Not A Cure For Financial Problems!

How to file for personal bankruptcy and the many related questions will be explained. Also, the increasing number of medical and student loan bankruptcies are discussed.

Declaring personal bankruptcy is not a cure for financial problems. In fact, it may be the wrong move for many. The topic is involved and complicated. Therefore, an experienced attorney with an understanding of bankruptcy law should be consulted.

Because declaring bankruptcy is a federal law, handled in federal court, it is uniform throughout the United States. It is a legal proceeding for a person who cannot pay their bills. Timing is an important ingredient for several reasons.

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Disclaimer: This website does not provide legal advice. Its sole purpose is to provide information. Contact your attorney for legal advice.

Some Things That Bankruptcy Can Do!

  • Eliminate the legal obligation to pay most or all debts.
  • Stop a home foreclosure action. (Does not eliminate any liens or mortgage.)
  • Prevent repossession of your car and other property. (Sometimes)
  • Stop wage garnishment and debt collector calls. ("Automatic stay")
  • Prevent (or restore) utility stoppages.
  • Allow you to keep necessities.

Some Things That Bankruptcy Doesn't Do!

  • Will not discharge certain debts such as: alimony, child support, court restitution orders, student loans, criminal fines, and certain taxes.
  • Does not eliminate the rights of "secured creditors". (Ex. home mortgages, car loans, liens)
  • Cosigners on your debt are not protected. They are still on the "hook".
  • You will be responsible for any debt incurred after filing.

Chapter 7 Bankruptcy

This is often referred to as "straight bankruptcy" or "liquidation". It is quicker and eliminates debt. But, some property could be confiscated and sold with the revenue going to the creditors.

While it doesn't eliminate mortgage and car payments, it will allow you keep your home and car if the value does not exceed the exemption amount. You will be allowed to keep your personal possessions.

You can also keep some cash and will not lose welfare or Social Security benefits. Not all who file for Chapter 7 bankruptcy become eligible for it. If funds are available to fund a Chapter 13 bankruptcy, that may be your only option. (See above for other benefits.)

Chapter 13 Bankruptcy

Reorganization or the "wage earners" plan are common names for this. This type of bankruptcy is often used by businesses (Chapter 11) that are dealing with hard times. People who want to keep their home or car and are behind in payments can often benefit from this.

Property is not lost and a repayment plan, that the court approves, is implemented. Unfortunately, most of these filers do not complete their repayment programs, even though a percentage of the debt is eliminated and the payment schedule is lengthen.

Personal Bankruptcy Questions!

  • How often can I file for bankruptcy?    (answer) There is a wait period of 8 years after filing for Chapter 7 and 6 years for Chapter 13 (some exceptions).
  • How long will bankruptcy stay on my credit report?    (answer) 7 to 10 years.
  • Can my payroll be garnished?    (answer) Yes, up to 25 percent of disposable income.
  • Will bankruptcy hurt my credit rating?    (answer) Yes. But, it was probably poor already.
  • Will I have to appear in court?    (answer) Yes.
  • What is a 60/60 Plan?    (answer) A credit counseling service may propose repayment of 60 percent of the debt in the next 60 months.
  • What is the primary reason for filing bankruptcy?   (answer) Unpaid medical bills. This is due to high deductibles ($5,000 to $10,000) and the lack of universal health care in the United States.
  • What is "student loan bankruptcy"?   (answer) There are is an ever increasing adult population that is unable to repay their student loans. A solution is needed.

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