Bankruptcy can eliminate any legal obligation requiring you to pay all, or most of your debts. In some circumstances, it can stop the foreclosure of property by issuing an "automatic stay," protecting your car or home. Bankruptcy can also ensure your utilities remain on, while you catch up on any missed payments. Filing for bankruptcy can put an end to wage garnishments and prevent creditors from attempting to collect unpaid balances.
Filing for bankruptcy will not not discharge debts that bankruptcy law singles out for special treatment. You must continue to pay child support, alimony, some student loans, restitution orders, and criminal fines even after filing for bankruptcy.
Chapter 7 Bankruptcy: This option is appropriate for those with low incomes or for individuals with extensive expenses. Also called “straight” or “liquidation” bankruptcy, Chapter 7 allows you to sell certain types of property to pay creditors.
Chapter 11 Bankruptcy: Also known as "reorganization," Chapter 11 bankruptcy is designed for businesses with very large debts. This option enables organizations to pay debt over time.
Chapter 12 Bankruptcy: This form of bankruptcy provides debt relief for family farmers or fishermen. It enables these individuals to restructure their expenses to avoid foreclosure.
Chapter 13 Bankruptcy: This type of bankruptcy is best for individuals with a regular income. An individual can design an installment plan to pay debts back using their current source of income.
In most bankruptcy cases, you will be required to meet with creditors and the bankruptcy trustee to address financial information and answer questions. You will only be required to appear in court if you need to dispute a debt.
Unfortunately, if a friend or family member has co-signed on a loan, he or she may be liable for your debt if you file for bankruptcy. However, these circumstances may be mitigated by filing for Chapter 13 bankruptcy.
Generally, students will not be affected in bankruptcy. However, there are two exceptions to this rule:
If a student loan is not insured or guaranteed by a unit of the government, the loan may be discharged.
If paying back the loan will “impose an undue hardship on you and your dependents,” then the student loan may be discharged.
Mr. Troutman can review the details of your student loans to determine whether these circumstances apply to you.
When you file for bankruptcy, all creditors and bill collectors must stop collection efforts entirely once they are aware you have filed. If any creditor continues to try to collect after they have been made aware of your bankruptcy, they may be sanctioned in court.