Bankruptcy

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Bankruptcy is a term often associated with situations of financial hardship.  It is also a valuable tool to assist individuals in repaying debts and rehabilitating themselves from financial hardships. Although federal laws attempt to make the bankruptcy process easy for the common person to use, the procedures are often complex and require the guidance of an experienced attorney.

The two most common types of bankruptcies involve the liquidation and reorganization of a person’s assets to alleviate financial burden. Liquidation of assets, known as Chapter 7 Bankruptcy, is when a debtor requests a legal discharge of his/her debts from the bankruptcy courts.

Chapter 13 Bankruptcy is when a debtor is responsible for repayment of debts in a pre-determined plan of how and when the debt(s) will be repaid.

The entire bankruptcy process occurs under the guidance and jurisdiction of the Federal Bankruptcy Court. Regardless of the type of bankruptcy filed, upon the initial filing an order called an automatic stay will be administered by the court.  An automatic stay will stop most creditors from pursuing collections from the debtor filing bankruptcy.  During the automatic stay period, the court will often freeze certain debts.

Specific bankruptcy filing impacts include the following:

• Repossession – Bankruptcy prevent repossession once a case is filed.  It is important to note that filing a Chapter 7 Bankruptcy will not result in a return of a previously repossessed vehicle.  Filing a Chapter 13 will stop repossession and allow the debtor to pay the balance owed on the auto loan while retaining possession and ownership of their vehicle.
• Foreclosure – Chapter 7 filing will only temporarily stop a foreclosure.  A Chapter 13 filing may be a better option in this case since it usually allows a debtor to keep his or her house.
• Wage Garnishments – The filing of any bankruptcy may stop wage garnishments.
• Evictions – A landlord may proceed with an eviction, particularly if a judgment has been made against an individual. The stay may delay the eviction by a week or so and occurrences like property destruction may prevent the court from delaying an eviction.

There are certain debts that cannot be discharged and a debtor will continue to be responsible for payment on them, including unpaid child support, alimony, and tax debts. Additionally, a bankruptcy court may not discharge student loans unless a debtor can show that repayment would create be an undue hardship.