Chapter 7 Bankruptcy and Chapter 13 are legal proceedings that are available to a person to cope with a financial crisis.  One of the main purposes of bankruptcy legislation is to afford the opportunity to a person, who is hopelessly burdened with debt, to free himself or herself of the debt and start fresh - "a new lease on life."

Yes, they will!  By law - all actions against a debtor must cease once the documents are filed.  Creditors cannot initiate or continue any lawsuits, wage garnishees, or even make telephone calls demanding payments.  However, secured creditors such as banks holding, for example, a lien on a car, may try to get the stay lifted if you cannot make payments.

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt.

From an individual debtor's standpoint, one of the primary goals of filing a bankruptcy case is to obtain relief from burdensome debt. Relief is attained through the bankruptcy discharge, the purpose of which is to provide a "fresh start" to the honest debtor. 

Bankruptcy filings are public records.  However, under normal circumstances, no one will know you if you have ever filed for bankruptcy.

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee collects the NONEXEMPT assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors.  Important:  Because there is usually little or no nonexempt property in most Chapter 7 cases, usually there is no actual liquidation of the debtor's assets.  These cases are called "no-asset cases."  A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court.  In most Chapter 7 cases, the debtor receives a discharge that releases the debtor from personal liability for certain dischargeable debts.  The debtor normally receives a discharge just a few months after the petition is filed.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income.  Chapter 13 may be preferable to Chapter 7 because it enables the debtor to keep a valuable asset, such as a house with substantial equity, while still receiving Bankruptcy protection.  It is also favored because it allows the debtor to propose a "plan" to repay creditors over time - usually three to five years.  At a confirmation hearing, the court either approves or disapproves the plan, depending on whether the plan meets the Bankruptcy Code's requirements for confirmation.  Chapter 13 is very different from Chapter 7, since the Chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan.  Unlike Chapter 7, the debtor does not receive an immediate discharge of debts.  The debtor must complete the payments required under the plan before the discharge is received.  The debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect.  The discharge is also considerably broader (i.e., more debts are eliminated) under Chapter 13 than the discharge under Chapter 7.

The most common reasons for filing bankruptcy are:

Usually not with a Chapter 13 case.  However, it is possible with a Chapter 7 case.  Whether a debtor keeps credit cards after filing a Chapter 7 bankruptcy is up to the credit card company.  If you are discharging a credit card the bank (credit card company) will cancel the card unless you reaffirm the debt.  Even if you have a zero balance the credit card company might cancel the card. 

Yes!  A number of banks now offer "secured" credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to  guarantee payment.  Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.  However, we always encourage clients to avoid future credit card use if possible.

One year after a bankruptcy discharge, debtors are eligible for automobile loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy.  The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past.

Two years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy.  The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past.

The fact you filed bankruptcy becomes less significant the further in the past the bankruptcy is.  The truth is, most banks will probably consider you a better credit risk after bankruptcy than before.

No. U.S.C. Sec. 525 prohibits any employer from discriminating against you because you filed bankruptcy.

Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged.  The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case.  Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

The timing of the discharge varies, depending on the chapter under which the case is filed.  In a chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting).  Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court.  In a chapter 13 (adjustment of debts of an individual with regular income), the court grants the discharge as soon as practicable after the debtor completes all payments under the plan.

Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors.  Therefore, the debtor must still repay those debts after bankruptcy.  Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor's drunken driving).

A broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case.  As a general rule, the chapter 13 debtor is discharged from all debts provided for by the plan except certain long-term obligations (such as a home mortgage), debts for alimony or child support, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime.

A debtor who has received a discharge may voluntarily repay any discharged debt.  A debtor may repay a discharged debt even though it can no longer be legally enforced.  Sometimes a debtor agrees to repay a debt because it is owed to a family member or because it represents an obligation to an individual for whom the debtor's reputation is important, such as a family doctor. 

A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case.  The law provides express prohibitions against discriminatory treatment of debtors by both governmental units and private employers.  A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case.  The law prohibits the following forms of governmental discrimination: terminating an employee; discriminating with respect to hiring; or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege.  A private employer may not discriminate with respect to employment if the discrimination is based solely upon the bankruptcy filing. 

Presently, the Court charges a fee for filing chapter 7 of $299.  The Court’s filing fee for chapter 13 is $274.

In order to qualify for relief under chapter 7 of the Bankruptcy Code, the debtor must be an individual, a partnership, or a corporation.  An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e).

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $290,525 and secured debts are less than $871,550.  11 U.S.C. § 109(e).  A corporation or partnership may not file a chapter 13 bankruptcy case.

The filing of a petition under chapter 7 or chapter 13 "automatically stays" most actions against the debtor or the debtor's property. 11 U.S.C. § 362. This stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally cannot initiate or continue any lawsuits, wage garnishments, or even telephone calls demanding payments. Creditors normally receive notice of the filing of the petition from the clerk.

The automatic stay stops and prevents foreclosure, repossession, garnishments, collection calls, etc.  Upon notice of the chapter 7 or chapter 13 case, creditors must cease attempting to collect from the debtor or the debtor’s property until further order from the bankruptcy court. 

Upon the filing of the Chapter 7 petition, an impartial case trustee is appointed by the United States trustee to administer the case and liquidate the debtor's nonexempt assets.  The Chapter 7 trustee will preside over the meeting of creditors and determine whether there are any nonexempt assets available to liquidate for the benefit of creditors. 

Upon the filing of the Chapter 13 petition, an impartial case trustee is appointed by the United States trustee to monitor the case and administer the payments under the plan.  An attorney from the Chapter 13 trustee’s office will preside over your meeting of creditors to insure that you are making the payments under your plan and that it meets the requirements of the law.

The meeting of creditors is a required, administrative hearing which allows the Chapter 13 or Chapter 7 trustee to ask you questions regarding your debts, assets, and finances.

The confirmation hearing the hearing in a Chapter 13 case where the judge approves the proposed repayment plan.  After the plan is confirmed, the trustee will begin making payments to the creditors who have filed claims in the case.  The confirmation hearing usually takes place about a month after the meeting of creditors.  Chapter 7 cases do not have confirmation hearings.

You should list anybody and everybody that you might owe money or who might assert a claim of any kind against you.  This includes, but is not limited to: taxes, child support, student loans, credit cards, medical bills, utilities, mortgages, car loans, finance companies, credit unions, and anyone who may want to sue you.  They might not all be treated the same in your case, and some might not be discharged, but every one of your creditors should be listed.