Bankruptcy – in Brief
Bankruptcy is a proceeding under federal law that allows debtors who owe more money than they can pay to either eliminate their debts or work out a payment plan to pay a portion (or all) of their debts over time. Filing for bankruptcy brings all of your assets and creditors into one forum — the bankruptcy court — where the rights of all concerned can be balanced. Filing for bankruptcy protects you from actions by creditors to collect debts. When you file for bankruptcy, a temporary court order called an “automatic stay” goes into effect immediately, ordering creditors to cease taking any further steps to collect debts. The automatic stay stops creditor harassment and wage garnishments. It may also stop (at least temporarily) or prevent repossessions, foreclosures, and certain types of lawsuits.
The two most common types of personal bankruptcies are a liquidation bankruptcy under Chapter 7 (where unsecured debts are discharged) and a debt reorganization bankruptcy under Chapter 13 (where all or a portion of your debts are paid off over time). Once your debts have been discharged in Chapter 7 or your reorganization payment plan has been approved in Chapter 13, the automatic stay is replaced with a permanent order enjoining creditors from taking any action to collect debts.
Listing All Your Debts
You are required to disclose all of your debts in your bankruptcy documents. Depending on the laws of your state, you may remain obligated to pay any debts you do not disclose.
Filing a Second Time
If you filed bankruptcy in the past, you may be able to file again subject to certain time limits. You cannot file a Chapter 7 bankruptcy if your debts were discharged under Chapter 7 within the last eight years, and in some cases if your debts were reorganized under Chapter 13 within the last six years. You cannot file a Chapter 13 bankruptcy if your debts were reorganized under Chapter 13 within the last six years. Under some circumstances, however, you may be able to file for Chapter 13 even though you obtained a discharge of debts under Chapter 7 fewer than eight years ago.
Your Spouse
If you are married, you can file bankruptcy without your spouse joining in the proceeding. But doing so may have consequences for your spouse and it is sometimes advisable for married persons to file jointly. Depending on the laws of your state, when one spouse files bankruptcy, the spouse who doesn’t file may lose some property and may end up being responsible for some of the debts. Also, when you have joint debts, the discharge of a debt by one spouse may appear on the credit reports of both spouses. One of the benefits of filing a joint bankruptcy is that doing so can increase the amount of property you are allowed to keep.
Your Co-Signers
Filing bankruptcy will not protect your co-signers. If you file a Chapter 7 bankruptcy, your creditors have the right to demand payment from co-signers. If you file a Chapter 13 bankruptcy and your payment plan is for less than the entire amount owed, your creditors are entitled to collect the balance from co-signers. Additionally, unless you list them as creditors, if co-signers end up paying your creditors you may become obligated to reimburse your co-signers.
Recent Comments