Frequently Asked Bankruptcy Questions
While financial strain and stress are caused by many reasons, their solution can be found in the United States Bankruptcy Code. Practically every civilization, since organized society, has had some form of bankruptcy relief. Many people have turned to bankruptcy as a solution to their financial situation. Whether to stop a foreclosure on a house, a repossession of a car or a wage garnishment, bankruptcy can provide a fresh start and allow you to rebuild your credit and get back on a healthy financial footing. Whether or not bankruptcy is the best solution for your financial situation is very case dependent.
Do I need a bankruptcy lawyer to file for bankruptcy?
The bankruptcy law significantly changed in 2005, making it more difficult to file for bankruptcy protection. Although you are not legally required to have an attorney to file for bankruptcy, consulting with an experienced bankruptcy attorney will help you fully understand your options and avoid potential complications. For example, failure to obtain credit counseling before filing or not providing certain documents to the Court and the Trustee timely will cause your case to be dismissed. Other problems that could result include losing your home or other property you are trying to protect, that you otherwise may have been able to protect had you sought out legal advice. There are a number of bankruptcy preparer services that advertise that they can prepare and file your petition for you, however, they are prohibited from giving legal advice and they cannot represent you when a problem develops.
What are the different kinds of bankruptcy?
An individual filing for bankruptcy generally must decide whether to file for protection under Chapter 7, 11 or 13, depending upon the circumstances.
Chapter 7 is the liquidation chapter, also known as a “straight bankruptcy“. A chapter 7 case typically remains open for six (6) months (from filing to final decree), with a discharge being entered within ninety (90) days of the filing of the petition. All debts must be listed, regardless of whether or not you wish to continue paying them. For instance, a mortgage or car note must be listed, and if you are keeping the property, you will continue to make payments on the debt, despite the bankruptcy filing. Some debts can be reaffirmed through a Chapter 7, however, legal advice is invaluable to determine your rights and obligations when reaffirming a particular debt, as some reaffirmations may have a negative impact and adverse consequence.
Although there is no minimum or maximum debt required in order to file for bankruptcy relief, the Office of the U.S. Trustee reviews every filing for potential fraud and abuse.
Chapter 11 is commonly referred to as business reorganization. Although individuals can file a Chapter 11, most filings are for businesses. Under a Chapter 11 case, the business or individual debtor remains in possession of the assets and formulates a plan to pay creditors over a period of time. The debtor in possession may divide creditors into different classes, rearrange or sell certain assets, and have certain protection while formulating a plan while remaining in business. There is no limit on the amount of debt an individual or business may have under this chapter.
Chapter 13 is another type of reorganization, commonly referred to as a “wage earners” plan. This chapter is primarily filed by someone whose house is in foreclosure, has substantial non exempt assets or income is above the median average. As with Chapter 11, a plan of reorganization is proposed to the creditors for payments from three (3) to five (5) years in length. A portion of your wages are paid to a Chapter 13 Trustee who administers the plan and pays your creditors. Under Chapter 13, a lawyer can provide assistance in maximizing your fresh start through motions with the court to revalue assets, strip liens and provide you the relief you are seeking. The eligibility limits on filing a Chapter 13 change on a yearly basis and you should consult the Bankruptcy Code or an attorney for the limitations.
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