Personal Bankruptcy - Overview

Collection Actions - Debt Relief

Garnishment

Foreclosure

Repossession

Creditor Harassment

Overview:
The federal bankruptcy laws offer individuals the opportunity of a "fresh start." The different chapters of the Federal Bankruptcy Code offer different forms of "debt relief" to individuals. Bankruptcy is an appropriate remedy for those individuals who have debts which exceed their income. In most cases, filing a petition in bankruptcy can stop or at least postpone wage garnishment and foreclosure. In essence, an individual who files Chapter 7 or Chapter 13 bankruptcy temporarily hands their financial affairs over to the Federal Government. The individual places their assets in the "federal basket" and then the individual may pull certain assets out of that basket and retain ownership based on the exemptions provided by the Federal Bankruptcy Code. The sale proceeds from any non-exempt assets are distributed among a debtor's creditors by the US Bankruptcy Court.

Chapter 7 is often referred to "straight" or "liquidation" bankruptcy and Chapter 13 is often referred to as the "wage earner" or "repayment" plan.

The bankruptcy proceedings include the following participants.

The Debtor, also known as the petitioner, is the person who files bankruptcy. Husband and wife may be joint debtors or joint petitioners. Couples unmarried living together must file separately even though they may have joint debts.
The creditors include any persons, businesses, corporations or governmental agencies that claim money from the debtor.
The Office of the United States Trustee, an agency of the Department of Justice has the statutory responsibility for oversight of the bankruptcy process;
The case trustee, automatically appointed by the US Trustee, one person representing the interests of all unsecured creditors.
The case trustee in a Chapter 7 proceeding is required to investigate, discovery and collect estate property, and is responsible for the liquidation of nonexempt estate property for distribution. The Chapter 13 trustee, appointed by the U.S. Trustee, handles receipts and disbursements pursuant to a Chapter 13 Plan that is approved by the Court.
The Bankruptcy judge presides over any issues that arise between the debtor and the creditors or Office of the United States Trustee.

The bankruptcy process is slightly different for Chapter 7 and Chapter 13:

Before the debtor can file bankruptcy, the debtor must obtain credit counseling from an agency approved by the United States Trustee. If the filing is an emergency, the debtor must obtain credit counseling immediately after filing.
First, the debtor must gather detailed information about their financial affairs for the past one to two years, a list of all debts, the names and addresses of all creditors' account numbers, a list of all assets, and a statement of monthly income and expenses.
Filing forms and paying fees to the court clerk.
Appearing for a mandatory meeting of creditors. The court notifies parties of the hearing which is scheduled between 20 and 40 days after filing.
Turning over property, if ordered by the court, for distribution to creditors.
Attending other required hearings or appearing for examinations ordered by the court. Chapter 13 offers individuals the opportunity to come current on their mortgage arrears so to avoid foreclosure.

Who may declare bankruptcy?
Almost anyone may seek relief from debts by filing bankruptcy except for those who had a previous bankruptcy case dismissed within the preceding 180 days for failure to abide by a court order, or in certain instances where there was a voluntary dismissal. Except for Chapter 13, an individual cannot receive a discharge of his or her debts in a case commenced within eight years of a previous filing. If the court or the US trustee believes the filing is a substantial abuse of the bankruptcy code (typically because of income in excess of needs or fraud) relief may be denied.

What are some of the circumstances under which people file for relief under the US Bankruptcy Code?
Often individuals become overextended on their credit cards due to some of the following instances:

Divorce/Dissolution of Marriage .Married couples go from one set of household expenses to double the amount of expenses when they separate. If the divorce is on amicable terms then couples may file bankruptcy together prior to the entry of their divorce decree to save on the costs of filing. Once the divorce decree is entered then each individual must file separately.
Unexpected Illness. Often individuals find themselves or a family member in a medical emergency or with a long term illness. Many families don’t have health insurance or are underinsured. In time, the family’s resources become exhausted and they have no recourse but to file bankruptcy.
Layoffs or Cut Backs in Overtime: Individuals who are laid off from employment often cannot meet their basic needs from the amount of unemployment compensation they receive. Eventually the unemployment benefits run out. If the layoff lasts a long time or the employee is not called back to work and cannot find other employment, then the individual is forced to file bankruptcy. Employees also often rely inappropriately on overtime pay ( and creditors extend credit based in part on income from overtime) to meet their monthly obligations. When overtime work is cut, the individual falls behind on monthly payments because the individuals regular pay is not sufficient to cover monthly debt payments.
Defiency Judgments resulting from the sale of a repossessed vehicle.
Wage Garnishments .

Are all debts discharged by a Chapter 7 bankruptcy?
Certain types of debts may be non-dischargeable and not affected by an order granting a discharge. These debts include bu, but are not limited to, certain taxes, claims of certain creditors who are notified, spousal maintenance and child support, fines, certain student loans and damages caused by drunken driving. Additionally, certain abuses of cash advances and credit cards on the eve of bankruptcy are non-dischargeable. These debts also include obligations which arose through fraud or misrepresentation (for example, giving false financial information), theft, and intentional and malicious injuries, although in many of these instances creditors must obtain a court judgment declaring such debts non-dischargeable before the debts will survive bankruptcy.
Also, although a debtor's personal liability on secured loans can be discharged and creditors cannot sue the debtor after a bankruptcy discharge, most lien holders, like banks with car loans or home loans, will be able to eventually repossess or foreclose on their collateral if payments on the loans are not kept current A discharge may be denied or may be revoked within one year after it is granted on the grounds of debtor's fraud. Types of fraud include providing false information in the documents filed with the court, making false statements to the court, concealing assets, failing to obey court orders, and fraudulent transfer of assets.

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