Bankruptcy filing starts with the filing of the official petition, schedules and a "statement of financial affairs" with the state bankruptcy court.
You need to provide a list of the following while you make your petition:
You may file for bankruptcy under Chapter 7 or under Chapter 13 of the Federal Bankruptcy Code.
No, you must include all your debts in the bankruptcy petition.
Under Chapter 7 bankruptcy, the debtor’s assets are liquidated/ sold off by the court trustee in order to satisfy a portion of debts owed by the debtor. The rest of the debts are discharged. However you remain liable for certain debts even after going through bankruptcy procedure (refer to question 11). In case the debtor has no asset for liquidation, he/she would receive a total discharge of debts.
Chapter 13 bankruptcy is a great option for debtors willing to avoid asset liquidation. Under Chapter 13 bankruptcy, the court restructures your debts, by negotiating with your creditors. The restructuring usually involves reduction of debts and elimination of late-fees and over-limit charges. Thereafter the court also devises an affordable repayment plan that enables you to become debt free within a maximum of 3-5 years. Chapter 13 bankruptcy can be applied only if the debtor has some source of income to meet the repayment plan.
Chapter 11 is typically used for business bankruptcies and debt restructure. It allows businesses to reorganize themselves and get out of burdens of leases and contracts. A business is allowed to continue with its operations while it is under Chapter 11, although it does so under the supervision of the Bankruptcy Court and its appointees.
Since the proceedings of Chapter 11 bankruptcy are far more complex and expensive, it is not commonly used in case of personal bankruptcy.
Bankruptcy Means Test is an evaluation of your income with respect to your state’s median income in order to ensure that you are a suited candidate for Chapter 7 bankruptcy. If your income is below the median income of the state, you are allowed to file for Chapter 7 bankruptcy. In case you fail the Means Test, you may go ahead and file for a Chapter 13 bankruptcy.
Chapter 7 is the least expensive bankruptcy option, as it redeems almost all of your debts.
As soon as you file for bankruptcy, the court imposes an "automatic stay” on your creditors. It prohibits them from communicating with you for the purpose of debt collection. It is primarily meant to preserve your assets and save you from any further litigation.
Unless the debtor is guilty of fraud, there are minimal chances of losing protection of Automatic Stay. The automatic stay lasts throughout the bankruptcy proceedings unless a creditor has valid grounds for getting it legally removed.
Under the federal bankruptcy statute, a discharge releases a debtor from personal liability for certain specified types of debts. It means you are no longer required to pay the debts which are discharged as a part of bankruptcy procedure. The discharge operates as a permanent order that prohibits your creditors from taking any legal action for collection of your discharged debts. Although a debtor is relieved of personal liability for all the discharged debts, a valid lien (i.e., a charge upon specific property to secure a debt) that has not been exempted (i.e., made unenforceable) in the bankruptcy case will remain your liability. Therefore, a creditor may enforce the lien to recover the property secured by the lien even after the bankruptcy procedures are over.
The United States Bankruptcy laws aim at helping a genuine debtor to build his/her finances afresh without any debt burden. Therefore, bankruptcy discharges most of your debts. However, there are certain debts for which you stay liable, even after most of your debts get discharged.
Following are the debts which bankruptcy cannot discharge:
While Chapter 7 takes between 3 to 8 months to discharge the debts, Chapter 13 may take several months while trying to get your repayment program approved. However, the actual discharge is in Chapter 13 is not finalized until and unless you have met the requirements of the repayment plan.
Ideally Chapter 7 bankruptcy laws expose your assets to liquidation, in order to satisfy as much of your debts as possible. However, the US bankruptcy laws provide a wide range of “bankruptcy exemptions”, that allow you to save your properties. The exemptions are available under the federal as well as the state laws.
The state exemptions vary according to the states and you need to meet certain criteria in order to avail of the state exemptions. In case you do not meet the criteria, you may apply for the federal exemptions on bankruptcy.
Following are the federal exemptions:
According to the Chapter 7 bankruptcy laws, all your federal tax debt can be wiped off, if the following criteria are met:
Chapter 13 would require you to pay the IRS as part of your repayment plan.
Yes, it will, if your spouse/ former spouse, along with you, is jointly liable for the debt obligations. Married partners, who are jointly responsible for debts and do not own any non-exempt property with an equity exceeding $45,950, must file a joint bankruptcy petition. In case of divorced spouses liable for the same debts, the bankruptcy of one spouse may compel the other to file bankruptcy as well.
Joint petition allows the joint debtors to double exemptions. Doubling is especially advantageous when the petitioners wish to keep a house because it allows them to retain home equity up to $45,950. This amount is double the exemption amount available to an individual homeowner.
The answer to that depends upon your financial situation. Chapter 7 is the preferred type for debtors struggling with their dilapidated finances. On the other hand, Chapter 13 plan is best suited for debtors steeped in debts but with a steady income. While Chapter 7 proceedings get completed much faster, Chapter 13 repayment plan takes about 3-5 years to get completed. Chapter 7 bankruptcy is opted by about 70% of the bankruptcy filers all over the US.
Bankruptcy should be the least preferred option as far as credit score is concerned. A bankruptcy remains on your credit score for 10 years and once you have gone bankrupt, you cannot file for bankruptcy for the next 7 years. However, its effect on your credit rating will also partly depend upon the type of bankruptcy you opt for.
While a chapter 7 bankruptcy can leave the worst scar on your credit report, effects of chapter 13 bankruptcy are comparatively less scary.
Yes, you can. This change is known as "motion to convert". It can be done after you have filed for either of the chapters. For instance, if your chapter 13 fails, either you or the creditor may request a conversion to chapter 7.
The conversion can also be done at the request of the trustee. If the trustee is of the opinion that money might be available for unsecured creditors, your chapter 7 may be converted to a chapter 13.
If you cannot afford an expensive bankruptcy attorney to take care of your case, there is nothing to worry. Bankruptcies can be easily filed without an attorney. Moreover, if you have no real assets for liquidation, then filing bankruptcy on your own does make sense.
No. But you will need to meet the court trustee and your creditors at a meeting after filing for bankruptcy.
Please read https://www.ovlg.com/debt-relief/process.html for further bankruptcy help.