Frequently asked questions
A legal process where a person is able to obtain a new financial start when they are unable to pay their bills. Bankruptcy is filed under federal law and every case is conducted in a federal court. By filing for bankruptcy, individuals can stop creditors from attempting to collect a debt immediately, until all debts have been organized by the law.
- Elimination of legal responsibility for paying some or all debts, known as a “discharge”.
- Stopping a home foreclosure, giving a chance to catch back up on late payments. Although, mortgages and liens are not eliminated.
- Avoiding car or other property from being repossessed, or forcing creditors to return repossessed property.
- Restoring or avoiding utility service termination.
- Stopping deb collection harassments, wage garnishment, and other activities.
- Enables claims of creditor to be challenged who have conducted fraud or otherwise collected more than owed.
Bankruptcy court documents are granted by the federal judiciary through an electronic public access service called PACER (Public Access to Court Electronic Records).
Filing bankruptcy will not cover every financial issue, and may not be right for everyone. The following are typically not covered:
It cannot eliminate “secured” creditor debts. For example, a mortgage or property lien as collateral against a loan, car loans, etc. Although, secured creditors can be forced to receive payments over time through the bankruptcy process, while it can eliminate your responsibility of paying extra costs in the event property is taken. However, the collateral typically cannot be retained unless the debt is paid.
It cannot discharge certain debt types targeted out from bankruptcy laws. For example, alimony, child support, debts relative to divorce, court restitution orders, certain student loans, criminal fines, and certain taxes.
It cannot protect cosigners. If an individual had a cosigner for a loan, that cosigner may become responsible for repaying all or part of the remaining debt.
There are several types of bankruptcy, but the most common are Chapter 7 and Chapter 13. Individuals who discharged debt through Chapter 7 in the previous 8 years are unable to file. Individuals who discharged debt through Chapter 13 in the previous 6 years will be unable to file.
Additionally, individuals are unable to discharge debts in a Chapter 13 case if they have discharged debt through Chapter 7 in the previous 4 years, or Chapter 13 in the previous 2 years.
Although, if there were no discharges received in the previous bankruptcy filing process, depending on the reason, a discharge of debt may be received with no time restrictions.
- Chapter 7
Referred to as “straight” or “liquidated” bankruptcy which requires the debtor to release property exceeding specific limits referred to as “exemptions”, therefore allowing the property to be sold for paying creditors.
- Chapter 11
Referred to as “reorganization” bankruptcy, is typically used by businesses and separate debtors with large debts.
- Chapter 12
This form is reserved for use by family farmers only.
- Chapter 13
Referred to as “Debt adjustment”, requiring the debtor to file a payment plan for all or part of the debts using the individuals existing income.
The most common types used are Chapter 7 and 13, which can be filed by individuals or jointly if married.
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