What Is Bankruptcy?
Bankruptcy is a legal process for discharging debt. Bankruptcy allows “the honest but unfortunate debtor…a new opportunity in life and a clear field for the future, unhampered by the pressure and discouragement of preexisting debt” Local Loan, Co. v. Hunt 292 U.S. 234.
What Are the Different Types of Bankruptcy?
The bankruptcy code consists of six different chapters: 7, 9, 11, 12, 13, and 15, however, the most common filings are chapter 7, chapter 11, and chapter 13. Chapters 7 and 13 are commonly used by consumers to relieve themselves of unwanted debt. Below is a brief description of the most common types of bankruptcy:
Chapter 7 – Allows a filer to relieve themselves of unwanted debt while often retaining their assets through exemptions allowed by the Bankruptcy Code.
Chapter 13 – Allows a filer with regular income to reorganize their debts in such a way that allows the filer to pay back certain required debts. Persons filing chapter 13 bankruptcy have a monthly plan payment paid to a trustee and disbursed to their creditors. A common reason to file chapter 13 is to catch up on your home mortgage when you’ve fallen behind. Chapter 13 allows you to pay back mortgage arrears through your repayment plan. Your plan payment in chapter 13 is in part based on your ability to pay.
Chapter 11 – Allows a filer (often a business entity) to undergo a supervised reorganization of debt while typically staying in control of the business as long as certain requirements are being met.
Should I File for Bankruptcy?
There are many considerations that go into determining whether or not to file bankruptcy, from the amount of debt you have, the amount of income, what assets you have, etc. Bankruptcy can be a useful tool in addressing wage garnishment, vehicle repossession, foreclosure, and many other actions taken by creditors to collect outstanding debts. The filing of a bankruptcy, with almost no exceptions, will stop a garnishment, prevent a creditor from repossessing a vehicle, and stop a foreclosure on your home.
What Is the Process for Filing Bankruptcy?
At Hoke Law Firm, we have a process to preparing and filing your case that makes it as painless as possible. We begin by taking in documents and information from our client. We use a system that allows you to enter information and documentation from anywhere with an internet connection, even from your smartphone! Once we have received all the required documentation and information, as well as the fee, we will set you up with an appointment to come into the office and review your filing before signing it.
Once your case has been filed, you will be assigned a trustee based on the Court that you file your case in. Which court you file in is dependent on your domicile, which in most cases is where you’re living at the time of filing.
About a month or so after filing, you will attend a meeting with your assigned trustee. The meeting itself typically only lasts a few minutes and allows the trustee, and sometimes a creditor, the opportunity to ask you questions about your financial circumstances. In most cases, the trustee is confirming much of the information that you have already provided.
For a chapter 13 debtor, your first monthly payment to the trustee will be due 30-days after filing and then each month after until your case completes. Upon completion of your plan payments, the court enters an order discharging your debts and closing your case.
For a chapter 7 debtor, approximately 60 days after your meeting with the trustee, your discharge will be entered and your case typically closes within 30 days after that!
What Kind of Debt Can Be Included in My Bankruptcy?
Most consumer debts can be eliminated through the bankruptcy process. Certain types of debt may be excluded from being eliminated. The most common of these are recent tax debt, child/spousal support, and student loans. Secured debts can also be eliminated through bankruptcy, however, if you want to retain the thing that is securing the loan (house, car, etc.) you’ll need to continue making payments on those secured loans. That being said, it is possible to discharge.