Personal Bankruptcy

Bankruptcy is a procedure under Federal law which assists persons in financial difficulty to deal with a burdensome debt. Whether you have suffered the loss of a job, an illness or have just overextended yourself, you are entitled, under the federal bankruptcy law, to get relief from certain debts in order to get a fresh start with your credit. As used on this website, the term debtor will refer to the individual who files bankruptcy and the term creditor will refer to a person or company to whom the debtor owes a debt.

There are several types of bankruptcy and it is important to consider the facts of each individual situation in order to determine which proceeding would best meet each need. Factors which will be considered include your employment situation, the amount of money you earn each month, the amount of money it takes to provide for your living expenses, how much and what type of property you own and what type of debt you have. The guiding principle of the legislature in drafting the bankruptcy laws has been to allow a debtor relief from their debts while being as fair as possible to the creditors. Generally, this means that if you can pay a portion of your debt, but not all of it or as soon as the creditors want it, then you will be required to file a Chapter 13 Bankruptcy. You may also be required to file a Chapter 13 Bankruptcy case under the recent amendments to the bankruptcy code if your income is above a certain level.

A bankruptcy filing can do several things but the most immediate relief is the automatic stay. This is a type of injunction which keeps creditors from taking any action to collect on a debt. Once a bankruptcy petition is filed, the filing brings into effect the automatic stay. At that point, creditors are not permitted to contact the debtor, to call or write letters, to sue or proceed with a law suit or any other action to force the debtor to pay the debt. This automatic stay is the relief many persons need due to the persistent nature of the actions of the debt collectors.

The types of bankruptcy filed by individuals and couples are Chapter 7 and Chapter 13. Chapter 7 is also known as a straight bankruptcy or liquidation. A Chapter 13 is also known as a reorganization and is sometimes referred to as a wage earner plan. The ultimate goal in either Chapter 7 or Chapter 13 is to obtain a discharge of debt. A discharge is the release of the debtor from the obligation to repay the debt.
A bankruptcy filing stays on your credit record for ten years. However, this is often preferable to having adverse reports from your various creditors and in many cases, provides for recovery of your good credit faster than without bankruptcy.

Debtors are required to keep their attorney, the court and the trustee informed of their address and telephone number during the duration of their bankruptcy case. This is very important as documents which may affect your case and/or property rights will be mailed to you and will often be the only notice you receive. You should also be certain to notify your attorney in the event any creditor takes action to collect a debt which was included in your bankruptcy case. In some instances, a creditor can be penalized for continuing to contact a debtor after a bankruptcy case is filed.

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