What You Need to Know About Bankruptcy
Declaring personal bankruptcy can be a very scary yet quite real situation for you. You may looked at all your debts, your payoff options, and your assets and decided that bankruptcy is indeed the best option for you. If so, then you have taken a very bold first step. Now, prepare yourself for getting through bankruptcy by understanding the law and its terminology when you meet with your bankruptcy attorney. Here are some common terms used by the bankruptcy attorney during bankruptcy court proceedings.
Chapter 7 Bankruptcy. This refers to a complete liquidation of all non-exempt property to the creditors. Some property, such as your house and your car, will be exempt from seizure because you need these items in order to live and work. However, non-exempt property, such as your jewelry, furniture, oil paintings, etc., will be seized and sold in order to make up for your debts.
Chapter 13 Bankruptcy. This is often called a reorganization bankruptcy. In this case, your bankruptcy attorney arranges to have you pay off your debt in 3-5 years. Certain non-exempt property may be kept. Chapter 13 is only possible if you have a regular income and that income is sufficient to pay off your debts over time.
Unsecured debt. This is what is typically forgiven in a bankruptcy filing. Unsecured debt often includes credit card debt, medical bills, and store credit card bills. These debts do not have any tangible property or items attached to them.
Secured debt. Secured debt is debt that is associated with some kind of tangible property or asset. For example, a home mortgage is secured by a house, and a car loan is secured by a car. Secured debt may be seized during a bankruptcy settlement, especially a Chapter 7 bankruptcy settlement.
Exempt debt. This is the debt that is usually not erased during a bankruptcy filing. Generally, child support and alimony, private student loans (see note below), income taxes, and legal debts incurred due to personal negligence (e.g., drunk driving) are not erased during a bankruptcy settlement.
341 meeting. Typically, you do not appear in court during a bankruptcy filing. Chapter 7 bankruptcies may require your presence in court only if an objection is made in your case. Chapter 13 bankruptcies may require your presence in court only at the initial confirmation hearing. You are required to show up at a meeting with your creditors, however. This meeting is often called the “341 meeting” because section 341 of the U.S. bankruptcy code requires that the debtor be present at this meeting so that questions about debts and property can be answered.
At this point in time, it costs around $300 to file a Chapter 7 bankruptcy. If a bankruptcy attorney is hired, there may be additional costs amounting to $1,000 to $2,000. These additional costs may be worthwhile if you have significant debts. Typically, the initial consultation is free and will provide you with information that is pertinent to you case. You can try to keep your legal costs down by organizing your paperwork and knowing how you wish to file ahead of time. Also, depending on your state of residence, you may not be required to have your bankruptcy attorney with you when you meet with your creditors (Section 341 meeting).
The length of time required for a bankruptcy filing to be completed will vary. A Chapter 7 bankruptcy is typically faster, while a Chapter 13 bankruptcy may take several years to complete. Once the papers are in order and filed with a court of law, a Chapter 7 bankruptcy will take a month or two to complete. Most of this time is spent waiting for the actual court date. The end result here is the court declaring you bankrupt. In the interim, assuming you have hired a bankruptcy attorney, you may refer all calls from your creditors to your lawyer.
With Chapter 13 bankruptcy, you will need to work more closely with the bankruptcy court and your creditors in order to keep some of your assets. Debt reduction and a reasonable debt repayment plan will need to be scheduled. Thus, the time of repayment on a Chapter 13 bankruptcy can span from 3-5 years. In such a case, although bankruptcy may be officially declared by the court in a month or two, the actual process may span for several years.
Student Loans: In 2007, the U.S. Senate did propose a bill that would make private student loans a dischargeable debt in bankruptcy filings. Student loans had been dischargeable until 2005, when the U.S. Bankruptcy Code was changed to make private student loans the equivalent of non-dischargeable government-guaranteed student loans.
Here is some additional information about specific bankruptcy classifications:
Reverse Dns
