Price Law Group: A place to begin again.

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. Bankruptcy's roots can even be traced to the Bible (Deuteronomy 15:1-2 "Every seventh year you shall practice remission of debts. This shall be the nature of the remission: Every creditor shall remit the due that he claims from his neighbor; he shall not dun his neighbor or kinsman.").

Aren't there different kinds of bankruptcy?

Yes. Bankruptcies can generally be described as "liquidation" or "reorganization." There are several types of bankruptcy proceedings. A Price Law Group attorney will evaluate your particular case and recommend the best option for you. Chapter 7 is the most common form of liquidation bankruptcy. It is a “fresh start” proceeding in which 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. Chapter 7 is available to individuals, married couples, corporations and partnerships. Individual debtors typically receive their discharge within 4-6 months of filing the case. Any wages the debtor earns after the case is begun are the debtor's, beyond the reach of creditors who had claims on the date of filing. Chapter 11 is a reorganization proceeding, typically for corporations or partnerships. Individuals, especially those whose debts exceed the limits of Chapter 13, may file Chapter 11. In Chapter 11, the debtor usually remains in possession of his assets and continues to operate any business. The debtor proposes a plan of reorganization which, upon acceptance by a majority of the creditors, is confirmed by the court and binds both the debtor and the creditors to its terms of repayment. Plans can call for repayment out of future profits, sales of some or all of the assets, or a merger or recapitalization. Chapter 12 is a simplified reorganization for family farmers, modeled after Chapter 13, where the debtor retains his property and pays creditors out of future income. Chapter 13 is a repayment plan for individuals with regular income, unsecured debt less than $269,250, and secured debt less than $807,750. The debtor keeps his or her property and makes regular payments to the Chapter 13 trustee out of future income to pay creditors over the life of the plan (3-5 years). 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. The level of repayment depends on the debtor's income and the composition of the debt. Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Chapter 13 also provides a mechanism for individuals to prevent foreclosures and repossessions, while catching up on their secured debts.

Will filing for bankruptcy stop harassing phone calls from bill collectors?

When we help you file for either type of bankruptcy, we ensure that an “automatic stay” goes into effect and is enforced. The automatic stay prohibits virtually all 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. Most importantly, once you have retained an attorney (regardless of filing), the creditor will be referred to your attorney, and then, by law, the creditors will cease their harassing calls.

What is the general process in consumer bankruptcy cases?

In a Chapter 7 case, we will file several forms with the bankruptcy court listing your income and expenses, assets, debts and property transactions. A court-appointed person, the trustee, is assigned to oversee your case. About a month after filing, we will accompany you to a "meeting of creditors" where the trustee reviews your forms and asks any questions. Despite the name, creditors rarely attend. If you have any nonexempt property, you must give it (or its value in cash) to the trustee. The meeting lasts only a few minutes. A couple of months later, you should receive a notice from the court that "all debts that qualified for discharge were discharged." Chapter 13 is a little different. We will prepare and file the same forms plus a proposed repayment plan, in which we describe how you intend to repay your debts over the next three, or in some cases five years. A trustee is assigned to oversee the case and we will attend the meeting of creditors together. Often one or two creditors attend this meeting, especially if they don't like something in your plan. After meeting the creditors, you attend a hearing before a bankruptcy judge who either confirms or denies your plan. If your plan is confirmed, and you make all the payments called for under your plan, you often receive a discharge of any balance owed at the end of your case.

Will all my debts be discharged?

It depends. 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:

child support and alimony

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, criminal restitution, and certain 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 may be eliminated:

debts you incurred on the basis of fraud, such as lying on a credit application

debts from willful or malicious injury to another person or another person's property

debts from embezzlement, larceny or breach of trust, and 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).