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Bankruptcy FAQ
(Frequently Asked Questions)
What exactly is bankruptcy?
Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court.
What are the different kinds of bankruptcy?
Liquidation bankruptcy
Chapter 7 - Under Chapter 7 bankruptcy, a consumer or business asks the bankruptcy court to wipe out (discharge) the debts owed. Certain debts cannot be discharged.
In exchange for the discharge of debts, the business's assets or the consumer's nonexempt property is sold (or "liquidated"), and the proceeds are used to pay off creditors.
Reorganization
bankruptcy:
Chapter 13 - Consumers with secured debts under $871,550 and unsecured debts under $269,250 can file for Chapter 13.
Chapter 12 - Family farmers can file for Chapter 12.
Chapter 11 - Consumers with debts in excess of the Chapter 13 debt limits or businesses can file for Chapter 11.
In any reorganization bankruptcy, you file a plan with the bankruptcy court proposing how you will repay your creditors. Some debts must be repaid in full; others you pay only a percentage; others aren't paid at all. Some debts you have to pay with interest; some are paid at the beginning of your plan and some at the end.
Will filing for bankruptcy stop harassing calls from bill collectors?
When you bankruptcy, an "automatic stay" goes into effect. The automatic stay prohibits
creditors from taking any action to collect the debts you owe them unless the bankruptcy court lifts the stay and lets the creditor proceed with collections.
What are Nondischargeable Debts?
The following debts are nondischargeable in both Chapter 7 and Chapter 13. If you file for Chapter 7, these will remain when your case is over. If you file for Chapter 13, these debts will have to be paid in full during your plan. If they are not, the balance will remain at the end of your case:
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Debts you forget to list in your bankruptcy papers, unless the creditor learns of your bankruptcy case
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Child support and alimony
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Debts for personal injury or death caused by your intoxicated driving
student loans, unless it would be an undue hardship for you to repay
fines and penalties imposed for violating the law, such as traffic tickets and criminal restitution, and
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recent income tax debts and all other tax debts.
In addition, the following debts may be declared nondischargeable by a bankruptcy judge in Chapter 7 if the creditor challenges your request to discharge them. These debts may be discharged in Chapter 13. You can include them in your plan, and at the end of your case, the balance is wiped out:
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Debts incurred on the basis of fraud, such as lying on a credit application
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credit purchases of $1,150 or more for luxury goods or services made within 60 days of filing
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loans or cash advances of $1,150 or more taken within 60 days of filing
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debts from willful or malicious injury to another person or another person's property
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debts from embezzlement, larceny or breach of trust, and
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debts you owe under a divorce decree or settlement unless after bankruptcy you would still not be able to afford to pay them or the benefit you'd receive by the discharge outweighs any detriment to your ex-spouse (who would have to pay them if you discharge them in bankruptcy).
If you have questions about Bankruptcy matters, please do
not hesitate to contact
Jerry Melton.
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