Eliminating Debt Using Bankruptcy Law

Bankruptcy is one of several debt elimination solutions. However, many consumers view bankruptcy as a last resort, utilizing alternative debt management options which often leave them worse off.

How Does Bankruptcy Work?

Bankruptcy is the only debt elimination solution that has the power of federal law behind it. Bankruptcy allows debtors to obtain a fresh start by eliminating or restructuring debt while saving real and personal property deemed necessary for the debtor’s day to day life.

A bankruptcy case is initiated by filing a bankruptcy petition which sets forth the debtor’s assets, liabilities, income, and monthly expenses. A debtor must complete pre-bankruptcy counseling no more than 180 days before filing bankruptcy. Additionally a debtor must file paystubs or payment advices for the 60 day period preceding the bankruptcy filing. If a debtor files a Chapter 13 case, he must also file a Chapter 13 plan which sets forth his proposal for how he will repay his debts.

Within about 30-45 days of filing a bankruptcy petition, the debtor must attend the Meeting of Creditors. The Meeting of Creditors is conducted by the bankruptcy trustee who will question the debtor about his financial situation. If any creditors attend the Meeting of Creditors, they have the right to question the debtor, too.

If a debtor files a Chapter 13 case, he must also attend a Confirmation Hearing. At the Confirmation Hearing, the debtor’s Chapter 13 plan will either be confirmed or rejected by the court.

Differences Between Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 bankruptcy is a debt liquidation plan that allows a debtor to wipe out most of his unsecured debts. The filing fee for a Chapter 7 case is $299.00. Most Chapter 7 debtors receive a discharge within about 90 days of filing bankruptcy.

Chapter 13 is a debt consolidation plan which allows a debtor to restructure his debt and repay it over a three to five year period at which time he will receive a discharge. The filing fee for a Chapter 13 case is $284.00.

Chapter 7 and Chapter 13 debtors must complete pre-discharge counseling in order to receive a discharge. If a debtor fails to complete pre-discharge counseling, his case will be closed without discharge.

What is the Automatic Stay?

Bankruptcy is the only debt elimination solution which affords a debtor protection from collection efforts by his creditors. The automatic stay becomes effective the moment a debtor files bankruptcy and prevents creditors from engaging in collection activities, including:

Phone calls;
Letters;
Monthly statements;
Foreclosure;
Repossession; and
Lawsuits

Getting Legal Help

There are a lot of myths about bankruptcy which tend to scare people who could really benefit from filing. If you have considered bankruptcy but are afraid of how it will impact you and your family, you should contact an experienced bankruptcy attorney. A bankruptcy attorney will explain how the bankruptcy process works and help you decide whether bankruptcy is the right option for you.

Think Bankruptcy Might Be for You?