Debtor Bankruptcy Information:
BANKRUPTCY LAW IS FEDERAL LAW.
THIS INFORMATION IS GENERAL INFORMATION ABOUT WHAT HAPPENS IN A
BANKRUPTCY CASE. THE INFORMATION HERE IS NOT COMPLETE. YOU WILL
NEED LEGAL ADVICE, AS NOTHING ON THIS SITE CAN BE CONSTRUED AS
LEGAL ADVICE.
BANKRUPTCY CHAPTERS:
*Chapter 7
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Under the federal
bankruptcy statute, a discharge is a release of the
debtor from personal liability for certain specified
debts. In other words, the debtor is no longer required
by law to pay any debts that are discharged. The
discharge operates as a permanent order directed to the
creditors of the debtor that they refrain from taking
any form of collection action on discharged debts,
including legal action and communications with the
debtor, such as telephone calls, letters, and personal
contacts. Although a debtor is relieved of personal
liability for all debts that are discharged, a valid
lien that has not been avoided in the bankruptcy case
will remain after the bankruptcy case. Therefore, a
secured creditor may enforce the lien to recover the
property secured by the lien. |
*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 percentage 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. In a chapter
13 case you file a plan showing how you will pay off some of
your past-due and current debts over a period of three to five
years. By consolidating such debts and paying one monthly
installment to a chapter 13 trustee. The most important thing
about a chapter 13 case is that it will allow you to keep
valuable property, like your home or car, even if you are behind
on payments or you have equity not covered by your exemptions.
Your payments on these secured debts will generally be your
regular monthly payments plus, if excluded from the plan, a
divided amount if you need to get caught up due to being behind
when you file. If you have no arrears at the time of filing, and
the lien on the subject property is small enough to be paid
within three to five years, then that property may be included
within the plan and disbursed upon by the chapter 13 trustee.
Chapter 12 -
Like chapter 13, but is only for family farmers.
Chapter 11
- This is utilized mostly by businesses or larger corporations. 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 already filed
bankruptcy under chapter 7, you may be able to change your case
to another chapter.
Your bankruptcy may be reported
on your credit score for as long as ten years, but can be
removed from your credit as early as 7 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 bankruptcy 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 without proper cause. For example, you cannot
simply discharge debts for -
- most taxes;
- child support;
- alimony;
- most student loans;
- Court fines and criminal
restitution;
- personal injury cause by
driving drunk or under the influence of drugs.
The discharge applies to debts
that arose before the date you filed.
Also, if the judge finds that
you received money or property by fraud, that debt may not be
discharged.
It is important to list all of
your property and debts in your bankruptcy schedules. If you do
not list a debt, for example, it is possible the debt will not
be properly discharged.
By signing your bankruptcy
papers, you are swearing everything is true and correct to the
best of your knowledge, under penalty of perjury, and violation
of such in punishable with a fine up to $500,000.00 and/or up to
five years in jail. The judge can also deny your
discharge if you do something dishonest in connection with your
bankruptcy case, such as destroy or hide property, falsify
records, or lie, or if you disobey a court order.
You can only receive a chapter
7 discharge every eight years. No one can make you pay a debt that
has been discharged, but you can voluntarily pay any debt you
wish to pay. You do not have to sign a reaffirmation agreement
or any other kind of document to do this.
Some creditors hold a secured
claim (for example, the bank that holds the mortgage on your
house or the loan company that has a lien on your car). You do
not have to pay a secured claim if the debt is discharged, but
the creditor can still take the property. You must specify
your intentions with your secured property as to whether you
would like to reaffirm the debt, redeem the debt or surrender
the collateral.
WHAT IS A
REAFFIRMATION AGREEMENT?
Even if a debt can be
discharged, you may have special reasons why you want to promise
to pay it. For example, you may want to work out a plan with the
bank to keep your car. to promise to pay that debt, you must
sign and file a reaffirmation agreement with the court.
Reaffirmation agreements are under special rules and are
voluntary. They are not required by bankruptcy law if you intend
to redeem or surrender the subject property or vehicle.
Reaffirmation agreements -
- Must be voluntary;
- Must not place too heavy a
burden on you or your family;
- Must be in your best
interest;
- Can be cancelled anytime
before the court orders your discharge or within the 60 days
after the agreement is filed with the court. Whichever gives
you the most time.
If you are an individual and
you are not represented by an attorney, the court must hold a
hearing to decide whether to approve the reaffirmation
agreement. The agreement will not be legally binding until the
court approves it.
If you reaffirm a debt then you
are legally responsible for the debt. You owe the debt the same as though there was no
bankruptcy. The debt will not be discharged and the creditor can
take action to recover any property on which it has a lien or
mortgage if payment terms are not met. The creditor can also take legal action to recover a
judgment against you for any deficiency.
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INFORMATION OR HAVE ANY QUESTIONS ON HOW THESE BANKRUPTCY LAWS
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