and your business; each must be a separate bankruptcy case. However, if your business is a sole proprietorship, it is included in the bankruptcy you file personally.

Will I lose my house, car, and other personal property?

Not necessarily, each state has exemption laws that determine which items of property you can keep for yourself in a bankruptcy. For example, many states exempt personal items such as furniture and clothing to a certain value. In addition, other kinds of property are exempt up to a limit. These exemption limits mean that any equity that you have in the property above the limit is not exempt. The Bankruptcy Trustee can take the non-exempt property and sell it, pay off any creditors, and give to you the exemption amount.

Does my divorce decree protect me if my ex-spouse has filed bankruptcy and listed me as a co-signer?

If you are contractually bound with your ex-spouse on a debt, the creditor can require the entire payment of that debt from your share of the community property even though the divorce decree assigns the debt to your ex-spouse. Depending on the terms of your divorce decree, you may be able to have certain support obligations under it determined to be non-dischargeable by the bankruptcy court or in state court. If you find out that your ex-spouse has filed for bankruptcy, you should seek legal advice to find out your possible obligations.

Will filing bankruptcy change my credit rating?

Normally, filing a bankruptcy will have an impact on your credit rating. However, a bankruptcy filing will often actually improve your credit rating over time. Most individuals are able to rebuild their credit within a few years after filing. If you are currently thinking about bankruptcy, and you have fallen behind on paying your debts, it is likely that your current credit rating has already dropped. A discharge of your current debt may provide the opportunity to rebuild your credit with steady, regular payments on a new account.

How long will a bankruptcy show on my credit reports?

The Bankruptcy Code has nothing to say about credit reporting agencies. The Fair Credit Reporting Act, 15 U.S.C. 1681 et seq., is the law that controls credit reporting agencies. The law states that credit reporting agencies may not report a bankruptcy case on a person`s credit report for more than ten years after the date the bankruptcy case is filed. Other bad credit information is removed after seven years.

What chapter should I file under?

Your personal circumstances will determine the best chapter for you to file under. Choosing the appropriate type of bankruptcy is very important. The decision whether to file a bankruptcy and under what chapter is an extremely important decision and should be made only with competent legal advice from an experienced bankruptcy attorney after a review of all of the relevant facts concerning your case.

What is a chapter 11 bankruptcy?

Chapter 11 is the reorganization chapter available to businesses and individuals that have substantial assets and/or income to restructure and repay their debts. Creditors vote on whether to accept or reject a plan of reorganization that must be approved by the court. Chapter 11 allows flexibility in structuring the reorganization. Some plans may even release a debtor from ongoing contracts such as a commercial lease or service contract. Because of the flexibility, if you think that you are nearing financial trouble, you should consult with an attorney before you reach a financial crisis. There is no debt limit under chapter 11. However,