BANKRUPTCY

Bankruptcy law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. This supervised division also allows the interests of all creditors to be treated with some measure of equality. Certain bankruptcy proceedings allow a debtor to stay in business and use revenue generated to resolve his or her debts.

An additional purpose of bankruptcy law is to allow certain debtors to free themselves (to be discharged) of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid infull.

Frequent Asked Questions

1) A consumer can file for bankruptcy as many times as he or she likes.
If you filed for Chapter 7 within the last 8 years, you can’t file for it again. If you want to file a Chapter 13, you will not receive a discharge if you received one within two years or within four years if you were discharged from a Chapter 7, 11, or 12. So in a sense, yes you can file again, but the timing restraints are more rigorous.

2) Filing for bankruptcy will give a consumer a fresh new start with their credit.
Ask anyone who has ever filed for bankruptcy… getting credit extremely extremely hard and the rates will be horrible. It can even effect your ability to get a job. I think this is fair because otherwise everyone would spend beyond their means and just wipe the slate clean whenever they had a chance.

3) The car, house and boat can be kept without having to pay off the loans when included in the bankruptcy file.
If you have a loan on it, then you probably used the car/house/boat as collateral and put a lien on it, so when you go bankrupt the bank will seize your property.

4) All debts can be discharged in a bankruptcy filing.
Usually child support, student loans, and taxes won’t be discharged.

5) When one spouse files for bankruptcy it will not affect the other’s credit.
“Til death do us part…” is true with joint accounts. If you both have your name on the account and one of you goes bankrupt, the account is marked and it carries over to the other person.

6) Filing bankruptcy could cost you your job.
It shouldn’t, but it might. When you go for a job, sometimes they ask for a credit check but they aren’t allowed to disqualify you on those grounds alone. But just like other discrimination’s, it’s very very hard to prove it.

7) Purchasing a home and obtaining new credit after a bankruptcy is out of the question.
See #2, it’s not impossible but it’s very very difficult. Getting a mortgage is hard enough, getting one when you’ve recently been in a bankruptcy is even harder.

8) A consumer can choose whether or not to include all their debt in a bankruptcy filing.
You’re going to court, tell the truth.

9) Late payments on a credit report are just as bad as filing for bankruptcy.
Read any article on credit scores and you’ll learn that late payments will ding your credit score but a bankruptcy will derail it. Most credit card companies won’t even report it if you pay within 30 days, it’s just not worth the paperwork.

10) A spouse can proceed with filing for joint bankruptcy without getting the other’s permission.
If it’s joint, both have to consent.