Attorneys spend years learning all of the aspects of bankruptcy law, and if you as an individual, a married couple, or a business owner are considering filing for bankruptcy, it’s imperative that you consult an experienced bankruptcy lawyer.
The bankruptcy laws in the U.S. are laid out in Title 11 of the United States Code. There are also laws concerning bankruptcy in other parts of the Code, such as those involving taxes and the Internal Revenue Service. State laws regarding property also apply in many bankruptcy cases.
The complexity of bankruptcy laws can’t be ignored, but it’s helpful to have at least a grasp of the fundamentals. Such an understanding will help you prepare yourself to make some decisions about whether and how you will file for bankruptcy.
Chapter 7: Liquidation
For individuals and married couples who are considering bankruptcy, a Chapter 7 bankruptcy may be the appropriate option. In Chapter 7, a trustee is appointed to collect all the “non-exempt” property of the debtor(s), sell it, and distribute the proceeds of the sale to the creditors (the people and companies to whom the debtors owe money). This is referred to as liquidation. The debtor’s essential property, such as a home and a car for getting to work, are exempt from the liquidation.
Chapter 13: Reorganization
Chapter 13 is a different type of bankruptcy for individuals and couples. It allows the debtor(s) to keep all or at least most of their property and to pay creditors from future earnings. The debtor files a repayment plan with the court, agreeing to the terms of the repayment of debts over a specified period, generally three to five years.
Changes in the Bankruptcy Laws
Some new bankruptcy laws have been put into effect in recent years, in part as a way to reduce the misuse and abuse of bankruptcy. For example:
- There is now an income limit for filing Chapter 7 bankruptcy. If your income is over the limit, you cannot file a Chapter 7.
- All debtors must now get credit counseling before they will be allowed to file a bankruptcy.
- Other changes impose new, more stringent requirements on the attorneys who handle bankruptcies.
Whether you file for bankruptcy as an individual or for your business, you will probably have to appear in a bankruptcy court at least one time during the processing of your bankruptcy. There are bankruptcy courts across the United States, and the judicial district in which you are residing is probably the place where you’ll be filing your bankruptcy petition. Bankruptcy cases are not handled in state courts.
Tell the Complete Truth
An important note about bankruptcy court: Tell the bankruptcy judge the truth about your finances. If you:
- “forget” some pertinent details about your debts and/or your assets
- fail to accurately give full disclosure about your property and creditors
- omit any relevant information about your financial circumstances, or
- use a fraudulent social security number to hide the fact that you’ve completed a bankruptcy before
— your case will be dismissed by the judge, and you could be prosecuted for fraud, a crime for which the potential punishment is prison time.
Bankruptcy Forms Required by the Court
If you and your bankruptcy attorney have decided that bankruptcy is right for you, and you have decided whether a Chapter 7, Chapter 13, or Chapter 11 is the appropriate alternative, you may now need to attend credit counseling before you can file your bankruptcy petition.
When you file for bankruptcy, you must fill out a petition and other forms that have you describe:
- Your current income and monthly living expenses
- Property that you have now
- Property that you owned and money you spent during the past two years
- Property that you sold or gave away during the past two years
- Property that bankruptcy law allows you to keep (“exempt property”) such as some of the equity in your home, household furnishings, your clothing, necessities such as a car, and the tools of your trade, for example
Find Out More about Bankruptcy Court
The best way to get a true idea of what you can expect in bankruptcy court is to contact an experienced bankruptcy attorney in your area. Get your financial information together beforehand, so that you can give the attorney an accurate picture of your situation.
Talk with a Bankruptcy Attorney Today
If you are under severe financial stress, whether as an individual or as a business owner, bankruptcy may be the appropriate step for you to take. It’s essential that you discuss your circumstances with an experienced bankruptcy attorney contact a bankruptcy lawyer in your area today.