The Bankruptcy Process
Filing Bankruptcy is a legal process which may help you when you have more debt than you can afford to pay. Both individuals and businesses with debt problems may obtain help by filing for bankruptcy. Bankruptcy is meant to provide a FRESH START to the honest but unfortunate debtor.
The process begins by filing with the Court a Petition and Schedules which list all of your property and all of your debts. After you file for bankruptcy, creditors cannot try to collect from you.
A bankruptcy discharge releases you from personal liability for your pre-filing debts and prevents your pre-filing creditors from taking action against you.
Some debts are not discharged in a bankruptcy. For instance, some taxes, spousal and child support, student loans, criminal fines, and debts arising out of fraudulent conduct of the debtor.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a liquidation of debtor’s non-exempt assets to pay his/her creditors.
The Trustee determines whether the debtor has any property which is not protected by the law and sells the debtor’s non-exempt property and pays the proceeds to creditors. Depending on the debtor’s property, the law may protect all property and the Trustee sells nothing.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy debtor proposes a repayment plan to pay creditors over a period of 3 to 5 years.
Debtor makes Plan payments to the court appointed Trustee. The Trustee makes disbursements to the creditors from the Plan payments. Generally, debtor does not deal directly with creditors during her case. Debtor receives a Bankruptcy Discharge when she completes the Plan payments.