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Bankruptcy

Q. What is bankruptcy?

A. Bankruptcy is a course of action that allows individuals or corporations to do away with or reorganize their debt under the protection of the bankruptcy court.

 

Q. What are the types of bankruptcy?

A. Bankruptcies are either liquidating or restructuring. A liquidating bankruptcy is one in which all debts are discharged and all non-exempt assets are sold and divided among the creditors; in a restructuring bankruptcy, a plan must be filed showing how you will repay your creditors over a period of time. Some debts must be repaid in full; others are paid in part; some are not paid at all.

 

Q. What is Chapter 7 bankruptcy?

A. Chapter 7 is a liquidating type of bankruptcy; this means that at the conclusion of the bankruptcy, you will no longer have any debt, but will striped of all assets other than exempt property.

 

Q. What is exempt property?

A. Exempt property is property you can retain under State or Federal law even though all debts have been discharged or cancelled. Some of the common exemptions are: 1. Primary residence - you can exempt all or a portion of your home from the claims of creditors, other than the holder of the mortgage; 2. Insurance/retirement plans- certain types of retirement plans and cash values of life insurance policies are let off from the claims of creditors; 3. Personal Property- depending on state law, the debtor can exempt household goods, furniture and furnishings, and clothing. There may be a limit on the value of personal property that the debtor can exempt. Under certain circumstances, cars, tools used on your job and a portion of earned but unpaid wages can also be protected.

 

Q. What is a Chapter 13 bankruptcy?

A. Chapter 13 and Chapter 11 are a reorganization of debt that allows you to pay all or a portion of what you owe over a preset period of time under a plan of repayment.

 

Q. Why would you decide to reorganize your debt under Chapter 13 instead of discharging it under Chapter 7?

A. Chapter 7 bankruptcy is not to be had if a debtor has previously filed for bankruptcy protection within the last 6 years. Additionally, you may have valuable nonexempt assets that would be gone in a Chapter 7 liquidating bankruptcy. You may also have debts that cannot be removed or debt that is secured by property that is more valuable than the debt.

 

Q. What types of debts are not dischargeable?

A. Some of the types of debts that will not be discharged in a Chapter 7 bankruptcy and must be the full amount in a Chapter 13 restructuring include: 1. Child support and alimony; 2. Most student loans, except under certain cases; 3. Tax debts; 4. Debts which are the product of fraud or criminal acts; 5. Certain loans and credit purchases made within 60 days of filing for bankruptcy.

 

Q. How does a debtor file for bankruptcy?

A. A petition is filed with the bankruptcy court listing what debts are owed and what assets you have. Income, expenses and transfers of assets are also listed. Currently, if you file for bankruptcy you must pay a filing fee of about $175 for a Chapter 7 bankruptcy and $160 for a Chapter 13 bankruptcy.

 

Q. What happens after bankruptcy process is started?

A. A court-appointed trustee will be assigned to look over the bankruptcy case. A meeting of creditors, which the debtor must attend, will take place several weeks after filing. At this meeting the trustee will conduct an examination to determine whether the information in the petition is correct. The trustee may also ask you for additional records. Creditors rarely attend this meeting, however, if they do, they can also ask questions. The meeting usually is very short. In approximately 3-6 months you will receive a notice that your debt has been discharged.

 

Q. When will all the creditors stop calling me?

A. After filing for bankruptcy, no creditor can take any action to collect or implement any debt except through the bankruptcy court. If a creditor calls after filing, they should be told that a bankruptcy has been filed and be given the case number. If a creditor continues to harass the debtor after the filing, the creditor can be sued under various state and federal collection laws.

 

Q. Do I need a attorney to file for bankruptcy?

A. If you are filing a Chapter 13 or Chapter 11 , you will need a attorney. The plan that must be filed is very complicated and must meet certain technical legal requirements. If you are very inventive, you can file your own Chapter 7 bankruptcy. Bankruptcy forms and petitions usually are available from the clerk of the bankruptcy court. nonetheless, since even Chapter 7 bankruptcies can be complicated and you want to take advantage of all available exemptions, it is strongly recommended that you seek out an experienced attorney.

 

Q. What will my lawyer charge to represent me?

A. Chapter 7 bankruptcies are usually handled for a flat rate. While there is variation in charges from state to state, you can probably find a qualified attorney to represent you for no more than $750. Often, the attorney will accept payments over a period of time; however, you will have to pay your fee in full before the bankruptcy is filed. Chapter 11 and Chapter 13 reorganizations are far more complicated, and you will be expect fees in excess of $1000.

 

 

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