What is bankruptcy?

Bankruptcy is a legal process in which a person who owes money (a debtor) can be permanently released, or discharged, from most debts. Some debts cannot be discharged. Non-dischargeable debts include student loans, fines and restitution, child and spouse support, and recent income taxes. The bankruptcy proceeding can also allow a debtor to make payments toward debts over time, according to an approved payment plan. Bankruptcy is a civil, not criminal, court proceeding. As a debtor, one does not forfeit any civil and constitutional rights by filing bankruptcy. Also, neither the government, nor any utility company, may discriminate against you after you file a bankruptcy petition.

What are the Most Common Forms of Bankruptcy?

Chapter 7 Liquidation:
Also known as straight or consumer bankruptcy, this is the most common type. Most debts are discharged, but you must turn over all your non-essential, luxury assets, if any, to the bankruptcy trustee. The trustee then sells the non-essential property (if any) to pay at least some money to your creditors. Usually, there is no property to be sold, making it a "no asset" case. Chapter 7 may be filed every eight years. 

Chapter 13 - Adjustment of Debts of an Individual with Regular Income: 
Also known as a payment plan bankruptcy, you make payments to the trustee for three to five years. The trustee then pays your creditors under the terms of the plan. Many debts that cannot be discharged under other chapters can be discharged in a Chapter 13 bankruptcy, such as certain taxes. Chapter 13 can be filed almost any time a Chapter 7 is not pending.

Are both spouses in a marriage are required to file a bankruptcy together?

The answer is no. If the debts are joint family or medical expenses, however, it may be a good idea for both spouses to file a joint petition anyway. If the debts were incurred by one spouse before the marriage, or if the debts are from a business involving only one spouse, then a single-person bankruptcy filing should not affect the other spouse, unless the non-filing spouse agreed to be liable for the debts, usually by co-signing.

How long does the bankruptcy process take?

Usually, there is no time limit in which a bankruptcy must be resolved. A chapter 7 liquidation bankruptcy normally takes about four months from the date of filling until the discharge.

A chapter 13 payment plan bankruptcy takes from three to five years for you to finish making the payments to the bankruptcy court and receive your discharge. The discharge notice declares you free from most, or all, of your debts.

Why should I use an attorney?

Bankruptcy is a complex area of law. An experienced attorney can protect your property and handle your case correctly. If you are not represented by an attorney, you risk not receiving a full discharge of your debts. You also might lose property you otherwise could keep.      

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