Bankruptcy is a legal means for an individual or organization to declare their inability to pay their creditors. Bankruptcy is typically declared by the debtor, but can in fact be declared by the debtor or the creditor. While it's possible for bankruptcy to be initated by creditors (those who are OWED money) as a collection tool, by and large, the vast majority of bankruptcies are declared by the bankrupt party.
Bankruptcy laws are designed to give an individual or organization a "fresh start" in life by clearing them of debts, and to repay their creditors in an orderly manner to the extent that the debtor has assets available for payment.
Bankruptcy provided an organized means for the the debtor to resolve his debts through the division of his assets among his creditors. Bankruptcy allows a debtor to be rid of most financial obligations after their assets have been distributed to their creditors, thus the "fresh start".
The act of filing for bankruptcy also gives the debtor protection from collection and legal action of his creditors during the time that the claim is being reviewed.
Fraud is a major problem with bankruptcy, and in April, 2005, President George W. Bush signed the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" into law. This law prevents abuse by forcing more individuals to file Chapter 13 bankruptcy instead of Chapter 7. This law goes into effect in October 2005. Chapter 13 allows debtors to use future earnings to pay off debt, while Chapter 7 is more of a fresh start for the debtor.
| Type of negative information | Maximum time on credit report |
| General civil judgments | 7 years from the date filed |
| Tax liens | 7 years from the date paid (If tax lien is not paid, it will remain on the file indefinitely.) |
| Chapter 13 bankruptcies that have been dismissed or discharged | 7 years |
| All other bankruptcies (such as Chapter 7) | 10 years |
In
Bankruptcy is a legal procedure which can give people who cannot pay their bills a fresh start. A decision to file for bankruptcy is a serious step. You should make it only if it is the best way to deal with financial problems.
There are two types of bankruptcy available to most individuals. Chapter 13 or "reorganization" allows debtors to
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt.
However, In community property states, either spouse can contract for a debt without the other spouse's
Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card they will cancel the card unless you reaffirm the debt. Even if you have a zero balance the credit card company might cancel the card.
Some kinds of debts are not dischargeable, which means that you will remain obligated to repay them even after you complete your personal bankruptcy. Examples of nondischargeable debts are certain state and federal taxes, student loans unless at least 7 years old and debts that were induced or extended by fraud.
This is commonly referred to as "straight bankruptcy" and it is the most commonly filed form. Only individuals (not businesses or partnerships) may obtain a discharge in a Chapter 7 proceeding. Large credit card debt and other unsecured bills coupled with few assets, typify the filer of this form of bankruptcy. In the vast majority of cases
...Yes, When you file bankruptcy, federal law imposes an "automatic stay" which precludes your creditors from taking any action to collect debts against you including court judgements and tax debts during the pendency of the bankruptcy. For instance, if you have been served by one of your creditors to appear in court over a debt, the bankruptcy
...There are several situations where a chapter 13 is preferable to a chapter 7. A chapter 13 bankruptcy is normally for people who have too much income to file a Chapter 7 bankruptcy or have the kind of debt that is non- dischargeable in a Chapter 7 (e.g. certain taxes). Also, people file Chapter 13 because they are behind on their mortgage or
...There are two types of bankruptcy. Chapter 13, or "reorganization," allows debtors to keep property that they might otherwise lose, such as a mortgaged house or car. Reorganization may allow a person filing for Chapter 13 to pay off a default over a period of three to five years, rather than surrender property (in many cases your home).
...The following debts are not erased in both Chapter 7 and Chapter 13. If you file for Chapter 7, these will remain when your case is over. If you file for Chapter 13, these debts will have to be paid in full during your plan. If they are not, the balance will remain at the end of your case:
Day #1
The Bankruptcy documents are filed with the Bankruptcy Court.
There is an immediate stay so that most actions by creditor are prevented, wages cannot be garnisheed, legal actions cannot be continued.
Day #14
Creditors are advised by the clerk that a petition has been filed.
Day #20-#40
A Meeting of Creditors is held at the Court
You must reside or have a domicile, a place of business, or property in the United States or a municipality. You must not have been granted a Chapter 7 discharge within the last 6 years or completed a Chapter 13 plan. You must not have had a bankruptcy filing dismissed for cause within the last 180 days. It must not be a "substantial abuse" of
...It costs about $200 to file a Chapter 7 bankruptcy. A bankruptcy lawyer's fees vary but should be in the range of $800 to $1,200. Many bankruptcy lawyers will give you a free initial consultation. You can keep the fees down by being well organized and well prepared. You may also be able to keep the fees down by not requiring the lawyer to
...Within a couple of weeks of the filing of your petition, the bankruptcy court clerk mails your creditors notice of the filing and the imposition of the automatic stay. Until the creditors get notice, it may be necessary for you supply the creditor with the docket number and date of your bankruptcy. Once they have been given notice, they must
...No. You do not need to use a lawyer to file Chapter 7 yourself or Chapter 13.
However, we advise that you use the services of an experienced bankruptcy attorney as bankruptcy is complex. A bankruptcy lawyer is well worth the cost. You will save the cost of the legal fees many times over through peace of mind, release of stress and
...You are allowed to keep certain assets, depending on the state in which you reside.
To check the exemptions allowed in your state.
No. U.S.C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.
There are two ways a person can become a bankrupt. The first and more common way is to have the person file a petition to voluntarily go bankrupt.
The second, and rarely used way, is for creditors to ask the Court to make an Order that a person is bankrupt. In both these cases a Bankruptcy Trustee is required to administer the bankruptcy.
...In a bankruptcy, assets in excess of your allowed personal exemption, or non exempt assets such as, real estate, automobiles and boats will be liquidated by the trustee.
Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable
...The most common reasons for filing bankruptcy are:
The automatic stay prevents secured creditors from enforcing their lien rights. However, the stay will end when the bankruptcy case is closed, which usually occurs within five to seven months after the petition is filed in a "no-asset" case and much later in asset cases, or when the case is dismissed, which occurs infrequently. The automatic
...If the Chapter 7 is an asset case (or a notice is later sent out in a "no asset" Chapter 7 case disclosing that assets have been discovered and that claims should be filed), a creditor must file a proof of claim in order to share in any distribution of the money generated by the liquidation of the debtor's assets. The Bankruptcy Court clerk's
...Home : Bad Credit 101 : Bankruptcy : Bankruptcy Chapter 7
Chapter 7 bankruptcy relief, often called straight bankruptcy is available to corporations, partnerships and individuals and provides for simple debt liquidation. Chapter 7 bankruptcy essentially grants the debtor a discharge, which releases the debtor from
...The first event of importance after the filing of the petition is the creditors' meeting, which will be held approximately one month after the filing of the case. At this meeting, creditors may question the debtor regarding his or her assets and liabilities and on any other matter permitted by the Bankruptcy
Code or Rules.
The debtor's
The vast majority of filers get all or most of their debts discharged (wiped-out) without giving up any of their own property. This is because federal as well state laws provide exemptions for your property. Exempted property is property such as household goods and personal belongings, which you may keep despite your bankruptcy.
...A person can file Chapter 7 again if it has been more that 6 years since he or she was discharged from the previous Chapter 7 bankruptcy.
If you believe someone has filed for bankruptcy in your name, write to the U.S. Trustee (UST) in the region where the bankruptcy was filed. A list of the U.S. Trustee Programs's Regional Offices is available on the UST Web site, or check the Blue Pages of your phone book under U.S. Government Bankruptcy Administration.
Your letter should
Yes! A number of banks now offer "secured" credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.
Two years after a bankruptcy
...Legally, a bankruptcy can be reported to potential creditors for 10 years. Each debt that was discharged under the bankruptcy petition (such as credit card accounts) may remain on your report for seven years.
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