Bankruptcy Basics

About Bankruptcy

     The following is intended to be general information regarding bankruptcy. It is not intended to be, nor should it be taken as legal advice.

What is bankruptcy? Do I need to file bankruptcy?

     Bankruptcy is a federal law designed to give a financial fresh start to honest but unfortunate debtors. This goal is accomplished primarily through a bankruptcy discharge. The discharge is an order by the Bankruptcy Court that releases the debtor from personal liability for his dischargeable debts and prohibits creditors from ever taking actions to recover those debts.

You may want to consider bankruptcy if you need to

– Stop a foreclosure of your home;
– Stop a repossession of property such as a car or truck, or recover such property that has been recently repossessed;
– Eliminate or reduce overwhelming debt;
– Stop harassing collection calls;
– Stop a wage garnishment;
– Unfreeze a bank account;
– Remove liens on your property caused by judgments entered against you.

Are there different types of bankruptcy? What is the difference between Chapter 7 and Chapter 13?

     The two chapters of bankruptcy that individuals most often encounter are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is sometimes referred to as “straight bankruptcy” or “liquidation.” In theory, the Chapter 7 bankruptcy trustee takes over the debtor’s assets (excluding exempt property and property encumbered by liens) and sells them to generate cash. The cash is used to pay all or some portion of the debtor’s debts. In actual practice, most debtors do not own any property that is not exempted or encumbered by liens, so in the vast majority of Chapter 7 cases there is no actual sale of any of the debtor’s assets.

     Chapter 13 bankruptcy allows debtors to propose a repayment plan to allow debtors to keep assets such as their houses or cars and to possibly repay some part of their debt. In our practice the most common reason we advise our clients to file Chapter 13 is because they have fallen behind their house payment and/or their car payment but want to keep their property and get caught up on their payments. Another reason we advise Chapter 13 for our clients is where the client behind on a type of debt payment that cannot be discharged in bankruptcy, such as taxes or child support. Chapter 13 can allow the client to repay this debt over a three to five year period and also stops threats of wage garnishments and foreclosures while the repayment is in progress. Another less-common reason for filing Chapter 13 are situations where the debtor’s household income exceeds the limit for filing Chapter 7.

Which chapter is right for me?

     This requires a detailed examination of your financial condition, the types of debts you owe, the type of property you own and a host of other factors. You can call our office to set up a free consultation that will allow us to assist you in making this determination.

Will I get to keep my house? My car? My personal property?

     In most cases, people do get to keep all of their property. But again, the precise answer to this question depends on the facts of your particular case.

How much does it cost?

     The initial consultation is free. Fees for Chapter 7 cases may vary depending on the complexity of the case. Fees for Chapter 13 cases are based on an order by the Bankruptcy Court. Spouses can both file jointly for the same price as either spouse filing alone. After the initial consultation with Paul Caston, you will know exactly how much your cost will be. We are happy to make payment arrangements with you if need be.