BANKRUPTCY LAW IS A FEDERAL LAW. THIS SHEET GIVES YOU SOME GENERAL INFORMATION ABOUT WHAT HAPPENS IN A BANKRUPTCY CASE. THE INFORMATION HERE IS NOT COMPLETE. YOU MAY NEED LEGAL ADVICE
WHICH BANKRUPTCY IS RIGHT FOR ME?
You can choose the kind of bankruptcy that best meets your needs:
- Chapter 7 - A trustee is appointed to take over your property. Any property of value will be sold or turned into money to pay your creditors. You may be able to keep or exempt some personal items and possibly real estate depending on state law. You will be required to meet a bankruptcy means test to determine your eligibility based on household size.
- Chapter 13 — A trustee is appointed to your case, and you may remain in possession and usually keep your property, but you must earn wages or have some other source of regular income and must agree to pay your disposable net income (after paying your ordinary and necessary expenses) to the trustee for the benefit of your creditors. The Court must approve or confirm your repayment plan and your budget. The trustee that is appointed in your case collects the payments from you, pays your creditors, and make sure continue the terms of your repayment plan (from 36-60 months or 3 to 5 years).
- Chapter 12 - Like chapter 13, but is only for family farmers and fishermen.
- Chapter 11 - This is used mostly by businesses. In Chapter 11, you may continue to operate your business, but your creditors and the Court must approve a plan to repay your debts. There is no trustee unless the Judge decides that one is necessary; if a trustee is appointed, the trustee takes control of your business and property.
If you have already filed bankruptcy under a Chapter 7, you may be able to change or convert your case to another chapter.
Your bankruptcy may be reported on your credit record for as long as 10 years. It can affect your ability to receive or qualify for credit in the future.
WHAT IS A BANKRUPTCY DISCHARGE AND HOW DOES IT OPERATE?
One of the reasons people file bankruptcy is to get a "discharge." A discharge is a Court order which states that you do not have to pay most of your debts. Some debts cannot be discharged. For example, you cannot discharge debts for -
- Most taxes
- Child Support
- Most student loans
- Court fines and criminal restitution; and
- Personal injury caused by driving drunk or under the influence of drugs.
This discharge only applies to debts that arose before the date you filed.
Also, if the Judge finds that you received money or property by fraud, that debt may not be discharged.
It is important to list all your property and debts in your bankruptcy schedules, and you do so under penalty of perjury. If you fail to inadvertently list a debt, it is possible the debt will not be discharged. Here is the link to our intake which will assist you in gathering all the pertinent information: http://www.hagerlawfirm.com/intakes/Hager-bankruptcy-form.pdf
The Judge can also deny your discharge if you do something dishonest in connections with your bankruptcy case, such as destroy, transfer or hide property, falsify records, or lie or if you disobey a Court Order.
You can only receive a Chapter 7 discharge once every 8 years. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign a reaffirmation agreement or any other kind of document to do this.
Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car.) You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.
WHAT IS A REAFFIRMATION AGREEMENT?
Even if a debt can be discharged, you may have special reasons why you want to promise to pay it. For example, you want to work out a plan with the bank to keep your car. To promise to pay that debt, you must sign a reaffirmation agreement with the Court. Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law. Reaffirmation agreements —
- must be voluntary;
- must not place too heavy a burden on you or your family;
- must be in your interest; and
- can be canceled anytime before the Court issues your discharge or within 60 days after the agreement is filed with the Court, whichever gives you the most time.
If you are an individual and you are not represented by an attorney, the Court must hold a hearing to decide whether to approve the reaffirmation agreement. The agreement will not be legally binding until the Court approves it.
If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there were no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.
IF YOU WANT MORE INFORMATION OR HAVE QUESTIONS ABOUT THE HOW THE BANKRUPTCY LAWS AFFECT YOU, YOU MAY NEED LEGAL ADVICE. NOTE THAT THE TRUSTEE IN YOUR CASE IS NOT RESPONSIBLE FOR GIVING YOU LEGAL ADVICE.
Disclaimer: We are a Debt Relief Agency. We help people file for relief under the bankruptcy Code. This website contains general information about various areas of Bankruptcy. It is highly recommended that persons with debtor/creditor problems seek the advice of an attorney. The information on this Website is not intended to be legal advice and viewers should consult with an attorney.
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