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 -

    *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 - 

1. most taxes;
2. child support;
3. alimony;
4. most student loans;
5. Court fines and criminal restitution;
6. 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 - 

1. Must be voluntary;
2. Must not place too heavy a burden on you or your family;
3. Must be in your best interest;
4. 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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