Financial hardship can be extremely stressful. In many cases, Bankruptcy can help alleviate this heavy burden and allow for a fresh start. Our staff is experienced in debt liquidation and reorganization and will help you work toward a new financial beginning.

What is bankruptcy?

Bankruptcy is a process in which consumers and businesses can eliminate or repay some or all of their debt under the protection of the federal bankruptcy court. For the most part, bankruptcies can be divided into two types -- liquidation and reorganization. Though bankruptcy can eliminate many kinds of debts, such as credit card debt, medical bills, and unsecured loans, other debts debts, including child support and spousal support obligations and most tax debts, cannot be discharged through bankruptcy.

Who can file for bankruptcy?

To be eligible for Chapter 7 bankruptcy, a person must meet several criteria. Your income cannot be over a certain amount, and if it is, you must pass the "means test." In addition, the court will dismiss your case if you have filed a previous bankruptcy within a certain period of time, or if the court believes you are cheating your creditors.

What types of bankruptcies are available?

Chapter 7

The primary function of a Chapter 7 bankruptcy proceeding is to liquidate the debtor's nonexempt assets and distribute the proceeds to the debtor's creditors. In order to be eligible for Chapter 7, the debtor must satisfy a "means test." The court will evaluate the debtor's income and expenses to determine if the debtor may proceed under Chapter 7.

Chapter 13

Chapter 13 of the Bankruptcy Code provides for adjustment of debts of an individual with regular income, often referred to as a "wage-earner" plan. Chapter 13 allows a debtor to keep property and use disposable income to pay debts over time, usually three to five years.

Chapter 11

Chapter 11 bankruptcy proceedings offer corporations and partnerships the opportunity reorganize their finances. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11.

What are the Benefits of Bankruptcy?

Discharge of most debts

The principal goal of most bankruptcies is to have most unsecured debts discharged. The bankruptcy discharge totally eliminates any personal obligation to pay many types of debts. (A few types of debts are not dischargeable. Also, if a creditor has a lien on property taken as collateral, the debt owed to that creditor may still have to be dealt with after bankruptcy because the lien will, in some cases, survive.) For most debtors, bankruptcy is a relatively quick and easy way to end the creditor harassment, hardship, anxiety and marital stress normally associated with debt overload.

Protection of property and income from unsecured creditors Bankruptcy is often the only sure way to protect a debtor's property from unsecured creditors (those who did not take a lien on property as collateral at the time of the transaction). Bankruptcy may provide total protection for a home, car or other vital property. Normally, bankruptcy also serves to prevent any garnishment (attachment or seizure) of wages or other income after the petition is filed. This, in turn, may protect an individual's job if the employer does not favor multiple wage garnishments. Even attempts to reduce Social Security or other public benefit payments to get back previous overpayments should be preventable by a timely bankruptcy petition.

Tools for eliminating or modifying secured debts

A bankruptcy discharge does not, by itself, eliminate the liens on a debtor's property that secured creditors have obtained before bankruptcy. However, other provisions in the Bankruptcy Code do give debtors mechanisms to deal with most secured creditors. Many types of liens may be eliminated or reduced, either because they impair exemptions or because they are on property that is worth less than the liens. In a Chapter 13 case, payments on most other secured debts can be lowered, and a reasonable time can be gained to cure almost any defaulted secured debt. Often, one or more of these aspects of bankruptcy enable a debtor to retain a home, car or furniture that would otherwise be lost.

Automatic stay

The most valuable feature of a bankruptcy is sometimes the automatic stay, which the debtor gains instantaneously on filing a petition. The stay is an automatic court order that prohibits all sorts of collection attempts by creditors, allowing the bankruptcy to proceed in an orderly fashion. It forces an abrupt halt of most creditor actions against the debtor, including repossessions, garnishments or attachments, utility shutoffs, foreclosures and evictions. Many of these can thereafter be permanently prevented. The stay is also an effective way (though hardly the only way) to end creditor collection efforts. Creditors who violate the stay risk contempt of court, money damages and attorneys' fees. Beyond all this, the stay gives the debtor a breathing spell, time to sort things out.

Other protections available through bankruptcy

Bankruptcy may offer the only possible way for an individual to keep or regain a driver's license that is subject to revocation because of an unpaid debt arising from a motor vehicle accident. This, in turn, may mean employment and income for the individual's family. In some cases, bankruptcy can provide freedom for a debtor who might otherwise be incarcerated for failure to pay support obligations or as a result of a contempt proceeding involving some other debt. The Bankruptcy Code also protects the debtor from many types of discriminatory actions by government bodies and private employers on the basis of unpaid debts discharged in bankruptcy.

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