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.


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WHEN YOU FILE BANKRUPTCY:

You can choose the kind of bankruptcy that best suits 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 some personal items and possibly real estate depending on the law of the state where you live.

Chapter 13 – You can usually keep your property, but you must earn wages or have some other source of regular income and you must agree to pay part of your income to your creditors. The Court must approve your repayment plan and your budget. A trustee is appointed and will collect the payments from you, pay your creditors, and make sure you live up to the terms of your repayment plan.

Chapter 12 – Like Chapter 13, but it is only for family farmers.

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 filed bankruptcy under one chapter, you may be able to change your case to another chapter.

Your bankruptcy may be reported on your credit record for as long as ten years. It can affect your ability to receive credit in the future.


WHAT IS A BANKRUPTCY DISCHARGE AND HOW DOES IT OPERATE?

One of the reasons people file 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:

  • child support;
  • alimony;
  • most student loans;
  • Court fines and criminal restitution; and
  • personal injury caused by drunk driving or under the influence of drugs.

The discharge only applies to debts that arose before the date you filed.

If you decide to seek bankruptcy relief, you can represent yourself, you can hire an attorney to represent you, or you can get help in some localities from a bankruptcy petition preparer who is not an attorney. THE LAW REQUIRES AN ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE YOU A WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY PETITION PREPARER WILL DO FOR YOU AND HOW MUCH IT WILL COST. Ask to see the contract before you hire anyone.

The following information helps you understand what must be done in a routine bankruptcy case to help you evaluate how much service you need. Although bankruptcy can be complex, many cases are routine.

Before filling a bankruptcy case, either you or your attorney should analyze your eligibility for different forms of debt relief available under the Bankruptcy Code and which form of relief is most likely to be beneficial for you. Be sure you understand the relief you can obtain and its limitations. To file a bankruptcy case, documents called a Petition, Schedules and Statement of Financial Affairs, as well as in some cases a Statement of Intention need to be prepared correctly and filed with the bankruptcy court. You will have to pay a filing fee to the bankruptcy court. Once your case starts you will have to attend the required first meeting of creditors where you may be questioned by a court official called a ‘trustee’ and by creditors.

If you choose to file a Chapter 7 case, you may be asked by a creditor to reaffirm a debt. You may want help deciding whether to do so. A creditor is not permitted to coerce you into reaffirming your debts.

If you choose to file a Chapter 13 case in which you repay your creditors what you can afford over 3 to 5 years, you may also want help with preparing your Chapter 13 plan and with the confirmation hearing on your plan which will be before a bankruptcy judge.

If you select another type of relief under the Bankruptcy Code other than Chapter 7 or Chapter 13, you will want to find out what should be done from someone familiar with that type of relief.

You bankruptcy case may also involve litigation. You are generally permitted to represent yourself in litigation in bankruptcy court, but only attorneys, not bankruptcy petition preparers, can give you legal advice.


HOW ORDERING YOUR CREDIT REPORT CAN HELP YOU IN BANKRUPTCY 

Our firm recommends that each of our clients filing for bankruptcy obtain a credit report for the reasons listed below. If you are married, we recommend obtaining credit reports for both you and your spouse.

You will receive a printed copy of the report in the mail for your review.

  1. Obtaining the credit report helps us get accurate creditor names, addresses, types of debt, balances due, and account numbers.
  2. Through your credit report, we may find creditors whom you have overlooked. For a debt to be discharged, it must be listed in your bankruptcy pleadings, so it’s important that we find out about all debts.
  3. Credit reports can alert us to judgments against you.
  4. Credit reports can alert us to liens against your property, and the need to seek lien avoidance under 522(f), thus helping you protect your property in some cases.
  5. We may find out about co-signers to some of your debts, which are important to list in a bankruptcy.
  6. If you are married, there may be surprising items on your credit report or your spouse’s, and the reports can help us determine whether you should file individually or jointly.
  7. We may find out about debts created by a former spouse, who may have forged your signature to obtain credit.
  8. Credit reports can alert us to mistakes on your credit record. The report will list the names and addresses of all three major credit bureaus whom you can contact to correct any mistakes or provide updated information.
  9. Credit reports often contain the names and addresses of collection agencies representing creditors, and we can notify these collection agencies about the bankruptcy so that collection efforts stop.
  10. If the IRS has a tax lien on your property, the credit report will alert us so that it can be dealt with properly.
  11. Knowing what is on your credit report can help you get credit approval for important purchases after your debts are discharged.
  12. Not every creditor reports debts to a credit bureau, so your credit report will not list all debts. You should be sure to let your attorney know about all debts you are aware of.

Debt Relief Agencies

InCharge Education Foundation, Inc.

debtorEducation@InCharge.org

Clear Point Financial Services, Inc.

Consumer Credit Counseling Service of Greater Atlanta, Inc.

Garden State Consumer Credit Counseling, Inc.

GreenPath, Inc.

Hummingbird Credit Counseling and Education, Inc.

Institute for Financial Literacy, Inc.

Money Management International, Inc.

Springboard Nonprofit Consumer Credit Management, Inc.